<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 16, 1998
REGISTRATION NO. 333-51333
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
AMENDMENT NO. 1
TO
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------------
ATMI, INC.
(Exact Name of Registrant as Specified in its Charter)
DELAWARE 3674 06-1481060
(State or Other (Primary Standard Industrial (I.R.S. Employer
Jurisdiction of Classification Code Number) Identification No.)
Incorporation or
Organization)
7 COMMERCE DRIVE
DANBURY, CONNECTICUT 06810
(203) 794-1100
(Address, Including Zip Code, and Telephone Number, Including Area Code, of
Registrant's Principal Executive Offices)
EUGENE G. BANUCCI, PH.D.
CHIEF EXECUTIVE OFFICER
ATMI, INC.
7 COMMERCE DRIVE
DANBURY, CONNECTICUT 06810
(203) 794-1100
(Name, Address, Including Zip Code, and Telephone Number, Including Area Code,
of Agent for Service)
COPIES TO:
DONNA L. BROOKS, ESQ. THOMAS KING, ESQ.
SHIPMAN & GOODWIN LLP FREDRIKSON & BYRON, PA
ONE AMERICAN ROW 1100 INTERNATIONAL CENTRE
HARTFORD, CONNECTICUT 06103 900 SECOND AVENUE SOUTH
TELEPHONE NO.: (860) 251-5000 MINNEAPOLIS, MINNESOTA 55402
FACSIMILE NO.: (860) 251-5999
TELEPHONE NO.: (612) 347-7059
FACSIMILE NO.: (612) 347-7077
----------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF THE SECURITIES TO THE
PUBLIC: Upon consummation of the Merger as described herein.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance
with General Instruction G, check the following box. [_]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
----------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION
STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
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<PAGE>
NOW TECHNOLOGIES, INC.
10779 HAMPSHIRE AVENUE SOUTH
BLOOMINGTON, MN 55438
, 1998
Dear Shareholder:
I am pleased to invite you to attend a Special Meeting of Shareholders of
Now Technologies, Inc., a Minnesota corporation ("NOW"), which will be held on
, 1998, at 3:00 p.m., local time, at the facilities of NOW Technologies,
Inc., 10779 Hampshire Avenue South, Bloomington, Minnesota (the "Special
Meeting"). At the Special Meeting, you will be asked to consider and vote upon
a merger agreement, dated as of February 19, 1998 (the "Merger Agreement"), by
and among NOW, ATMI, Inc. a Delaware corporation ("ATMI"), and Glide
Acquisition, Inc., a newly-formed, wholly-owned Delaware subsidiary of ATMI
("Merger Subsidiary"), pursuant to which Merger Subsidiary will merge with and
into NOW, with NOW being the surviving corporation (the "Merger"), and NOW
will become a wholly-owned subsidiary of ATMI.
Under the terms of the Merger Agreement, each outstanding share of NOW
Common Stock (other than dissenting shares, if any) will be converted into the
right to receive that fraction of a share of ATMI Common Stock equal to the
Exchange Ratio. The Exchange Ratio will be calculated as follows: (i) if the
Closing Price (as defined below) is equal to or greater than $24.05 and less
than or equal to $32.54, the Exchange Ratio will be .775380; (ii) if the
Closing Price is equal to or greater than $21.55 and less than $24.05, the
Exchange Ratio will be 18.64662 divided by the Closing Price; (iii) if the
Closing Price is greater than $32.54 and less than or equal to $35.04, the
Exchange Ratio will be 25.22778 divided by the Closing Price; (iv) if the
Closing Price is less than $21.55, the Exchange Ratio will be .865338; and (v)
if the Closing Price is greater than $35.04, the Exchange Ratio will be
.720052. The Closing Price is the average of the closing prices of ATMI Common
Stock for the twenty trading days ending the third trading day prior to the
closing date of the Merger, subject to certain minimum and maximum amounts.
The attached Proxy Statement/Prospectus is intended to provide you with the
information that you will need to make an informed decision regarding how you
should vote on the proposed Merger. It also serves as a Prospectus for ATMI,
describing the investment in ATMI that you will be making if the Merger is
approved and the process for exchanging your NOW Common Stock for ATMI Common
Stock. A copy of the Merger Agreement is attached to the Proxy
Statement/Prospectus as Appendix A. I urge you to read this information
carefully before voting on the proposed Merger.
AFTER CAREFUL CONSIDERATION, THE BOARD OF DIRECTORS OF NOW BELIEVES THAT THE
PROPOSED TRANSACTION IS FAIR AND IN THE BEST INTERESTS OF NOW AND ITS
SHAREHOLDERS AND UNANIMOUSLY RECOMMENDS APPROVAL OF THE MERGER AGREEMENT AND
RECOMMENDS THAT YOU VOTE IN FAVOR OF APPROVAL AND ADOPTION OF THE MERGER
AGREEMENT AT THE SPECIAL MEETING.
It is important that your shares be represented at the Special Meeting.
Whether or not you plan to attend the Special Meeting, we urge you to
complete, sign, date, and return the enclosed proxy at your earliest
convenience in the enclosed postage-prepaid envelope. Your shares of NOW
Common Stock will be voted in accordance with the instructions you provide on
your proxy. If you do not return the accompanying form of proxy, your shares
will not be voted in favor of approval and adoption of the Merger Agreement
and will have the same effect as a no vote. If you attend the Special Meeting,
you may revoke your proxy by voting in person. Your prompt cooperation is
greatly appreciated.
Sincerely,
Terry Nagel
Chief Executive Officer
<PAGE>
NOW TECHNOLOGIES, INC.
10779 HAMPSHIRE AVENUE SOUTH
BLOOMINGTON, MN 55438
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON , 1998
NOTICE IS HEREBY GIVEN that a Special Meeting of the Shareholders of NOW
Technologies, Inc. ("NOW") will be held at the facilities of NOW Technologies,
Inc., 10779 Hampshire Avenue South, Bloomington, Minnesota, on , 1998, at
3:00 p.m., local time, to:
1. Consider and act upon a proposal to approve a merger agreement, dated
as of February 19, 1998 (the "Merger Agreement"), by and among NOW, ATMI,
Inc. a Delaware corporation ("ATMI"), and Glide Acquisition, Inc., a newly-
formed, wholly-owned Delaware subsidiary of ATMI ("Merger Subsidiary"),
pursuant to which Merger Subsidiary will merge with and into NOW, with NOW
being the surviving corporation (the "Merger"), and NOW will become a
wholly-owned subsidiary of ATMI. Under the terms of the Merger Agreement,
each outstanding share of NOW Common Stock (other than dissenting shares,
if any) will be converted into the right to receive that fraction of a
share of ATMI Common Stock equal to the Exchange Ratio. The Exchange Ratio
will be calculated as follows: (i) if the Closing Price (as defined below)
is equal to or greater than $24.05 and less than or equal to $32.54, the
Exchange Ratio will be .775380; (ii) if the Closing Price is equal to or
greater than $21.55 and less than $24.05, the Exchange Ratio will be
18.64662 divided by the Closing Price; (iii) if the Closing Price is
greater than $32.54 and less than or equal to $35.04, the Exchange Ratio
will be 25.22778 divided by the Closing Price; (iv) if the Closing Price is
less than $21.55, the Exchange Ratio will be .865338; and (v) if the
Closing Price is greater than $35.04, the Exchange Ratio will be .720052.
The Closing Price is the average of the closing prices of ATMI Common Stock
for the twenty trading days ending the third trading day prior to the
closing date of the Merger, subject to certain minimum and maximum amounts.
2. Transact such other business as may properly come before this Special
Meeting or any adjournment or postponements thereof.
WITH RESPECT TO THE PROPOSAL TO APPROVE THE MERGER AGREEMENT, NOW
SHAREHOLDERS HAVE A RIGHT TO DISSENT AND OBTAIN PAYMENT IN CASH FOR THEIR
SHARES.
Only shareholders of record as shown on the books of NOW at the close of
business on , 1998 are entitled to notice of and to vote at the Special
Meeting or any adjournments or postponements thereof.
IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED AT THE SPECIAL MEETING.
WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL MEETING, WE URGE YOU TO
COMPLETE, SIGN, DATE, AND RETURN THE ENCLOSED PROXY AT YOUR EARLIEST
CONVENIENCE IN THE ENCLOSED POSTAGE-PREPAID ENVELOPE. THIS WILL NOT LIMIT YOUR
RIGHT TO ATTEND OR VOTE AT THE MEETING.
BY ORDER OF THE BOARD OF DIRECTORS
Terry Nagel
Chief Executive Officer
, 1998
<PAGE>
NOW TECHNOLOGIES, INC.
PROXY STATEMENT
FOR
THE SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON , 1998
----------------
PROSPECTUS
OF
ATMI, INC.
----------------
This Proxy Statement is being furnished to the shareholders of NOW
Technologies, Inc., a Minnesota corporation ("NOW"), in connection with the
solicitation by the Board of Directors of NOW for use at a Special Meeting of
Shareholders to be held on , 1998, at 3:00 p.m., local time, at the
facilities of NOW Technologies, Inc., 10779 Hampshire Avenue South,
Bloomington, Minnesota, and at any adjournments or postponements thereof (the
"Special Meeting").
At the Special Meeting, the shareholders of NOW (the "NOW Shareholders")
will be asked to consider and vote upon the Merger Agreement dated as of
February 19, 1998 (the "Merger Agreement"), by and among ATMI, Inc., a
Delaware corporation ("ATMI"), NOW and Glide Acquisition, Inc., a Delaware
corporation ("Merger Subsidiary"). Pursuant to the Merger Agreement, Merger
Subsidiary will merge with and into NOW, with NOW being the surviving
corporation (the "Merger"), and NOW will become a wholly-owned subsidiary of
ATMI. In connection with the Merger, all shares of common stock of NOW, par
value $.01 per share ("NOW Common Stock"), issued and outstanding immediately
prior to the Merger (other than dissenting shares, if any) will be converted
into the right to receive shares of the common stock of ATMI, par value $.01
per share ("ATMI Common Stock"), and all options outstanding immediately prior
to the Merger to purchase NOW Common Stock under the stock option plans of NOW
will become options to purchase ATMI Common Stock.
Holders of NOW Common Stock who do not vote in favor of the Merger may, by
complying with Sections 302A.471 and 302A.473 of the Minnesota Business
Corporation Act (the "MBCA"), be entitled to dissenters' rights as set forth
with respect to the Merger. See "THE MERGER--Dissenters' Rights" and Appendix
B to this Proxy Statement/Prospectus which sets forth Sections 302A.471 and
302A.473 of the MBCA.
ATMI Common Stock is quoted on the Nasdaq National Market under the symbol
ATMI. It is a condition to the consummation of the Merger that the shares of
ATMI Common Stock to be issued in the Merger be listed on the Nasdaq National
Market upon notice of issuance.
(continued on next page)
THE SECURITIES TO BE ISSUED HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR BY ANY STATE SECURITIES COMMISSION
NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROXY
STATEMENT/PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
This Proxy Statement/Prospectus and the accompanying form of proxy are first
being mailed to the NOW Shareholders on or about , 1998.
THE DATE OF THIS PROXY STATEMENT/PROSPECTUS IS , 1998.
<PAGE>
(continued from previous page)
On February 19, 1998, the last trading day prior to the public announcement
of the Merger, the closing price of ATMI Common Stock was $29.125 per share.
On June 12, 1998, the closing price of ATMI Common Stock was $16.25 per share.
This Proxy Statement/Prospectus also constitutes the prospectus of ATMI with
respect to up to 1,586,164 shares of ATMI Common Stock to be issued in the
Merger upon conversion of the outstanding shares of NOW Common Stock.
The Merger will be effected pursuant to the terms and subject to the
conditions of the Merger Agreement which is attached to this Proxy
Statement/Prospectus as Appendix A and is incorporated herein by reference.
THE MATTERS DESCRIBED ABOVE ARE DISCUSSED IN DETAIL IN THIS PROXY
STATEMENT/PROSPECTUS. THE MERGER IS A COMPLEX TRANSACTION. NOW SHAREHOLDERS
ARE STRONGLY URGED TO READ AND CONSIDER CAREFULLY THIS PROXY
STATEMENT/PROSPECTUS IN ITS ENTIRETY, PARTICULARLY THE MATTERS REFERRED TO
UNDER "RISK FACTORS" COMMENCING ON PAGE 7.
ii
<PAGE>
AVAILABLE INFORMATION
ATMI is subject to the information requirements of the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), and in accordance therewith
files periodic reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information filed by ATMI can be inspected and copied at
the public reference facilities maintained by the Commission at 450 Fifth
Street, N.W., Washington, D.C. 20549, and at the Commission's Regional Offices
at Seven World Trade Center, Suite 1300, New York, New York 10048 and Citicorp
Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661-2511.
Copies of such materials can also be obtained from the Public Reference
Section of the Commission, 450 Fifth Street, N.W., Washington, D.C. 20549, at
prescribed rates. In addition, ATMI is required to file electronic versions of
these documents with the Commission through the Commission's Electronic Data
Gathering, Analysis and Retrieval (EDGAR) system. The SEC maintains a World
Wide Web site at http://www.sec.gov that contains reports, proxy and
information statements and other information regarding registrants that file
electronically with the Commission. Prior to October 10, 1997, ATMI's filings
were made under the name Advanced Technology Materials, Inc. ATMI's Common
Stock is traded on the Nasdaq National Market and reports, proxy statements
and other information concerning ATMI may be inspected at the offices of the
Nasdaq Stock Market, Inc., 1735 K Street, N.W., Washington, D.C. 20006.
ATMI has filed a Registration Statement on Form S-4 (together with any
amendments or supplements thereto, the "Registration Statement") under the
Securities Act of 1933, as amended (the "Securities Act"), with the Commission
relating to the shares of ATMI Common Stock to be issued in connection with
the Merger. This Proxy Statement/Prospectus, which constitutes part of the
Registration Statement, does not contain all of the information set forth in
the Registration Statement and the exhibits and schedules thereto. Statements
contained in this Proxy Statement/Prospectus as to the contents of any
contract or other document referred to are not necessarily complete, and, in
each instance, reference is made to the copy of such contract or other
document filed as an exhibit to the Registration Statement, each such
statement being qualified in all respects by such reference. For further
information with respect to ATMI and ATMI Common Stock, reference is made to
the Registration Statement, exhibits and schedules. A copy of the Registration
Statement, including the exhibits and schedules thereto, may be inspected
without charge at the Commission's principal office in Washington, D.C. and
copies of all or any part thereof may be obtained from such office after
payment of fees prescribed by the Commission.
INFORMATION PROVIDED BY ATMI AND NOW
THE INFORMATION SET FORTH IN THIS PROXY STATEMENT/PROSPECTUS CONCERNING ATMI
AND MERGER SUBSIDIARY HAS BEEN PROVIDED BY ATMI AND THE INFORMATION SET FORTH
IN THIS PROXY STATEMENT/ PROSPECTUS CONCERNING NOW HAS BEEN PROVIDED BY NOW.
----------------
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION OTHER THAN THOSE CONTAINED IN THIS PROXY STATEMENT/PROSPECTUS
AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED BY ATMI. THIS PROXY STATEMENT/ PROSPECTUS DOES
NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY TO ANY
PERSON IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION WOULD BE
UNLAWFUL OR TO ANY PERSON TO WHOM IT IS UNLAWFUL. NEITHER THE DELIVERY OF THIS
PROXY STATEMENT/PROSPECTUS NOR ANY OFFER OR SALE MADE HEREUNDER SHALL, UNDER
ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF ATMI OR THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY
TIME SUBSEQUENT TO THE DATE HEREOF.
----------------
Advanced Technology Materials(R) (logo), Novapure(R), Vector Technology(R),
Vector(TM) (logo), Guardian(R), Phoenix(TM), ReCAT(R), EpiGrade(R), Sparta(R),
SCRAM(R), EcoSys(R), EcoSys(R) (logo), Epitronics(TM), NovaSource(TM),
VaporSource(TM), SDS(R), NovaMOS(TM), Emosyn(TM), COCKTAIL(TM), ADCS(R),
ADCS(R) DESIGN, MINIBULK(R), SKINNIBULK(R), APC(TM), ULTRAPUR(TM), MARS(TM),
DOUBLE DISTILLATION(TM) and COYOTE CLEAN(TM) and certain other product and
business names used herein are trademarks of ATMI. This Proxy
Statement/Prospectus also includes trademarks of companies other than ATMI.
iii
<PAGE>
TABLE OF CONTENTS
<TABLE>
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<S> <C>
AVAILABLE INFORMATION................................................... iii
INFORMATION PROVIDED BY ATMI AND NOW.................................... iii
SUMMARY OF PROXY STATEMENT/PROSPECTUS................................... 1
The Companies......................................................... 1
Risk Factors.......................................................... 2
The Special Meeting................................................... 2
The Merger............................................................ 3
RISK FACTORS............................................................ 8
Risk Factors Related to ATMI.......................................... 8
Risk Factors Related to NOW........................................... 14
Risk Factors Related to the Merger.................................... 16
MARKET AND MARKET PRICES................................................ 19
COMPARATIVE PER COMMON SHARE DATA....................................... 20
SELECTED FINANCIAL DATA................................................. 22
THE SPECIAL MEETING..................................................... 25
Date, Time and Place.................................................. 25
Purpose............................................................... 25
Record Date; Quorum................................................... 25
Vote Required......................................................... 25
Voting of Proxies..................................................... 25
Solicitation of Proxies............................................... 26
Recommendation of the NOW Board of Directors.......................... 26
BUSINESS OF ATMI........................................................ 27
Introduction.......................................................... 27
Industry Background................................................... 27
ATMI Strategy......................................................... 29
Businesses and Products............................................... 30
Customers, Sales and Marketing........................................ 34
Competition........................................................... 35
Manufacturing......................................................... 35
Research and Development and Strategic Alliances...................... 35
Patents and Proprietary Rights........................................ 36
Backlog............................................................... 37
Environmental Regulation.............................................. 37
Employees............................................................. 38
Properties............................................................ 38
Litigation............................................................ 38
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS--ATMI ................................................... 39
Overview.............................................................. 39
Results of Operations................................................. 41
Liquidity and Capital Resources....................................... 45
Operations Outside the United States.................................. 46
Year 2000 Compliance.................................................. 47
MANAGEMENT OF ATMI...................................................... 48
Executive Officers and Directors...................................... 48
Executive Compensation................................................ 50
Option Grants......................................................... 51
Stock Option Exercises and Fiscal Year-End Option Values.............. 51
</TABLE>
iv
<PAGE>
<TABLE>
<CAPTION>
PAGE
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<S> <C>
Director Compensation................................................. 51
Employment Agreements................................................. 52
Compensation Committee Interlocks and Insider Participation........... 53
CERTAIN TRANSACTIONS--ATMI.............................................. 54
Acquisition of the ADCS Group......................................... 54
Acquisition of LSL.................................................... 56
Other................................................................. 57
PRINCIPAL ATMI STOCKHOLDERS AND STOCK OWNERSHIP OF ATMI MANAGEMENT...... 58
BUSINESS OF NOW......................................................... 60
General............................................................... 60
Business Strategy..................................................... 60
Markets............................................................... 61
Products.............................................................. 62
Patents............................................................... 63
Competition........................................................... 63
Manufacturing......................................................... 63
Marketing and Sales................................................... 63
Customers............................................................. 64
Employees............................................................. 64
Facilities............................................................ 64
Litigation............................................................ 64
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS--NOW..................................................... 65
Overview.............................................................. 65
Results of Operations................................................. 66
Liquidity and Capital Resources....................................... 68
Operations Outside the United States.................................. 68
Year 2000 Compliance.................................................. 68
PRINCIPAL NOW SHAREHOLDERS AND STOCK OWNERSHIP OF NOW MANAGEMENT........ 69
THE MERGER.............................................................. 70
General............................................................... 70
Terms of the Merger................................................... 70
Results of the Merger................................................. 71
Background of the Merger.............................................. 71
ATMI's Reasons for the Merger......................................... 74
NOW's Reasons for the Merger.......................................... 74
Recommendation of the NOW Board of Directors.......................... 75
Dissenters' Rights.................................................... 75
Effective Time of the Merger.......................................... 78
Conditions to the Merger.............................................. 78
Regulatory Approvals.................................................. 79
Business Pending the Merger........................................... 79
Termination........................................................... 80
Indemnification and Escrow............................................ 81
Employment Agreements................................................. 82
Accounting Treatment.................................................. 82
Certain Federal Income Tax Consequences............................... 83
Resale of Merger Shares............................................... 84
Nasdaq Listing........................................................ 84
DESCRIPTION OF CAPITAL STOCK OF ATMI.................................... 85
Common Stock.......................................................... 85
</TABLE>
v
<PAGE>
<TABLE>
<CAPTION>
PAGE
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<S> <C>
Preferred Stock........................................................ 85
Delaware Law and Certain Charter and Bylaw Provisions.................. 85
Registration Rights.................................................... 87
Transfer Agent and Registrar........................................... 87
COMPARISON OF ATMI COMMON STOCK AND NOW COMMON STOCK..................... 88
Authorized Capital Stock............................................... 88
Board of Directors..................................................... 88
Removal of Directors................................................... 88
Limitations on the Liability of Management............................. 89
Amendment of Bylaws.................................................... 89
Special Meetings of Stockholders....................................... 89
Action by Written Consent of Stockholders.............................. 89
Liquidity.............................................................. 89
Transferability........................................................ 89
Reporting Requirements................................................. 90
Takeover Statutes...................................................... 90
LEGAL MATTERS............................................................ 90
EXPERTS.................................................................. 90
INDEX TO FINANCIAL STATEMENTS............................................ F-1
APPENDICES:
A. Merger Agreement.................................................... A-1
B. Dissenting NOW Shareholders Rights--Sections 302A.471 and 302A.473
of the Minnesota Business Corporation Act........................... B-1
</TABLE>
vi
<PAGE>
SUMMARY OF PROXY STATEMENT/PROSPECTUS
The following is a summary of certain information contained elsewhere in this
Proxy Statement/ Prospectus. Certain capitalized terms used in this Summary are
defined elsewhere in this Proxy Statement/ Prospectus. This Summary is not
intended to be complete and is qualified in its entirety by reference to the
more detailed information appearing elsewhere in this Proxy
Statement/Prospectus, the Appendices hereto and the documents otherwise
referred to herein. This Proxy Statement/Prospectus contains forward-looking
statements which involve risks and uncertainties. The actual results of ATMI
and NOW could differ materially from those anticipated in these forward-looking
statements as a result of certain factors, including those set forth under
"Risk Factors" and elsewhere in this Proxy Statement/Prospectus.
THE COMPANIES
ATMI. ATMI is a leading supplier of thin film materials, equipment and
services used worldwide in the manufacture of semiconductor devices. ATMI
targets high growth consumable and equipment markets within the semiconductor
industry with proprietary and patented products based on chemical vapor
deposition ("CVD") technology. ATMI currently provides: (i) a broad range of
ultrahigh purity thin film materials and related delivery systems; (ii) a full
line of point-of-use semiconductor environmental equipment and services; and
(iii) specialty epitaxial thin film deposition services. ATMI's strategy is to
continue its growth through product line expansion in each of its existing
markets and to leverage its core technology to create new high growth
businesses. ATMI's customers include most of the leading semiconductor
manufacturers in the world.
In October 1997, ATMI acquired Advanced Delivery & Chemical Systems Nevada,
Inc. and its affiliates (collectively, the "ADCS Group"), a manufacturer and
distributor of ultrahigh purity semiconductor thin film materials and related
delivery systems, in exchange for 5,468,747 shares of ATMI Common Stock. The
operations of the ADCS Group have been combined with ATMI's NovaMOS business to
create the ADCS division. Also in October 1997, ATMI acquired Lawrence
Semiconductor Laboratories, Inc. and its affiliate (collectively, "LSL"), a
provider of silicon epitaxial thin film deposition services, in exchange for
3,671,349 shares of ATMI Common Stock. The operations of LSL have been combined
with the ATMI's Epitronics division, which now offers a wide spectrum of
epitaxial services. Both transactions were accounted for as poolings of
interest.
ATMI is a holding company which performs executive, financial and
administrative functions for its subsidiaries. ATMI was incorporated in
Delaware in April 1997 and is the successor registrant to Advanced Technology
Materials, Inc. ("ATM"). ATM was incorporated in Connecticut in 1986 and
reincorporated in Delaware in 1987 and is now a wholly-owned subsidiary of
ATMI. As used in this Proxy Statement/Prospectus, "ATMI" means either ATMI,
Inc. itself or ATMI, Inc. and its consolidated subsidiaries, including its
predecessor registrant, ATM, as the context may indicate. ATMI's executive
offices are located at 7 Commerce Drive, Danbury, Connecticut 06810, and its
telephone number is (203) 794-1100. See "BUSINESS OF ATMI."
NOW. NOW manufactures proprietary, state-of-the-art, high-performance
containers and dispensing systems for advanced purity chemicals used in the
manufacture of microelectronics, particularly semiconductor integrated circuits
("ICs") and active matrix flat panel displays ("AMFPDs"). To a lesser extent,
NOW's products also serve customers in the pharmaceutical, biotech and
laboratory markets. NOW's patented NOWPak container and dispensing systems
provide a viable alternative to the traditional glass bottles and steel or
plastic drums used in high-tech market niches that require high-performance
chemical packaging and dispensing systems. The NOWPak system offers value-added
packaging to end-user customers like IBM, Intel, Sharp and Motorola, who
require a high degree of purity, productivity, safety and environmental
responsibility. NOW markets its products to these end-users but actually sells
its products to chemical suppliers whose end-user customers have specified that
the chemicals be packaged in NOW products. See "BUSINESS OF NOW."
1
<PAGE>
Merger Subsidiary. Merger Subsidiary is a Delaware corporation and a wholly-
owned subsidiary of ATMI organized for the purpose of acting as a constituent
entity in the Merger. Merger Subsidiary has not engaged in any substantive
business activity. The principal executive offices of Merger Subsidiary are
located at 7 Commerce Drive, Danbury, Connecticut 06810, and its telephone
number is (203) 794-1100.
RISK FACTORS
In evaluating the Merger, the NOW Shareholders should consider the following
risk factors relating to ATMI, NOW and the Merger, which are discussed in
greater detail in "RISK FACTORS" beginning on page 7. The NOW Shareholders are
urged to read "RISK FACTORS" in its entirety.
This Proxy Statement/Prospectus contains forward-looking statements and,
although ATMI believes that they are based on reasonable assumptions, no
assurances can be given that actual results will not differ from such forward-
looking statements. See "RISK FACTORS."
Risk factors relating to ATMI include risks associated with: potential
fluctuations in quarterly results; acquisitions; the expansion of operations
and management of growth by ATMI; ATMI's dependence on sales outside the United
States and markets outside the United States; ATMI's dependence on particular
customers; rapid technological change and competing technologies; competition
in the markets for semiconductor thin film materials and delivery systems,
environmental equipment and epitaxial deposition services; ATMI's ability to
protect the proprietary nature of its technology, including the defense of its
patents; limited indemnification in connection with recent acquisitions; new
product development and commercialization; manufacturing operations; product
liability and limited insurance coverage; environmental regulations to which
ATMI is subject; the concentration of ownership in certain stockholders of
ATMI; the fact that ATMI has never paid cash dividends on its capital stock;
and the anti-takeover effect of certain charter and bylaw provisions and the
possible issuance of preferred stock.
Risk factors relating to NOW include risks associated with: NOW's dependence
on the semiconductor industry as its primary market; the developmental stage of
certain of NOW's product lines, including risks related to product
commercialization; its dependence on sales outside the United States and risks
associated with markets outside the United States; product liability;
competition in the markets for semiconductor devices, related materials and
manufacturing equipment, rapid technological change; its dependence on key
personnel; NOW's ability to protect the proprietary nature of its technology,
including the defense of its patents; and environmental regulations to which
NOW is subject.
In addition to the risks associated with each of ATMI and NOW, there are
certain risk factors relating to the Merger. These include risks associated
with: the integration of business operations of ATMI and NOW; the lack of a
fairness opinion with respect to the Merger; the substantial expenses resulting
from the Merger; the potential for fluctuation in the market price of ATMI
Common Stock, resulting in uncertainty as to the number of shares of ATMI
Common Stock to be issued in connection with the Merger; future volatility in
the price of ATMI Common Stock; the potential dilutive effect of the Merger;
the substantial termination fees associated with termination of the Merger and
the potential that such fees may not adequately compensate for any business
opportunities lost in favor of pursuing the Merger; and the limited scope of
the tax opinion received by ATMI with respect to certain of the expected
federal income tax consequences of the Merger.
THE SPECIAL MEETING
Date, Time and Place. The Special Meeting will be held on , 1998, at 3:00
p.m., local time, at the facilities of NOW Technologies, Inc., 10779 Hampshire
Avenue South, Bloomington, Minnesota. See "THE SPECIAL MEETING--Date, Time and
Place."
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<PAGE>
Purpose. At the Special Meeting, the NOW Shareholders will be asked to
consider and vote upon a proposal to approve and adopt the Merger Agreement.
See "THE SPECIAL MEETING--Purpose."
Record Date; Vote Required. The NOW Board of Directors has fixed the close of
business on , 1998 as the record date (the "Record Date") for the
determination of shareholders entitled to notice of and to vote at the Special
Meeting. Only holders of record of NOW Common Stock at the close of business on
the Record Date are entitled to notice of and to vote at the Special Meeting.
As of the close of business on the Record Date, there were 1,833,000 shares of
NOW Common Stock outstanding and entitled to vote, held of record by 76
shareholders. Each NOW Shareholder is entitled to one vote for each share of
NOW Common Stock held as of the Record Date. The affirmative vote of a majority
of the shares of NOW Common Stock outstanding as of the Record Date is required
to approve and adopt the Merger Agreement. Accordingly, abstentions and non-
votes will have the effect of votes against the Merger Agreement. As a group,
all executive officers and directors of NOW owned 956,000 shares, or 52.2%, of
the NOW Common Stock outstanding as of the Record Date. All of NOW's executive
officers and directors have indicated to NOW that they intend to vote to
approve the Merger. See "THE SPECIAL MEETING--Record Date; Quorum" and "THE
SPECIAL MEETING--Vote Required."
Voting of Proxies. The NOW Shareholders may cast their vote, in person or by
proxy, by delivering to an officer of NOW a properly executed proxy. A copy,
facsimile, or other reproduction may be substituted or used in lieu of the
original proxy. For the purpose of voting by proxy by facsimile, the facsimile
number is (612) 942-9270. The shares represented by properly executed proxies
received prior to or at the Special Meeting in response to this solicitation
and not revoked will be voted at the Special Meeting. A proxy may be revoked at
any time before it is exercised at the Special Meeting by (i) delivering to the
President of NOW at 10779 Hampshire Avenue South, Bloomington, Minnesota 55438
or by facsimile at (612) 942-9270, a written notice bearing a later date than
the date of the proxy, stating that the proxy is revoked, (ii) signing and so
delivering a proxy relating to the same shares and bearing a later date prior
to the vote at the Special Meeting or (iii) attending the Special Meeting and
voting in person (although attendance at the Special Meeting will not, by
itself, revoke a proxy). All proxies that are properly executed and returned
and that are not revoked will be voted at the Special Meeting in accordance
with the instructions indicated on the proxies or, if no direction is
indicated, to approve and adopt the Merger Agreement, as recommended by the NOW
Board of Directors. See "THE SPECIAL MEETING--Voting of Proxies."
THE MERGER
Terms of the Merger. Pursuant to the Merger Agreement and subject to the
approval of the NOW Shareholders and certain other conditions, Merger
Subsidiary will merge with and into NOW, with NOW being the surviving
corporation. As a result of the Merger, NOW will become a wholly-owned
subsidiary of ATMI. Upon consummation of the Merger, the outstanding shares of
NOW Common Stock will be converted into the right to receive shares of ATMI
Common Stock. The aggregate number of shares of ATMI Common Stock to be
exchanged for the outstanding shares of NOW Common Stock (the "Merger
Consideration") will be equal to the number of outstanding shares of NOW Common
Stock multiplied by the "Exchange Ratio." Pursuant to the terms of the Merger
Agreement, the Exchange Ratio is based in part upon the "NOW Share Price" and
will vary depending upon the "Closing Price" of ATMI Common Stock. "NOW Share
Price" means $21.9372, which was determined by arm's-length negotiations among
the parties to the Merger Agreement based on the parties' valuation of NOW, the
number of outstanding shares of NOW Common Stock and certain outstanding
options to purchase NOW Common Stock. "Closing Price" means the average of the
closing prices of ATMI Common Stock as reported by the Nasdaq National Market
for the twenty trading days ending the third trading day prior to the closing
date of the Merger (the "Closing Date"); provided that if the Closing Price is
greater than $35.04 per share, the Closing Price shall be deemed to be $35.04
per share; and if the Closing Price is less than $21.55 per share, the Closing
Price shall be deemed to be $21.55 per share. If the Closing Price is equal to
or greater than $24.05 (85% of the "Initial Price") and less than or equal to
$32.54 (115% of the Initial Price), then the Exchange Ratio shall be equal to
.775380 (the NOW
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Share Price divided by the Initial Price). The "Initial Price" is the average
of the closing prices of ATMI Common Stock as reported by the Nasdaq National
Market for the twenty trading days ended March 6, 1998 and is fixed at $28.29.
If the Closing Price is equal to or greater than $21.55 and less than $24.05,
then the Exchange Ratio shall be equal to 18.64662 (85% of the NOW Share Price)
divided by the Closing Price. If the Closing Price is greater than $32.54 and
less than or equal to $35.04, then the Exchange Ratio shall be equal to
25.22778 (115% of the NOW Share Price) divided by the Closing Price. If the
Closing Price is less than $21.55, then the Exchange Ratio shall be equal to
.865338 (85% of the NOW Share Price divided by $21.55); and if the Closing
Price is greater than $35.04, then the Exchange Ratio shall be equal to .720052
(115% of the NOW Share Price divided by $35.04). To simplify the presentations
contained in this Proxy Statement/Prospectus, the dollar amounts described
above are stated to two decimal places. However, the Exchange Ratio
calculations carry such prices to eight decimal places, and the resulting
Exchange Ratios are carried to six decimal places.
The following table sets forth the Exchange Ratio to be applied in the Merger
and the aggregate Merger Consideration assuming various Closing Prices.
<TABLE>
<CAPTION>
AGGREGATE MERGER
CONSIDERATION
(SHARES OF ATMI
CLOSING PRICE EXCHANGE RATIO COMMON STOCK)
------------- -------------- ----------------
<S> <C> <C>
$20 0.865338 1,586,164
$24 0.776943 1,424,136
$28 0.775380 1,421,271
$32 0.775380 1,421,271
$36 0.720052 1,319,856
</TABLE>
As a result of the foregoing, the NOW Shareholders will receive in the
aggregate a maximum of 1,586,164 shares of ATMI Common Stock and a minimum of
1,319,856 shares of ATMI Common Stock.
In addition, each outstanding option to purchase NOW Common Stock will
entitle the holder thereof at the Effective Time (as defined herein) to
purchase shares of ATMI Common Stock under a stock option plan of ATMI, to be
determined in accordance with the Exchange Ratio.
Because the number of shares of ATMI Common Stock issuable to the NOW
Shareholders will depend on the Closing Price, there is no guarantee as to the
exact number of shares of ATMI Common Stock that the NOW Shareholders will
receive. During the period between the date of this Proxy Statement/Prospectus
and the date of the Special Meeting, the NOW Shareholders may obtain updated
information regarding the market price for ATMI Common Stock, the estimated
Exchange Ratio and the estimated aggregate amount of the Merger Consideration
by calling a toll-free telephone number established by ATMI (1-888-562-2927).
Because the Merger Agreement is subject to the approval of the NOW
Shareholders, the NOW Shareholders are not bound to deliver their shares of NOW
Common Stock and to consummate the transaction unless and until such approval
is received. See "THE MERGER--Terms of the Merger."
Immediately following the Effective Time, each NOW Shareholder will be
entitled to surrender his, her or its certificates representing NOW Common
Stock to ATMI to receive shares of ATMI Common Stock based on the Exchange
Ratio; provided that five percent of such shares will be placed in escrow. All
such shares to be held in escrow will be held and applied in accordance with
the terms of the Merger Agreement and the escrow agreement ("the Escrow
Agreement") to be entered into by and among ATMI, the NOW Shareholders and
State Street Bank and Trust Company, as escrow agent. See "THE MERGER--
Indemnification and Escrow."
After consummation of the Merger, NOW will be a wholly-owned operating
subsidiary of ATMI. No material disposition or restructuring of either ATMI or
NOW or any material part thereof is contemplated as a result of the Merger.
Assuming a Closing Price of $21.55 per share, the stockholders of ATMI and the
NOW
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<PAGE>
Shareholders would own approximately 92.8% and 7.2% respectively, of the
approximately 22,028,306 shares of ATMI Common Stock that would be outstanding.
See "THE MERGER--Results of the Merger."
ATMI's Reasons for the Merger. The ATMI Board of Directors believes that the
Merger is in the best interests of the stockholders of ATMI and has unanimously
approved the Merger Agreement for reasons including (i) ATMI's belief that
NOW's delivery systems will have broad application in the delivery of a wide
variety of front-end semiconductor liquid materials, (ii) the proprietary
nature of NOW's products, (iii) NOW's market leading position in the
photolithography delivery systems packaging market, and (iv) ATMI's
determination that NOW has the highest reputation for product quality and
service among its customers. See "THE MERGER--ATMI's Reasons for the Merger."
Recommendations of the NOW Board of Directors; NOW's Reasons for the
Merger. The NOW Board of Directors has unanimously approved the Merger
Agreement and unanimously recommends that the NOW Shareholders approve such
agreement. The NOW Board of Directors believes the Merger Agreement and the
transactions contemplated thereby are fair and reasonable and in the best
interests of NOW and its shareholders for reasons including (i) the existence
of a public trading market for the ATMI Common Stock to be received by the NOW
Shareholders in the Merger, (ii) the ability of the NOW Shareholders to
participate in the growth opportunities of the combined company, (iii) the
global presence and reputation of ATMI in the semiconductor industry, and (iv)
the mission and strategy of ATMI to become a leading supplier in each of its
markets in the semiconductor industry. See "THE MERGER--NOW's Reasons for the
Merger" and "THE MERGER--Recommendation of the NOW Board of Directors."
Required NOW Shareholder Approval. The affirmative vote of a majority of the
shares of NOW Common Stock outstanding as of the Record Date is required to
approve and adopt the Merger Agreement. As a group, all executive officers and
directors of NOW owned 956,000 shares, or 52.2%, of the NOW Common Stock
outstanding as of the Record Date. All of NOW's executive officers and
directors have indicated to NOW that they intend to vote to approve the Merger.
See "THE SPECIAL MEETING--Vote Required."
Dissenters' Rights. If the Merger Agreement is approved by the required vote
of the NOW Shareholders and is not abandoned or terminated, holders of NOW
Common Stock that did not vote in favor of the Merger may, by complying with
Sections 302A.471 and 302A.473 of the MBCA, a copy of which is attached hereto
as Appendix B, assert dissenter's rights as described therein, and the shares
of NOW held by such persons will be deemed to be "Dissenting Shares." See "THE
MERGER--Dissenters' Rights."
Effective Time of the Merger. The Merger will become effective upon the
filing of properly executed Articles of Merger with the Secretary of State of
the State of Minnesota and a Certificate of Merger with the Secretary of State
of the State of Delaware (the "Effective Time"). The parties anticipate that
the closing of the Merger (the "Closing") will be held immediately following
the Special Meeting. See "THE MERGER--General."
Conditions to the Merger. The obligation of each of ATMI and NOW to
consummate the Merger is subject to certain conditions typical in transactions
of this type. See "THE MERGER--Conditions to the Merger."
Regulatory Approvals. The Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended (the "HSR Act") provides that certain business mergers
(including the Merger) may not be consummated until certain information has
been furnished to the Department of Justice (the "DOJ") and the Federal Trade
Commission (the "FTC") and certain waiting period requirements have been
satisfied. ATMI and NOW each made its filing with the DOJ and the FTC with
respect to the Merger on April 6, 1998, and the specified waiting period under
the HSR Act expired on May 7, 1998. Notwithstanding the expiration of the
waiting period of the HSR Act filing, the FTC, the DOJ or others could take
action under the antitrust laws, including, after the Effective Time, seeking
the divestiture by ATMI of all or any part of the assets of NOW acquired in the
Merger. There can be no assurance that a challenge to the Merger on antitrust
grounds will not be made or, if such a challenge is made, that it would not be
successful. See "THE MERGER--Regulatory Approvals."
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<PAGE>
Business Pending the Merger. The Merger Agreement provides that, until the
Closing, NOW will conduct its business only in the usual and ordinary manner
and will use its reasonable best efforts to preserve the business organization
and assets of NOW and to keep available the services of its current employees
and not to impair relationships with suppliers, customers and others having
business relations. NOW also agreed to certain restrictions and limitations
with respect to the operation of its business prior to the Closing. See "THE
MERGER--Business Pending the Merger."
Termination. The Merger Agreement may be terminated at any time prior to the
Effective Time, whether before or after approval of the Merger Agreement by the
NOW Shareholders, by mutual written consent or by either party under certain
circumstances. If either party terminates the Merger Agreement for certain
reasons specified in the Merger Agreement, the party creating the reason for
termination is obligated to pay the other party a fee of $2.2 million. See "THE
MERGER--Termination."
Interests of Certain Persons in the Merger. In considering the
recommendations of the NOW Board of Directors with respect to the Merger
Agreement and the transactions contemplated thereby, the NOW Shareholders
should be aware that certain executive officers and directors of NOW have
interests in the Merger that are in addition to the interests of the NOW
Shareholders generally. In particular, the obligation of ATMI to consummate the
Merger is subject to the condition that Terry J. Nagel, Michael L. Osgar and
Joshua P. Waldman enter into two-year employment agreements with NOW. The
employment agreements provide for annual salaries to Messrs. Nagel, Osgar and
Waldman of $170,000, $120,000 and $115,000, respectively, subject to certain
adjustments. See "THE MERGER--Employment Agreements."
Accounting Treatment. It is intended that the Merger will be accounted for as
a pooling of interests under generally accepted accounting principles ("GAAP").
It is a condition to the consummation of the Merger that ATMI shall have
received a letter from Ernst & Young LLP, ATMI's independent auditors, as to
the appropriateness of pooling-of-interests accounting for the Merger under
Accounting Principles Board Opinion No. 16 and that NOW shall have received a
letter from Deloitte & Touche LLP, NOW's independent auditors, stating that it
knows of nothing with respect to NOW that would prohibit ATMI from accounting
for the Merger as a pooling of interests. See "THE MERGER--Accounting
Treatment."
Federal Income Tax Consequences. A condition to the consummation of the
Merger is the receipt by ATMI of an opinion of Ernst & Young LLP substantially
to the effect that the Merger will constitute a tax-free reorganization. If the
Merger so qualifies, no gain or loss will be recognized by the NOW Shareholders
upon their receipt of ATMI Common Stock in exchange for the NOW Common Stock
except with respect to payment in lieu of fractional shares. The NOW
Shareholders are urged to consult their own personal tax and financial advisors
concerning the federal income tax consequences of the Merger, as well as any
applicable state, local, foreign or other tax consequences, based upon such
shareholder's own particular facts and circumstances. See "THE MERGER--Certain
Federal Income Tax Consequences."
Resale Restrictions. All shares of ATMI Common Stock received by the NOW
Shareholders in the Merger (the "Merger Shares") will be freely transferable,
except that Merger Shares received by persons who are deemed to be "affiliates"
(as such term is defined under the Securities Act) of NOW immediately prior to
the consummation of the Merger may be resold by them only as permitted by the
Securities Act and Rule 145 promulgated thereunder and other applicable
securities laws. Generally, all Merger Shares received by such "affiliates" may
be sold subject to certain volume and manner of sale limitations. See "THE
MERGER--Resale of Merger Shares."
Differences Between Rights of Holders of ATMI Common Stock and NOW Common
Stock. Stockholders of a public company, such as ATMI, in contrast to
stockholders of a private company, such as NOW, have access to public
information in periodic reports about the company and have a trading market for
their shares. In contrast to NOW, ATMI also has a classified Board of
Directors, and directors may only be
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<PAGE>
removed for cause. In addition, stockholders of ATMI may not act by written
consent nor call meetings of stockholders. See "DESCRIPTION OF CAPITAL STOCK OF
ATMI" and "COMPARISON OF ATMI COMMON STOCK AND NOW COMMON STOCK."
Nasdaq Listing. ATMI will file a Notification for the Listing of Additional
Shares prior to the Closing Date with the Nasdaq National Market relating to
the shares of ATMI Common Stock to be issued in the Merger to the NOW
Shareholders. Although no assurance can be given that the Nasdaq National
Market will accept the shares of ATMI Common Stock to be so issued for listing,
ATMI anticipates that such shares of ATMI Common Stock will be listed. It is a
condition to the consummation of the Merger that such shares of ATMI Common
Stock be listed on the Nasdaq National Market prior to the Effective Time
subject to notice of issuance. See "THE MERGER--Nasdaq Listing."
7
<PAGE>
RISK FACTORS
In addition to the other information in this Proxy Statement/Prospectus, the
NOW Shareholders should consider carefully the following factors in evaluating
the Merger.
The statements contained in this Proxy Statement/Prospectus which are not
historical are "forward-looking statements" within the meaning of Section 27A
of the Securities Act. Examples of forward-looking statements include, without
limitation, statements by ATMI and NOW regarding financial projections,
expectations for demand and sales of new and existing products, market and
technology opportunities, business strategies, business opportunities,
objectives of management for future operations and semiconductor industry and
market segment growth. All forward-looking statements involve risks and
uncertainties. Actual results may differ materially from those discussed in
the forward-looking statements as a result of certain factors including, but
not limited to, changes in the pattern of semiconductor industry growth, the
markets for or customer interest in the products of ATMI or NOW, product and
market competition, delays or problems in the development and
commercialization of products, technological changes affecting the
competencies of ATMI or NOW and those set forth below and elsewhere in this
Proxy Statement/Prospectus. The cautionary statements made in this Proxy
Statement/Prospectus should be read as being applicable to all related
forward-looking statements wherever they appear in this Proxy
Statement/Prospectus.
RISK FACTORS RELATED TO ATMI
Potential Fluctuations in Quarterly Results. ATMI's quarterly operating
results have varied significantly as a result of a number of factors,
including the timing of significant orders from, and shipments to, customers,
the timing and market acceptance of new products, the timing and amount of
bonus and incentive payment to employees, the effect of taxes and the impact
of various non-recurring expenses. ATMI expects that its operating results
will fluctuate in the future as a result of these and other factors including
the demand for semiconductors in general, cyclicality in the market for
semiconductor manufacturing equipment, ATMI's product mix, ATMI's success in
developing, introducing and shipping new products and the level of competition
encountered in its markets. ATMI's operating results for any quarter,
therefore, are not necessarily indicative of results for any future period.
Due to the foregoing factors, it is possible that in future quarters ATMI's
operating results will be below the expectations of public market analysts and
investors. In such event, the price of the Common Stock would likely be
materially adversely affected. In addition, in recent years, the stock market
in general has experienced extreme price and volume fluctuations, which have
particularly affected the market price of many technology companies and which
have often been unrelated to the operating performance of those companies.
These broad market fluctuations may also adversely affect the market price of
ATMI's Common Stock. See "MARKET AND MARKET PRICES" and "MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS--
ATMI."
Risks Associated with Acquisitions. In October 1997, ATMI acquired through
pooling-of-interests transactions all of the issued and outstanding securities
of the ADCS Group and LSL. There can be no assurance that ATMI will be able to
integrate successfully the information technology infrastructure,
administration, management and service operations of ATMI, ATM, the ADCS Group
and LSL in general, or integrate the operations of ATMI's former NovaMOS
division and the ADCS Group or the operations of LSL into ATMI's Epitronics
division in particular, that such integration will occur in a timely and
efficient manner, if at all, or that the uncertainty associated with such
integration will not result in the loss of customers or key employees. The
successful combination of the various companies will require, among other
things, the timely integration of such companies' respective product and
service offerings and coordination of their respective sales and marketing,
research and development, and finance and administrative activities. The
difficulties of such integration may be increased by the necessity of
coordinating geographically separated organizations. The failure to achieve
such integration in a timely, effective or efficient manner could have a
material adverse effect on the business, operating results and financial
condition of ATMI. The completion of the integration of the operations of the
ADCS Group and LSL will require the dedication of management resources and
8
<PAGE>
temporarily distract attention from the day-to-day business of ATMI, which
could materially adversely affect ATMI's business, operating results and
financial condition. There can be no assurance that ATMI will not incur
additional charges in subsequent quarters to reflect costs associated with the
acquisitions.
If appropriate opportunities present themselves, ATMI intends to acquire
other businesses, technology or product lines that ATMI believes are
strategic, although ATMI currently has no understandings, commitments or
agreements with respect to any acquisition other than the Merger. There can be
no assurance that ATMI will be able to successfully identify, negotiate or
finance such acquisitions, or to integrate such acquisitions with its current
business. The process of integrating an acquired business, technology or
product into ATMI may result in unforeseen operating difficulties and
expenditures and may absorb significant management attention that would
otherwise be available for ongoing development of ATMI's business. Moreover,
there can be no assurance that the anticipated benefits of any acquisition
will be realized. Acquisitions could result in potentially dilutive issuances
of equity securities, the incurrence of debt and contingent liabilities and
amortization expenses related to goodwill and other intangible assets, which
could materially adversely affect ATMI's business, operating results and
financial condition. Any such future growth and any acquisitions of other
businesses, technologies or products may require ATMI to obtain additional
equity or debt financing, which may not be available or may be dilutive.
Risks Associated with Expansion of Operations and Management of Growth. ATMI
has recently experienced a period of rapid growth and intends to continue to
expand its business. Because of the level of scientific and management
expertise necessary to support continued growth, ATMI's future success will
depend in part upon its ability to attract and retain highly skilled
scientific, technical, managerial and marketing personnel. Competition for
such personnel in the semiconductor industry is intense, and the companies
with which ATMI competes are often larger and more established than ATMI.
Therefore, there can be no assurance that ATMI will be successful in
attracting and retaining qualified personnel. In addition, ATMI's expansion
may also significantly strain operational, management, financial, sales and
marketing and other resources. To manage growth effectively, ATMI must
continue to enhance its information technology infrastructure, systems and
controls and successfully expand, train and manage its employee base. There
can be no assurance that ATMI will be able to manage this expansion
effectively, including providing satisfactory levels of customer service and
technical support. Any failure to manage ATMI's growth properly could have a
material adverse effect on ATMI's business, operating results and financial
condition. See "BUSINESS OF ATMI--Businesses and Products" and "MANAGEMENT OF
ATMI."
Dependence on the Semiconductor Market. Substantially all of ATMI's sales
are to customers in the worldwide semiconductor industry. ATMI's results of
operations, therefore, are materially dependent upon economic and business
conditions in the semiconductor industry. The semiconductor industry has
experienced significant growth in recent years; however, historically, the
semiconductor industry, and the semiconductor equipment industry in
particular, have been highly cyclical and have experienced periods of
overcapacity at various times, resulting in significantly reduced demand for
semiconductor materials, capital equipment and wafer processing services.
Should an industry downturn occur, it would adversely affect ATMI's business,
operating results and financial condition. Furthermore, ATMI must continue to
maintain a satisfactory level of research and development expenditures and to
invest in service and sales activities, even in periods of reduced demand. See
"BUSINESS OF ATMI--Industry Background."
Dependence on Sales Outside the United States; Risks Associated with Markets
Outside the United States. In the years ended December 31, 1995, 1996 and 1997
and the three months ended March 31, 1998, sales outside the United States
accounted for 25.5%, 28.9%, 21.9% and 26.3%, respectively, of ATMI's revenues.
ATMI anticipates that, in the future, sales outside the United States will
continue to account for a significant percentage of its revenues. A
significant portion of ATMI's revenues will therefore be subject to risks
associated with sales in markets outside the United States, including export
controls, unexpected changes in legal and regulatory requirements and policy
changes affecting the markets for semiconductor technology, changes in
tariffs, exchange rates and other barriers, political and economic
instability, difficulties in accounts
9
<PAGE>
receivable collection, difficulties in managing resellers or representatives,
difficulties in staffing and managing foreign operations, difficulties in
protecting ATMI's intellectual property outside the United States, seasonality
of sales and potentially adverse tax consequences. There can be no assurance
that such factors will not have a material adverse effect on ATMI's future
sales outside the United States and, consequently, ATMI's business, operating
results and financial condition. Although ATMI's sales to date have been
predominantly denominated in U.S. dollars, the value of the U.S. dollar in
relation to other currencies may also adversely affect ATMI's sales to
customers outside the United States. In addition, expenses and revenues of
ADCS-Korea Co., Ltd. ("ADCS-Korea") are denominated in South Korean currency
and hence are exposed to risks customarily associated with currency
fluctuations. Any significant volatility in South Korean currency, as it
relates to invested capital in ADCS-Korea, could have a material adverse
impact on ATMI's stockholders' equity as reflected in currency translation
adjustments in ATMI's financial statements. ATMI does not hedge its exposure
with respect to such fluctuations. To the extent that ATMI expands its
international operations or changes its pricing practices to denominate prices
in other currencies, ATMI will be exposed to increased risks of currency
fluctuations. Certain of ATMI's divisions conduct a material portion of their
activities in Asia, including South Korea, Taiwan and Japan, and there can be
no assurance that volatile economic conditions in the region or of those
countries, or instability in the currency of such countries or in such
countries' capital markets, would not have a material adverse effect on ATMI's
business, operating results and financial condition. See "MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS--
ATMI--Operations Outside the United States" and "BUSINESS OF ATMI--Customers,
Sales and Marketing."
Dependence on Particular Customers. A significant portion of ATMI's revenues
has been derived from particular customers. For the years ended December 31,
1995, 1996 and 1997 and the three months ended March 31, 1998, sales to ATMI's
five top customers totaled approximately 26.0%, 23.8%, 21.0% and 18.4%,
respectively, of all sales during such periods. ATMI's relationships with
these customers are subject to various risks, including termination, reduction
or modification in the event of changes in the customers' requirements or
budgetary constraints, risks of potential disclosure of ATMI's confidential
information to third parties and the failure or inability of a customer to
perform its prime contract with its customer. There can be no assurance that
such customers will continue to purchase ATMI's products or utilize its
services at the same levels as in the past. There can be no assurance that
ATMI's major customers will not secure alternative sources for products or
services. A reduction in, or discontinuance of, these customers' purchases
from ATMI would have a material adverse effect on ATMI's business, operating
results and financial condition. See "BUSINESS OF ATMI--Customers, Sales and
Marketing."
Rapid Technological Change and Competing Technologies. Semiconductor
technology is characterized by rapid change. With such rapid changes likely to
occur in the development of new semiconducting materials and processes, the
future success of ATMI will depend in large part upon its ability to keep pace
with such advances. There can be no assurance that ATMI will be able to
develop technologies in response to such changes. ATMI is evaluating a number
of new opportunities to commercialize its core technology including the
commercialization of smart card devices employing ATMI's advanced dielectric
materials technology. There can be no assurance that any such opportunities
will lead to commercial products or that any such products will be introduced
on a timely basis or be competitive. There can also be no assurance that
ATMI's current products or development efforts will not be rendered obsolete
by technological advances of others, or that other equipment or materials will
not prove more advantageous to customers in the markets ATMI serves. In
addition, certain of ATMI's current technologies face competition from other
existing technologies. There can be no assurance that existing or newly-
developed technologies or materials will not become superior to or more cost-
effective than ATMI's current technologies and products. There also can be no
assurance that ATMI will develop successful technologies and products in
response to future demands of the industry. See "BUSINESS OF ATMI--Businesses
and Products."
Competition. The markets for semiconductor thin film materials and delivery
systems, environmental equipment and epitaxial deposition services are
intensely competitive. There are a number of domestic and
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international companies engaged in commercial activities in the markets ATMI
serves. Many of these companies have substantially greater financial, research
and development, manufacturing and marketing resources than ATMI. In addition,
as this industry evolves, other competitors may emerge. To remain competitive,
ATMI must continue to invest in and focus upon research and development and
product and process innovation. There can be no assurance that ATMI will be
successful in such efforts. ATMI believes that its ability to compete
successfully depends on a number of factors including price, technical
capabilities, quality, customers service and the ability to provide full
market-basket solutions to customers that are increasingly seeking to
streamline their vendor relationships. There can be no assurance that ATMI
will be able to compete successfully in the future. See "BUSINESS OF ATMI--
Competition."
Patents and Protection of Proprietary Technology. ATMI's ability to compete
effectively with other companies will depend, in part, on the ability of ATMI
to maintain the proprietary nature of its technology. Although ATMI has been
awarded, has filed applications for, or has been licensed under, numerous
patents in the United States and other countries, there can be no assurance
concerning the degree of protection offered by these patents or the likelihood
that pending patents will be issued. There can be no assurance that
competitors both within and outside the United States, many of which have
substantially greater resources and have made substantial investments in
competing technologies, will not apply for and obtain patents that will
prevent, limit or interfere with ATMI's ability to make and sell its products.
There can also be no assurance that competitors will not intentionally
infringe ATMI's patents. The defense and prosecution of patent suits are both
costly and time-consuming, even if the outcome is favorable to ATMI. Outside
the United States, the expenses associated with such proceedings can be
prohibitive. In addition, there is an inherent unpredictability in obtaining
and enforcing patents outside the United States. An adverse outcome in the
defense of a patent suit could subject ATMI to significant liabilities to
third parties or require ATMI to license rights from third parties or to cease
selling its products. Although ATMI believes that its products and other
proprietary rights do not infringe the proprietary rights of third parties,
there can be no assurance that third parties will not assert infringement
claims against ATMI in the future. ATMI also relies on unpatented proprietary
technology, and there can be no assurance that others may not independently
develop the same or similar technology or otherwise obtain access to ATMI's
proprietary technology. If ATMI is unable to maintain the proprietary nature
of its technologies, ATMI's business could be materially adversely affected.
See "BUSINESS OF ATMI--Patents and Proprietary Rights."
Limited Indemnification. The former securityholders of the ADCS Group and
LSL have agreed to indemnify ATMI and certain of its subsidiaries and
affiliates from and against certain losses arising out of breaches of
representations and warranties made by the respective securityholders and for
certain tax matters. As security for these obligations, the former
securityholders of the ADCS Group and LSL have delivered into escrow certain
shares of ATMI's Common Stock they received in connection with the
acquisitions by ATMI of the ADCS Group and LSL. ATMI and the former
securityholders of the ADCS Group have divergent views on any potential
exposures related to the various tax matters for which there will be
indemnification. The former securityholders of the ADCS Group believe that any
exposure would be immaterial, and ATMI believes that any successful challenge
to the tax matters is not probable. While the possible exposures, if any, are
difficult to quantify, ATMI believes that, regardless of the probability that
liabilities arise, the potential exposures could range from $0 to $22.0
million depending on the tax matter. The current value of the shares escrowed
by the former securityholders of the ADCS Group provides indemnity towards the
upper range of the potential exposures. Nevertheless, if any of the
contingencies were to mature into actual liabilities, there could be a
material adverse effect on ATMI and its operating results and financial
condition. Under the respective agreements, the parties have agreed to time
limitations during which indemnification may be sought and certain thresholds
which must be reached before indemnification obligations arise. A possibility
exists that the losses could exceed the value of the shares held in escrow
because the shares held in escrow are insufficient in number or, due to market
conditions and potential stock price volatility, in value to adequately
compensate ATMI for any losses which are the subject of the indemnification.
Furthermore, a possibility exists that the losses which are the subject of the
indemnification will be incurred during periods other than those for which
claims may be made with respect to such losses. Consequently, losses for which
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there is insufficient indemnification could have a material adverse effect on
ATMI's business, operating results and financial condition. See "CERTAIN
TRANSACTIONS--ATMI."
Risks Associated with New Product Development and Commercialization. ATMI
believes that its future success will depend, in part, upon its ability to
enhance its existing products and processes and to develop and commercialize
new products and processes. ATMI expects to continue to make significant
investment in research and development. There can be no assurance that ATMI
will be able to improve its existing products and process technologies or to
develop and market new products and technologies. Further, there can be no
assurance that ATMI's development of new or enhanced products will be cost-
effective or introduced in a timely manner or accepted in the marketplace.
Failure by ATMI to develop or introduce enhanced and new products and
processes in a timely manner may have a material adverse effect on ATMI's
business, operating results and financial condition. See "BUSINESS OF ATMI--
Businesses and Products."
Risks Associated with Manufacturing Operations. The manufacture of
semiconductors and related materials and equipment involves highly complex
manufacturing processes. ATMI has established manufacturing facilities for
many of its products, including semiconductor environmental equipment, thin
film materials, delivery systems, substrates and epitaxial wafers. ATMI has
also established a pilot facility to fabricate, test and assemble
semiconductor thin films, devices and circuits. Any prolonged disruption in
ATMI's manufacturing operations, whether due to technical or labor
difficulties, delay or inability to obtain sufficient quantities of certain
production input or equipment, destruction or damage to any facility or other
reasons, could have a material adverse effect on ATMI's business, operating
results and financial condition. ATMI is dependent upon a limited number of
suppliers to provide it with sufficient quantities of certain materials and
equipment used in its processes. There can be no assurance that ATMI can
obtain the quantities of materials and equipment it requires. To be
financially successful, ATMI must manufacture its products in commercial
quantities, at acceptable costs and on a timely basis and, accordingly, may be
required to expand certain of its facilities. There can be no assurance that
ATMI will be able to manufacture such products in high volume. ATMI has
limited experience in manufacturing certain of its products, and it may incur
significant start-up costs and unforeseen expenses in connection with attempts
to manufacture these products and expand its facilities. See "BUSINESS OF
ATMI--Manufacturing."
Product Liability Risk; Limited Insurance Coverage. The manufacture and sale
of ATMI's products, which include thin film and other toxic materials, involve
the risk of product liability claims. In addition, a failure of one of ATMI's
products at a customer site could interrupt the business operations of such
customer. There can be no assurance that ATMI's existing insurance coverage
limits are adequate to protect ATMI from any liabilities that it might incur
in connection with the manufacture and sale of its products. A successful
product liability claim or series of product liability claims brought against
ATMI in excess of its insurance coverage could have a material adverse effect
on ATMI's business, operating results and financial condition.
Environmental Regulations. ATMI uses, generates and discharges toxic,
volatile or otherwise hazardous chemicals and wastes in its manufacturing,
processing and research and development activities. Therefore, ATMI is subject
to a variety of federal, state and local governmental regulations related to
the storage, use and disposal of these materials. ATMI believes that it has,
or is seeking to obtain, all the permits necessary to conduct its business.
However, the failure to comply with present or future laws, rules or
regulations or the failure of ATMI to obtain the permits it is currently
seeking could result in fines or other liabilities being imposed on ATMI,
suspension of production or a cessation of operations. While ATMI believes
that it has properly handled its hazardous materials and wastes and has not
contributed to any on-site contamination or environmental condition at any of
its premises, the various premises, particularly the premises in Danbury,
Connecticut, may have been contaminated prior to ATMI's occupancy. ATMI is not
aware of any environmental investigation, proceeding or action by federal or
state agencies involving these premises. However, under certain federal and
state statutes and regulations, a government agency may seek to recover its
response costs and/or require future remedial measures from both operators and
owners of property where releases of hazardous substances have occurred or are
ongoing. The prior occupant of the Danbury, Connecticut premises has agreed to
indemnify ATMI for remediation costs in connection with any pre-
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existing, on-site contamination or environmental condition. However, there can
be no assurance that this indemnification will prove adequate to cover any
liability imposed on ATMI related to the environmental condition of the
premises or the cost of defending an environmental action, either of which
could be substantial. ATMI's activities may also result in its being subject
to additional regulation. Such regulations could require ATMI to acquire
significant additional equipment or to incur other substantial expenses to
comply with environmental laws, rules or regulations. Any failure by ATMI to
control the use of, or to restrict adequately the discharge of, hazardous
substances could subject it to substantial financial liabilities and could
have a material adverse effect on ATMI's business, operating results and
financial condition. See "BUSINESS OF ATMI--Environmental Regulation."
Concentration of Ownership. As of the date of this Proxy
Statement/Prospectus, the executive officers and directors of ATMI as a group
beneficially own approximately 26.6% of the outstanding shares of ATMI Common
Stock. Individually, Stephen H. Siegele, a director of ATMI and the former
principal securityholder of the ADCS Group, and Lamonte H. Lawrence, a
director of ATMI and the former principal stockholder of LSL, beneficially own
approximately 12.4% and 10.1% of the outstanding shares of ATMI's Common
Stock, respectively. As a result of their stock ownership, the current
executive officers and directors of ATMI as a group, and each of Mr. Siegele
and Mr. Lawrence individually, are able to exert significant influence over
all matters requiring stockholder approval, including the election of
directors and the approval of significant corporate transactions. This
concentration of ownership in such persons could also have the effect of
making it more difficult for a third party to acquire, or could discourage a
third party from attempting to acquire, control of ATMI and, therefore, may
limit the price that certain investors might be willing to pay in the future
for shares of ATMI's Common Stock. See "PRINCIPAL ATMI STOCKHOLDERS AND STOCK
OWNERSHIP OF ATMI MANAGEMENT."
Risks Associated with ATMI Corporate Structure. While ATMI, Inc. performs
substantial executive, financial and administrative functions for ATMI as a
whole, ATMI, Inc. is a holding company which conducts no commercial business
operations of its own. The principal asset of ATMI, Inc. is the capital stock
of its operating subsidiaries. All of ATMI's business operations are conducted
through its operating subsidiaries, and, as a result, ATMI, Inc. is dependent
upon the earnings, cash flows, dividends and distributions from such
subsidiaries to pay its expenses and meet its obligations and to pay any cash
dividends or distributions on ATMI Common Stock that may be authorized by the
ATMI Board of Directors. There can be no assurance that ATMI's operating
subsidiaries will generate sufficient earnings and cash flows to pay dividends
or distribute funds to ATMI, Inc. to enable it to meet its obligations and to
pay its expenses. Furthermore, certain financing agreements of ATMI's
subsidiaries contain limitations or prohibitions on the payment of dividends
without the lender's consent or in conjunction with a subsidiary's failure to
comply with various financial covenants.
Lack of Dividends. ATMI has never declared or paid any cash dividends on its
capital stock. ATMI currently intends to retain all available earnings, if
any, for use in its business and does not anticipate paying any cash dividends
in the foreseeable future. Certain financing agreements of ATMI's subsidiaries
contain limitations or prohibitions on the payment of dividends without the
lender's consent or in conjunction with a subsidiary's failure to comply with
various financial covenants.
Anti-Takeover Effect of Certain Charter and Bylaw Provisions; Possible
Issuance of Preferred Stock. ATMI's Certificate of Incorporation and Bylaws
contain provisions that may discourage acquisition bids or make it more
difficult for a third party to acquire ATMI. These provisions could limit the
price that certain investors might be willing to pay in the future for shares
of ATMI's Common Stock. In addition, shares of Preferred Stock may be issued
in the future without further stockholder approval, and upon such terms and
conditions, and having such rights, privileges and preferences, as the Board
of Directors may determine. The rights of the holders of ATMI's Common Stock
will be subject to, and may be adversely affected by, the rights of the
holders of any Preferred Stock that may be issued in the future. ATMI has no
present plans to issue any shares of Preferred Stock. However, the issuance of
Preferred Stock, while providing desirable
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flexibility in connection with possible acquisitions and other corporate
purposes, could have the effect of making it more difficult for a third party
to acquire, or could discourage a third party from attempting to acquire, a
majority of the outstanding voting stock of ATMI. See "DESCRIPTION OF CAPITAL
STOCK OF ATMI--Preferred Stock" and "DESCRIPTION OF CAPITAL STOCK OF ATMI--
Delaware Law and Certain Charter and Bylaw Provisions."
RISK FACTORS RELATED TO NOW
Dependence on Semiconductor Market. A significant portion of NOW's sales are
to customers in the semiconductor industry. NOW's results of operations,
therefore, are materially dependent upon economic and business conditions in
the semiconductor industry. Although the semiconductor industry has
experienced significant growth in recent years, the industry is subject to
periodic downturns such as those which occurred in 1996 and 1997 and which are
occurring at the present time. While NOW's revenue growth has continued, its
revenues have been adversely affected by current market conditions in the
semiconductor industry. Because of these adverse market conditions, NOW's
financial results are expected to fluctuate in the near term. There can be no
assurance that such growth will continue in the future or that downturns in
the semiconductor industry will not have a material adverse effect on NOW's
business, operating results, cash flows and financial condition. See "BUSINESS
OF NOW--Markets."
Development Stage of Certain Product Lines; Product
Commercialization. Although NOW currently offers commercial products serving
semiconductor materials and equipment market segments, certain of its products
are in the early stages of development, testing and commercialization. Any
delays in development of these products could have an adverse effect on NOW's
financial and competitive positions. There can be no assurance that any
products under development will be technically or commercially successful, or
that NOW will be able to manufacture adequate quantities of its products at
commercially acceptable cost levels or on a timely basis.
Dependence on Sales Outside the United States; Risks Associated with Markets
Outside the United States. In the fiscal years ended March 31, 1996 and 1997
and the nine months ended December 31, 1997, sales in markets outside the
United States accounted for 34%, 43% and 38%, respectively, of NOW's sales.
NOW anticipates that, in the future, sales in markets outside the United
States will continue to account for a significant percentage of its sales.
Therefore, a significant portion of NOW's sales will be subject to risks
associated with sales in markets outside the United States, including export
controls, unexpected changes in legal and regulatory requirements and policy
changes affecting the markets for semiconductor technology, changes in
tariffs, exchange rates and other barriers, political and economic
instability, difficulties in accounts receivable collection, difficulties in
managing resellers or representatives, difficulties in staffing and managing
operations outside the United States, difficulties in protecting NOW's
intellectual property outside the United States, seasonality of sales and
potentially adverse tax consequences. There can be no assurance that such
factors will not have a material adverse effect on NOW's future international
sales and, consequently, NOW's business, operating results and financial
condition. Although NOW's sales to date have been denominated in United States
dollars, the value of the United States dollar in relation to other currencies
may also adversely affect NOW's sales to customers outside the United States.
To the extent that NOW expands its international operations or changes its
pricing practices to denominate prices in other currencies, NOW will be
exposed to increased risks of currency fluctuations. See "MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS--
NOW--Operations Outside the United States."
Product Liability Risk; Limited Insurance Coverage. The manufacture and sale
of NOW's products involve the risk of product liability claims. In addition, a
failure of one of NOW's products at a customer site could interrupt the
business operations of such customer. There can be no assurance that NOW's
existing insurance coverage limits are adequate to protect NOW from any
liabilities that it might incur in connection with the manufacture and sale of
its products. A successful product liability claim or series of product
liability claims brought against NOW in excess of its insurance coverage could
have a material adverse effect on NOW's business, operating results, cash
flows and financial condition.
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Competition. The markets for semiconductor devices, related materials and
manufacturing equipment are intensely competitive. There are a number of
domestic and international companies engaged in commercial activities in the
market niches served by NOW, many of whom have substantially greater
financial, research and development, manufacturing and marketing resources
than NOW. In addition, as this industry evolves, other competitors will likely
emerge. See "BUSINESS OF NOW--Competition."
Rapid Technological Change. Semiconductor technology is characterized by
rapid technological changes. The future success of NOW will depend in large
part on its ability to keep pace with advancing semiconductor technology.
Rapid changes are likely to occur in the development of new semiconducting
materials and processes, and in the chemicals and equipment required to
support those processes. There can be no assurance that NOW will be able to
develop technologies in response to such changes. There can be no assurance
that NOW's development efforts will not be rendered obsolete by the
technological advances of others, or that other equipment or chemical delivery
systems will not prove more advantageous to customers in the market niches NOW
serves.
Dependence on Key Personnel. NOW is dependent upon certain key management
personnel, including its President, Terry J. Nagel, its Vice President of
Technology, Joshua P. Waldman, and its Vice President of Engineering, Michael
L. Osgar. The loss of the services of these or any other key individuals could
have a material adverse effect on NOW. As a condition to closing of the Merger
Agreement, each of Messrs. Nagel, Osgar and Waldman will enter into a two-year
employment and non-competition agreement with ATMI. See "THE MERGER--
Employment Agreements."
Patents and Proprietary Rights. NOW's ability to compete effectively with
other companies will depend, in part, on the ability of NOW to maintain the
proprietary nature of its technology. Although NOW has been awarded or has
filed applications for numerous patents in the United States and other
countries, there can be no assurance as to the degree of protection offered by
these issued patents or as to the likelihood that pending patents will be
issued. There can be no assurance that competitors in both the United States
and other countries, many of which have substantially greater resources and
have made substantial investments in competing technologies, have not applied
for or obtained or will not apply for and obtain patents that will prevent,
limit or interfere with NOW's ability to make and sell its products.
Furthermore, there can also be no assurance that competitors will not
intentionally infringe NOW's patents. The defense and prosecution of patent
suits are both costly and time-consuming, even if the outcome is favorable to
NOW. Outside the United States, the expenses associated with such proceedings
can be prohibitive and obtaining and enforcing patents outside the United
States is inherently unpredictable. An adverse outcome in the defense of a
patent suit could require disputed rights to be licensed from third parties or
require NOW to cease selling its products. Although NOW believes that its
products and other proprietary rights do not infringe the proprietary rights
of third parties, there can be no assurance that third parties will not assert
infringement claims against NOW in the future. NOW also relies on unpatented
proprietary technology, and there can be no assurance that others may not
independently develop the same or similar technology or otherwise obtain
access to NOW's proprietary technology. To protect its rights in these areas,
NOW requires employees and consultants to enter into confidentiality
agreements, but there can be no assurance that these agreements will provide
meaningful protection for NOW's trade secrets, know-how or other proprietary
information in the event of any unauthorized use, misappropriation or
disclosure of such trade secrets, know-how or other proprietary information.
If NOW is unable to maintain the proprietary nature of its technologies, its
business, operating results, cash flows and financial condition could be
materially adversely affected. See "BUSINESS OF NOW--Patents."
Environmental Regulations. NOW uses, generates and discharges toxic,
volatile or otherwise hazardous chemicals and wastes in its research and
development and manufacturing activities. Therefore, NOW is subject to a
variety of federal, state and local governmental regulations related to the
storage, use and disposal of these materials. NOW believes that it has all the
permits necessary to conduct its business; however, the failure to comply with
present or future regulations could result in fines being imposed on NOW,
suspension of production or a cessation of operations. While NOW believes that
it has properly handled its hazardous materials and wastes and has not
contributed to any on-site contamination or environmental condition at its
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premises in Bloomington, Minnesota, these premises may have been contaminated
prior to NOW's occupancy. NOW is not aware of any environmental investigation,
proceeding or action by federal or state agencies involving these premises.
Under certain federal and state statutes and regulations, a government agency
may seek recovery and response costs from both operators and owners of
property where releases of hazardous substances have occurred or are ongoing.
NOW's activities may also result in its being subject to additional
regulation. Such regulations could require NOW to acquire significant
additional equipment or to incur other substantial expenses to comply with
environmental regulations. Any failure by NOW to control the use of, or to
restrict adequately the discharge of, hazardous substances could subject it to
substantial financial liabilities and could have a material adverse effect on
NOW's business, operating results, cash flows and financial condition.
Lack of Dividends. NOW has never paid cash dividends on its equity
securities. If the Merger is not consummated, NOW intends to retain all
available earnings, if any, generated by its operations for development and
growth of its business and does not intend to pay cash dividends in the
foreseeable future.
RISK FACTORS RELATED TO THE MERGER
Integration of Business Operations. ATMI and NOW have entered into the
Merger Agreement with the expectation that the Merger will result in
beneficial synergies for the combined companies. The Merger may affect ATMI's
ability to integrate and manage its overall business effectively. There can be
no assurance that ATMI will be able to integrate successfully the information
technology infrastructure, administrative, management and service operations
of ATMI and NOW, that such integration will occur in a timely and efficient
manner, if at all, or that the uncertainty associated with such integration
will not result in the loss of customers or key employees. The successful
combination of ATMI and NOW will require, among other things, the timely
integration of their respective product and service offerings and coordination
of their respective sales and marketing, research and development, and finance
and administrative activities. The difficulties of such integration may be
increased by the necessity of coordinating geographically separated
organizations. The failure to achieve such integration in a timely, effective
or efficient manner could have a material adverse effect on the business,
operating results and financial condition of ATMI. The integration of the
operations of NOW following the Merger will require the dedication of
management resources and temporarily distract attention from the day-to-day
business of ATMI, which could temporarily adversely affect ATMI's business and
operating results. There can be no assurance that ATMI will not incur
additional charges in subsequent quarters to reflect costs associated with the
Merger or that management will be successful in its efforts to integrate the
operations of ATMI and NOW.
Lack of Fairness Opinion. NOW did not seek an opinion from BT Alex. Brown
Incorporated ("BT Alex. Brown"), its investment banker, as to the fairness of
the Merger to the NOW Shareholders from a financial point of view. The NOW
Board of Directors made the determination not to incur the extensive cost of a
fairness opinion for the following reasons: (i) the sale process conducted by
BT Alex. Brown was extensive, and eighteen potential acquirers were solicited
to make bids; (ii) the price agreed to by ATMI was within the financial
parameters set by NOW's management at the outset of the sale process; and
(iii) based on its experience, the NOW Board of Directors determined that the
terms of the Merger were fair to NOW and its shareholders. Without a written
fairness opinion, NOW Shareholders must rely on the determination of the NOW
Board of Directors, who are not experts in transaction evaluations, that the
Merger is fair to the NOW Shareholders. Therefore, the NOW Shareholders have
less assurance that the Merger is in fact fair to them from a financial point
of view. See "THE MERGER--NOW's Reasons for the Merger."
Substantial Expenses Resulting from the Merger. ATMI and NOW expect to incur
costs and expenses of approximately $2.0 million in connection with the
Merger, which will be reflected in the financial statements of ATMI in the
period that the Merger is consummated. These costs will therefore negatively
impact operating results for the fiscal quarter in which the Merger is
consummated. Although ATMI and NOW do not believe that the costs will exceed
these estimates, there can be no assurance that these estimates are correct or
that unanticipated contingencies will not occur that will substantially
increase the costs of
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combining the operations of the companies or will result in a material adverse
effect on the operating results of the companies in future periods.
Amount of Common Stock Issuable Pursuant to the Merger. Upon consummation of
the Merger, each outstanding share of NOW Common Stock will be converted into
the right to receive a certain number of shares of ATMI Common Stock. The
Merger Agreement provides that the number of shares of ATMI Common Stock to be
issued to the NOW Shareholders pursuant to the Merger shall be determined by
the Exchange Ratio, which is based in part upon the market price of ATMI
Common Stock at the Effective Time, subject to certain minimum and maximum
values. The market price of ATMI Common Stock, however, has historically been
volatile. See "RISK FACTORS--Risk Factors Related to the Merger--Volatility of
Stock Prices." Consequently, there can be no assurance as to the market value
of ATMI Common Stock on the Closing Date. Accordingly while there is a maximum
and minimum number of shares of ATMI Common Stock that the NOW Shareholders
can receive in the Merger, the value of such shares will fluctuate and will be
based upon the market price of ATMI Common Stock. On June 12, 1998, the
closing price of ATMI Common Stock on the Nasdaq National Market was $16.25
per share.
Volatility of Stock Prices. ATMI Common Stock has experienced substantial
price volatility in response to actual or anticipated quarterly variations in
results of operations, announcements of technological innovations or new
products by ATMI or its competitors, developments related to patents or other
intellectual property rights, developments in the relationships with the
customers, suppliers or strategic partners of ATMI and other events or
factors. In addition, any shortfall or changes in revenue, gross margins,
earnings or other financial results from analysts' expectations could cause
the price of ATMI Common Stock to fluctuate significantly. In the most recent
ninety-day trading period, the price of ATMI Common Stock has experienced
significant volatility. Declines in the market price of ATMI Common Stock may
be linked to the volatility in the economic conditions in Asia and to the
decline in technology stocks, generally, and the softening of the
semiconductor market, specifically. In recent years, the stock market in
general has experienced extreme price and volume fluctuations, which have
particularly affected the market price of many technology companies and which
have often been unrelated to the operating performance of those companies.
These broad market fluctuations may also adversely affect the market price of
ATMI Common Stock. Changes in the market price of ATMI Common Stock will
impact the number of shares of ATMI Common Stock issuable pursuant to the
Merger as discussed in "RISK FACTORS--Risk Factors Related to the Merger--
Amount of Common Stock Issuable Pursuant to the Merger."
Potential Dilutive Effect to NOW Shareholders. ATMI believes that beneficial
synergies will result from the Merger; however, there can be no assurance that
such synergies will be achieved or that the combination of the businesses of
ATMI and NOW, even if achieved in an efficient, effective and timely manner,
will result in combined operating results and financial condition superior to
what would have been achieved by each company independently. The issuance of
ATMI Common Stock in connection with the Merger could reduce the market price
of ATMI Common Stock. In addition, there can be no assurance that the NOW
Shareholders would not achieve greater returns on investment if ATMI and NOW
were to remain independent companies.
Termination Fees; Foregone Business Opportunities. The Merger Agreement
provides for the payment of a $2.2 million termination fee if the agreement is
terminated under certain circumstances. Payment of any such fees are not
secured by the assets of any of the parties; therefore, there can be no
assurance that any party against whom a termination fee is assessed will have
sufficient funds or will otherwise be willing or able to pay. In the event
that the Merger Agreement is terminated under circumstances requiring the
payment of a termination fee, there can be no assurance that any $2.2 million
fee payable by any party would be sufficient to cover all of the costs and
expenses associated with pursuing the transaction or would be sufficient to
compensate for any business opportunities that any party to which such fee was
payable had to forego in favor of pursuing the Merger. See "THE MERGER--
Termination."
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Limited Scope of Tax Opinion. Ernst & Young LLP has delivered to ATMI an
opinion with respect to certain of the expected federal income tax
consequences of the Merger, a copy of which is attached as an exhibit to the
Registration Statement of which this Proxy Statement/Prospectus forms a part.
The tax opinion is limited to the matters set forth therein and does not
address any other issues, including but not limited to, any state, local,
foreign, consolidated return, employee benefit, and Section 382 of the
Internal Revenue Code of 1986, as amended (the "Code"), issues related to the
limitations on the utilization of net operating loss carryforwards, or
alternative minimum tax consequences to the parties to the Merger. The tax
opinion assumes that the NOW Common Stock will be held as a capital asset by
the holders thereof immediately prior to the Effective Time and does not
address the tax consequences that may be relevant to a particular shareholder
subject to special treatment under certain federal income tax laws. The NOW
Shareholders are advised to consult their own tax advisers as to the specific
tax consequences of the Merger to them, including the application and effect
of state, local and foreign income and other tax laws. See "THE MERGER--
Certain Federal Income Tax Consequences."
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<PAGE>
MARKET AND MARKET PRICES
The ATMI Common Stock has traded on the Nasdaq National Market under the
symbol ATMI since October 13, 1997, and prior thereto the Common Stock of ATM,
ATMI's predecessor, was traded on the Nasdaq National Market from November
1993 under the same symbol. The NOW Common Stock is not traded on any public
market. Set forth below are the closing prices per share of ATMI Common Stock
on the Nasdaq National Market, the estimated market value of NOW Common Stock
as determined by the NOW Board of Directors and the equivalent per share price
of NOW Common Stock on (i) February 19, 1998, the last business day preceding
public announcement of the Merger, and (ii) June 12, 1998:
<TABLE>
<CAPTION>
ESTIMATED
MARKET PRICE MARKET VALUE EQUIVALENT PER
PER SHARE PER SHARE OF SHARE PRICE OF
OF ATMI NOW NOW
DATE COMMON STOCK COMMON STOCK COMMON STOCK(1)
---- ------------ ------------ ---------------
<S> <C> <C> <C>
February 19, 1998................. $29.125 $10.00 $22.58
June 12, 1998..................... 16.25 14.06 14.06
</TABLE>
- ---------------------
(1) Based on an Exchange Ratio of .775380 and .865338 shares of ATMI Common
Stock for each share of NOW Common Stock at February 19, 1998 and June 5,
1998, respectively, which were the applicable Exchange Ratios at each
respective date.
The following table sets forth for the periods indicated the high and low
sales price for the ATMI Common Stock as reported on the Nasdaq National
Market:
<TABLE>
<CAPTION>
HIGH LOW
------ ------
<S> <C> <C>
FISCAL YEAR ENDED DECEMBER 31, 1996
1st Quarter................................................. $12.75 $ 9.63
2nd Quarter................................................. 15.88 10.38
3rd Quarter................................................. 13.88 10.75
4th Quarter................................................. 18.50 12.25
FISCAL YEAR ENDED DECEMBER 31, 1997
1st Quarter................................................. 22.00 16.00
2nd Quarter................................................. 29.75 15.75
3rd Quarter................................................. 39.25 25.00
4th Quarter................................................. 42.25 18.13
FISCAL YEAR ENDED DECEMBER 31, 1998
1st Quarter................................................. 31.19 20.00
2nd Quarter (through June 12, 1998)......................... 33.75 14.75
</TABLE>
As of May 31, 1998, there were approximately 185 holders of record of the
ATMI Common Stock.
There is no public market for the NOW Common Stock.
ATMI has never declared or paid any cash dividends on its capital stock.
ATMI currently intends to retain all available earnings, if any, for use in
its business and does not anticipate paying any cash dividends in the
foreseeable future. Certain financing agreements of ATMI's subsidiaries
contain limitations or prohibitions on the payment of dividends without the
lender's consent or in conjunction with a subsidiary's failure to comply with
various financial covenants.
NOW has never paid cash dividends on its capital stock and currently intends
to retain all of its earnings, if any, for use in its business to finance
future growth and, accordingly, does not anticipate paying cash dividends in
the foreseeable future.
The NOW Shareholders are advised to obtain current Nasdaq National Market
quotations for ATMI Common Stock. No assurance can be given as to the market
price of ATMI Common Stock at the consummation of the Merger or at any other
time.
19
<PAGE>
COMPARATIVE PER COMMON SHARE DATA
(UNAUDITED)
The following tables set forth the book value per common share at December
31, 1997 and at March 31, 1998 and income per common share from continuing
operations for each of the three years in the period ended December 31, 1997
and for the three months ended March 31, 1998, of ATMI and the book value per
common share at March 31, 1998 and income per common share from continuing
operations for each of the four years in the period ended March 31, 1998 of
NOW. The book value per common share of ATMI at March 31, 1998, the income per
common share from continuing operations of ATMI for the three months ended
March 31, 1998, the book value per common share of NOW at March 31, 1998, the
income per common share from continuing operations of NOW for the year ended
March 31, 1998, the equivalent pro forma book value per common share and the
equivalent pro forma income per common share from continuing operations
information is unaudited. The information set forth below should be read in
conjunction with the respective audited and unaudited consolidated financial
statements of ATMI and NOW, including the related notes thereto, appearing
elsewhere in this Proxy Statement/Prospectus.
ATMI has not paid cash dividends since inception. It is anticipated that
ATMI will retain all earnings, if any, for use in the expansion of its
business and therefore does not anticipate paying any cash dividends in the
foreseeable future. The payment of future dividends will be at the discretion
of the Board of Directors of ATMI and will depend, among other things, upon
earnings, capital requirements, financial condition and debt covenants. In
addition, NOW has not paid any dividends.
The following equivalent pro forma book value per common share and income
per common share from continuing operations have been presented on an
equivalent share basis under pooling-of-interests accounting and assuming the
minimum number of shares issuable to the NOW Shareholders of 1,319,856 at a
Closing Price of $35.04 per share and an Exchange Ratio of .720052.
<TABLE>
<CAPTION>
<S> <C>
BOOK VALUE PER COMMON SHARE:
Historical:
ATMI (at December 31, 1997)....................................... $3.41
ATMI (at March 31, 1998).......................................... 6.06
NOW (at March 31, 1998)........................................... 3.38
Equivalent Pro Forma:
NOW (at March 31, 1998)........................................... 4.70
</TABLE>
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
FISCAL YEAR (1) MARCH 31,
-----------------------
1995 1996 1997 1998 1998
----- ----- ----- ----- ------------
<S> <C> <C> <C> <C> <C>
INCOME PER COMMON SHARE FROM CONTINU-
ING OPERATIONS:
Basic Historical:
ATMI ............................ $0.32 $0.70 $0.26 -- $0.25
NOW ............................. 0.65 0.52 0.10 $0.82 --
Diluted Historical:
ATMI ............................ 0.30 0.65 0.24 -- 0.24
NOW ............................. 0.64 0.51 0.10 0.80 --
Equivalent Basic Pro Forma:
NOW ............................. 0.90 0.72 0.14 1.14 --
Equivalent Diluted Pro Forma:
NOW ............................. 0.89 0.71 0.14 1.11 --
</TABLE>
- ---------------------
(1) Information with respect to ATMI is presented for fiscal years ended
December 31, 1995, 1996 and 1997, and information with respect to NOW is
presented for fiscal years ended March 31, 1995, 1996, 1997 and 1998.
20
<PAGE>
The following equivalent pro forma book value per common share and income
per common share from continuing operations have been presented on an
equivalent share basis under pooling-of-interests accounting and assuming the
maximum number of shares issuable to the NOW Shareholders of 1,586,164 at a
Closing Price of $21.55 per share and an Exchange Ratio of .865338.
<TABLE>
<CAPTION>
<S> <C>
BOOK VALUE PER COMMON SHARE:
Historical:
ATMI (at December 31, 1997)....................................... $3.41
ATMI (at March 31, 1998).......................................... 6.06
NOW (at March 31, 1998)........................................... 3.38
Equivalent Pro Forma:
NOW (at March 31, 1998)........................................... 3.91
</TABLE>
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
FISCAL YEAR (1) MARCH 31,
-----------------------
1995 1996 1997 1998 1998
----- ----- ----- ----- ------------
<S> <C> <C> <C> <C> <C>
INCOME PER COMMON SHARE FROM CONTINU-
ING OPERATIONS:
Basic Historical:
ATMI ............................ $0.32 $0.70 $0.26 -- $0.25
NOW ............................. 0.65 0.52 0.10 $0.82 --
Diluted Historical:
ATMI ............................ 0.30 0.65 0.24 -- 0.24
NOW ............................. 0.64 0.51 0.10 0.80 --
Equivalent Basic Pro Forma:
NOW ............................. 0.75 0.60 0.12 0.95 --
Equivalent Diluted Pro Forma:
NOW ............................. 0.74 0.59 0.11 0.92 --
</TABLE>
- ---------------------
(1) Information with respect to ATMI is presented for fiscal years ended
December 31, 1995, 1996 and 1997, and information with respect to NOW is
presented for fiscal years ended March 31, 1995, 1996, 1997 and 1998.
21
<PAGE>
SELECTED FINANCIAL DATA
The following tables set forth certain selected financial data for ATMI and
NOW.
SELECTED CONSOLIDATED FINANCIAL DATA--ATMI
The following selected consolidated statements of income data for the years
ended December 31, 1994, 1995, 1996 and 1997 and the balance sheet data as of
December 31, 1995, 1996 and 1997 are derived from the audited consolidated
financial statements of ATMI. The statements of income data for the year ended
December 31, 1993 and the three-month periods ended March 31, 1997 and 1998
and the balance sheet data as of December 31, 1993 and 1994 and March 31, 1998
are derived from unaudited consolidated financial statements. The unaudited
consolidated financial statements include all adjustments, consisting of
normal recurring accruals, which ATMI considers necessary for a fair
presentation of the financial position and the results of operations for these
periods. Operating results for the three-month period ended March 31, 1998 are
not necessarily indicative of the results that may be expected for the entire
year ending December 31, 1998. The data set forth below should be read in
conjunction with ATMI's Consolidated Financial Statements and Notes thereto
and other financial information included elsewhere in this Proxy
Statement/Prospectus.
<TABLE>
<CAPTION>
THREE MONTHS
FISCAL YEAR ENDED DECEMBER 31, ENDED MARCH 31,
----------------------------------------------- ----------------
1993 1994 1995 1996 1997 1997 1998
------- ------- ------- ------- ------- ------- -------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT
OF INCOME DATA:
Product revenues........ $16,998 $27,537 $51,460 $78,815 $92,757 $19,895 $25,021
Contract revenues....... 6,070 7,223 8,712 9,846 9,120 2,618 2,355
------- ------- ------- ------- ------- ------- -------
Total revenues.......... 23,068 34,760 60,172 88,661 101,877 22,513 27,376
Cost of revenues........ 12,655 17,739 29,723 41,231 48,684 11,487 12,346
------- ------- ------- ------- ------- ------- -------
Gross profit............ 10,413 17,021 30,449 47,430 53,193 11,026 15,030
Operating expenses:
Research and
development.......... 1,864 3,981 5,697 9,838 10,581 2,465 2,788
Selling, general and
administrative....... 6,415 9,308 15,886 20,590 23,153 5,155 5,590
Non-recurring
expenses............. 0 0 0 2,000(1) 9,000(2) -- --
------- ------- ------- ------- ------- ------- -------
Total operating
expenses........... 8,279 13,289 21,583 32,428 42,734 7,620 8,378
------- ------- ------- ------- ------- ------- -------
Operating income........ 2,134 3,732 8,866 15,002 10,459 3,406 6,652
Interest income
(expense), net......... (338) (250) (357) 4 (328) 16 (12)
Other income (expense),
net.................... 123 3,769 (543) 18 233 (5) 108
------- ------- ------- ------- ------- ------- -------
Income before income
taxes and minority
interest............... 1,919 7,251 7,966 15,024 10,364 3,417 6,748
Income taxes............ 1,138 1,728 2,888 3,158 5,941 920 2,228
------- ------- ------- ------- ------- ------- -------
Income before minority
interest............... 781 5,523 5,078 11,866 4,423 2,497 4,520
Minority interest....... 269 12 10 151 (2) 19 (55)
------- ------- ------- ------- ------- ------- -------
Net income.............. $ 1,050 $ 5,535(3) $ 5,088 $12,017(4) $ 4,421 $ 2,516 $ 4,465
======= ======= ======= ======= ======= ======= =======
Net income per share--
assuming dilution...... $ 0.07 $ 0.33(3) $ 0.30 $ 0.65(4) $ 0.24 $ 0.13 $ 0.24
======= ======= ======= ======= ======= ======= =======
Weighted average shares
outstanding--assuming
dilution............... 14,610 16,637 17,127 18,394 18,660 18,732 18,853
</TABLE>
22
<PAGE>
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------------------
MARCH 31,
1993 1994 1995 1996 1997 1998(5)
------- ------- ------- ------- ------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
CONSOLIDATED BALANCE SHEET
DATA:
Cash, cash equivalents and
marketable securities...... $14,765 $16,474 $33,818 $30,812 $29,011 $ 84,077
Working capital............. 15,404 17,124 34,221 36,586 39,933 98,154
Total assets................ 29,518 40,995 78,590 93,191 103,146 160,747
Long-term debt, less current
portion.................... 2,022 7,811 11,975 15,769 14,526 14,035
Minority interest........... 3,179 6 535 545 595 650
Total stockholders' equity.. 16,825 22,410 45,118 55,473 61,872 122,333
</TABLE>
- ---------------------
(1) Represents a one-time charge of $2.0 million ($1.2 million, net of taxes)
accrued in connection with patent litigation involving LSL, which resulted
in a settlement payment in May 1997.
(2) Represents a one-time charge of $9.0 million accrued in connection with
costs incurred in investigating, analyzing and completing the ADCS Group
and LSL acquisitions.
(3) Net income and net income per share--assuming dilution in 1994 include a
non-recurring gain of approximately $3.6 million, or $0.22 per share--
assuming dilution, related to the restructuring of a joint venture and
costs incurred in the acquisition of Vector Technical Group, Inc.
(4) Net income and net income per share--assuming dilution in 1996 include the
effect of the ADCS Group's treatment as an S-Corporation for a portion of
the year. If the ADCS Group had been taxed as a C-Corporation for all of
1996, ATMI's net income and net income per share--assuming dilution would
have been approximately $10.5 million and $0.57, respectively, for the
year ended December 31, 1996.
(5) On March 31, 1998, ATMI completed a registered public offering of
4,720,000 shares of ATMI Common Stock. Of such shares, 2,000,000 shares
were sold by ATMI and 2,720,000 shares were sold by certain stockholders
of ATMI. In this offering, ATMI received net proceeds of approximately
$55.7 million.
23
<PAGE>
SELECTED FINANCIAL DATA--NOW
The following selected financial data for NOW for the five years ended March
31, 1997 are derived from the audited financial statements of NOW. The
selected financial data for the nine months ended December 31, 1996 and 1997
are derived from the unaudited financial statements of NOW. Interim unaudited
data for the nine months ended December 31, 1996 and 1997 reflect, in the
opinion of management of NOW, all adjustments (consisting of normal recurring
accruals) necessary for a fair presentation of such data. Results for the nine
months ended December 31, 1997 are not necessarily indicative of results which
may be expected for any other interim period or for the year as a whole. The
data set forth below should be read in conjunction with NOW's consolidated
financial statements and notes thereto and other financial information
included elsewhere in this Proxy Statement/Prospectus.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
FISCAL YEAR ENDED MARCH 31, DECEMBER 31,
---------------------------------------- ------------------
1993 1994 1995 1996 1997 1996 1997
------ ------ ------ ------- ------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Sales................... $2,798 $3,952 $8,202 $10,518 $10,111 $ 6,658 $ 11,697
Cost of sales........... 1,198 1,660 4,051 5,329 5,528 3,909 5,686
------ ------ ------ ------- ------- -------- --------
Gross profit............ 1,600 2,292 4,151 5,189 4,583 2,749 6,011
Operating expenses
Selling, general and
administrative........ 1,135 1,392 2,234 3,660 4,257 3,015 3,665
Research and
development........... 23 56 88 157 195 154 179
------ ------ ------ ------- ------- -------- --------
1,158 1,448 2,322 3,817 4,452 3,169 3,844
------ ------ ------ ------- ------- -------- --------
Operating income
(loss)................. 442 844 1,829 1,372 131 (420) 2,167
Other income (expense),
net.................... 39 59 11 119 30 24 (2)
------ ------ ------ ------- ------- -------- --------
Income (loss) before
income taxes........... 481 903 1,840 1,491 161 (396) 2,165
Income tax (provision)
benefit................ (183) (276) (670) (544) 24 200 (758)
------ ------ ------ ------- ------- -------- --------
Income (loss) before
extraordinary item..... 298 627 1,170 947 185 (196) 1,407
Extraordinary item...... 44 -- -- -- -- -- --
------ ------ ------ ------- ------- -------- --------
Net income (loss)....... $ 342 $ 627 $1,170 $ 947 $ 185 $ (196) $ 1,407
====== ====== ====== ======= ======= ======== ========
Net income (loss) per
share--assuming
dilution(1)............ $ 0.19 $ 0.35 $ 0.64 $ 0.51 $ 0.10 $ (0.11) $ 0.75
====== ====== ====== ======= ======= ======== ========
Weighted average shares
outstanding--assuming
dilution(1)............ 1,807 1,792 1,834 1,851 1,874 1,820 1,869
<CAPTION>
MARCH 31,
----------------------------------------
1993 1994 1995 1996 1997 DECEMBER 31, 1997
------ ------ ------ ------- ------- ------------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash, cash equivalents
and marketable
securities............. $ 817 $1,124 $1,515 $ 819 $ 876 $ 2,374
Working capital
(deficiency)........... 1,359 1,540 2,137 (1,066) (505) 1,419
Total assets............ 1,892 2,894 4,942 9,210 8,954 10,256
Long-term debt, less
current portion........ -- -- -- -- 18 12
Stockholders' equity.... 1,628 2,255 3,456 4,450 4,648 6,096
</TABLE>
- ---------------------
(1) Weighted average shares outstanding--assuming dilution reflect the
weighted average number of shares of NOW Common Stock outstanding and
includes the effect of shares which would be issuable upon the exercise of
outstanding stock options using the treasury stock method. If the
calculation of net income (loss) per share--assuming dilution and the
weighted average shares outstanding--assuming dilution were presented on
an equivalent share basis under pooling-of-interests accounting, assuming
a Closing Price of $35.04 per share, a minimum of 1,319,856 shares of ATMI
Common Stock would be issuable in exchange for all of the NOW Common
Stock, and net income (loss) per share--assuming dilution would be $0.26,
$0.49, $0.89, $0.71 and $0.14 for the years ended March 31, 1993, 1994,
1995, 1996 and 1997, respectively, and $(0.15) and $1.05 for the nine
months ended December 31, 1996 and 1997, respectively. Assuming a Closing
Price of $21.55 per share, a maximum of 1,586,164 shares of ATMI Common
Stock would be issuable in exchange for all of the NOW Common Stock and
net income (loss) per share--assuming dilution would be $0.22, $0.40,
$0.74, $0.59 and $0.11 for the years ended March 31, 1993, 1994, 1995,
1996 and 1997, respectively, and $(0.12) and $0.87 for the nine months
ended December 31, 1996 and 1997, respectively.
24
<PAGE>
THE SPECIAL MEETING
This Proxy Statement/Prospectus is being furnished to the NOW Shareholders
in connection with the solicitation by the NOW Board of Directors of proxies
in the accompanying form to be used at the Special Meeting.
DATE, TIME AND PLACE
The Special Meeting will be held on , 1998, at 3:00 p.m., local time,
at the facilities of NOW Technologies, Inc., 10779 Hampshire Avenue South,
Bloomington, Minnesota.
PURPOSE
At the Special Meeting, the NOW Shareholders will be asked to consider and
vote upon a proposal to approve and adopt the Merger Agreement.
RECORD DATE; QUORUM
Only holders of record of NOW Common Stock at the close of business on the
Record Date are entitled to notice of and to vote at the Special Meeting. As
of the close of business on the Record Date, there were 1,833,000 shares of
NOW Common Stock outstanding and entitled to vote, held of record by 76
shareholders. The presence (in person or by proxy) of the holders of a
majority of the outstanding shares of NOW Common Stock entitled to vote at the
Special Meeting is necessary to constitute a quorum. Abstentions will each be
included in determining whether a quorum is present.
VOTE REQUIRED
Each NOW Shareholder is entitled to one vote for each share of NOW Common
Stock held as of the Record Date. The affirmative vote of a majority of the
shares of NOW Common Stock outstanding as of the Record Date is required to
approve and adopt the Merger Agreement. Accordingly, abstentions and non-votes
will have the effect of votes against the Merger Agreement. As a group, all
executive officers and directors of NOW owned 956,000 shares, or 52.2%, of the
NOW Common Stock outstanding as of the Record Date. All of NOW's executive
officers and directors have indicated to NOW that they intend to vote to
approve the Merger.
VOTING OF PROXIES
The NOW Shareholders may cast their vote, in person or by proxy, by
delivering to an officer of NOW a properly executed proxy. A copy, facsimile,
or other reproduction may be substituted or used in lieu of the original
proxy. For the purpose of voting by proxy by facsimile, the facsimile number
is (612) 942-9270. The shares represented by properly executed proxies
received prior to or at the Special Meeting in response to this solicitation
and not revoked will be voted at the Special Meeting. A proxy may be revoked
at any time before it is exercised at the Special Meeting by (i) delivering to
the President of NOW at 10779 Hampshire Avenue South, Bloomington, Minnesota
55438 or by facsimile at (612) 942-9270, a written notice bearing a later date
than the date of the proxy, stating that the proxy is revoked, (ii) signing
and so delivering a proxy relating to the same shares and bearing a later date
prior to the vote at the Special Meeting or (iii) attending the Special
Meeting and voting in person (although attendance at the Special Meeting will
not, by itself, revoke a proxy). All proxies that are properly executed and
returned and that are not revoked will be voted at the Special Meeting in
accordance with the instructions indicated in the proxies or, if no direction
is indicated, to approve and adopt the Merger Agreement, as recommended by the
NOW Board of Directors. The NOW Board of Directors is not currently aware of
any business to be brought before the Special Meeting other than the specific
proposals referred to in this Proxy Statement/Prospectus and specified in the
accompanying notice of the Special Meeting. As to any other business that may
properly come before the Special Meeting, however, it is intended that
proxies, in the form enclosed, will be voted in respect thereof in accordance
with the judgment of the persons voting such proxies.
25
<PAGE>
SOLICITATION OF PROXIES
The expense of soliciting proxies will be borne by NOW. In addition to the
solicitation of proxies by mail, solicitation may be made by certain
directors, officers and other employees of NOW by personal interview,
telephone or telegraph. No additional compensation will be paid to such
persons for such solicitation.
RECOMMENDATION OF THE NOW BOARD OF DIRECTORS
THE NOW BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF THE MERGER
AGREEMENT.
26
<PAGE>
BUSINESS OF ATMI
INTRODUCTION
ATMI is a leading supplier of thin film materials, equipment and services
used worldwide in the manufacture of semiconductor devices. ATMI targets high
growth consumable and equipment markets within the semiconductor industry with
proprietary and patented products based on chemical vapor deposition ("CVD")
technology. ATMI currently provides: (i) a broad range of ultrahigh purity
thin film materials and related delivery systems; (ii) a full line of point-
of-use semiconductor environmental equipment and services; and (iii) specialty
epitaxial thin film deposition services. Over the last three years, ATMI has
achieved a leadership position in each of its target markets by providing a
more complete line of products than its competitors. ATMI's strategy is to
continue its growth through product line expansion in each of its existing
markets and to leverage its core technology to create new high growth
businesses. ATMI's customers include most of the leading semiconductor
manufacturers in the world.
ATMI has capitalized on the growth of the semiconductor industry in general,
and CVD processing in particular, by providing leading edge products and
services in each of its target markets. ATMI's ADCS division develops and
markets ultrahigh purity thin film materials and proprietary delivery systems.
ADCS is also the developer of the "Safe Delivery System," or SDS, which stores
dangerous gases as solids in cylinders, providing increased safety and
substantially greater operating efficiencies. ATMI believes its EcoSys
division is the only provider of point-of-use environmental equipment offering
all of the key technologies for semiconductor effluent abatement. ATMI's
Epitronics division is a world leader in specialty epitaxial services,
providing high quality processing of silicon and next-generation III-V and
wide bandgap wafers. ADCS, EcoSys and Epitronics accounted for approximately
45%, 27% and 28%, respectively, of ATMI's revenues in 1997, and approximately
42%, 30% and 28%, respectively, of ATMI's revenues in both 1996 and 1995.
INDUSTRY BACKGROUND
The semiconductor industry has grown substantially in recent years as
semiconductor devices have proliferated in a wide variety of consumer and
industrial products, especially in computing, networking and communications
equipment. According to Dataquest Incorporated, the semiconductor industry
achieved worldwide sales in 1996 of $138 billion and is estimated to achieve
worldwide sales of over $300 billion in 2001. This increase in demand for
semiconductor devices has been fueled by the ability of semiconductor
manufacturers to deliver products with consistently enhanced performance
characteristics and functionality, improved reliability, increased memory
capacity and reduced size, weight, power consumption and cost. These advances
have been made possible by innovations in the fabrication processes, equipment
and the materials used in manufacturing advanced semiconductor devices. At the
same time, as the construction and management of fabrication facilities has
become more complex, semiconductor manufacturers have sought to streamline
their vendor relationships and reduce the number of vendors upon which they
rely, which in turn has driven significant consolidation among the providers
of semiconductor capital equipment and materials and materials delivery
systems.
Semiconductor devices are manufactured by repeating a complex series of
process steps on a wafer substrate, usually made of silicon. The primary
process steps include deposition, patterning and etch. During deposition,
several layers of conducting, semiconducting or insulating thin films are
formed on a wafer. Precise and reliable control of the deposition of these
films is vital to the ultimate performance of an individual device. The
initial method of thin film deposition was physical vapor deposition ("PVD"),
which has in recent years been largely supplanted by CVD for the deposition of
semiconducting and insulating thin films. In the CVD process, wafers are
placed in a sophisticated reaction chamber (a "reactor"), and a specially
designed gas or vaporized liquid material is introduced. Simultaneously, a
form of energy (e.g., heat or plasma) is added to the reactor to cause the
decomposition of the material being introduced. As a result of this
decomposition, a thin film of material is deposited on the surface of the
wafer.
27
<PAGE>
The advantages of CVD include the relative thinness of the films applied to
the wafer, as well as their conformality (ability to coat evenly, especially
in holes and trenches designed into the device), purity and ability to coat
large areas. These advantages have led to rapid growth in sales of reactors
and related CVD process consumables and equipment. Consumables and related
equipment include the raw materials used in the CVD process and the delivery
systems required to transport the materials around a semiconductor plant and
to a reactor. Related equipment also includes specially designed environmental
equipment that is used to abate the toxic or otherwise hazardous effluent from
CVD reactors.
In addition to deposition on patterned wafers, CVD thin film processes are
used to prepare bare wafers prior to the fabrication of integrated circuits to
provide the wafer surfaces with the desired uniformity of electrical and
physical properties. Such CVD thin film deposition is referred to as epitaxial
deposition, and such wafers when processed are referred to as epitaxial, or
"epi," wafers. The complexity, sensitivity and capital intensive nature of the
CVD processes used for epitaxy have created a market for epitaxial thin film
deposition services, or essentially contract manufacture of epi wafers using
CVD processes.
Materials and Delivery Systems
The market for semiconductor thin film consumables has expanded with the
growth of the market for semiconductor devices. The design of new thin film
deposition materials and equipment to transport these materials around a
semiconductor plant and to reactors has experienced ongoing innovation driven
by the demand for expanding semiconductor device capabilities and
corresponding decreases in circuit dimensions. Safe and effective thin film
deposition requires dedicated systems designed to deliver and vaporize
precursor materials for deposition in reactors without contamination or
inadvertent release of toxic gases. Tetraethylorthosilicate ("TEOS") is a
principal liquid precursor material used in the deposition of silicon dioxide
layers, which generally serve as insulators between the conductive layers in a
semiconductor device. Other important materials include trimethylphosphite
("TMP"), triethylphosphate ("TEPO"), trimethylborate ("TMB") and
triethylborate ("TEB"), which are used for the deposition of phosphorous and
boron containing materials.
Because thin film precursors are consumables, the market for these materials
and delivery systems generally tracks wafer starts, as opposed to the market
for equipment, which generally tracks investment in new plants. The thin film
materials market is also characterized by segmentation into a wide variety of
material types and forms. For example, most thin film precursors are now sold
as pressurized gases, which allows for easy transport around a typical
semiconductor manufacturing plant. However, many of these gases are toxic
and/or hazardous, leading to the development of safer alternatives including
the use of liquid or solid CVD precursors and the adoption of gas handling
technologies and delivery systems that minimize the danger of a catastrophic
release of toxic gas.
Environmental Equipment
The use of CVD processes has also required the development of environmental
equipment designed to abate the effluent from CVD reactors. In general, less
than 25% of the materials entering a CVD reactor are deposited as a thin film.
The remainder of the source materials, and certain by-products, constitute an
effluent stream containing toxic and hazardous material that must be abated to
meet increasingly strict worldwide environmental, safety and health
regulations. Traditionally, abatement has been accomplished by the use of
"whole plant" environmental systems which aggregate the effluents from an
entire facility. However, growing variations in the processes utilized and the
drive for increased productivity have led to the growth of point-of-use
environmental systems in which a single environmental unit is attached to a
single reactor. This approach provides for superior abatement because the
system can be tuned to the unique hazards of a particular effluent stream. In
addition, point-of-use environmental systems can improve plant productivity by
reducing downtime associated with servicing environmental systems.
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Specialty Epitaxial Deposition Services
The demand for higher performance integrated circuits and discrete
semiconductor devices has driven the use of epitaxial wafers in a wide variety
of applications. Because epitaxy involves a high degree of expertise and
requires significant capital expenditures, a merchant market for epitaxial
wafers, primarily silicon epitaxial wafers, has in recent years grown to more
than $1.2 billion. This market is subdivided into "generic" wafers for high
volume applications such as dynamic random access memory ("DRAM") and
"specialty" wafers for use in applications such as automotive electronics and
sensors, silicon-based low power telecommunications circuits, analog power
controls and robust application-specific integrated circuits.
The continued drive for improved device performance and new applications for
integrated circuits has led to the development and commercialization of
alternative semiconductor technologies. A newer generation of devices has
emerged that utilize epitaxial wafers made of III-V and wide bandgap
materials, as opposed to silicon, to achieve this improved performance. III-V
semiconductors, including gallium arsenide and indium phosphide, are finding
increasing use in wireless communication devices where high frequency
performance is critical, in optoelectronic devices where the electronic
structure of the III-V semiconductors allows energy efficient light generation
and in solar cells for satellite applications where efficient generation of
electricity is critical. Wide bandgap semiconductors such as silicon carbide
and gallium nitride offer advantages in high power, optoelectronic and high
temperature devices.
ATMI STRATEGY
ATMI is a leading supplier of thin film materials and related delivery
systems, a full line of point-of-use semiconductor environmental equipment and
specialty epitaxial deposition services for the semiconductor industry. ATMI's
objective is to establish and enhance leadership positions in each of the
markets it serves. ATMI's strategy consists of the following key elements:
Leverage CVD Technology Leadership. ATMI has invested extensively in
developing proprietary and patented CVD thin film technology which it
leverages to commercialize new products to meet customer requirements. Its CVD
technology is based on a multidisciplinary approach that draws upon the
experience of ATMI's personnel in the areas of chemistry, physics, materials
science and electrical engineering. ATMI dedicates significant resources to
maintaining its expertise in CVD technology and protecting its intellectual
property, which now includes 89 issued U.S. patents and numerous counterparts
outside the United States. ATMI intends to continue to develop new products
and new lines of business that leverage its core competencies.
Target High Growth Semiconductor Markets. ATMI targets semiconductor markets
where technology-driven paradigm shifts are occurring or are enabled by the
use of ATMI's core technologies. ATMI typically focuses on markets with high
growth rates and that require products that are consumed in the production
process, such as thin film materials. For example, ATMI believes that the
market for low pressure gas delivery systems and related consumables, served
by ATMI's SDS gas delivery product line, is growing at a rate in excess of the
overall growth rate of the semiconductor equipment industry.
Accelerate Product Introduction Through Strategic Alliances. ATMI forms
strategic alliances, including joint development programs and collaborative
marketing efforts, to accelerate the introduction of its products into markets
that have manufacturing and/or distribution barriers. Most of ATMI's strategic
alliances are with leading semiconductor manufacturers, such as IBM, Lucent
Technologies, Micron Technology, Siemens and Texas Instruments, each of which
has participated in advanced materials development programs with ATMI. Such
programs enhance ATMI's core technology base and promote the introduction of
targeted products while reducing ATMI's need to make research and development
and capital expenditures. In addition, since ATMI's inception, the United
States government has provided approximately $65.6 million in research funding
directed towards the costly development of new thin film processes and
materials for complex electronic devices.
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Provide Full Market-Basket Solutions. To address semiconductor
manufacturers' desire to streamline their vendor relationships, ATMI seeks to
provide a full market-basket solution, or "one-stop shopping," in each of its
target markets. To provide such capability, ATMI pursues internal development
of new products and seeks to acquire complementary product lines and services
to continually expand its capabilities. For example, ATMI acquired "wet" and
"combustion" scrubber product lines to complement its internally developed
"dry" scrubber product line in order to expand its capabilities to abate
effluents from all major semiconductor front-end processes. This approach
allows EcoSys to serve a wide spectrum of the semiconductor industry's
environmental needs and to provide comprehensive worldwide service.
BUSINESSES AND PRODUCTS
ATMI conducts its operations through three primary divisions: ADCS, EcoSys
and Epitronics. ADCS designs, manufactures and markets ultrahigh purity thin
film materials and their related delivery systems equipment for CVD, diffusion
and etch applications in the semiconductor and semiconductor equipment
manufacturing industries. EcoSys manufactures, sells and services point-of-use
environmental equipment for the semiconductor industry. Epitronics provides
specialty epitaxial deposition services to the semiconductor industry for a
wide variety of end-use applications.
<TABLE>
<CAPTION>
DIVISION BUSINESS PRODUCTS
- ------------------------------------------------------------------------------------------------------
<S> <C> <C>
ADCS Thin film materials and delivery systems . Thin film materials
. Liquid delivery systems
. Gas delivery systems
- ------------------------------------------------------------------------------------------------------
EcoSys Point-of-use environmental equipment . Novapure dry scrubbers
. Vector liquid scrubbers
. Guardian active oxidation scrubbers
- ------------------------------------------------------------------------------------------------------
Epitronics Specialty thin film deposition services . Silicon epitaxial services
. III-V epitaxial services
. Wide bandgap epitaxial services
- ------------------------------------------------------------------------------------------------------
</TABLE>
Consistent with its corporate strategy, ATMI actively explores new
opportunities to commercialize its core technology. In January 1998, ATMI
announced the formation of its Emosyn division. Emosyn intends to develop and
commercialize smart card devices employing ATMI's ferroelectric materials and
process integration technology. ATMI developed this technology in a consortium
with IBM, Micron Technology and Texas Instruments. Emosyn recently entered
into a strategic alliance with a subsidiary of SMH Swatch, the largest watch
maker in Switzerland, to design, develop, manufacture and distribute
integrated circuits for use in smart cards. In addition, ATMI currently has
two other ventures in development that it believes may comprise future
business units for ATMI. The first is focused on the development of gas
sensing devices that will allow for the detection and measurement of the many
gases used in thin film processing, and the second is focused on the
development of metrology tools that will detect thin film properties during
the deposition process.
ADCS: SEMICONDUCTOR MATERIALS AND DELIVERY SYSTEMS
ATMI believes ADCS is one of the fastest growing suppliers of ultrahigh
purity thin film materials and associated delivery systems equipment to the
semiconductor industry. ATMI has taken advantage of the changes in the market
for thin film materials and delivery systems by: (i) developing and
commercializing a wide range of CVD liquid precursors; (ii) commercializing
innovative bulk delivery systems which automatically deliver materials of the
highest purity and consistency to the reactor; (iii) developing innovative
delivery systems that allow for the introduction of low volatility liquids and
even solids to the reactor; and (iv) developing and commercializing patented
low-pressure gas delivery systems for safe handling and delivery of toxic and
hazardous gases to semiconductor process equipment.
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ADCS strives to ensure that its materials and related delivery systems meet
and exceed the requirements of its customers, which include semiconductor
device manufacturers and OEMs located throughout the world. In developing its
business, ADCS seeks: (i) to offer the most complete line of consumable and
delivery system products; (ii) to offer the most consistent, highest purity
thin film materials available; (iii) to offer the most reliable, innovative
equipment products; (iv) to improve the level of customer service and response
offered and to remain cost-effective to its customers; (v) to meet customer
needs for statistical quality control and dock-to-stock programs; and (vi) to
continue to meet the industry's needs for advanced thin film materials
required for next-generation devices and beyond.
Products and Services
ADCS has three primary product lines: thin film materials, liquid delivery
systems and gas delivery systems. ADCS also provides services relating to each
of these product lines.
Thin Film Materials. ADCS produces a broad range of thin film materials that
are used in making semiconductor devices. In addition to the widely used CVD
precursors--TEOS, TMP, TEPO, TMB and TEB--ADCS also sells thin film materials
used in other semiconductor manufacturing processes, including phosphorous and
boron halides used for doping by diffusion processing. ADCS also manufactures
and sells source reagents that allow CVD of advanced materials, including
titanium nitride, platinum, copper, tantalum oxide, lead zirconate titanate,
strontium bismuth tantalate and barium strontium titanate thin films.
All of these thin films must be of very high purity in order to function
properly within the device, particularly with respect to unwanted metallic
contamination. The purity of the starting chemicals used in the process is,
therefore, critical. ADCS ULTRAPUR chemicals have purities in excess of
99.99999% to 99.999999% with respect to unwanted metal impurities. A
proprietary DOUBLE DISTILLATION purification process is used to produce these
high-purity specifications. In order to preserve this high purity, the
chemicals are packaged and delivered in high quality, carefully constructed
and cleaned containers. ADCS has developed a proprietary COYOTE CLEAN process
for preparation of its containers, which range from quartz and stainless steel
ampules to much larger MINIBULK and SKINNIBULK canisters. Coupled with its
Quality Control Program, ADCS believes that this cleaning and container
technology produces the most consistent, highest purity chemicals in the
industry and ensures their quality as delivered into the reactor. Continuing
its commitment to quality, ADCS achieved ISO 9001 certification in 1997.
Liquid Delivery Systems. ADCS designs, manufactures and sells proprietary
continuous refill and delivery systems and their related hardware. These
systems and hardware products are designed to deliver ultrahigh purity thin
film materials to the CVD reactor under the desired physical conditions. ADCS'
delivery hardware products include stainless steel ampules, stainless steel
MINIBULK canisters, stainless steel SKINNIBULK canisters, quartz bubblers,
bulk chemical delivery cabinets, level sensing systems, manual and continuous
refill systems and other application-specific equipment.
ATMI believes that its continuous refill systems enhance the performance of
the process tools they support by eliminating process downtime resulting from
canister changes. Typically, process tools must cease operation when canister
changes are made to replenish source material. ADCS' bulk refill systems allow
continuous delivery of source material. In addition to the elimination of the
downtime associated with canister changes, this configuration also minimizes
the atmospheric and moisture contamination that can occur during these change-
outs.
Gas Delivery Systems (SDS). The SDS, or "Safe Delivery System," patented by
ATMI, uses a standard gas cylinder containing an adsorbent material. When the
cylinder is filled with gas, the gas is adsorbed by the material and
essentially "fixed" so that it behaves like a solid. The SDS cylinder is,
therefore, not under pressure, minimizing any potential leak of hazardous gas
and allowing more gas to be introduced into the cylinder. Consequently,
material delivery via SDS is safer and provides higher rates of productivity
than traditional methods. Since most semiconductor processes operate at
reduced pressure and the gas can be
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desorbed or released from the SDS under vacuum, it can be installed and
operated like a conventional high-pressure gas cylinder. These advantages have
led major chip manufacturers to adopt this technology.
To date, four gases--arsine, phosphine, boron trifloride and silicon
tetrafloride--using the SDS technology have been introduced. Each is used to
"dope" silicon wafers using ion implant processes. All of these gases are
available in different size cylinders, and some have different adsorbents that
allow for additional gas capacity within a cylinder. These products are
manufactured by ATMI and, on a toll basis, by Matheson Gas Products
("Matheson"), ATMI's exclusive distributor for ion implant.
ATMI also believes that significant markets for SDS exist outside ion
implant. ATMI is now conducting beta site tests with selected semiconductor
manufacturers and OEMs for CVD applications using SDS. ATMI believes that
commercial introduction of SDS products for this market will occur in the
second half of 1998. ATMI also has undertaken extensive development efforts to
identify new markets and products for the SDS technology. ATMI believes that
certain etch gases used in the semiconductor industry and certain gases
employed in the medical field are possible candidates for SDS.
Services. In addition to its thin film materials and associated delivery
systems equipment, ADCS offers custom manufacturing services, such as
stainless steel and quartz delivery hardware fabrication. ADCS also provides
special services such as custom bulk refill, container cleaning and hardware
repair.
ECOSYS: POINT-OF-USE SEMICONDUCTOR ENVIRONMENTAL EQUIPMENT
ATMI believes EcoSys is the only provider of point-of-use environmental
equipment offering all of the key technologies for effluent gas abatement to
the semiconductor industry: dry chemical, liquid and active oxidation. As a
result of this broad product line, ATMI believes EcoSys is a global market
leader in the manufacture and sale of point-of-use semiconductor effluent
abatement equipment. ATMI's strategy is to grow EcoSys' market share through
the continued development and acquisition of new semiconductor environmental
products and services. ATMI believes that this full line of semiconductor
environmental products, coupled with a comprehensive service strategy, will
allow for continued market penetration by its EcoSys business.
Products and Services
EcoSys has three primary product lines and several developmental products.
Each of the three major point-of-use products has cost of ownership advantages
for semiconductor customers in certain applications such as CVD, ion implant
and etch.
Novapure dry chemical scrubbers adsorb and concentrate hazardous effluent
through the use of consumable resins at rates many times that of conventional
effluent treatment methods. ATMI believes that EcoSys, through its patented
adsorption materials, is a market leader for point-of-use semiconductor
effluent dry scrubbing throughout the world. Additionally, demand for
consumable resin material is increasing as the installed base of dry scrubbers
increases.
Vector liquid scrubbers are designed for cost effective removal of acidic
and high particulate bearing gases commonly used in the wafer fabrication
process. Vector scrubbers recirculate scrubbing water, minimizing overall
water use, and are effective in removing high particulate effluent.
Guardian active oxidation scrubbers treat a variety of combustible materials
used in semiconductor processing. The Guardian product line is designed for
low cost of ownership by operating on inexpensive methane fuel while achieving
very high removal efficiencies. These combustion systems also abate certain
global warming gases such as perfluorinated carbon compounds ("PFCs") at high
efficiency with near zero nitrous oxide generation.
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EcoSys is engaged in the development of additional product lines to
complement its existing ones in order to meet the evolving needs of
semiconductor manufacturers. Developmental products include ReCAT catalytic
oxidation scrubbers which use proprietary catalysts to destroy volatile
organic compounds ("VOCs"). VOCs arise from the use of solvents in applying
photoresists and other organic materials during device fabrication. EcoSys is
also marketing and continuing to develop effluent treatment systems for the
capture of semiconductor process gases in emergency and cylinder change-out
situations. Such situations might arise at the point of delivery of a gas to a
reactor through gas cylinder rupture or similar catastrophic event. In
addition, EcoSys is investigating the potential for recycling the materials
used in thin film deposition processes in the belief that recycling is
ultimately preferred over destructive abatement. PFCs, for example, are used
in various wafer cleaning and etch processes. As suspected ozone depleting
materials, their use is being limited by production cutbacks and the need for
strict environmental control systems. In conjunction with Praxair Corporation,
EcoSys has developed a PFC recycling system that captures the gas and
repurifies it for subsequent reuse. In 1997, the first unit was installed at a
test site.
EPITRONICS: SPECIALTY EPITAXIAL DEPOSITION SERVICES
Epitronics is primarily a service business providing specialty epitaxial
deposition services for silicon, III-V and wide bandgap wafers. Desired
electrical and physical properties of the epitaxial layers are specified by
the customer and developed in collaboration with Epitronics. The properties of
the epitaxial layers are selected to maximize the performance of the
customer's integrated circuit or device while maximizing yield and minimizing
cost. Epitronics' fundamental competitive advantages include the manufacture
of high quality epitaxial layers with high yield. In addition, Epitronics
differentiates itself by offering quality epitaxial deposition services with
fast turnaround and in flexible volumes.
ATMI believes that Epitronics is the only provider offering CVD thin film
deposition services for each of the key materials used in semiconductor
devices today and that it is now a world leader in specialty epitaxial
deposition services. Epitronics' strategy is to maximize market share through
the continued development and acquisition of new semiconductor thin film
products and services. A key element of the business strategy is to work with
the customer in the early stages of product development to ensure that proven
epitaxial processes are in place when the decision is made to expand into
manufacturing.
Products and Services
Epitronics provides epitaxial deposition services for silicon, III-V
materials and wide bandgap materials. ATMI also distributes certain wafer
products that are manufactured by third parties to provide "one-stop shopping"
for its customers. Several new products are also in varying stages of
commercialization.
Silicon Epitaxial Wafers. Epitronics currently processes silicon epitaxial
wafers in Mesa, Arizona. Epitronics has experience in a wide range of silicon
epitaxial processes and selects the process that provides the highest value to
the customer. Processes include deposition from trichlorosilane,
dichlorosilane and silane which can be operated at atmospheric or reduced
pressure. Epitronics is particularly skilled at: (i) the deposition of
epitaxial layers on wafers that already have patterns or buried circuits
created by selective implantation and diffusion; (ii) the deposition of
lattice matched silicon thin films containing high amounts of boron and
germanium that can be used in sensor applications; and (iii) the selective
deposition of silicon on sapphire or other oxide-patterned substrates.
III-V Epitaxial Wafers. Epitronics processes III-V epitaxial wafers in
Phoenix, Arizona. III-V epi products are finding increasing use in wireless
communications, satellites and optoelectronics for data and telecommunication
markets. In particular, there is an increased demand for III-V epi wafers for
heterojunction bipolar transistors for use in power amplifiers. Epitronics
markets its epitaxial services and sells the product of the service, epitaxial
wafers, directly to industry and government customers according to their
design specifications.
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Wide Bandgap Epitaxial Wafers. Epitronics is developing epitaxial processes
for silicon carbide and gallium nitride on one- to two-inch diameter silicon
carbide and sapphire wafers in Danbury, Connecticut. The silicon carbide
wafers are manufactured in-house and are also offered for sale to external
customers. ATMI believes that these substrate sales will promote additional
collaborations, addressing technology development and commercial epitaxial
product introduction issues associated with future optoelectronic, sensor and
power device products.
Distribution Products. Consistent with its marketing strategy of offering a
complete line of specialty epitaxial wafers and advanced substrates,
Epitronics is a distributor of SIMOX (Separation by IMplanted OXygen) wafers
for Nippon Steel Corporation ("NSC") (Japan) and specialty III-V wafers for
Wafer Technology (United Kingdom). These distributed materials complement
Epitronics' epitaxial services and leverage the development of the sales and
marketing organization required to execute its customer service driven
marketing plan. NSC SIMOX wafers are used for fabricating high speed and
radiation-hard circuits. Specialty III-V wafers from Wafer Technology include
indium phosphide-based materials for optical fiber-based communications,
gallium arsenide for optoelectronic devices and indium antimonide for infrared
detectors.
Developmental Products. Epitronics is developing both substrate and thin
film technology for solid-state blue light emitting diodes ("LEDs") and
lasers. Blue LEDs will be primarily used in full color displays while blue
lasers are valuable for increasing optical data storage capabilities and in
full color printers. Gallium nitride substrate technology under development by
Epitronics and others may be essential to high yield LED manufacturing
processes and to developing long lifetime blue lasers. Epitronics is
collaborating with Hewlett-Packard, Xerox, SDL and others to develop substrate
technology for commodity blue lasers and is developing proprietary device
designs to enable penetration of specialty laser markets. Epitronics is the
preferred high performance materials supplier for a consortium which is
developing blue lasers for improved data storage.
CUSTOMERS, SALES AND MARKETING
ATMI sells and distributes its products worldwide, both directly and through
manufacturers' representatives. Many of ATMI's customers have relationships
with more than one division of ATMI, or are acting as collaborators on ATMI's
development programs. A number of ATMI's customers are listed below:
Advanced Micro Devices IBM Samsung Electronics
Applied Materials Intel SGS Thomson
Atmel Lucent Technologies Siemens
GEC Plessey Semiconductor Motorola Sony
Goldstar Electronics National Semiconductor Texas Instruments
Hewlett-Packard Novellus Tokyo Electron
Hyundai Electronics Philips TSMC
ADCS primarily distributes its materials and delivery system products to
end-use customers through its direct sales force in North America and Europe
and through regional manufacturing representatives in Asia. ADCS distributes
its products in South Korea through ADCS-Korea. Additionally, the equipment
product lines are marketed and sold to semiconductor equipment OEMs, who in
turn resell to end users. The SDS product is currently being marketed and sold
solely into the ion implant market through an exclusive distribution agreement
with Matheson.
EcoSys distributes its point-of-use environmental equipment through
manufacturers' representatives throughout the world. Direct sales personnel
serve as regional managers who coordinate the representatives' activity within
their respective regions. Additionally, EcoSys markets directly to
semiconductor end-user facility managers to provide full-fab environmental
solutions as well as installation and on-going service.
Epitronics markets and sells its thin film deposition services and epitaxial
wafers primarily on a direct basis. In particular, silicon epi wafers and
services are sold directly throughout the world. Wide bandgap and III-V
epitaxial wafers are sold directly in North America and through distributors
and agents in Europe and Asia.
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COMPETITION
The semiconductor thin film materials and delivery systems, environmental
equipment and epitaxial deposition services markets are characterized by
rapidly evolving technology and products. Both large and small companies offer
products in these markets, and many of these companies have significantly
greater financial and other resources than ATMI. ATMI attempts to compete by
leveraging its substantial investment in CVD thin film technology to expand
product offerings in combination with tactical acquisitions to provide full
market-basket solutions to customers that are increasingly seeking to
streamline their vendor relationships.
ADCS' primary competitors in the United States are the Schumacher Division
of Air Products Corporation and the Diffusion Systems Division of Olin Hunt
Specialty Products, Inc. Outside of North America, ADCS competes with these
companies and also with Yamanaka Hutech Corporation and Kojundo in Asia and
Merck in Europe. There are several other smaller participants in these
markets. There are currently no direct competitors to the patented SDS
product. Several companies, however, provide gases in high-pressure containers
that compete with the process capability of SDS.
EcoSys' primary competition in effluent gas treatment is from companies
focused on water and combustion treatment methods. The primary water scrubber
competitor is Delatech, while combustion scrubber competitors include Delatech
and Alzeta. Dry scrubber competitors include CS GmbH, Ebara, Japan Pionics and
the Edwards Division of British Oxygen Corporation.
As a supplier of a broad-based line of epi services and products, Epitronics
has competitors in each of its three primary product areas. In silicon epi,
Epitronics competes with Moore Technologies and a number of specialty wafer
manufacturers with their own epi capabilities. In III-V epi, Epitronics
competes with Kopin, Epi Products, Emcore and a number of smaller
manufacturers. In wide bandgap epi, competitors include Cree Research (silicon
carbide) and IBIS Technology (SIMOX wafers).
MANUFACTURING
ADCS manufactures its thin film materials and delivery systems at its
Burnet, Texas and Danbury, Connecticut facilities. In addition, ADCS-Korea's
facility in Anseong, South Korea manufactures thin film materials to be
distributed in the South Korean market. The manufacturing facility for SDS in
Danbury is complemented by contracted manufacturing from Matheson's facility.
ATMI believes that these facilities are adequate for its current needs, but
expects to expand to meet anticipated demand.
EcoSys manufactures the majority of its point-of-use environmental equipment
in San Jose, California. EcoSys manufactures its proprietary adsorbents for
its gas treatment products at ATMI's Danbury facility. Manufacture of the
Guardian product line had been subcontracted to a third party which
manufactured these products prior to the acquisition of the Guardian product
line by ATMI in 1995. ATMI commenced manufacture of this product line at its
San Jose facility in 1997.
Epitronics processes its specialty silicon epitaxial wafers at its Mesa,
Arizona facility and processes III-V semiconductor wafers for the wireless and
optoelectronic industries at its Phoenix, Arizona facility. It processes wide
bandgap wafers and produces high performance thin films in Danbury.
Raw materials for ATMI's products and processes are available from multiple
domestic sources.
RESEARCH AND DEVELOPMENT AND STRATEGIC ALLIANCES
ATMI's research and development expenses consist of personnel and other
indirect costs for internally funded project development. ATMI's external
funding is almost exclusively from various agencies of the federal government.
ATMI also participates in joint development efforts with certain semiconductor
manufacturers and semiconductor equipment OEMs. Total sums expended for
research and development in the years ended December 31, 1995, 1996 and 1997
and the three months ended March 31, 1998 were $13.2 million, $18.2 million,
$18.5 million and $4.5 million, respectively. Of those amounts, $7.5 million,
$8.3 million, $7.9 million and $1.7 million, respectively, were externally
funded and are classified as cost of contract revenues on ATMI's Consolidated
Financial Statements, and $5.7 million, $9.8 million, $10.6 million and
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$2.8 million, respectively, were internally funded expenditures by ATMI and
are classified as research and development expenses on ATMI's Consolidated
Financial Statements. Over the last three years, a significant portion of
ATMI's research and development has focused on ferroelectric materials and SDS
gas delivery systems.
Ferroelectric Materials. ATMI believes that further reductions in circuit
dimensions will require changes in the materials used for the thin films
required to store, transmit and switch electricity in the complex circuitry of
semiconductor devices. As a result, in August 1992, ATMI entered into an
agreement with IBM, Micron Technology and Texas Instruments (the
"Collaborating Group") to develop advanced thin film capacitor materials and
CVD process technology delivery equipment for next-generation memory devices.
This agreement focused on developing CVD process technology to fabricate
ferroelectric thin films, such as barium strontium titanate, for high
performance memory devices. Barium strontium titanate can store over 30 times
more electrical charge than conventional thin films. Use of this material
could significantly reduce the manufacturing complexity of advanced memory
devices. In April 1993, the Advanced Research Projects Agency awarded a $5
million contract for the development of thin film materials technology to the
Collaborating Group, with ATMI as prime contractor. This program was
successfully completed in 1996 with a total cost of over $20 million. ATMI,
through its Emosyn division, intends to use the technology developed under the
program to develop and commercialize smart card devices pursuant to a
strategic alliance with a subsidiary of SMH Swatch. In addition, ATMI's
ferroelectric thin film technology has also expanded to other ferroelectric
materials that have applications ranging from non-volatile memory devices to
wireless components. This in turn has led ATMI to enter into strategic
alliances with Lucent Technologies, Siemens and Texas Instruments to develop
these materials for commercial markets.
SDS Gas Delivery Systems. Simultaneously with the development of these thin
film materials, ATMI developed and patented a novel approach to the delivery
of gases to semiconductor reactors. Historically, semiconductor process gases
have only been available in high-pressure cylinders that can create an
immediate danger over a large area if inadvertently released. Through the use
of in-cylinder adsorbents, SDS reduces cylinder pressures below atmospheric
levels. This lowered pressure allows controllable, on-demand release of
certain semiconductor process gases. ATMI began a strategic alliance with
Matheson in January 1994, under which Matheson exclusively distributes the SDS
product to ion implant users in the worldwide semiconductor industry.
Government Contracts. ATMI participates in United States government funded
research and development contracts. As of March 31, 1998, ATMI had received
aggregate awards since its inception of approximately $65.6 million from
United States government agencies, including approximately $57.3 million
recognized as revenue by ATMI through March 31, 1998. These contracts fund
continued CVD technology development, development of high performance
semiconductor devices, ferroelectric thin films and devices for specific
applications, while offsetting the cost of research and development.
Government contract revenues totaled approximately $8.7 million, $9.8 million,
$9.1 million and $2.4 million for the years ended December 31, 1995, 1996 and
1997 and the three months ended March 31, 1998, respectively. This represents
approximately 14.5%, 11.1%, 9.0% and 8.6% of ATMI's total revenues for those
respective periods. The government, at its convenience, may terminate
contracts with ATMI. The government may also exercise "march-in" rights in the
event that ATMI fails to continue to develop the technology, whereby the
government may exercise a non-exclusive, royalty-free, irrevocable, worldwide
license to any technology developed under contracts funded by the government.
ATMI will continue to submit proposals to various government entities for
additional research and development funding as long as such proposals are
consistent with its commercialization strategy.
PATENTS AND PROPRIETARY RIGHTS
ATMI has made a significant investment in securing intellectual property
protection for its technology and products. ATMI protects its technology by,
among other things, filing patent applications for technology considered
important to the development of its business. It also relies upon trade
secrets, unpatented know-
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how, continuing technological innovation and the aggressive pursuit of
licensing opportunities to help develop and maintain its competitive position.
ATMI has been awarded 89 United States patents and currently has 93 United
States patent applications pending. Foreign counterparts of certain of these
applications have been filed or may be filed at an appropriate time. ATMI
decides on a case-by-case basis whether, and in what countries, it will file
counterparts of a United States patent application outside the United States.
ATMI holds licenses to 12 United States patents. ATMI's United States patents
expire between 2006 and 2016. The United States patents licensed to ATMI
expire during the period from 2006 through 2013.
ATMI's ability to compete effectively with other companies will depend, in
part, on its ability to maintain the proprietary nature of its technology.
Although ATMI has been awarded, has filed applications for, or has been
licensed under numerous patents in the United States and other countries,
there can be no assurance concerning the degree of protection afforded by
these patents or the likelihood that pending patents will be issued.
ATMI requires all employees and most consultants, outside scientific
collaborators, sponsored researchers and other advisors to execute
confidentiality agreements upon the commencement of employment or consulting
relationships with ATMI. These agreements provide that all confidential
information developed or made known to the individual during the course of the
individual's relationship with ATMI is to be kept confidential and not
disclosed to third parties except in specific circumstances. All of ATMI's
employees have entered into agreements providing for the assignment of rights
to inventions made by them while in the employ of ATMI.
BACKLOG
Neither ADCS, which conducts significant portions of its business with open-
ended, long-term supply contracts which do not specify quantities, nor
Epitronics, which generally operates with fast turnaround, maintains
significant backlog. Because orders comprising ATMI's backlog may be canceled
and delivery schedules may be changed, ATMI's backlog at any particular date
may not be indicative of actual sales for any succeeding period.
ATMI considers orders for products shippable within six months of the
backlog date and fully executed and funded research contract awards as of the
backlog date as firm backlog. As of March 31, 1998, ATMI had firm backlog of
approximately $19.1 million, consisting of approximately $10.8 million of
product orders and approximately $8.3 million of executed and funded research
contracts. This compares to a firm backlog level of approximately $14.4
million as of March 31, 1997, which consisted of approximately $6.9 million of
product orders and approximately $7.5 million of executed and funded research
contracts. SDS product backlog is not included in ATMI's backlog computations
because the product is sold and shipped to Matheson for distribution to the
ultimate end user.
ENVIRONMENTAL REGULATION
ATMI uses, generates and discharges toxic, volatile or otherwise hazardous
chemicals and wastes in its manufacturing, processing and research and
development activities. Therefore, ATMI is subject to a variety of federal,
state and local governmental regulations related to the storage, use and
disposal of these materials. ATMI believes that it has, or is seeking to
obtain, all the permits necessary to conduct its business. However, the
failure to comply with present or future laws, rules or regulations or the
failure of ATMI to obtain the permits it is currently seeking could result in
fines or other liabilities being imposed on ATMI, suspension of production or
a cessation of operations. While ATMI believes that it has properly handled
its hazardous materials and wastes and has not contributed to any on-site
contamination or environmental condition at any of its premises, the various
premises, particularly the premises in Danbury, Connecticut, may have been
contaminated prior to ATMI's occupancy. ATMI is not aware of any environmental
investigation, proceeding
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<PAGE>
or action by federal or state agencies involving these premises. However,
under certain federal and state statutes and regulations, a government agency
may seek to recover its response costs and/or require future remedial measures
from both operators and owners of property where releases of hazardous
substances have occurred or are ongoing. The prior occupant of the Danbury,
Connecticut premises has agreed to indemnify ATMI for remediation costs in
connection with any pre-existing, on-site contamination or environmental
condition. However, there can be no assurance that this indemnification will
prove adequate to cover any liability imposed on ATMI related to the
environmental condition of the premises or the cost of defending an
environmental action, either of which could be substantial. ATMI's activities
may also result in its being subject to additional regulation. Such
regulations could require ATMI to acquire significant additional equipment or
to incur other substantial expenses to comply with environmental laws, rules
or regulations. Any failure by ATMI to control the use of, or to restrict
adequately the discharge of, hazardous substances could subject it to
substantial financial liabilities and could have a material adverse effect on
ATMI's business, operating results and financial condition.
EMPLOYEES
As of May 31, 1998, ATMI employed a total of 402 individuals, including 134
in sales and administration, 214 in operations and 54 in research and
development. Of these employees, 44 hold Ph.D. degrees and 31 hold other
advanced degrees in electrical engineering, materials science, chemistry,
physics or related fields. None of ATMI's employees are covered by collective
bargaining agreements. ATMI has not experienced any work stoppages and
considers its relations with its employees to be strong.
PROPERTIES
ATMI's headquarters are located in Danbury, Connecticut where it leases a
72,000 square foot facility. ATMI occupies this facility under a lease which
expires on August 30, 2005. ATMI believes its existing facility is adequate
and suitable for its current and anticipated needs.
ADCS' headquarters and general corporate offices are located in Austin,
Texas, where it leases approximately 4,000 square feet. This lease expires May
31, 2000. ADCS also owns approximately six acres of property in Burnet, Texas,
on which its 12,000 square foot manufacturing facility is located. Although
ATMI believes the existing headquarters and manufacturing facilities are
adequate for the current level of demand, ATMI expects to expand the ADCS
manufacturing facilities within the next 18 months to meet anticipated demand.
ADCS-Korea owns approximately 1.4 acres in an industrial park in Anseong,
South Korea, where its approximately 9,000 square foot manufacturing facility
and office are located.
EcoSys leases a 24,000 square foot facility in San Jose, California, which
lease expires in March 2003. EcoSys has recently leased an additional 21,000
square foot facility in the same San Jose office park, which lease expires
March 2003. ATMI believes these facilities are adequate and suitable for
EcoSys' current and anticipated needs.
Epitronics owns its corporate headquarters located in Mesa, Arizona. This
facility measures 33,000 square feet, is expandable to 50,000 square feet and
houses the specialty silicon epitaxial service business. Epitronics also
leases a 15,000 square foot facility in Phoenix, Arizona, where the III-V
epitaxial business is located, which lease expires August 1999. The wide
bandgap epitaxial business is housed in ATMI's corporate facility in Danbury,
Connecticut. ATMI obtains certain of its manufacturing equipment by entering
into capital leases while other equipment is held subject to liens on the
related equipment securing notes payable. ATMI believes these facilities are
adequate and suitable for Epitronics' current and anticipated needs.
LITIGATION
ATMI is not a party to any material litigation and is not aware of any
pending or threatened litigation that could have a material adverse effect
either upon ATMI's business, operating results or financial condition.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS--ATMI
The following discussion and analysis should be read in conjunction with
"Selected Financial Data" and the Consolidated Financial Statements of ATMI
and Notes thereto included elsewhere in this Proxy Statement/Prospectus.
Except for the historical information contained herein, the discussion in this
Proxy Statement/Prospectus contains certain forward-looking statements that
involve risks and uncertainties, such as statements of ATMI's plans,
objectives, expectations and intentions. When used in this Proxy Statement/
Prospectus, the words "anticipate," "plan," "believe," "estimate," "expect"
and similar expressions as they relate to ATMI or its management are intended
to identify such forward-looking statements. The cautionary statements made in
this Proxy Statement/Prospectus should be read as being applicable to all
related forward-looking statements wherever they appear in this Proxy
Statement/Prospectus. ATMI's actual results, performance or achievements could
differ materially from the results expressed in, or implied by, these forward-
looking statements. Factors that could cause or contribute to such differences
include those discussed in "Risk Factors," as well as those discussed
elsewhere herein.
OVERVIEW
ATMI was incorporated in Delaware in 1997 and is the successor registrant to
ATM, which was incorporated in Connecticut in 1986 and reincorporated in
Delaware in 1987. ATMI is a leading supplier of specialty thin film materials
and delivery systems, point-of-use environmental equipment and epitaxial
processing services for the semiconductor industry. Product revenues include
revenues from the sale of consumable thin film materials and materials
delivery systems, environmental equipment, consumable resins for effluent
abatement and processed epitaxial wafers. Product revenues are recognized upon
the shipment of those products. ATMI also derives revenues from contract
research and development activities related to high performance semiconductor
materials and devices and from royalties generated under various license
agreements. Contract revenues are recognized using a percentage-of-completion
method based upon costs incurred and estimated future costs.
A substantial majority of ATMI's revenues track "wafer starts" within the
semiconductor industry, or the volume of silicon wafers processed into fully
functional semiconductor devices. These include revenues derived from the sale
of speciality thin film materials that are used in CVD processes and the
delivery systems for these materials. Manufacturers seek to replenish these
consumable materials on a continuing basis. Furthermore, once ATMI's specialty
materials are qualified for a specific process, ATMI's customers typically
source materials from ATMI for the lifetime of the process, generating a
recurring revenue stream. Similarly, ATMI derives a recurring revenue stream
from the sale of resins that are used in certain of its environmental
equipment products. Additionally, ATMI's epitaxial wafer processing services
revenues are directly tied to the number of wafers processed for ATMI's
customers. A smaller portion of ATMI's revenues, principally those derived
from environmental equipment sales, track new semiconductor plant
construction. In 1997, approximately 73% of ATMI's product revenues were from
product lines that were primarily related to "wafer starts," while
approximately 27% of ATMI's product revenues were from product lines that were
primarily related to "fab starts," or new plant construction.
ATMI's products are based primarily on proprietary and patented CVD
technologies used in the manufacture of semiconductor devices. ATMI's strategy
has been to use these technologies to develop and, in conjunction with
industry collaborators, sequentially introduce products into high growth
markets of the semiconductor industry. Using this phased commercialization
strategy, ATMI has been able to develop its core CVD technologies and
establish businesses to support further commercialization of its products.
ATMI has also used a targeted acquisition strategy to assist in building
critical mass and market position in each of the markets it serves.
ADCS comprises the thin film materials and related delivery system products
of ATMI and contributed approximately 45% of consolidated revenues in 1997.
ATMI entered the thin film materials market in
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February 1992 with a strategy targeting advanced materials for next-generation
devices. As those next-generation markets were evolving and ATMI's new thin
film materials were nearing commercialization, ATMI sought to accelerate this
commercialization by acquiring another supplier currently serving this market
with established products and strong distribution and manufacturing
capabilities. In October 1997, ATMI acquired the ADCS Group and combined
ATMI's thin film materials and delivery systems business with the business of
the ADCS Group.
EcoSys manufactures, sells and services point-of-use semiconductor
environmental equipment and generated approximately 27% of ATMI's consolidated
revenues in 1997. ATMI entered the semiconductor environmental equipment
market in 1989 with the introduction of its Novapure dry chemical scrubber.
This product was originally designed pursuant to a contract with the
Environmental Protection Agency. In 1991, this product and several others
resulting from early stage research and development efforts at ATMI were
contributed to Novapure Corporation ("Novapure"), a joint venture with
Millipore Corporation ("Millipore"). In 1994, ATMI acquired Vector, a
manufacturer of liquid and combustion semiconductor environmental equipment.
In conjunction with the sale of certain product lines of Novapure to Millipore
in 1994, ATMI formed EcoSys by combining the retained rights to the effluent
treatment product line of Novapure with Vector's product lines. In 1995, ATMI
acquired the Guardian Systems product line of combustion semiconductor
environmental equipment to further broaden EcoSys' product offerings.
Epitronics provides end-use customers with thin film epitaxial services
covering a variety of materials in the semiconductor industry and generated
approximately 28% of ATMI's consolidated revenues in 1997. ATMI's development
of epitaxial processes began in 1987, centered around novel wide bandgap
semiconductor materials such as silicon carbide. Through discussions with its
customers and development collaborators, ATMI recognized that an opportunity
existed to create a materials company that could offer epitaxial services for
a wide spectrum of semiconductor materials. To complement its silicon carbide
and gallium nitride epitaxial thin film technology, ATMI acquired Epitronics
Corporation, a Phoenix, Arizona-based processor of III-V epitaxial wafers for
the wireless and optoelectronics markets in December 1995. ATMI integrated the
operations of Epitronics Corporation with its Diamond Electronics division in
1996, under the more widely recognized Epitronics name. In October 1997, ATMI
acquired LSL, a Mesa, Arizona-based provider of silicon epitaxial wafer
processing services. ATMI has integrated the operations of LSL with
Epitronics, which now offers a wide spectrum of epitaxial services.
The acquisitions of Vector, the ADCS Group and LSL have been accounted for
as pooling-of-interests transactions. As a result, the Consolidated Financial
Statements of ATMI have been restated to include the results of Vector, the
ADCS Group and LSL for all periods presented.
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RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, certain items
from ATMI's consolidated statements of income expressed as a percentage of
total revenues:
<TABLE>
<CAPTION>
PERCENTAGE OF TOTAL REVENUES
---------------------------------
THREE
MONTHS
FISCAL YEAR ENDED ENDED
DECEMBER 31, MARCH 31,
------------------- ------------
1995 1996 1997 1997 1998
----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
Product revenues........................ 85.5% 88.9% 91.0% 88.4% 91.4%
Contract revenues....................... 14.5 11.1 9.0 11.6 8.6
----- ----- ----- ----- -----
Total revenues.......................... 100.0 100.0 100.0 100.0 100.0
Cost of revenues........................ 49.4 46.5 47.8 51.0 45.1
----- ----- ----- ----- -----
Gross profit............................ 50.6 53.5 52.2 49.0 54.9
Operating expenses:
Research and development.............. 9.5 11.1 10.4 10.9 10.2
Selling, general and administrative... 26.4 23.2 22.7 22.9 20.4
Non-recurring expenses................ 0.0 2.3 8.8 0.0 0.0
----- ----- ----- ----- -----
Total operating expenses............ 35.9 36.6 41.9 33.8 30.6
----- ----- ----- ----- -----
Operating income........................ 14.7 16.9 10.3 15.1 24.3
Interest income (expense), net.......... (0.6) 0.0 (0.3) 0.1 0.0
Other income (expense), net............. (0.9) 0.0 0.2 0.0 0.4
----- ----- ----- ----- -----
Income before income taxes and minority
interest............................... 13.2 16.9 10.2 15.2 24.6
Income taxes............................ 4.8 3.6 5.8 4.1 8.1
----- ----- ----- ----- -----
Income before minority interest......... 8.4 13.4 4.3 11.1 16.5
Minority interest....................... 0.0 0.2 0.0 0.1 (0.2)
----- ----- ----- ----- -----
Net income.............................. 8.5% 13.6% 4.3% 11.2% 16.3%
===== ===== ===== ===== =====
</TABLE>
Comparison of Three Months Ended March 31, 1998 and 1997
Revenues. Total revenues increased 22% to $27.4 million in the three months
ended March 31, 1998 from $22.5 million in the three months ended March 31,
1997. Product revenues increased 26% to $25.0 million in the three months
ended March 31, 1998 from $19.9 million in the corresponding period in 1997.
The product revenue growth was primarily attributable to the continued
expansion of SDS product sales, increased material sales at ADCS and growth in
sales of silicon epi services at Epitronics. Contract revenues decreased 10%
to $2.4 million, or 8.6% of total revenues, in the quarter ended March 31,
1998 from $2.6 million, or 11.6% of total revenues, in the same quarter of
1997. The decrease in the 1998 quarter reflected a general decrease in
government funding of ATMI's research activities, as well as the completion of
various existing government contracts.
Gross Profit. Cost of revenues is comprised of material, labor and overhead
in differing proportions, depending on the business unit within ATMI. EcoSys'
cost of revenues consists primarily of material costs, while ADCS' costs have
a higher relative labor content and Epitronics' costs consist primarily of
indirect costs of maintaining an epi facility. Additionally, contract revenue
costs consist of direct labor and material and indirect costs associated with
the performance of government contracted research activity. Gross profit
increased 36% to $15.0 million in the three months ended March 31, 1998 from
$11.0 million in the three months ended March 31, 1997. Gross margin increased
to 54.9% of revenues in the three months ended March 31, 1998 from 49.0% of
revenues in the corresponding period in 1997.
Gross profit from product revenues increased 36% to $14.4 million in the
three months ended March 31, 1998 from $10.6 million in the same three month
period in 1997. Gross margin on product revenues increased
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to 57.5% in the three months ended March 31, 1998 from 53.1% in the three
months ended March 31, 1997. This increase was due principally to a shift in
product mix towards higher margin consumable product lines, which includes the
SDS product.
Gross profit on contract revenues increased 38% to $0.6 million in the
quarter ended March 31, 1998 from $0.4 million in the same quarter in 1997.
Gross margin on contract revenues increased to 26.9% in the first quarter of
1998 from 17.6% in the first quarter of 1997. The increase in contract margin
resulted from the completion of certain firm-fixed price contracts in the
quarter. Additionally, contract margins can vary slightly from year to year
based on the mix of cost-type, firm-fixed price and cost share arrangements.
Research and Development Expenses. Research and development expenses consist
of personnel and other indirect costs for internally funded project
development. These expenses are complemented by the externally funded research
activities relating to contract revenues. Research and development expenses
increased 13% to $2.8 million in the three months ended March 31, 1998 from
$2.5 million in the three months ended March 31, 1997. The increase in the
first quarter of 1998 was principally due to development efforts surrounding
ATMI's advanced thin film materials technology and application-specific
product development efforts within the recently announced Emosyn venture. As a
percentage of revenues, research and development expenses decreased to 10.2%
in the three months ended March 31, 1998 from 10.9% in the three months ended
March 31, 1997.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased 8% to $5.6 million in the three months ended
March 31, 1998 from $5.2 million in the same three month period in 1997. The
increase in the 1998 quarter was primarily due to increased administrative
costs, increased commissions on higher product revenues and increased
marketing activities. As a percentage of revenues, selling, general and
administrative expenses decreased to 20.4% in the three months ended March 31,
1998 from 22.9% in the corresponding period in 1997 due to the faster growing
consumable product lines requiring less variable selling cost than the
equipment lines.
Interest Income (Expense), Net. Interest income (expense), net, including
other income (expense), net, increased to $96,000 in the quarter ended March
31, 1998 from $11,000 in the quarter ended March 31, 1997. The increase in the
1998 quarter related to a decrease in interest expense as a result of
decreases in outstanding debt balances and an increase in interest income due
to an increase in the cash position of ATMI at March 31, 1998 compared to
March 31, 1997. There was no significant increase in interest income from the
public offering due to its completion at the end of the first quarter of 1998.
Income Taxes. ATMI's income tax expense related primarily to United States
federal and state taxes on income generated, partially offset by available
foreign and research and development credits. Income tax expense increased
142.2% to $2.2 million in the three months ended March 31, 1998 from $0.9
million in the three months ended March 31, 1997. For the three months ended
March 31, 1998, the effective tax rate was 33.0% compared to 26.9% for the
three months ended March 31, 1997. The increase was primarily due to the
utilization of ATMI's loss carryforwards in 1997.
Minority Interest. Minority interest represents the 30% interest held by
K.C. Tech Co., Ltd. ("K.C. Tech") in the operations of ADCS-Korea, a South
Korean chusik hoesa, which is a joint venture established to manufacture, sell
and distribute chemicals to the semiconductor and related industries in South
Korea.
Earnings Per Share. Earnings per share, on a diluted basis, increased 84.6%
to $0.24 per share in the first quarter of 1998 from $0.13 per share in the
first quarter of 1997. Basic earnings per share under Financial Accounting
Standards Board Statement No. 128 ("FAS 128") increased 66.7% to $0.25 per
share in the first quarter of 1998 from $0.15 per share in the first quarter
of 1997. There was no material change in shares outstanding for the first
quarter of 1998 when compared to the first quarter of 1997.
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Comparison of Fiscal Years Ended December 31, 1997, 1996 and 1995
Revenues. Total revenues increased 15% to $101.9 million in 1997 from $88.7
million in 1996, and increased 47% in 1996 from $60.2 million in 1995. Product
revenues increased 18% to $92.8 million in 1997 from $78.8 million in 1996,
and increased 53% in 1996 from $51.5 million in 1995. Commercial product
revenues have grown rapidly, such that they comprised 91.0% of total revenues
in 1997 compared to 88.9% in 1996 and 85.5% in 1995.
Over the three year period, ADCS revenues grew at a rate in excess of the
growth rate of the semiconductor industry. ADCS revenues increased 41% in 1997
when compared to 1996. This growth was primarily attributable to a substantial
increase in SDS product sales as well as the conversion of SDS revenues in the
fourth quarter of 1996 from a royalty stream to a product revenue stream. ADCS
thin film materials revenues increased 17% in 1997 when compared to 1996. This
materials revenue growth included sales to new customers as well as increased
sales to existing accounts. Revenues from the sale of materials delivery
equipment increased only 2% when comparing the two periods, due primarily to a
shift away from an OEM distribution channel to a direct sales channel where,
particularly in the second quarter of 1997, the OEM equipment orders slowed in
advance of any increase in end-user orders.
Sales of materials and delivery systems increased 42% in 1996 when compared
to 1995. This growth was primarily due to market share gains in Europe and
Asia along with increased sales to existing customers. Increased acceptance of
ATMI's delivery and refill hardware systems also generated revenue growth over
this period.
The SDS product line began to have a significant impact on ATMI's revenue
growth in 1996. The revenue from this product line changed in late 1996 from a
royalty stream to a product revenue stream. As a result, sales of this product
represented 5.0% of total revenues in 1996, up from 1.5% of total revenues in
1995.
By leveraging its technology leadership and full service philosophy in the
market for semiconductor environmental equipment, EcoSys increased market
share in the face of a declining overall capital equipment market in 1996 and
the first half of 1997. EcoSys revenues increased 9% in 1997 when compared to
1996 and increased 48% in 1996 when compared to 1995. The 1997 increase was
attributable to a slight increase in equipment sales and continued growth in
sales of consumable resins. The December 1995 acquisition of the Guardian
Systems product line, which was accounted for as a purchase transaction, was
responsible for a portion of the revenue growth in 1996.
Epitronics revenues increased 2% in 1997 when compared to 1996. Growth in
the small gallium arsenide and wide bandgap product lines was tempered by a
slight increase in silicon epitaxial services revenues. The relative flatness
in silicon epi revenues was primarily a result of production downtime
associated with the relocation of manufacturing equipment to ATMI's new Mesa,
Arizona facility, which was completed in July 1997. Additionally, a diversion
of management's attention during early 1997 related to the negotiation and
sale of the silicon epi business to ATMI had a slight negative effect on
revenue growth during that period. Prior to 1997, Epitronics revenues had
grown significantly, driven primarily by increased customer demand for the
silicon processing services of ATMI. Epitronics revenues increased 50% in 1996
when compared to 1995.
With the exception of some downward pressure on pricing in the ADCS
materials product line, the net sales increase, particularly in 1997, is a
reflection of increased volumes of products sold.
Contract revenue decreased by 7% to $9.1 million, or 9.0% of total revenues,
in 1997 from $9.8 million, or 11.1% of total revenues, in 1996. The decline in
1997 resulted from a general decrease in government funding of ATMI's contract
research activities, reflecting the completion of certain contract research
programs and ATMI's decision to focus on research relating to specific,
commercially relevant efforts. General increases in government funding of ATMI
research resulted in the growth of contract revenues in previous years.
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<PAGE>
Government funding increased 13% to $9.8 million in 1996 from $8.7 million in
1995. The increased research funding in 1996 was primarily focused on
materials development, device processing and device design activities within
ADCS and Epitronics.
Gross Profit. Gross profit increased 12% to $53.2 million in 1997 from
$47.4 million in 1996, primarily as a result of increased revenues. Gross
margin decreased to 52.2% of revenues in 1997 from 53.5% of revenues in 1996.
Gross margin on product revenues decreased to 56.0% in 1997 from 58.3% in
1996. The decrease of product margins was primarily attributable to lower
margins in the silicon epi business due to the relocation of manufacturing
equipment during the first half of 1997 and duplicate facility costs during
that period. Additionally, margin decreases were caused by lower selling
prices to end-user customers of ADCS and the fact that the SDS revenue stream
was a smaller but higher margin royalty stream in 1996. Margin decreases were
partially offset by the improved margin profile of the overall product mix of
EcoSys in 1997. Gross margin on contract revenues decreased to 13.7% in 1997
from 15.3% in 1996. Contract margins varied slightly when comparing the two
periods due to different fee arrangements and indirect cost absorption.
Gross profit increased 56% to $47.4 million in 1996 from $30.4 million in
1995 and gross margin improved to 53.5% of revenues in 1996 from 50.6% of
revenues in 1995. In 1996, ATMI's sales mix continued to shift toward greater
volumes of high-margin products. Gross margin on product revenues increased
57% to $45.9 million in 1996 from $29.2 million in 1995. Product gross margin
improved to 58.3% of product revenues in 1996, up from 56.8% of product
revenues in 1995. The improved product margins in 1996 were attributable
primarily to higher margins on epitaxial processing due to efficiencies gained
with increased volume and to the significant increases in royalties in
connection with SDS product line growth. Gross profit on contract revenues
increased 23% to $1.5 million in 1996 from approximately $1.2 million in 1995,
while gross margin on contract revenues increased to 15.3% in 1996 from 14.0%
in 1995. Contract margins can vary from year to year based on the mix of cost-
type, fixed-price and cost sharing arrangements. Additionally, different fee
arrangements and indirect cost absorption can result in some margin
variability.
Research and Development Expenses. Research and development expenses
increased 8% to $10.6 million in 1997 from $9.8 million in 1996, and increased
73% in 1996 from $5.7 million in 1995. The 1997 increase was primarily due to
increased staffing for several development efforts pertaining to certain of
ATMI's advanced thin film technology and related applications. The 1996
increase was primarily due to expansion of product development efforts within
EcoSys and ADCS and increased spending to expand and protect the SDS
technology portfolio. Research and development expenses as a percentage of
revenues decreased to 10.4% in 1997, compared with 11.1% in 1996, which was an
increase from 9.5% in 1995.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased 12% to $23.2 million in 1997 from $20.6
million in 1996, and increased 30% in 1996 from $15.9 million in 1995. The
increases were primarily due to increased corporate administrative costs,
increased commissions on higher product revenues and increased product
marketing activity. ATMI's variable selling costs grew in 1996 in line with
ATMI's revenue growth. ATMI also added administrative staff in 1996 to support
revenue growth and incurred increased costs related to the businesses acquired
in 1995. Selling, general and administrative expenses as a percentage of
revenues decreased to 22.7% in 1997, compared with 23.2% in 1996 and 26.4% in
1995.
Non-Recurring Expenses. The 1997 operating results included a one-time, non-
recurring charge of $9.0 million related to the costs incurred in
investigating, analyzing and completing the ADCS Group and LSL acquisitions.
These costs included legal, accounting and investment banking fees as well as
miscellaneous expenses incurred in connection with the transactions that
closed in the fourth quarter of 1997. This $9.0 million charge varies from a
previously reported estimate of $6.1 million in the pro forma financial
statements included in ATMI's Form 8-K dated October 10, 1997. The increase in
costs relates primarily to additional investment banking, legal and accounting
fees associated with registering the securities for the transactions and
closing the deals. In addition, the extended timeframe between executing and
closing the transactions caused an increase in the costs incurred by ATMI in
integrating the newly acquired businesses. The $9.0
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<PAGE>
million charge is made up primarily of $2.5 million in legal fees, $1.3
million in audit and accounting fees, $2.4 million of fees paid to investment
bankers, a $1.8 million break-up fee incurred by LSL, $0.5 million in printing
and filing fees and $0.5 million of employee relocation costs. The 1996
operating results included a one-time charge of $2.0 million accrued in
connection with patent litigation involving LSL, which resulted in a
settlement payment in May 1997.
Interest Income (Expense), Net. Interest income is primarily derived from
interest earned on ATMI's cash, cash equivalents and marketable securities.
Interest income decreased 10% to $1.5 million in 1997 from $1.6 million in
1996, and increased 70% in 1996 from $1.0 million in 1995. ATMI's invested
cash balances were lower in 1997 than in 1996 due to net cash outflow during
the year, primarily from the costs incurred in closing the ADCS Group and LSL
acquisitions in the fourth quarter of 1997. The increase in interest income in
1996 was due to ATMI's invested cash balances throughout 1996 being
significantly higher than in 1995 due to ATMI's public offering of common
stock in October 1995. Interest expense increased 11% to $1.8 million in 1997
from $1.6 million in 1996, and increased 24% in 1996 from $1.3 million in
1995. The 1997 increase was due to larger debt balances outstanding during
1997, while the 1996 increase was primarily attributable to increased
borrowings under capital lease commitments at Epitronics as well as the
mortgage on the Mesa, Arizona facility.
Income Taxes. ATMI's income tax expense related to United States federal and
state taxes on income generated, partially offset by the utilization of loss
carryforwards and available federal and state tax credits. Income tax expense
increased 88% to $5.9 million in 1997 from $3.2 million in 1996, and increased
9% in 1996 from $2.9 million in 1995. The effective income tax rate increased
to 57.3% in 1997 from 21.0% in 1996 and decreased from 36.3% in 1995. The
significant increase in 1997 to a level above statutory rates was due in part
to the 1997 operating results including the $9.0 million non-recurring charge
related to the ADCS Group and LSL acquisitions for which no tax benefit has
been taken. The decline in the effective rate in 1996 was the result of the
ADCS Group's being taxed as a S-Corporation for a portion of 1996. ATMI
expects the effective tax rate to approach fully taxed rates in 1998.
Minority Interest. Minority interest represents K.C. Tech's 30% interest in
the operations of ADCS-Korea.
Earnings Per Share. Earnings per share, on a diluted basis, decreased 63% to
$0.24 per share in 1997 from $0.65 per share in 1996 and increased 117% in
1996 from $0.30 per share in 1995. However, after adjusting earnings to
exclude the non-recurring charges recognized in 1997 and 1996, and to adjust
1996 earnings on a pro forma basis to treat the ADCS Group as a C-Corporation
for all of 1996, earnings per share, on a diluted basis, increased 13% to
$0.72 per share in 1997 from $0.64 per share in 1996, and increased 113% in
1996 from $0.30 per share in 1995.
Basic earnings per share under FAS 128 decreased 63% to $0.26 per share in
1997 from $0.70 per share in 1996, and increased 119% in 1996 from $0.32 per
share in 1995.
LIQUIDITY AND CAPITAL RESOURCES
To date, ATMI has financed its activities through the sale of equity,
external research and development funding, various lease and debt instruments
and operations. ATMI's working capital increased to $98.2 million at March 31,
1998 from $39.9 million at December 31, 1997 and $36.6 million at December 31,
1996.
Net cash provided by operations was approximately $2.7 million during the
three months ended March 31, 1998, due primarily to the profitability of
operations. In 1997, operations provided cash of approximately $5.9 million.
Working capital increases, most notably in accounts receivable, inventory and
other assets, resulted in significant uses of cash during the three months
ended March 31, 1998 and during 1997. The $9.0 million of non-recurring
transaction costs, expensed in the fourth quarter of 1997, reduced the cash
generated from operations by approximately $7.0 million, as approximately $2.0
million remained
45
<PAGE>
unpaid at December 31, 1997. Net cash generated from operations in 1996 of
approximately $13.3 million was due principally to the increased profitability
of ATMI for the year. In 1995, ATMI generated net cash from operations of $7.2
million, primarily due to the profitability of operations, which was offset by
a significant increase in accounts receivable because of end-of-the-year
product shipments.
ATMI's investing activities included capital expenditures of $2.2 million,
$6.3 million, $11.6 million and $6.3 million in the three months ended March
31, 1998 and the years 1997, 1996 and 1995, respectively. The 1998
expenditures related primarily to the installation of additional manufacturing
capacity in Danbury, Connecticut and at the ADCS manufacturing facilities in
Burnett, Texas. The 1997 expenditures included both the installation of SDS
manufacturing capacity in the Danbury, Connecticut facility and an increase in
epitaxial capacity in Epitronics' Arizona facilities. In addition, ATMI
anticipates the purchase of a reactor for $2.5 million in 1998. Capital
expenditures for 1996 included final construction of Epitronics' manufacturing
facility in Mesa, Arizona, as well as manufacturing expansion for EcoSys and
ADCS-Korea, and laboratory construction for customer application work for
EcoSys. Capital expenditures in 1995 were for renovations and leasehold
improvements to ATMI's Danbury and San Jose, California facilities, upgrades
to ATMI's information systems and purchases of laboratory equipment.
Among other investing activities, ATMI sold $0.8 million in marketable
securities in 1997, while in 1996, ATMI sold $3.6 million in marketable
securities and made a $4.0 million payment in connection with the 1995
acquisition of the Guardian Systems product line. During 1995, ATMI made a
$1.0 million investment in Candescent Technologies Corporation (formerly
Silicon Video Corporation) in conjunction with a joint development program,
and purchased $11.2 million of marketable securities with the proceeds
received from the 1995 public offering of common stock.
As of March 31, 1998, ATMI has financed a significant portion of its capital
equipment purchases, particularly the silicon epitaxial capacity currently in
place, through capital leases with approximately $8.0 million of capital lease
obligations outstanding. Financial institutions have also provided collateral-
based loans for other equipment purchases, and approximately $5.8 million of
notes payable to commercial banks was outstanding as of March 31, 1998. In
addition, the State of Connecticut has extended loans of $1.8 million to
assist in the renovation of ATMI's Danbury facility. At March 31, 1998, $2.0
million remained outstanding on a promissory note related to ATMI's 1995
acquisition of the Guardian Systems product line. At March 31, 1998, $18.6
million of loans and financing remained outstanding. Management believes that
its debt service obligations can be adequately satisfied by cash flows from
operations.
In March and April 1998, ATMI completed a registered underwritten public
offering of 5,428,000 shares of ATMI Common Stock. Of such shares, 2,257,291
shares were sold by ATMI, and 3,170,709 shares were sold by certain
stockholders of ATMI. Net proceeds to ATMI were approximately $62.9 million.
ATMI believes that existing cash balances, including the proceeds from the
recent sale of ATMI Common Stock in the 1998 public offering, marketable
securities, existing sources of liquidity and anticipated funds from
operations, including those of the newly acquired businesses, will satisfy its
projected working capital and other cash requirements through at least the end
of 1998. However, ATMI believes the level of financing resources available to
it is an important competitive factor in its industry and may seek additional
capital prior to the end of that period. Additionally, ATMI considers, on a
continuing basis, potential acquisitions of technologies and businesses
complementary to its current business. Other than the Merger, there are no
present understandings, commitments or agreements with respect to any such
acquisition. However, any such transaction may affect ATMI's future capital
needs.
OPERATIONS OUTSIDE THE UNITED STATES
In the years ended December 31, 1995, 1996 and 1997 and the three months
ended March 31, 1998, sales outside the United States, including Asia and
Europe, accounted for 25.5%, 28.9%, 21.9% and 26.3%, respectively, of ATMI's
revenues. ATMI anticipates its sales outside the United States will continue
to account
46
<PAGE>
for significant percentage of its revenues. In addition, ATMI has entered into
a joint venture agreement with K.C. Tech pursuant to which it has a 70%
interest in ADCS-Korea, a South Korean chusik hoesa, which manufactures, sells
and distributes thin film materials to the semiconductor and related
industries in South Korea.
YEAR 2000 COMPLIANCE
ATMI is aware of the issues associated with the programming code in existing
computer systems as the year 2000 approaches. The "Year 2000" problem is
pervasive and complex, as virtually every computer operation will be affected
in the same way by the rollover of the two digit year value to 00. The issue
is whether computer systems will properly recognize date sensitive information
when the year changes to 2000. Systems that do not properly recognize such
information could generate erroneous data or cause a system to fail.
ATMI is utilizing both internal and external resources to identify, correct
or reprogram, and test its systems for Year 2000 compliance. It is anticipated
that all reprogramming efforts will be complete by December 31, 1998, allowing
adequate time for testing. This process includes obtaining confirmations from
ATMI's primary vendors that plans are being developed or are already in place
to address processing of transactions in the year 2000. However, there can be
no assurance that the systems of other companies on which ATMI's systems rely
also will be converted in a timely fashion or that any such failure to convert
by another company would not have an adverse effect on ATMI's systems.
Management is in the process of completing its assessment of the Year 2000
compliance costs. However, based on currently available information (excluding
the possible impact of vendor systems which management currently is not in a
position to evaluate), management does not believe that these costs will have
a material effect on ATMI's earnings.
CAUTIONARY STATEMENT FOR PURPOSES OF THE "SAFE HARBOR" PROVISIONS OF THE
PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
The statements contained in this "Management's Discussion and Analysis of
Financial Condition and Results of Operations" which are not historical are
"forward-looking statements" within the meaning of Section 27A of the
Securities Act. These forward-looking statements represent ATMI's present
expectations or beliefs concerning future events. ATMI cautions that such
statements are qualified by important factors that could cause actual results
to differ materially from those in the forward looking statements including
those factors identified in "Risk Factors." Results actually achieved thus may
differ materially from expected results included in these statements.
47
<PAGE>
MANAGEMENT OF ATMI
EXECUTIVE OFFICERS AND DIRECTORS
The executive officers and directors of ATMI, and their ages as of the date
of this Proxy Statement/Prospectus, are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Eugene G. Banucci, Ph.D.... 55 President, Chief Executive Officer, Chairman of
the Board and Director
Peter S. Kirlin, Ph.D...... 37 Executive Vice President
Daniel P. Sharkey.......... 41 Vice President, Chief Financial Officer and
Treasurer
Ward C. Stevens, Ph.D...... 43 Vice President--Administration and Secretary
Nicholas J. Wood........... 34 Vice President and General Manager--Emosyn
Division
Duncan W. Brown, Ph.D...... 45 President--Epitronics Division
James M. Burns............. 51 President--EcoSys Division
Stephen H. Siegele......... 38 President--ADCS Division and Director
Mark A. Adley(1)(2)........ 39 Director
John A. Armstrong, 63
Ph.D(1)................... Director
Robert S. Hillas(1)(2)..... 49 Director
Lamonte H. Lawrence........ 59 Director
Stephen H. Mahle(2)........ 52 Director
</TABLE>
- ---------------------
(1) Member of the Audit Committee
(2) Member of the Compensation Committee
Eugene G. Banucci, Ph.D., a founder of ATMI, has served as President, Chief
Executive Officer, Chairman of the Board and director since 1986. Previously,
Dr. Banucci served in a variety of executive and managerial positions. From
1984 to 1986, he was a director of American Cyanamid Company's Chemical
Research Division, with responsibility for the research, development and
technical service activities of the Chemicals Group.
Peter S. Kirlin, Ph.D. has served as Executive Vice President of ATMI since
1995. From 1991 to 1995, Dr. Kirlin served as Vice President of
Microelectronics and General Manager of the former NovaMOS division of ATMI.
From 1988 to 1991, Dr. Kirlin served as Director of Superconductor Materials
and Electronics for ATMI. Prior to joining ATMI, Dr. Kirlin was a Project
Leader and Research Engineer for American Cyanamid Company.
Daniel P. Sharkey has served as Chief Financial Officer since joining ATMI
in 1990 and has served as Vice President and Treasurer since 1993. From 1987
to 1990, Mr. Sharkey was Vice President of Finance and Administration for
Adage, Inc., a manufacturer of highperformance computer graphics terminals.
From 1983 to 1987, he was Corporate Controller for CGX Corporation.
Previously, Mr. Sharkey served as Audit Supervisor for KPMG Peat Marwick.
Ward C. Stevens, Ph.D., a founder of ATMI, has served as a Vice President
since 1986 and served as a director from 1986 to 1990. Prior to joining ATMI,
Dr. Stevens was a Materials Scientist and Project Leader at American Cyanamid
Company and a Materials Scientist at Celanese Research Company.
Nicholas J. Wood has served as Vice President and General Manager--Emosyn
Division since January 1998. From 1995 through 1997, Mr. Wood served as Vice
President--Marketing of ATMI. From 1985 to 1995, he served in a variety of
sales and marketing positions with Intel Corporation. Most recently, from 1992
to 1995, he served as Northern European Marketing Manager of Intel.
Duncan W. Brown, Ph.D., a founder of ATMI, has served as President--
Epitronics Division since March 1996. From 1986 to October 1997, Dr. Brown
served as Vice President of ATMI and from 1990 to October
48
<PAGE>
1997, he also served as a director of ATMI. From 1983 to 1986, Dr. Brown was a
Research Chemist at American Cyanamid Company. Previously, Dr. Brown was a
Postdoctoral Fellow in the Departments of Chemistry at the Massachusetts
Institute of Technology and Harvard University, and an Academic Associate at
IBM's Research Division.
James M. Burns has served as President--EcoSys Division since joining ATMI
in January 1997. Previously, Mr. Burns served as Executive Vice President and
General Manager at Genus, Inc. from 1995 to 1996, as Assistant Vice
President--Operations at Hughes Network Systems from 1992 to 1995, and as
Director--Customer Satisfaction and Quality at Trimble Navigation, Ltd. from
1991 to 1992. Prior to that time, Mr. Burns served in a variety of managerial
positions in the high technology electronics industry.
Stephen H. Siegele has served as President--ADCS Division and as a director
of ATMI since October 1997. Mr. Siegele, a co-founder of the ADCS Group,
served as the President and Chief Executive Officer of the ADCS Group from
February 1994 until October 1997 and has served as a director since its
inception in 1988. From 1988 to 1994, Mr. Siegele served as Vice President of
the ADCS Group. Prior to that time, Mr. Siegele served in sales and
engineering positions at Intel Corporation and Olin Hunt Specialty Products,
Inc.
Mark A. Adley has served as a director of ATMI since 1991. Since 1996, Mr.
Adley has been a Managing Director at Credit Suisse First Boston Corporation,
where he was a Director from 1994 to 1996. From 1992 through 1993, Mr. Adley
served as an investment manager for Clipper Asset Management Corporation, the
General Partner of The Clipper Group, L.P. ("Clipper"). During 1991, Mr. Adley
served as an investment manager for Clipper. Mr. Adley was a Director at CS
First Boston Merchant Bank during 1990 and, at The First Boston Corporation,
was a Vice President from 1989 to 1990 and an Associate from 1985 to 1988.
John A. Armstrong, Ph.D. has served as a director of ATMI since 1993. Dr.
Armstrong is currently an Adjunct Professor of Physics at the University of
Massachusetts. Previously, he was Vice President of Science and Technology for
IBM from 1987 until his retirement in 1993.
Robert S. Hillas has served as a director of ATMI since 1987. Mr. Hillas has
been the President, Chief Executive Officer and Chairman of the Board of
Envirogen, Inc., an environmental systems and services company, since April
1998. From 1993 to April 1998, Mr. Hillas served as a Managing Director of
E.M. Warburg, Pincus & Co. LLC. From 1985 to 1992, Mr. Hillas served as a
General Partner of DSV Management Ltd., the General Partner of DSV Partners
IV, a venture capital limited partnership, and from 1981 to 1992, as a General
Partner of DSV Partners III, a venture capital limited partnership. Mr. Hillas
is also a director of Transition Systems, Inc.
Lamonte H. Lawrence has served as a director of ATMI since October 1997. Mr.
Lawrence, the founder of LSL, served as the President and Chief Executive
Officer of LSL from its inception in 1988 until October 1997. In 1983, Mr.
Lawrence founded U.S. Semiconductor Corp., where he served as President from
its inception in 1983 to 1987.
Stephen H. Mahle has served as a director of ATMI since March 1996. Mr.
Mahle has been Senior Vice President of Medtronic, Inc., a medical device
manufacturer, and President of its pacing business since January 1998. From
1995 to 1998, he was President of the Brady Pacing Business, a division of
Medtronic, Inc. From 1989 to 1995, Mr. Mahle served as Vice President and
General Manager of the Brady Pacing Business. Previously, Mr. Mahle served in
a variety of marketing and product development roles for Medtronic, Inc.
In October 1997, Mr. Siegele was appointed to the ATMI Board of Directors
for a three-year term pursuant to the terms of an agreement executed in
connection with ATMI's acquisition of the ADCS Group. This agreement also
provides that upon the expiration of Mr. Siegele's initial three-year term,
the ATMI Board of Directors will nominate Mr. Siegele to serve for an
additional three-year term, subject to certain limitations. In addition, in
October 1997, Mr. Lawrence was appointed to the ATMI Board of Directors for a
two-year term pursuant to the terms of an agreement executed in connection
with ATMI's acquisition of LSL.
49
<PAGE>
ATMI's Certificate of Incorporation and Bylaws divide the ATMI Board of
Directors into three classes, with the members of each class serving for terms
of office that expire at the third annual meeting of stockholders following
their election and until successors are duly qualified. The terms of Class I
(John A. Armstrong and Robert S. Hillas), Class II (Eugene G. Banucci, Mark A.
Adley and Lamonte H. Lawrence) and Class III (Stephen H. Mahle and Stephen H.
Siegele) directors expire at the annual meeting of stockholders in 2001, 1999
and 2000, respectively.
The standing committees of the ATMI Board of Directors are the Audit
Committee, the Compensation Committee and the Nominating Committee. The Audit
Committee is comprised of Mr. Adley, Dr. Armstrong and Mr. Hillas. The Audit
Committee oversees ATMI's system of internal accounting controls, recommends
to the ATMI Board of Directors the appointment of a firm of independent
certified auditors to conduct the annual audit of ATMI's financial statements,
reviews the scope of the audit, reviews reports from the independent certified
auditors, and makes such recommendations to the ATMI Board of Directors in
connection with the annual audit as it deems appropriate. The Compensation
Committee is comprised of Mr. Adley, Mr. Hillas and Mr. Mahle. The
Compensation Committee reviews the compensation of officers of ATMI and ATMI's
compensation policies and practices. The Compensation Committee also
administers ATMI's 1987, 1995 and 1997 Stock Plans, including recommending the
grant of stock options thereunder. The Nominating Committee is comprised of
Dr. Banucci, Mr. Lawrence and Mr. Siegele. The Nominating Committee has the
authority to recommend to the ATMI Board of Directors criteria for the
selection of candidates for director, evaluate candidates and recommend
nominees to serve as directors. Executive officers serve at the discretion of
the ATMI Board of Directors. There are no family relationships among any of
the executive officers or directors.
EXECUTIVE COMPENSATION
The following table sets forth certain information regarding the
compensation paid by ATMI for the years ended December 31, 1997, 1996 and 1995
to ATMI's Chief Executive Officer and each of the other four most highly
compensated executive officers in 1997 (together, the "Named Executive
Officers") for services in all capacities to ATMI and its subsidiaries.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
------------
AWARDS
------------
SECURITIES ALL OTHER
ANNUAL COMPENSATION UNDERLYING COMPEN-
--------------------
NAME AND PRINCIPAL POSITION YEAR SALARY ($) BONUS ($) OPTIONS (#) SATION ($)(1)
- --------------------------- ---- ---------- --------- ------------ -------------
<S> <C> <C> <C> <C> <C>
Eugene G. Banucci.........
President, Chief 1997 210,000 125,000 25,000 3,769
Executive Officer and 1996 181,300 40,000 -- 2,121
Chairman of the Board 1995 155,250 40,000 35,000 2,875
James M. Burns (2)........ 1997 200,000 80,000 35,000 --
President--EcoSys 1996 -- -- -- --
Division 1995 -- -- -- --
Peter S. Kirlin........... 1997 150,000 50,000 20,000 2,700
Executive Vice President 1996 111,100 30,000 -- --
1995 96,560 35,000 25,000 400
Daniel P. Sharkey.........
Vice President, Chief 1997 130,000 50,000 15,000 1,903
Financial Officer and 1996 110,000 20,000 -- 1,678
Treasurer 1995 103,000 25,000 15,000 1,583
Duncan W. Brown........... 1997 149,167 10,000 5,000 2,073
President--Epitronics 1996 103,000 8,000 -- 1,988
Division 1995 98,000 15,000 10,000 1,932
</TABLE>
- ---------------------
(1) Represents premiums paid for life insurance and long-term disability
policies of which ATMI is not the beneficiary and flexible spending
contributions toward health care costs not covered by ATMI plans.
(2) Mr. Burns joined ATMI on January 2, 1997.
50
<PAGE>
Mr. Stephen H. Siegele, the President of the ADCS division, joined ATMI on
October 13, 1997 in connection with ATMI's acquisition of the ADCS Group. In
1997, ATMI paid Mr. Siegele a base salary of $89,000 for the period in 1997
during which he was employed by ATMI. Had Mr. Siegele been employed by ATMI
for all of 1997, he would have been ATMI's most highly compensated executive
officer.
OPTION GRANTS
The following table sets forth certain information with respect to stock
options granted to the Named Executive Officers during the year ended December
31, 1997.
<TABLE>
<CAPTION>
POTENTIAL
INDIVIDUAL GRANTS REALIZABLE VALUE AT
--------------------------------------------
ASSUMED ANNUAL
NUMBER OF % OF TOTAL RATES OF STOCK
SECURITIES OPTIONS PRICE APPRECIATION
UNDERLYING GRANTED TO EXERCISE FOR OPTION TERM (2)
--------------------
OPTIONS EMPLOYEES PRICE EXPIRATION
NAME GRANTED(#)(1) IN 1997 ($/SH) DATE 5% ($) 10% ($)
---- ------------- ---------- -------- ---------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
Eugene G. Banucci....... 25,000 4.1% 17.25 1/1/07 271,211 687,301
James M. Burns.......... 35,000 5.8% 16.88 1/2/07 371,441 941,304
Peter S. Kirlin......... 20,000 3.3% 17.25 1/1/07 216,969 549,841
Daniel P. Sharkey....... 15,000 2.5% 17.25 1/1/07 162,726 412,381
Duncan W. Brown......... 5,000 0.8% 17.25 1/1/07 54,242 137,460
</TABLE>
OPTION GRANTS IN LAST FISCAL YEAR
- ---------------------
(1) Options granted vest ratably over five years on each of the first five
anniversary dates of the grant date.
(2) The dollar amounts under these columns are the result of calculations
assuming 5% and 10% growth rates as set by the Commission and, therefore,
are not intended to forecast future price appreciation, if any, of ATMI's
Common Stock.
STOCK OPTION EXERCISES AND FISCAL YEAR-END OPTION VALUES
The following table sets forth information concerning option holdings as of
December 31, 1997 with respect to the Named Executive Officers.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
SHARES UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
ACQUIRED OPTIONS AT FY-END (#) AT FY-END ($)(1)
------------------------- -------------------------
ON VALUE
NAME EXERCISE(#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Eugene G. Banucci....... -- -- 112,175 47,200 2,502,094 502,825
James M. Burns.......... -- -- 0 35,000 -- 258,125
Peter S. Kirlin......... -- -- 64,074 35,700 1,410,598 371,450
Daniel P. Sharkey....... -- -- 77,375 28,500 1,729,372 329,750
Duncan W. Brown......... -- -- 72,537 11,900 1,665,361 138,275
</TABLE>
- ---------------------
(1) Based on the fair market value of ATMI Common Stock as of December 31,
1997 ($24.25) minus the exercise price of the options.
DIRECTOR COMPENSATION
ATMI's directors do not receive any cash compensation for service on the
ATMI Board of Directors or any committee thereof but are reimbursed for
expenses incurred in connection with attending meetings of the ATMI Board of
Directors and any committee thereof. In October 1993, ATMI granted options for
the
51
<PAGE>
purchase of 22,500 shares of ATMI Common Stock at an exercise price of $3.56
per share to John A. Armstrong in consideration of consulting services
performed for ATMI. In December 1994, ATMI granted options for the purchase of
22,500 shares of ATMI Common Stock at an exercise price of $5.50 per share to
Robert S. Hillas in consideration of his services on the ATMI Board of
Directors. In May 1995, ATMI granted options for the purchase of 22,500 shares
of ATMI Common Stock at an exercise price of $8.50 per share to Mark A. Adley
in consideration of his services on the ATMI Board of Directors. In March
1996, ATMI granted options for the purchase of 22,500 shares of ATMI Common
Stock at an exercise price of $10.50 per share to Stephen H. Mahle in
consideration of his services on the ATMI Board of Directors. In each case,
the exercise price for the options granted was the fair market value of the
ATMI Common Stock on the date of grant, and the options granted were subject
to certain vesting provisions.
EMPLOYMENT AGREEMENTS
ATMI entered into employment agreements with Eugene G. Banucci, Daniel P.
Sharkey and Duncan W. Brown, effective October 10, 1997. Pursuant to the
agreements, Dr. Banucci will act as President, Chief Executive Officer and
Chairman of the Board of ATMI, Mr. Sharkey will act as Vice President, Chief
Financial Officer and Treasurer of ATMI, and Dr. Brown will act as President
of the Epitronics division of ATMI, for annual salaries of $210,000, $130,000
and $180,000, respectively. Salaries are subject to increase from time to time
to take into account appropriate cost of living adjustments and general
compensation increases based on performance, in the discretion of the ATMI
Board of Directors. Each employee will also be eligible to receive additional
compensation, including awards of performance bonuses at levels commensurate
with other employees of ATMI of equivalent position and grants of employee
stock options, in each case in the discretion of the Compensation Committee of
the ATMI Board of Directors.
The employment agreements expire on the earliest to occur of (i) October 10,
1999, (ii) the death of the employee, (iii) the termination of the agreements
due to the incapacity of the employee, (iv) the termination of the agreements
by the employer with or without cause, or (v) the termination of the
agreements by the employee for just cause. Under the terms of the agreements,
if the employer terminates the employee without cause, or if the employee
terminates the agreement for just cause, the employer will pay the employee
his annual base salary then in effect for a period of 18 months after
termination in the case of Dr. Banucci and for a period of nine months after
termination in the case of Mr. Sharkey and Dr. Brown. The employer will also
provide the employee during such severance period with medical, dental, life
and disability insurance benefits on the same basis the employer would have
provided the employee during such period had he continued to be an employee of
the employer.
The employment agreements restrict each employee from competing with the
employer during the term of the agreement and for a period of the later of
October 10, 2002 or 36 months after the termination of employment in the case
of Dr. Banucci or 24 months after the termination of employment in the case of
Mr. Sharkey and Dr. Brown. In the event ATMI should seek to enforce such non-
competition provisions in a court, a court may, in exercising its
discretionary authority, determine not to enforce, or to limit enforcement of,
such provisions against an employee.
The employment agreements also provide that any termination associated with
a change in control of ATMI (including resignation by the employee for just
cause such as a significant decrease in the employee's duties or authority)
would result in the acceleration of options outstanding (and as may be
subsequently granted) to them; provided that such acceleration of vesting
shall not occur if and to the extent that (i) ATMI's independent accountant
has advised the ATMI Board of Directors that such acceleration could prohibit
the accounting treatment of the transaction which is a change in control as a
pooling of interests under Accounting Principles Board Opinion No. 16 (or any
successor opinion) and (ii) the ATMI Board of Directors intends to treat such
transaction as a pooling of interests, in which case options would continue to
vest as permitted within the terms of the applicable stock plans. In addition,
Dr. Banucci, Mr. Sharkey and Dr. Brown would be entitled to any bonuses under
any bonus plans then in effect as if fully earned. Benefits payable under the
agreements upon a change in control may subject the employee to an excise tax
as "excess parachute
52
<PAGE>
payments" under Section 280G of the Internal Revenue Code of 1986, as amended.
ATMI will reimburse the employee for all excise taxes paid, but the
reimbursement will constitute an excess parachute payment and will be subject
to further excise tax. Such further excise tax will trigger further
reimbursement by ATMI. ATMI will not be allowed to take a deduction for
federal income tax purposes for the excess parachute payments.
In December 1996, ATMI entered into an employment agreement with James M.
Burns, the President of the EcoSys division. Pursuant to the agreement, Mr.
Burns will serve as President of EcoSys for an annual base salary of $200,000,
subject to increase in accordance with the policies of ATMI, as determined by
the ATMI Board of Directors. For 1997 and 1998, Mr. Burns is also be eligible
to receive special incentive compensation based upon EcoSys' pretax income and
market share in the front-end semiconductor environmental equipment market for
such years. Pursuant to the agreement, ATMI paid Mr. Burns a signing bonus of
$40,000 and granted Mr. Burns options to purchase 35,000 shares of Common
Stock at an exercise price of $16.88 per share, which vest ratably over five
years.
ATMI may terminate Mr. Burns' employment agreement at any time. If ATMI
terminates Mr. Burns without cause, ATMI will pay Mr. Burns his annual base
salary then in effect for a period of nine months after termination. ATMI will
also provide Mr. Burns during such severance period with medical benefits at
least equivalent to the benefits provided to Mr. Burns during his employment.
The employment agreement restricts Mr. Burns from competing with ATMI during
the term of his employment and for a period of 24 months thereafter. In the
event ATMI should seek to enforce such non-competition provisions in a court,
a court may, in exercising its discretionary authority, determine not to
enforce, or to limit enforcement of, such provisions against Mr. Burns.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During 1996 and until October 10, 1997, the Compensation Committee of the
ATMI Board of Directors consisted of Gary A. Andersen and John A. Armstrong,
and since October 10, 1997 has consisted of Mark A. Adley, Robert S. Hillas
and Stephen H. Mahle. No executive officer of ATMI served on the compensation
committee of another entity or on any other committee of the board of
directors of another entity performing similar functions during the last
fiscal year.
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CERTAIN TRANSACTIONS--ATMI
ACQUISITION OF THE ADCS GROUP
On October 10, 1997, ATMI acquired the ADCS Group in exchange for 5,468,747
shares of ATMI Common Stock. Stephen H. Siegele, an executive officer,
director and greater than 5% stockholder of ATMI, was a principal holder of
interests in the ADCS Group and received 3,741,305 shares of ATMI Common Stock
in the exchange. F.H.S. Investments, Ltd., of which Frederick H. Siegele,
Stephen H. Siegele's father, is the sole general partner, received 626,534
shares of Common Stock in exchange for its interests in the ADCS Group. Stuart
F. Siegele and Frederick J. Siegele, Stephen H. Siegele's brothers, received
205,861 and 179,009 shares of ATMI Common Stock, respectively, in exchange for
their interests in the ADCS Group.
On October 10, 1997, in connection with the acquisition of the ADCS Group,
ATMI and the holders of interests in the ADCS Group (the "ADCS Holders"),
including Stephen H. Siegele, F.H.S. Investments, Frederick J. Siegele and
Stuart F. Siegele, entered into an indemnification agreement (the
"Indemnification Agreement") with ATMI. Pursuant to the Indemnification
Agreement, ATMI will indemnify and hold harmless each of the ADCS Holders and
their respective heirs, affiliates, general partners, limited partners and
each of their respective successors and assigns (the "ADCS Indemnified
Parties") against any and all losses arising out of or relating to any breach
of the representations, warranties, or covenants of ATMI, ATM or Alamo Merger,
Inc. in the merger and exchange agreement executed in connection with the
acquisition of the ADCS Group (the "Merger and Exchange Agreement") or any
document, certificate or agreement delivered pursuant to the Merger and
Exchange Agreement.
In addition, pursuant to the terms of the Indemnification Agreement, the
ADCS Holders will indemnify and hold harmless ATMI, its subsidiaries, its
affiliates (including the ADCS Group and its subsidiaries) and their
respective successors and assigns (the "ATMI Indemnified Parties") against any
and all losses arising out of and relating to (i) any breach of the
representations, warranties and covenants of the ADCS Group and its
subsidiaries contained in the Merger and Exchange Agreement or any document,
certificate or agreement delivered pursuant to the Merger and Exchange
Agreement and (ii) the following tax matters: (1) any previously unpaid income
taxes which may result from the restructuring of the ADCS Group in 1996; (2)
depreciation on tax returns filed with respect to fiscal year 1996 and the
period in 1997 prior to October 10, 1997; (3) state sales tax paid with
respect to fiscal year 1996 and the period in 1997 prior to October 10, 1997
to a state in which the ADCS Group had not previously paid sales tax or
franchise taxes; (4) disallowance of any deductions for executive
compensation; or (5) disallowance of any deductions for travel or
entertainment expenses taken on tax returns filed with the respect to fiscal
year 1996 and the period of 1997 prior to October 10, 1997. Notwithstanding
the foregoing indemnification, ATMI has agreed to bear the costs of certain
proceedings involving the taxing authorities through a trial court
determination related to these tax matters. Furthermore, the Indemnification
Agreement provides that each ADCS Holder will severally indemnify the ATMI
Indemnified Parties for losses arising from breaches of such holder's
representations, warranties and covenants contained in any certificate or
agreement delivered to ATMI in connection with consummation of the
transactions contemplated by the Merger and Exchange Agreement.
The Indemnification Agreement limits ATMI's liability for losses to the
aggregate value of the 750,000 shares of ATMI Common Stock which the ADCS
Holders were required to place in escrow as security for their indemnification
obligations. Stephen H. Siegele, F.H.S. Investments, Frederick J. Siegele and
Stuart F. Siegele have deposited in escrow certificates representing 513,095,
85,924, 24,550 and 28,232 shares of ATMI Common Stock, respectively. The
Indemnification Agreement sets forth certain limits on the parties'
indemnification obligations, such as deductibles that must be reached before a
claim may be made, time deadlines before which claims must be made and
limitations on the amount of indemnification which may be paid. The ADCS
Holders, in the aggregate, shall not be liable for any damages in excess of
the aggregate value of the shares of ATMI Common Stock in the escrow funds
valued at $16.00 per share (the price at which shares were issued based on
arm's length negotiations and which is required to adjust the number of shares
issued in the transaction to the number of shares that would have been issued
if the outcome of the contingencies for which shares are escrowed had been
known at the consummation of the transaction). In
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<PAGE>
addition, and no ADCS Holder shall be liable for any damages in excess of such
holder's escrow fund. The escrowed shares are divided and held in three
separate accounts, each of which will be available only for the payment or
satisfaction of certain specified claims, with an aggregate of 625,000 shares
available solely for claims arising under tax matter (1) discussed in the
prior paragraph, an aggregate of 75,000 shares available solely for claims
arising under tax matters (2) through (5) discussed in the prior paragraph and
an aggregate of 50,000 shares available solely for (i) claims for
indemnification other than with respect to tax matters (1) through (5), and
(ii) claims against an ADCS Holder arising from breaches of such holder's
representations, warranties and covenants as discussed below, provided that
recourse will be limited to the escrow fund of the breaching ADCS Holder.
Other than with respect to tax matters or fraud or intentional
misrepresentation, an indemnified party generally may not make any claim for
indemnification after October 10, 1998, and no such claim may be brought after
the date of issuance of the first independent audit report with respect to the
financial statements of ATMI after October 10, 1997, if such claim is of a
type expected to be encountered in the course of an audit performed in
accordance with generally accepted auditing standards. The claims period for
claims with respect to the tax matters specified above or with respect to
fraud or intentional misrepresentation will extend for the statute of
limitations applicable to the matters which are the subject of such claims.
The escrow account consisting of 50,000 shares of ATMI Common Stock will be
held in escrow until the later of: (i) October 10, 1998; and (ii) the date on
which all claims regarding breaches of general representations and warranties
by the ADCS Group and the ADCS Holders are finally resolved and all amounts
have been paid in full from the escrow funds. The escrow accounts consisting
of 625,000 shares and 75,000 shares of ATMI Common Stock will be held in
escrow until the later of: (i) October 10, 1998; and (ii) the expiration of
the applicable statute of limitations with respect to the tax matters for
which the ADCS Holders are providing indemnification (unless a claim for tax
matters is pending). A portion of the escrow accounts consisting of 625,000
shares and 75,000 shares of ATMI Common Stock may be released earlier if ATMI
determines that certain of the escrowed shares are no longer required as
security for the indemnification obligations of the ADCS Holders.
While management of ATMI believes that the indemnification provided by the
ADCS Holders will be adequate, because of the various limitations discussed
above, a possibility exists that the losses experienced by ATMI could exceed
the value of the shares held in escrow because the shares held in escrow are
insufficient in number or, due to market conditions and potential stock price
volatility, in value to adequately compensate ATMI for any losses which are
the subject of the indemnification. Furthermore, a possibility exists that the
losses which are the subject of the indemnification will be incurred during
periods other than those for which claims may be made with respect to such
losses. Consequently, losses for which there is insufficient indemnification
could have a material adverse effect on ATMI.
ATMI entered into employment agreements with each of Stephen H. Siegele,
Frederick H. Siegele and Frederick J. Siegele effective October 1997. Pursuant
to the agreements, Stephen H. Siegele, Frederick H. Siegele and Frederick J.
Siegele will act as President, Chief Technical Officer and General Counsel of
the ADCS division, respectively. The agreements provide for annual salaries to
Stephen H. Siegele, Frederick H. Siegele and Frederick J. Siegele of $400,000,
$150,000 and $160,000, respectively. Salaries are subject to increase from
time to time to take into account appropriate cost of living adjustments and
general compensation increases based on performance, in the discretion of the
ATMI Board of Directors. Each employee will also be eligible to receive
additional compensation, including awards of performance bonuses at levels
commensurate with other employees of ATMI of equivalent position and grants of
employee stock options, in each case in the discretion of the Compensation
Committee of the ATMI Board of Directors.
The employment agreements expire on the earliest to occur of (i) October 10,
1999, (ii) the death of the employee, (iii) the termination of the agreements
due to the incapacity of the employee, (iv) the termination of the agreements
by the employer with or without cause or (v) the termination of the agreements
by the employee for just cause. Under the terms of the agreements, if the
employer terminates the employee without cause, or if the employee terminates
the agreement for just cause, the employer will pay the employee his annual
base salary then in effect for a period of 18 months after termination in the
case of Stephen H. Siegele and for a period of nine months after termination
in the case of Frederick H. Siegele and Frederick J. Siegele.
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The employer will also provide the employee during such severance period with
medical, dental, life and disability insurance benefits on the same basis the
employer would have provided the employee during such period had he continued
to be an employee of the employer.
The employment agreements restrict each employee from competing with the
employer during the term of the agreement and for a period of the later of
October 10, 2002 or 36 months after the termination of employment in the case
of Stephen H. Siegele or 24 months after the termination of employment in the
case of Frederick H. Siegele and Frederick J. Siegele. In the event ATMI
should seek to enforce such non-competition provisions in a court, a court
may, in exercising its discretionary authority, determine not to enforce, or
to limit enforcement of, such provisions against an employee.
ACQUISITION OF LSL
On October 10, 1997, ATMI acquired LSL in exchange for 3,671,349 shares of
ATMI Common Stock. Lamonte H. Lawrence, a director and greater than 5%
stockholder of ATMI, was the principal stockholder of LSL and received
3,597,922 shares of ATMI Common Stock in exchange for his shares of LSL's
common stock.
Under the terms of the merger agreement executed in connection with the
acquisition of LSL (the "LSL Merger Agreement"), ATMI will indemnify and hold
harmless each of the former stockholders of LSL (the "LSL Stockholders"),
including Lamonte H. Lawrence, against any and all losses arising out of (i)
the conduct of the business or ownership of LSL after ATMI's acquisition
thereof, and (ii) any breach of the representations, warranties, or covenants
of ATMI contained in the LSL Merger Agreement. Losses do not include any loss
resulting from a diminution in the value of ATMI Common Stock received in the
acquisition of LSL. Further, ATMI will indemnify and hold harmless each of
Lamonte H. Lawrence, Lawrence Semiconductor Investments, Inc. ("LSI") and
Lawrence Semiconductor Research Laboratories, Inc. ("LSRL"), of which Mr.
Lawrence is sole stockholder, against any and all losses arising out of a
breach by LSL of any obligation guaranteed by Mr. Lawrence, LSI or LSRL.
In addition, pursuant to the terms of the LSL Merger Agreement, the LSL
Stockholders will indemnify and hold harmless LSL, ATMI, Welk Acquisition
Corporation, and each of their officers, directors, employees, agents,
representatives and affiliates (the "Company Indemnified Parties") against any
and all losses arising out of any breach of the representations, warranties
and covenants of LSL contained in the LSL Merger Agreement. Each LSL
Stockholder will also severally indemnify Company Indemnified Parties for each
LSL Stockholder's pro rata share of losses arising from any breach of the
representations, warranties and covenants of LSL contained in the LSL Merger
Agreement with respect to taxes and environmental matters (the "Special
Indemnities").
The LSL Merger Agreement sets forth certain limits on the parties'
indemnification obligations, such as deductibles that must be reached before a
claim may be made, time deadlines before which claims must be made and
limitations on the amount of indemnification which may be paid. Except with
respect to the Special Indemnities, the LSL Stockholders, in the aggregate,
shall not be liable for any losses in excess of the aggregate value of the
183,568 shares of ATMI Common Stock in the escrow funds valued at $21.00 per
share (the price at which shares were issued based on arm's length
negotiations and which is required to adjust the number of shares issued in
the transaction to the number of shares that would have been issued if the
outcome of the contingencies for which shares are escrowed had been known at
the consummation of the transaction). Mr. Lawrence has placed 179,896 shares
into the escrow fund. With respect to the Special Indemnities, Mr. Lawrence is
individually and personally liable for his pro rata portion, or 98%, of any
losses.
Other than with respect to the Special Indemnities and certain covenants, an
indemnified party generally may not make any claim for indemnification after
October 10, 1998, and no such claim may be brought after the date of issuance
of the first independent audit report with respect to the financial statements
of ATMI after ATMI's acquisition of LSL if such claim is of a type expected to
be encountered in the course of an audit performed in accordance with
generally accepted auditing standards. With respect to the Special
Indemnities, the claims period will extend for the statute of limitations
applicable to the matters which are the subject of such claims.
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<PAGE>
While management of ATMI believes that the indemnification provided by the
LSL Stockholders will be adequate, because of the various limitations
discussed above, a possibility exists that the losses experienced by ATMI
could exceed the value of the shares held in escrow because the shares held in
escrow are insufficient in number or, due to market conditions and potential
stock price volatility, in value to adequately compensate ATMI for any losses
which are the subject of the indemnification. Furthermore, a possibility
exists that the losses which are the subject of the indemnification will be
incurred during periods other than those for which claims may be made with
respect to such losses. Consequently, losses for which there is insufficient
indemnification could have a material adverse effect on ATMI or the other
parties entitled to indemnification.
On October 10, 1997, LSL and LSI, a corporation wholly owned by Lamonte H.
Lawrence, entered into a consulting agreement (the "Consulting Agreement").
Pursuant to the Consulting Agreement, Mr. Lawrence's employment by LSL
terminated, LSL's obligations under any employment agreement ceased, and LSL
retained LSI as an independent consultant for a three-year period (the
"Consulting Term") on an independent contractor basis. Consulting services
under the Consulting Agreement are provided exclusively by Mr. Lawrence.
During each of the three twelve-month periods of the Consulting Term, Mr.
Lawrence will render consulting services as mutually agreed by LSI and LSL. In
consideration of the consulting services to be provided, LSL will pay LSI a
per diem of $2,880, but in no event will the total fee payable to LSI total
less than $250,000 for the first twelve-month period. Such minimum was
determined as approximately one-third of Mr. Lawrence's compensation from LSL
in 1996, as Mr. Lawrence, on behalf of LSI, is expected to devote
approximately one-third of his time during the year to LSL-related matters.
ATMI will permit LSI to become a participating employer in ATMI's health
insurance program, but only for the benefit of Mr. Lawrence. The Consulting
Agreement may be terminated by LSI after one year upon thirty days' written
notice to LSL, may only be terminated by LSL for cause and terminates
automatically upon Mr. Lawrence's disability or death.
OTHER
In October 1997, LSL converted existing notes receivable from Lamonte H.
Lawrence bearing interest at 7% and due upon demand into a promissory note in
the principal amount of $1,000,779 bearing interest at 8% per annum. The note
is due and payable on October 9, 1998.
In March 1997, ATMI loaned Peter S. Kirlin $60,000 in exchange for Dr.
Kirlin's promissory note bearing interest at 6% per annum. In July 1997, ATMI
loaned Dr. Kirlin an additional $50,000 in exchange for Dr. Kirlin's
promissory note bearing interest at 6% per annum. In December 1997, Dr. Kirlin
prepaid an aggregate of $23,120 due under the notes and ATMI consolidated the
two notes into one promissory note in the principal amount of $86,880 bearing
interest at 6% per annum. The note is due and payable on June 30, 1998.
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PRINCIPAL ATMI STOCKHOLDERS AND STOCK OWNERSHIP OF ATMI MANAGEMENT
The following table sets forth certain information known to ATMI regarding
the beneficial ownership of ATMI Common Stock as of May 31, 1998, by: (i) each
person known by ATMI to own beneficially more than five percent of the
outstanding ATMI Common Stock; (ii) each director of ATMI; (iii) each Named
Executive Officer; and (iv) all directors and executive officers of ATMI as a
group. Except as otherwise indicated, all shares are owned directly. Except as
indicated by footnote, and subject to community property laws where
applicable, the persons named in the table have sole voting and investment
power with respect to all shares of ATMI Common Stock shown as beneficially
owned by them.
<TABLE>
<CAPTION>
NAME AND ADDRESS OF BENEFICIAL OWNER SHARES BENEFICIALLY OWNED PERCENT OF CLASS
- ------------------------------------ ------------------------- ----------------
<S> <C> <C>
Stephen H. Siegele
6805 Capital of Texas Highway
Suite 330
Austin, Texas 78731................ 2,541,305 12.4%
Lamonte H. Lawrence
100 Sir Francis Drake Boulevard
Ross, California 94957............. 2,073,922 10.1%
Eugene G. Banucci (1)............... 323,382 1.6%
Duncan W. Brown (2)................. 176,671 *
Daniel P. Sharkey (3)............... 80,375 *
Peter S. Kirlin (3)................. 68,074 *
Robert S. Hillas (4)................ 40,977 *
Mark A. Adley (5)................... 26,000 *
John A. Armstrong (6)............... 18,000 *
Stephen H. Mahle (7)................ 9,600 *
James M. Burns (8).................. 8,970 *
All directors and executive officers
as a group (13 persons) (9)........ 5,564,515 26.6%
</TABLE>
- ---------------------
* Less than 1% of the outstanding ATMI Common Stock.
(1) Includes 117,175 shares issuable upon exercise of options that are
exercisable within 60 days of March 31, 1998 and 6,159 shares either owned
or issuable upon exercise of options within 60 days of March 31, 1998 by
Dr. Banucci's spouse. Dr. Banucci disclaims beneficial ownership of the
shares held by his spouse.
(2) Includes 73,537 shares issuable upon exercise of options that are
exercisable within 60 days of March 31, 1998 and 4,634 shares either owned
or issuable upon exercise of option within 60 days of March 31, 1998 by
Dr. Brown's spouse. Dr. Brown claims beneficial ownership of the shares
held by his spouse.
(3) Consists entirely of shares issuable upon exercise of options that are
exercisable within 60 days of March 31, 1998.
(4) Includes 21,250 shares issuable upon exercise of options that are
exercisable within 60 days of March 31, 1998.
(5) Includes 23,000 shares issuable upon exercise of options that are
exercisable within 60 days of March 31, 1998.
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<PAGE>
(6) Includes 16,000 shares issuable upon exercise of options that are
exercisable with 60 days of March 31, 1998.
(7) Includes 9,500 shares issuable upon exercise of options that are
exercisable within 60 days of March 31, 1998.
(8) Includes 7,000 shares issuable upon exercise of options that are
exercisable within 60 days of March 31, 1998.
(9) Includes 499,647 shares issuable to executive officers, directors and
their spouses pursuant to options which are exercisable within 60 days of
March 31, 1998.
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BUSINESS OF NOW
GENERAL
NOW manufactures proprietary, state-of-the-art, high-performance containers
and dispensing systems for advanced purity chemicals used in the manufacture
of microelectronics, particularly semiconductor integrated circuits ("ICs")
and active matrix flat panel displays ("AMFPDs"). To a lesser extent, NOW's
products also serve customers in the pharmaceutical, biotech and laboratory
markets. NOW's patented NOWPak container and dispensing systems provide a
viable alternative to the traditional glass bottles and steel or plastic drums
used in high-tech market niches that require high-performance chemical
packaging and dispensing systems. The NOWPak system offers value-added
packaging to end-user customers like IBM, Intel, Sharp and Motorola, who
require a high degree of purity, productivity, safety and environmental
responsibility. NOW markets its products to these end-users but actually sells
its products to chemical suppliers whose end-user customers have specified
that the chemicals be packaged in NOW products.
BUSINESS STRATEGY
NOW strategy consists of the following three-pronged approach:
Provide a superior alternative in advanced chemical packaging and dispensing
systems. NOW's primary business strategy has been to develop a container and
dispensing system for advanced purity chemicals that provides greater levels
of purity, productivity, safety and environmental responsiveness than
traditional containers and dispensing systems. By providing a pure, safe and
convenient means of chemical packaging and dispensing, the NOWPak system
results in greater productivity in industries where minute levels of yield
enhancement have large and rapid paybacks. As performance requirements for
high purity chemicals are becoming more demanding, applications are
increasingly sensitive to contamination from sub-micron particle sizes and
from parts per billion levels of metal ions. The NOWPak system is designed to
meet the demanding requirements of chemical users who scrutinize every aspect
of chemical delivery, from the chemical suppliers' facilities to the point-of-
use production area. NOWPak's ability to deliver critical chemicals with high
levels of purity significantly improves production yields for manufacturers.
Productivity is increased because users no longer need to spend time rinsing
out glass bottles, disposing of glass foam inserts and storing burdensome
glass bottles. NOWPak's safety features can prevent costly clean-up operations
and work interruptions. Finally, the environmental benefits of NOWPak allow
the user to be responsive to demands for corporate mandated waste reduction.
"Lock in" the end-user with an integrated packaging and dispensing
system. In NOW's core markets, nearly all NOWPak customers utilize the
complete system of dispensers, containers and accessories. Once NOW has
established a customer through the sale of a dispenser, repeat business
through the purchase of replacement containers or liners is usually obtained.
The specification of the essential connection dispensing hardware leads to
recurring sales of the consumable replacement liner or container.
Market directly to both the end-user and the chemical supplier. From its
inception, NOW's strategy has been to focus its sales and marketing efforts
directly on the end-user of photolithography chemicals. By establishing such
direct relationships, NOW has caused end-users to request NOWPak containers
from their chemical suppliers and NOWPak dispensers from their equipment
suppliers. An important part of this strategy has been to assist the end-user
in understanding and evaluating the benefits of using a NOWPak system. Once
NOWPak systems have been integrated into fabrication plants ("fabs") of an
end-user and the user has experienced directly the benefits of the NOWPak
system, the customer has often used the NOWPak system in other fabs. As a
result, NOW has particularly benefited from the copy-exact trend prevalent in
the microelectronics industry.
This strategy creates the foundation for end-users to require the chemical
and equipment suppliers to provide their product in the NOWPak system.
Recently, NOW has begun to cultivate relationships with both chemical and
equipment suppliers. As a result, NOW has begun developing stronger ties with
intermediaries, especially chemical suppliers. NOW has implemented a program
to educate the chemical suppliers on the benefits of the NOWPak system so that
they will become more proactive in positioning NOW products to serve the needs
of their customers.
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<PAGE>
MARKETS
Integrated Circuits
Approximately 53% of NOW's sales in fiscal 1997 were to its core target
market of photolithography chemicals used in the manufacture of ICs. The
traditional means of delivery to this market is through glass containers.
Historically, IC manufacturers had not been willing to pay for higher cost
packaging and delivery systems. As photolithography chemicals became
increasingly expensive and the need for ultra-pure chemicals became apparent,
IC manufacturers have been forced to consider alternative packaging and
delivery systems. Though traditional glass bottles remain the dominant means
of delivering chemicals to IC manufacturers, NOW has experienced success in
penetrating this market. Based on the volume of chemicals delivered in NOWPak
systems compared to the total volume of photolithography chemicals consumed in
IC manufacturing, NOW estimates that it currently holds a 10% share of this
worldwide market.
NOW's growth strategy has taken advantage of the growing trend toward copy-
exact fab design within the semiconductor industry. Copy-exact refers to the
use of the same equipment and procedures at a company's new manufacturing
facilities as those used in the development fabs and current generation fabs.
For example, Intel and IBM, once successful in integrating the NOWPak in a
particular fab, have usually continued to use the NOWPak in all of the new
fabs constructed for that particular technology. NOW has focused its efforts
on developing early end-user relationships to strengthen the relationship as
the end-user constructs new fabs. By developing these relationships, the use
of NOW's products in IC fabs has increased from 85 fabs in 1994 to 152 fabs in
1997. Because NOW has maintained strong customer relationships with its large,
well-established end-user customer base who are expected to continue to add
capacity, NOW believes that it is in a strong position to capitalize on the
copy-exact trend in the future.
NOW believes that one of the most significant developments in the
microelectronics market is the forecasted growth of deep ultraviolet ("DUV")
lithography in IC manufacturing. DUV photoresists represent a unique
opportunity for the NOWPak to become the defacto standard container due to the
extreme sensitivity of this chemistry to airborne contaminants. Another
emerging technology is the use of chemical mechanical polishing ("CMP")
slurries for wafer planarization. The CMP slurries worldwide market is
projected to increase from $37 million in 1996 to $133 million by 2000 (Rose
Associates). Sales to users and manufacturers of CMP slurries and similar
products represented 2% of NOW's sales in fiscal 1997. Overall, NOW believes
it is well positioned to take advantage of industry wide growth and to
increase sales in new product areas, such as the "Bag-in-a-Drum" system for
CMP Slurries and the "Bag-in-a-Bottle" for DUV resist applications.
Flat Panel Displays
NOW estimates that it currently packages over 75% of the photolithography
chemicals used in the AMFPD market. These sales accounted for approximately
42% of NOW's sales in fiscal 1997. The design and manufacture of AMFPDs
require an ultra-pure method of containing and dispensing chemicals onto very
large glass panels. The limitations of glass bottles to a four-liter size
posed significant logistical problems in the coating requirements inherent in
the manufacturing of large AMFPDs. The 20 liter NOWPak has performed well when
employed in this dispensing process and has become a preferred container for
this rapidly growing technology.
In Asia, several companies (including Sharp, NEC, Samsung, Hitachi and
D.T.I.) have made multi-billion dollar investments to construct facilities
that will develop and produce AMFPDs. A large market currently exists for
electronic displays with improved resolution and brightness, greater
reliability and flat screens which minimize perimeter distortion. Displays
with high image quality, smaller dimensions and lower weight are desired.
Cathode ray tube ("CRT") based products have been unable to attain the
improved resolution, brightness, reliability and minimization of perimeter
distortion in very large formats without also introducing excessive size,
weight and cost. Due to CRT limitations, the microelectronics industry is
currently developing alternate technologies such as AMFPDs. If the application
of AMFPDs evolves beyond the current core uses of notebook PC displays and
replaces CRT use in desktop computers and TV's, NOW's sales in this segment
may greatly increase.
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Other
NOW also sells its products to the laboratory, pharmaceutical and
biotechnology markets. While NOW has not focused marketing resources on these
markets, the market interest appears to be growing as NOW has received new
orders from chemical suppliers such as Mallinkrodt/Baker, Allied Signal and
Merck. These markets accounted for approximately 3% of NOW's sales in fiscal
1997.
PRODUCTS
NOW's primary products are its NOWPak chemical containers and dispensing
systems which consist of four parts: (i) container assemblies; (ii)
replacement liners; (iii) dispensing hardware; and (iv) accessories.
NOW manufactures three different types of container assemblies: the "Bag-in-
a-Bottle" ("BIB"), "Bag-in-a-Can" ("BIC"), and "Bag-in-a-Drum" ("BID"). Each
features a pre-cleaned collapsible inner liner, or "bag," inside a rugged,
high-density polyethylene or stainless steel overpack. The standard liner film
is made of polytetrafluoroethylene ("PTFE") which provides unmatched inertness
to virtually all chemicals. The empty inner liner is easily removed for waste
consolidation and the outer shell is recyclable or returnable for insertion of
a new replacement liner. NOWPak containers are generally available in sizes of
1, 2.5, 4, 10, 18-20 and 200 liters.
NOW's initial and largest market is packaging for photolithography chemicals
used in the manufacture of semiconductor ICs. These chemicals are typically
packaged in one liter through ten liter BIB containers. NOW's market
applications for chemicals used in the manufacture of AMFPDs as well as for
the pharmaceutical, biotech and laboratory markets are typically in 18-20
liter BIB and BIC containers. Additionally, applications have recently
expanded beyond photolithography chemicals in the semiconductor niche to
include ancillary chemicals, polishing slurries and process chemicals for
which the new 200 liter BID is the package design of choice.
Purity. With the increasing complexity of semiconductor designs,
microelectronics manufacturers are more sensitive to the purity of the
chemicals used in manufacturing, particularly in the photolithography process.
Purity features of NOWPak containers include: (i) a cleanroom manufactured,
collapsible PTFE film liner and a unique breakseal closure; (ii) all
fluorocarbon-wetted components which virtually eliminate extractables; and
(iii) a unique sealed dispensing system which isolates the liner contents from
environmental exposure. In 1994, NOW received the Best Product Award from
Semiconductor International Magazine for its NOWPak Packaging and Dispensing
System. The editors cited user reports of 10-15% defect density reduction of
wafers processed with use of the NOWPak system. This reduction in
contamination has resulted in increased product yields and reduced total costs
for the end-user, which is critical in the photolithography process where
contamination is a major yield detractor.
Productivity. In addition to increased product yields resulting from the
purity benefits described above, end-users gain other productivity benefits
through the use of the NOWPak system. The NOWPak allows for 99+% chemical
usage and offers easy installation and maintenance features. The end-user can
achieve greater production output because the larger volume of the NOWPak
containers (e.g. ten liter containers versus a standard one gallon glass
bottle) reduces the number of empty container changeovers. In addition, the
elimination of glass bottle breakage significantly diminishes the risk of fab
shutdown or process interruption. Compared to traditional glass bottles,
handling and disposal of the containers after use is extremely efficient, as
the empty liner is removed and consolidated for easy disposal, no rinsing is
required, and the overpack is returnable or recyclable.
Safety. Safety features of the NOWPak include a double containment package
design with a rugged overpack, and all inner liners are tested for leaks.
Unlike standard containers that must vent the chemical directly to the
workplace, the NOWPak system eliminates venting with a unique collapsible
liner design. By reducing the chemical's exposure to the air, the NOWPak
system protects the chemical's purity. Conversely, by reducing the
environment's exposure to the chemical, the NOWPak system protects both the
environment and the chemical operator from the hazardous chemicals.
Additionally, the NOWPak system reduces potential hazards such as broken glass
bottles and chemical spills.
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Environmental Responsibility. The recyclable and returnable feature of the
NOWPak system helps end-users comply with new ISO 14001 environmental
management guidelines. The inner liner is easily removed for economical
consolidation of residual hazardous waste without rinsing. The overpack is
typically not contaminated by the chemical and is easily picked up for local
recycling or returned to the chemical supplier (or to NOW) for insertion of a
new replacement liner.
PATENTS
NOW holds a variety of patents for both individual components and the NOWPak
system as a whole which NOW believes constitute effective barriers to entry in
its chosen product applications. NOW currently has eight United States and ten
international patents either issued or pending. These patents range from
"Container and Dispensing System for Liquid Chemicals" to "Method of Handling
High Purity Fluids." NOW has not patented any of its proprietary manufacturing
processes, preferring instead to protect them as trade secrets and maintaining
comprehensive confidentiality and non-disclosure agreements with key suppliers
and employees.
COMPETITION
The markets for containers and dispensing systems for chemicals used in the
manufacture of microelectronics and AMFPDs are characterized by intense
competition and are subject to rapid and significant technological change.
There are numerous domestic and foreign companies that offer products that
compete with NOW's products in these markets, and many of these companies have
significantly greater financial and other resources than NOW. NOW believes
that its ability to compete in the markets for containers and dispensing
systems is dependent largely upon its ability to continually enhance and
improve its products and technologies. Factors such as price, service, product
quality and customer support are important considerations of NOW's customers
in selecting containers and dispensing systems. Competitors with greater
resources than NOW may, therefore, have a competitive advantage.
MANUFACTURING
NOW has developed a manufacturing process to meet the critical purity and
integrity requirements of the microelectronics industry. Custom engineered
liner-making equipment has been developed to process high temperature polymer
films without imparting particulate or ionic contamination. Proprietary
surface cleaning techniques with specialty film materials provide certified
low particle chemical containment at sub-micron levels. Each liner is tested
for leaks using sensitive pressure decay methods. Quality control procedures
performed on every production lot include liquid particle count analysis,
burst testing and vibration testing. All container styles have been certified
to meet or exceed U.S. Department of Transportation specifications as well as
appropriate United Nations codes for the international shipment of hazardous
chemicals.
MARKETING AND SALES
NOW divides its customers into three categories: end-users, chemical
suppliers and equipment suppliers. While marketing is focused on the end-user,
NOW generally sells its containers to chemical suppliers. The chemical
companies then sell their high purity chemicals in NOWPak containers at the
request of end-users. NOW sells dispensers both directly to end-users so that
they can retrofit a fab to be compatible with the NOWPak system as well as to
semiconductor equipment suppliers (OEMs) for installation of the NOWPak system
in new fabs.
Since its inception, NOW has focused its marketing efforts on end-users who
are expected to benefit the most from NOW's products and who will then
generate the greatest demand for NOW's products. NOW makes direct sales calls
on IC and AMFPD manufacturers to educate them on the benefits of the NOWPak
system. Often a manufacturer will evaluate the use of the NOWPak system for
six to nine months before deciding whether to install the NOWPak system in one
of that manufacturer's fabs. NOW estimates that in
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<PAGE>
well over half of the situations in which a manufacturer evaluates the NOWPak,
it chooses to install the system. Once the system is in place and demonstrates
its value, the end-user has usually specified the NOWPak for use in subsequent
new fab builds.
CUSTOMERS
NOW maintains a number of strong relationships with large, well-established
clients in various levels of the microelectronics industry. Once a new end-
user customer is established, NOW generally gains more business as the user
builds and retrofits fabs. Over 150 of the top IC and AMFPD makers around the
world are currently using the NOWPak system, including AMD, Cypress, Fujitsu,
Hitachi, IBM, Intel, Motorola, Phillips, Samsung, Sharp and Texas Instruments.
Sales to NOW's four largest direct customers accounted for 15%, 12% and 11%
and 7%, respectively, of total sales in fiscal 1997, 12%, 7%, 14% and 10%,
respectively, of total sales in fiscal 1996, and 7%, 12%, 18% and 10% of total
sales in fiscal 1995.
EMPLOYEES
As of May 31, 1998, NOW employed a total of 86 people. The work force is
non-union and no unionization attempts or related work stoppages have occurred
to date. NOW considers its relations with its employees to be strong.
FACILITIES
NOW operates from a 70,000 square foot facility located in Bloomington,
Minnesota, including approximately 20,000 square feet of cleanroom
manufacturing, about half of which is class 10/100. A facilities monitoring
system ensures efficient control of certain critical aspects of the facility,
including its ultra pure water and chemical neutralizing systems. NOW believes
that this facility will meet its needs for the foreseeable future. NOW's base
monthly lease payment is $24,400, and the lease expires in 2000, with two,
three-year renewal options.
LITIGATION
There is no pending or threatened litigation against NOW.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF
OPERATIONS--NOW
OVERVIEW
NOW was incorporated in Minnesota in 1987. NOW manufactures proprietary,
state-of-the-art, high performance containers and dispensing systems for
advanced purity chemicals used in the manufacture of microelectronics,
particularly semiconductor ICs and AMFPDs. To a lesser extent, NOW's products
also serve customers in the pharmaceutical, biotech and laboratory markets.
NOW's patented NOWPak container and dispensing systems provide a state-of-the-
art alternative to the traditional glass bottles and steel or plastic drums
used in high-tech market niches that require high-performance chemical
packaging and dispensing systems. The NOWPak system offers value-added
packaging to end-users but actually sells to chemical suppliers whose end-user
customers have specified that the chemicals be packaged in NOW products.
NOW's initial and largest market is packaging for photolithography chemicals
used in the manufacture of IC's, particularly semiconductors. NOW's market
applications have expanded to include packaging for chemicals used in the
manufacture of AMFPD's as well as for high purity solvents used in the
pharmaceutical, biotech and laboratory markets. Additionally, applications for
the NOWPak system have recently expanded beyond photolithography chemicals in
the semiconductor niche to include ancillary chemicals, polishing slurries and
process chemicals.
A substantial majority of NOW's sales track "wafer starts" within the
semiconductor industry, or the volume of silicon wafers processed into fully
functional devices. These include sales of replacement liners and containers.
A smaller portion of NOW's sales, principally sales of dispensing connectors,
track new semiconductor plant construction. In NOW's core markets,
photolithography chemicals, nearly all NOWPak customers utilize the complete
system of dispensers, containers and accessories. Once NOW has established a
customer through the sale of a dispenser, NOW is generally able to generate
repeat business through the purchase of replacement containers or liners. The
specification of the essential connection dispensing hardware leads to
recurring sales of the consumable replacement liner or container. NOW's
experiences show that in its core target market of one liter through ten liter
containers for the IC market, each installed dispenser leads to the sale of
approximately 33 liners per year. In the AMFPD market, the usage rate averages
over 74 liners per year for each installed dispenser. In fiscal 1997,
approximately 82% of NOW's sales were from replacement liners and/or
containers while approximately 18% were from dispensing equipment.
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RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, certain items
from NOW's consolidated statements of income expressed as a percentage of
sales:
<TABLE>
<CAPTION>
PERCENTAGE OF SALES
------------------------------------
NINE MONTHS
FISCAL YEAR ENDED
ENDED MARCH 31, DECEMBER 31,
------------------- ---------------
1995 1996 1997 1996 1997
----- ----- ----- ------ ------
<S> <C> <C> <C> <C> <C>
Sales..................................... 100.0% 100.0% 100.0% 100.0 % 100.0%
Cost of sales............................. 49.4 50.7 54.7 58.7 48.6
----- ----- ----- ------ ------
Gross profit.............................. 50.6 49.3 45.3 41.3 51.4
Operating expenses:
Selling, general and administrative..... 27.2 34.8 42.1 45.3 31.4
Research and development................ 1.1 1.5 1.9 2.3 1.5
----- ----- ----- ------ ------
Total operating expenses.................. 28.3 36.3 44.0 47.6 32.9
----- ----- ----- ------ ------
Operating income (loss)................... 22.3 13.0 1.3 (6.3) 18.5
Other income (expense), net............... 0.1 1.2 0.3 0.3 0.0
----- ----- ----- ------ ------
Income (loss) before income taxes......... 22.4 14.2 1.6 (6.0) 18.5
Income tax (provision) benefit............ (8.1) (5.2) 0.2 3.1 (6.5)
----- ----- ----- ------ ------
Net income (loss)......................... 14.3% 9.0% 1.8% (2.9)% 12.0%
===== ===== ===== ====== ======
</TABLE>
Comparison of the Nine Months Ended December 31, 1997 and December 31, 1996
Sales. Sales for the nine months ended December 31, 1997 were $11.7 million
compared to $6.7 million for the same period in 1996, an increase of 75.7%.
This increase reflected increased demand for NOW's packaging and dispensing
products which resulted from a strengthening of semiconductor market
conditions in the 1997 period. NOW's sales vary directly with the level of
manufacturing of microelectronics, particularly semiconductor ICs and active
matric flat panel displays, and with the level of retrofits of fabs and new
fab construction. Generally, NOW's sales are lower in periods of reduced IC
production and increase in periods of increasing IC production. During the
period from April 1, 1996 through June 30, 1996, NOW's order flow decreased
due in part to the reduction of the level of retrofits of existing fabs and
new fab construction in the microelectronics industry. Beginning in July 1996,
order flow increased through August 1997 and then began to decrease through
December 1997. As a result, NOW's backlog increased from $1,387,000 at
December 31, 1995 to $2,356,000 at December 31, 1996, and was reduced to
$1,154,000 at December 31, 1997. The semiconductor industry is subject to
periodic downturns and an industry downturn is occurring currently. Because of
such adverse market conditions, NOW's financial results are expected to
fluctuate in the near term. See "RISK FACTORS--Risk Factors Related to NOW--
Dependence on Semiconductor Market." As a result, NOW's substantial sales
increase for the nine months ended December 31, 1997 compared to the nine
months ended December 31, 1996 may not necessarily be indicative of future
operating results.
Gross Profit. Gross profit was approximately $6.0 million, or 51.4% of
sales, for the nine month period ended December 31, 1997 compared to
approximately $2.7 million, or 41.3% of sales, for the same period in 1996.
The gross profit increase of approximately $3.3 million was primarily driven
by the increased sales levels noted above. The increase in the gross margin
percentage was primarily a result of NOW's ability to utilize efficiencies in
its manufacturing process to achieve additional operating leverage with
significantly higher production levels.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses as a percentage of sales decreased to 31.4% for the
nine months ended December 31, 1997 compared to 45.3% for the same period in
1996, largely due to improved sales volumes. Selling, general and
administrative expenses increased to approximately $3.7 million for the nine
months ended December 31, 1997 from approximately $3.0 million for the same
period in 1996 due to NOW's continued investment in its infrastructure to
support increasing sales volumes and its long-term growth plans.
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Research and Development. Research and development expenses consist of
outside consultants fees and material costs of internal research and
development. Allocation of direct labor and indirect costs to research and
development activities have not historically been classified as research and
development expenses. Research and development expenses increased 16.3% to
approximately $180,000 for the nine months ended December 31, 1997 from
approximately $150,000 for the nine months ended December 31, 1996. This
increase was primarily due to engineering development efforts related to the
introduction of a new dispensing hardware product design.
Other Income (Expense), Net. Other income (expense) consists primarily of
interest income, interest expense related to NOW's industrial revenue bonds,
and royalty income. For the nine months ended December 31, 1997, NOW had other
expense, net of approximately $2,000, compared to other income, net of
approximately $24,000 for the nine-month period ended December 31, 1996.
Although interest income increased as a result of higher invested cash
balances during the nine months ended December 31, 1997, as compared to the
nine months ended December 31, 1996, the increase was offset by a significant
decrease in royalty income.
Income Taxes. The income tax provision of approximately $760,000 for the
nine months ended December 31, 1997 and the income tax benefit of
approximately $200,000 for the nine months ended December 31, 1996 represented
effective rates of 35% and 51%, respectively. The income tax provision
increased significantly in the period ended December 31, 1997 compared to
December 31, 1996 due to the operating profit in 1997 versus the operating
loss in 1996. The 51% effective rate for the nine months ended December 31,
1996 was attributable to utilization of foreign sales corporation tax benefits
and research and development credits.
Comparison of Fiscal Years Ended March 31, 1997, 1996 and 1995
Sales. Sales decreased 3.9% to approximately $10.1 million in fiscal 1997
from approximately $10.5 million in fiscal 1996 and increased 28.2% in fiscal
1996 from approximately $8.2 million in 1995. In fiscal 1997, NOW experienced
its first year of flat sales growth since 1992, which was largely attributable
to an international downturn in the semiconductor industry. As product orders
throughout the industry decreased, NOW customers suspended orders and utilized
their existing inventory stock. By the end of fiscal 1997, the semiconductor
market began to recover, resulting in an approximately $3.2 million backlog as
of March 31, 1997. NOW's sales growth in fiscal 1996, as in previous fiscal
years, was attributable to continued market penetration, growth of its target
market and expanding application for its products.
Gross Profit. Gross profit was approximately $4.6 million, or 45.3%, of
sales for the year ended March 31, 1997 compared to approximately $5.2
million, or 49.3%, of sales, for the year ended March 31, 1996. The decrease
in gross margin percentage was primarily attributable to increased fixed costs
associated with the new leased manufacturing facility combined with flat sales
in fiscal 1997. Although gross profit increased 25.0% to approximately $5.2
million in fiscal 1996 compared to approximately $4.2 million in fiscal 1995,
gross profit as a percentage of sales decreased slightly from 50.6% to 49.3%.
The decrease was a result of inefficiencies at NOW's prior facility, increased
costs of operating two facilities during the relocation process, and higher
than normal scrap rates.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses as a percentage of sales increased to 42.1% in fiscal
1997 compared to 34.8% and 27.2% in fiscal 1996 and 1995, respectively.
Selling, general and administrative expenses increased to approximately $4.3
million for the year ended March 31, 1997 from approximately $3.7 million for
the year ended March 31, 1996 and from $2.2 million for the year ended March
31, 1995. The increase in fiscal 1997 was primarily due to increased personnel
and additional marketing and selling costs associated with NOW's
infrastructure development needed to support its future growth plans. The
increase in fiscal 1996 was primarily due to NOW's growth and certain
duplicate occupancy expenses incurred during the relocation process and the
growth in operations of NOW during that period.
Research and Development. Research and development expenses increased 24.6%
to approximately $200,000 in fiscal 1997 compared to approximately $150,000 in
fiscal 1996, and increased 78.7% in fiscal 1996
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from approximately $90,000 in fiscal 1995. In addition to NOW's ongoing focus
on the minimization and control of contamination resulting from the use of
NOW's products, NOW enhanced its research and continued development of new
processes for cleaning films and parts and new materials to address new
application requirements for purity and utility.
Other Income (Expense), Net. Other income decreased 75.3% for the year ended
March 31, 1997 to approximately $29,000 from approximately $119,000 for the
year ended March 31, 1996, primarily due to an increase in interest expense as
NOW's industrial revenue bond was outstanding for an entire year compared to
nine months in fiscal 1996. Other income for the year ended March 31, 1995 was
not significant.
Income Taxes. The income tax benefit for fiscal 1997 was $24,000 compared to
a tax provision of $544,000 in fiscal 1996 and $670,000 in fiscal 1995. The
significant decrease in fiscal 1997 was due to a decrease in taxable income
resulting from operations combined with the utilization of foreign sales
corporation tax benefits and research and development credits. Income taxes
for both fiscal 1996 and 1995 were proportionally in line with the levels of
operating income for those periods.
LIQUIDITY AND CAPITAL RESOURCES
Since inception, NOW's funding requirements have been met by private equity
investment, cash flow from operations and an industrial revenue bond used to
finance its relocation to a new facility in fiscal 1996.
Net cash provided by operations was approximately $2.0 million, $0.6
million, $0.3 million, and $1.3 million for the nine months ended December 31,
1997 and the fiscal years ended March 31, 1997, 1996 and 1995, respectively.
The amount of cash provided by operations has been related to the level of
operating profitability of NOW, an increasing amount of non-cash expenses
related to depreciation and amortization of an increasing level of fixed
assets, and fluctuations in working capital items.
NOW's investing activities included capital expenditures of approximately
$0.2 million, $0.4 million, $4.6 million, and $.8 million in the nine months
ended December 31, 1997 and the fiscal years ended March 31, 1997, 1996 and
1995, respectively. The high level of fiscal 1996 expenditures consisted
primarily of equipment and leasehold improvements for the new facility.
Capital expenditures during the other periods were consistent with
management's expectation of normal annual capital expenditures.
NOW's financing activities have consisted of the temporary use of a $750,000
working capital line of credit and a $250,000 equipment term loan facility
with Norwest Bank and a $3.6 million industrial revenue bond funded in fiscal
1996 to finance equipment and leasehold improvements for its new facility.
There were no outstanding borrowings under its bank line as of December 31,
1997. NOW's management believes that anticipated cash generated from operating
activities and available borrowings will be sufficient to meet its projected
working capital and capital expenditure requirements through at least fiscal
1999.
OPERATIONS OUTSIDE THE UNITED STATES
In the nine months ended December 31, 1997 and the years ended March 31,
1997, 1996 and 1995, sales outside the United States, including Asia and
Europe, accounted for approximately 38%, 43%, 34% and 41%, respectively, of
NOW's sales. NOW anticipates its sales outside the United States will continue
to account for a significant percentage of its sales.
YEAR 2000 COMPLIANCE
NOW is utilizing both internal and external resources to identify, correct
or reprogram and test its systems for Year 2000 compliance. It is anticipated
that all reprogramming efforts will be complete by December 31, 1998, allowing
adequate time for testing. This process includes obtaining confirmations from
NOW's primary vendors that plans are being developed or are already in place
to address processing of transactions in the year 2000. However, there can be
no assurance that the systems of other companies on which NOW's systems rely
also will be converted in a timely fashion or that any such failure to convert
by another company would not have an adverse effect on NOW's systems.
Management is in the process of completing its assessment of the Year 2000
compliance costs. However, based on currently available information (excluding
the possible impact of vendor systems which management currently is not in a
position to evaluate), management does not believe that these costs will have
a material effect on NOW's earnings.
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<PAGE>
PRINCIPAL NOW SHAREHOLDERS AND
STOCK OWNERSHIP OF NOW MANAGEMENT
The following table sets forth certain information regarding the beneficial
ownership of the NOW Common Stock as of May 31, 1998 by (i) each person known
by NOW to own more than five percent of the outstanding NOW Common Stock, (ii)
each director of NOW, (iii) each executive officer of NOW, and (iv) all
directors and executive officers of NOW as a group. Except as otherwise
indicated, the persons named in the table have sole voting and investment
power with respect to all shares of NOW Common Stock owned by them.
<TABLE>
<CAPTION>
NAME AND ADDRESS OF BENEFICIAL
OWNER (1) SHARES BENEFICIALLY OWNED (2) PERCENT OF CLASS (2)
- ------------------------------ ----------------------------- --------------------
<S> <C> <C>
Terry J. Nagel.............. 261,667 (3) 14.2%
Michael A. Osgar............ 261,666 (4) 14.2%
Joshua P. Waldman........... 257,667 (5) 14.0%
Robert D. Furst............. 183,000 (6) 9.9%
Don Burkman................. 28,000 (7) 1.5%
Emily S. Engle.............. 16,000 (8) *
C. Douglas Marsh............ 8,004 (9) *
All executive officers and
directors
as a group (7
individuals)............... 1,016,004 (10) 53.5%
</TABLE>
- ---------------------
* Less than 1% of the outstanding shares of NOW Common Stock.
(1) Each named person's address is c/o NOW Technologies, Inc., 10779 Hampshire
Avenue South, Bloomington, Minnesota 55438.
(2) Under the rules of the Commission, shares not actually outstanding are
deemed to be beneficially owned by an individual if such individual has
the right to acquire the shares within 60 days. Pursuant to such
Commission rules, shares deemed beneficially owned by virtue of an
individual's right to acquire them are also treated as outstanding when
calculating the percent of the class owned by such individual and when
determining the percent owned by any group in which the individual is
included.
(3) Includes 4,000 shares which may be purchased by Mr. Nagel upon exercise of
a currently exercisable option.
(4) Includes 4,000 shares which may be purchased by Mr. Osgar upon exercise of
a currently exercisable option.
(5) Includes 4,000 shares which may be purchased by Mr. Waldman upon exercise
of a currently exercisable option.
(6) Includes 12,000 shares which may be purchased by Mr. Furst upon exercise
of a currently exercisable option.
(7) Includes 12,000 shares which may be purchased by Mr. Burkman upon exercise
of a currently exercisable option.
(8) Includes 16,000 shares which may be purchased by Ms. Engle upon exercise
of a currently exercisable option.
(9) Consists of 8,004 shares which may be purchased by Mr. Marsh upon exercise
of a currently exercisable option.
(10) Includes 60,004 shares which may be purchased upon exercise of currently
exercisable options.
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<PAGE>
THE MERGER
The description of the Merger contained in this Proxy Statement/Prospectus
summarizes the material provisions of the Merger Agreement and is qualified in
its entirety by reference to the Merger Agreement, the full text of which is
attached hereto as Appendix A and is incorporated herein by reference. The NOW
Shareholders are urged to read Appendix A in its entirety.
GENERAL
The Merger will be effected through the merger of Merger Subsidiary with and
into NOW, with NOW being the surviving corporation and will become effective
upon the filing of properly executed Articles of Merger with the Secretary of
State of the State of Minnesota and a Certificate of Merger with the Secretary
of State of the State of Delaware (the "Effective Time"). As a result of the
Merger, NOW will become a wholly-owned subsidiary of ATMI.
TERMS OF THE MERGER
ATMI incorporated Merger Subsidiary under the laws of the State of Delaware
for the purposes of accomplishing the Merger. Pursuant to the Merger
Agreement, Merger Subsidiary will merge with and into NOW, with NOW being the
surviving corporation. As a result of the Merger, NOW will become a wholly-
owned subsidiary of ATMI. In connection with the Merger, the NOW Common Stock
will be converted into the right to receive shares of ATMI Common Stock. The
aggregate number of shares of ATMI Common Stock to be exchanged for the NOW
Common Stock (the "Merger Consideration") will be equal to the number of
outstanding shares of NOW Common Stock multiplied by the "Exchange Ratio."
Pursuant to the terms of the Merger Agreement, the Exchange Ratio is based in
part upon the "NOW Share Price" and will vary depending upon the "Closing
Price" of ATMI Common Stock. "NOW Share Price" means $21.9372, which was
determined by arm's-length negotiations among the parties to the Merger
Agreement based on the parties' valuation of NOW, the number of outstanding
shares of NOW Common Stock and certain outstanding options to purchase NOW
Common Stock. "Closing Price" means the average of the closing prices of ATMI
Common Stock as reported by the Nasdaq National Market for the twenty trading
days ending the third trading day prior to the closing date of the Merger (the
"Closing Date"); provided that if the Closing Price is greater than $35.04 per
share, the Closing Price shall be deemed to be $35.04 per share; and if the
Closing Price is less than $21.55 per share, the Closing Price shall be deemed
to be $21.55 per share. If the Closing Price is equal to or greater than
$24.05 (85% of the "Initial Price") and less than or equal to $32.54 (115% of
the Initial Price), then the Exchange Ratio shall be equal to .775380 (the NOW
Share Price divided by the Initial Price). The "Initial Price" is the average
of the closing prices of ATMI Common Stock as reported by the Nasdaq National
Market for the twenty trading days ended March 6, 1998 and is fixed at $28.29.
If the Closing Price is equal to or greater than $21.55 and less than $24.05,
then the Exchange Ratio shall be equal to 18.64662 (85% of the NOW Share
Price) divided by the Closing Price. If the Closing Price is greater than
$32.54 and less than or equal to $35.04, then the Exchange Ratio shall be
equal to 25.22778 (115% of the NOW Share Price) divided by the Closing Price.
If the Closing Price is less than $21.55, then the Exchange Ratio shall be
equal to .865338 (85% of the NOW Share Price divided by $21.55); and if the
Closing Price is greater than $35.04, then the Exchange Ratio shall be equal
to .720052 (115% of the NOW Share Price divided by $35.04). To simplify the
presentations contained in this Proxy Statement/Prospectus, the dollar amounts
described above are stated to two decimal places. However, the Exchange Ratio
calculations carry such prices to eight decimal places, and the resulting
Exchange Ratios are carried to six decimal places.
The following table sets forth the Exchange Ratio to be applied in the
Merger and the aggregate Merger Consideration assuming various Closing Prices.
<TABLE>
<S> <C> <C>
AGGREGATE MERGER CONSIDERATION
CLOSING PRICE EXCHANGE RATIO (SHARES OF ATMI COMMON STOCK)
------------- -------------- ------------------------------
$20 0.865338 1,586,164
$24 0.776943 1,424,136
$28 0.775380 1,421,271
$32 0.775380 1,421,271
$36 0.720052 1,319,856
</TABLE>
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<PAGE>
As a result of the foregoing, the NOW Shareholders will receive in the
aggregate a maximum of 1,586,164 shares of ATMI Common Stock and a minimum of
1,319,856 shares of ATMI Common Stock.
In addition, at the Effective Time each outstanding option to purchase NOW
Common Stock will entitle the holder thereof to purchase shares of ATMI Common
Stock under a stock option plan of ATMI, to be determined in accordance with
the Exchange Ratio.
Because the number of shares of ATMI Common Stock issuable to the NOW
Shareholders will depend on the Closing Price, there is no guarantee as to the
exact number of shares of ATMI Common Stock that the NOW Shareholders will
receive. During the period between the date of this Proxy Statement/Prospectus
and the date of the Special Meeting, the NOW Shareholders may obtain updated
information regarding the market price for ATMI Common Stock, the estimated
Exchange Ratio and the estimated aggregate amount of the Merger Consideration
by calling a toll-free telephone number established by ATMI (1-888-562-2927).
Because the Merger Agreement is subject to the approval of the NOW
Shareholders, the NOW Shareholders are not bound to deliver their shares of
NOW Common Stock and to consummate the transaction unless and until such
approval is received.
Immediately following the Effective Time, each NOW Shareholder will be
entitled to surrender his, her or its certificates representing NOW Common
Stock to ATMI to receive shares of ATMI Common Stock based on the Exchange
Ratio; provided that five percent of such shares will be placed in escrow. All
such shares to be held in escrow will be held and applied in accordance with
the terms of the Merger Agreement and the Escrow Agreement. See "THE MERGER--
Indemnification and Escrow."
As promptly as practicable after the Effective Time, the NOW Shareholders
who have not dissented to the Merger will be sent instructions for use in
exchanging the stock certificates that formerly represented shares of NOW
Common Stock for certificates for the shares of ATMI Common Stock into which
such shares of NOW Common Stock have been converted. The certificates
representing such shares of ATMI Common Stock, and any dividends or other
distributions paid on such ATMI Common Stock, will not be delivered to the NOW
Shareholders until the certificates representing shares of NOW Common Stock
are delivered pursuant to the exchange instructions. No interest will be paid
on dividends or other distributions which the holder of such shares shall be
entitled to receive upon such delivery.
If the Closing were to occur as of the date of this Proxy
Statement/Prospectus, the Closing Price would be $21.55, and as a result,
.865338 shares of ATMI Common Stock would be issued for each share of NOW
Common Stock, or an aggregate of 1,586,164 shares.
RESULTS OF THE MERGER
After consummation of the Merger, NOW will be a wholly-owned operating
subsidiary of ATMI. No material disposition or restructuring of either ATMI or
NOW or any material part thereof is contemplated as a result of the Merger.
Assuming a Closing Price of $21.55 per share, the stockholders of ATMI and the
NOW Shareholders would own approximately 92.8% and 7.2%, respectively, of the
approximately 22,028,306 shares of ATMI Common Stock that would be
outstanding.
BACKGROUND OF THE MERGER
Since its formation in 1986, ATMI has focused on the development of new
materials technologies for the manufacture of semiconductor chips. As an
element of its strategy, ATMI has utilized a phased commercialization plan to
enter sequentially three market segments served by its core CVD technology,
namely, semiconductor environmental equipment, semiconductor thin film
materials and semiconductor epitaxial thin film deposition services. The first
of these market segments was semiconductor environmental equipment which is
now represented by ATMI's EcoSys division. ATMI first introduced environmental
products in 1989. ATMI then began to build market critical mass through
mergers and acquisitions, including
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a merger with Vector Technical Group, Inc. in 1994 and the acquisition of the
Guardian Systems combustion scrubber product line from Messer Griesheim
Industries, Inc. in 1995. This strategy has allowed EcoSys to become one of
the world's largest suppliers of point-of-use environmental equipment for the
semiconductor industry, satisfying a key goal of ATMI's strategy to become a
market leader in each of its served market segments.
As ATMI's semiconductor thin film materials development programs progressed,
it created the NovaMOS division in 1992 to serve the semiconductor CVD
precursors market segment. Over the last five years, the NovaMOS business
introduced several products for next-generation semiconductor devices. In
October 1997, ATMI acquired the ADCS Group, a manufacturer and distributor of
ultrahigh purity semiconductor thin film materials and related delivery
systems. ATMI combined the operations of the ADCS Group with ATMI's NovaMOS
business to create the ADCS division.
ATMI's third business, semiconductor epitaxial thin film deposition services
(or "epi" services), grew from ATMI's early efforts to develop epi processes
for novel semiconductor materials such as diamond and silicon carbide. As that
development effort progressed, ATMI created the Diamond Electronics division
in 1992 to commercialize these thin film technologies. In December 1995, ATMI
acquired Epitronics Corporation, a manufacturer of gallium arsenide epi
products, to extend ATMI's epi capability to all advanced materials. ATMI
integrated the operations of Epitronics Corporation with its Diamond
Electronics division in 1996 under the Epitronics name. In October 1997, ATMI
acquired LSL to further extend its epi product line to silicon epitaxial
services. ATMI has integrated the operations of LSL with Epitronics.
With the completion of the ADCS Group and LSL acquisitions in October 1997,
ATMI had achieved its primary goal of providing "one-stop shopping" to its
customers in each of its three core businesses: point-of-use environmental
equipment, CVD materials and epitaxial services. Concurrently with the
expansion of ATMI's CVD materials capabilities with the ADCS Group
acquisition, ATMI's SDS gas delivery system product line continued to
penetrate the ion implant materials marketplace. After several reviews of
strategy during 1997, the ATMI Board of Directors agreed to broaden the focus
of ATMI's materials efforts beyond CVD and ion-implant to include all so-
called semiconductor front-end materials and related delivery systems.
Consistent with this strategy, the ATMI Board of Directors established a
process for identifying acquisition/merger candidates in the semiconductor
materials segment and the criteria for evaluating them. Included in the target
company criteria were (1) complementary front-end materials or delivery
systems products, (2) proprietary technology and/or market leadership
position, and (3) a quality reputation among customers. These criteria are
referred to below as the "Semiconductor Materials Market Initial Criteria."
The establishment of the Semiconductor Materials Market Initial Criteria led
to meetings and discussions with a number of companies that were possible
targets, including NOW.
NOW was founded in 1987 to manufacture and sell high performance containers
and delivery systems for advanced purity chemicals used in the semiconductor
industry. NOW has been profitable since the first full year of
commercialization of its products. However, because no trading market exists
for the NOW Common Stock, an investment in NOW Common Stock provides very
little liquidity. Recognizing the interest of many of the NOW Shareholders in
greater liquidity, in early 1996, the NOW Board of Directors began to consider
an exit strategy for the NOW Shareholders. Initially, the NOW Board of
Directors considered taking NOW public. Due to the significant expense and
difficulty of going public and the uncertainties of the public market, the NOW
Board of Directors eventually directed management to explore the sale of NOW.
On August 27, 1997, NOW entered into an engagement agreement with BT Alex.
Brown, an internationally-recognized investment banking firm, to serve as its
financial advisor with respect to the potential sale of NOW. NOW selected BT
Alex. Brown as its financial advisor on the basis of its reputation and
experience in assisting companies in selecting suitable acquisition partners.
In the course of its services, BT Alex. Brown advised NOW and its Board of
Directors on various matters relating to the sale process, including a
comparative review of the proposals received.
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With the assistance of BT Alex. Brown, NOW prepared a confidential
memorandum describing the business and prospects of NOW, which was sent to 18
companies, including ATMI, in December 1997. Shortly thereafter, Dr. Eugene
Banucci, the Chief Executive Officer of ATMI, had initial discussions with
Terry Nagel, the President of NOW. After a review of the confidential
memorandum and discussions with Mr. Nagel, the management of ATMI concluded
that the acquisition of NOW met all of the Semiconductor Materials Market
Initial Criteria. In January 1998, ATMI submitted to NOW and BT Alex. Brown a
preliminary bid for NOW, which allowed ATMI to be qualified to conduct
preliminary due diligence on NOW. The preliminary bid included a proposed
purchase price of between $28 million and $33 million payable in ATMI Common
Stock. ATMI's bid was based on a multiple of ATMI's estimate of NOW's after-
tax earnings for the twelve-month period ended March 31, 1998. Based on their
initial indications of interest, four other companies also qualified for
preliminary due diligence on NOW, two of which ultimately submitted final
written offers.
During January and early February 1998, representatives of ATMI, including
Dr. Banucci, Daniel Sharkey, the Chief Financial Officer, and Dr. Peter
Kirlin, the Executive Vice President, met with representatives of NOW on
several occasions for due diligence purposes. At a special meeting of the ATMI
Board of Directors on February 6, 1998, the ATMI Board of Directors reviewed
both NOW's financial results as well as the status of the negotiations and
approved the material terms of a merger agreement proposed by Dr. Banucci
which was submitted to BT Alex. Brown and NOW later that day. At the same
time, the ATMI Board of Directors appointed Robert Hillas as the Board's
outside director designee for oversight of the negotiations.
During this time, however, NOW received a cash offer from a third party (the
"Competing Bidder") of $42 million, which the NOW Board of Directors
preliminarily determined to pursue by proceeding to negotiate a definitive
agreement. Before these negotiations were commenced, ATMI increased its offer
to $44 million payable in ATMI Common Stock. After the Competing Bidder
refused to increase its offer, the NOW Board of Directors determined to accept
the revised ATMI offer and enter into contract negotiations.
On February 12, 1998, the NOW Board of Directors held a special meeting to
consider ATMI's revised offer. The Board reviewed the impact of consummating
the sale of NOW for ATMI Common Stock as opposed to cash, the terms of the
price protection provisions contained in the Merger Agreement and the
potential negative impact of ATMI's then proposed public offering on the price
of ATMI Common Stock and, consequentially, the value of the Merger to the NOW
Shareholders. The Board, in consultation with legal counsel, also reviewed the
material terms of the merger agreement proposed by ATMI. The NOW Board of
Directors approved the material terms of the merger agreement proposed by ATMI
and authorized the officers of NOW to negotiate and execute a definitive
merger agreement.
The definitive Merger Agreement between ATMI and NOW was then negotiated
during the period from February 13 to February 19, 1998 during which time ATMI
conducted further due diligence of NOW. As part of these negotiations, the
parties discussed the details regarding the amount of the Merger
Consideration, including the price protection provisions. The parties had
previously agreed upon a purchase price of $44 million, payable in ATMI Common
Stock, which was based on a multiple of NOW's projected earnings before income
taxes for the twelve-month period ended March 31, 1998 and arm's-length
negotiations between the parties. On February 19, 1998, the parties agreed to
the terms of the final merger agreement including certain stock price
protection mechanisms based on the average trading price of the ATMI Common
Stock during the period after reaching agreement on the purchase price and
before the closing of the transaction.
On February 19, 1998, after the ATMI Board of Directors and the NOW Board of
Directors each voted unanimously to approve the Merger Agreement, NOW and ATMI
signed the Merger Agreement which was announced to the public prior to the
opening of trading of ATMI Common Stock on February 20, 1998.
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ATMI'S REASONS FOR THE MERGER
The ATMI Board of Directors believes that the Merger is in the best
interests of the stockholders of ATMI and has unanimously approved the Merger
Agreement. Prior to reaching its conclusions, the ATMI Board of Directors
received a presentation from, and reviewed the Merger with, ATMI's management
and its legal and financial advisors. The ATMI Board of Directors believes
that the following reasons support this acquisition:
. NOW is a semiconductor liquids packaging company focused on the supply
of photolithography delivery systems to semiconductor end users. These
systems are actually sold through equipment manufacturers and OEMs but
are specified by semiconductor end users. ATMI believes that NOW's
delivery systems will have broad application in the delivery of a wide
variety of front-end semiconductor liquid materials (criteria 1 of the
Semiconductor Materials Market Initial Criteria);
. NOW products are proprietary in that NOW has patents that protect both
the products designed by NOW and their field of use (criteria 2 of the
Semiconductor Materials Market Initial Criteria);
. NOW has a market leading position in the photolithography delivery
systems packaging market (criteria 2 of the Semiconductor Materials
Market Initial Criteria);
. During due diligence, ATMI determined that NOW had the highest
reputation for product quality and service among its customers (criteria
3 of the Semiconductor Materials Market Initial Criteria);
. NOW has an established operating model that has been profitable
historically;
. The pooling-of-interests accounting treatment of the Merger; and
. The likelihood of successful completion of the Merger.
The ATMI Board of Directors also considered a number of potentially negative
factors in its deliberations concerning the Merger, including, but not limited
to: (i) the risk that the potential benefits of the Merger (including
opportunities for expansion) would not be fully realized; (ii) the risks
associated with expansion, including the need for NOW to expand its management
team; (iii) the potential difficulties of integrating the operations of NOW;
and (iv) the direct expenses of the Merger.
The Merger and the future results of ATMI and NOW are subject to risks and
uncertainties, including those set forth in "RISK FACTORS."
The ATMI Board of Directors also considered, among other matters: (i)
information concerning NOW's business, prospects, financial performance and
results, including the financial statements as of and for the twelve-month
period ended December 31, 1997; (ii) current conditions in the semiconductor
industry and the size of NOW's market, including other providers of packaging
systems; and (iii) reports from ATMI's management as to the results of their
due diligence examination.
NOW'S REASONS FOR THE MERGER
The NOW Board of Directors concluded that the Merger is fair and in the best
interests of NOW and the NOW Shareholders and voted unanimously to approve the
Merger Agreement and to authorize the officers of NOW to execute the Merger
Agreement on its behalf. The NOW Board of Directors also directed that the
Merger be submitted to the NOW Shareholders together with the NOW Board's
recommendation that the NOW Shareholders approve the Merger. Prior to reaching
its conclusions, the NOW Board of Directors received a presentation from, and
reviewed the Merger with, NOW's management and its legal and financial
advisors. The NOW Board of Directors believes that the following are reasons
for the NOW Shareholders to vote for approval of adoption of the Merger
Agreement and the Merger:
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. The NOW Common Stock has no public trading market, whereas the ATMI
Common Stock to be received by the NOW Shareholders will be freely
tradable (subject to certain securities laws restrictions and the
requirements of pooling-of-interests accounting treatment);
. The Merger will provide the NOW Shareholders with the opportunity to
receive, on a tax-free basis, ATMI Common Stock that will enable the NOW
Shareholders to participate in the growth opportunities of the combined
company;
. The global presence and reputation of ATMI in the semiconductor
industry;
. The mission and strategy of ATMI to become a leading supplier in each of
its markets in the semiconductor industry: point-of-use environmental
equipment; thin film materials and related delivery systems; and
specialty epitaxial thin film deposition services;
. The leadership role ATMI has taken in the development of next-generation
materials and materials delivery technology;
. The belief of the NOW Board of Directors that the combination of the two
companies will create more growth opportunities for both companies,
provide significant economies of scale and create greater resources to
enable the combined company to compete more effectively with competitors
having greater resources than NOW; and
. The fact that the $44 million valuation of the Merger Consideration was
believed to be fair for the sale of NOW.
The NOW Board of Directors also considered certain negative factors and
risks relating to the Merger, including but not limited to: (i) the risks
associated with ATMI's business strategy and projected growth; (ii) the risks
related to ATMI's ability to integrate NOW and other recently acquired
entities; and (iii) the market risks associated with holding significant
shares of ATMI Common Stock.
In making its decision to approve the Merger, the NOW Board of Directors
also considered, among other factors: (i) ATMI's audited financial statements
for fiscal 1995 and fiscal 1996 and its February 11, 1998 press release
announcing ATMI's financial results for fiscal 1997; (ii) ATMI's draft of its
preliminary Prospectus dated March 3, 1998 related to a public offering of
shares of ATMI Common Stock for cash; (iii) various analysts' reports covering
ATMI; and (iv) NOW management and BT Alex. Brown reports as to their due
diligence activities relating to ATMI. The NOW Board of Directors did not
obtain a fairness opinion from BT Alex. Brown regarding the fairness of the
Merger terms to NOW Shareholders. Given the extensive sales process conducted
by NOW with the assistance of BT Alex. Brown, the fact that NOW is a private
company with a limited number of shareholders and the significance of the
consideration to be received by NOW Shareholders, the NOW Board of Directors
did not believe the fairness opinion was necessary.
The Merger and the future results of ATMI and NOW are subject to certain
risks and uncertainties, including those set forth in "RISK FACTORS."
RECOMMENDATION OF THE NOW BOARD OF DIRECTORS
THE NOW BOARD OF DIRECTORS UNANIMOUSLY BELIEVES THAT THE MERGER AGREEMENT IS
FAIR AND REASONABLE AND IN THE BEST INTERESTS OF NOW AND THE NOW SHAREHOLDERS.
THE NOW BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE ADOPTION OF
---
THE MERGER AGREEMENT.
DISSENTERS' RIGHTS
The following discussion is not a complete statement of the law pertaining
to dissenters' rights under the MBCA and is qualified in its entirety by
reference to the full text of Section 302A.471 and 302A.473 of the MBCA
attached to this Proxy Statement/Prospectus as Appendix B. ANY NOW SHAREHOLDER
WHO WISHES TO
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EXERCISE SUCH DISSENTERS' RIGHTS OR WHO WISHES TO PRESERVE HIS OR HER RIGHT TO
DO SO SHOULD REVIEW THE FOLLOWING DISCUSSION AND APPENDIX B CAREFULLY BECAUSE
FAILURE TO TIMELY AND PROPERLY COMPLY WITH THE PROCEDURES SPECIFIED WILL
RESULT IN THE LOSS OF DISSENTERS' RIGHTS UNDER THE MBCA.
Procedure to Preserve Dissenters' Rights. Section 302A.471 of the MBCA
grants any shareholder of record of NOW on the Record Date and certain
beneficial owners on such date who object to the Merger the right to have NOW
purchase the shares of NOW Common Stock owned by the dissenting shareholder at
their fair value. It is a condition to the Merger that shareholders holding
less than ten percent of the outstanding NOW Common Stock shall have exercised
their dissenters' rights. It is the present intention of ATMI to abandon the
Merger in the event NOW Shareholders exercise dissenters' rights with respect
to greater than ten percent of the outstanding NOW Common Stock.
The Merger Agreement must be approved by the holders of at least a majority
of the outstanding shares of the NOW Common Stock. A shareholder who wishes to
exercise dissenters' rights must file with NOW before the vote on the Merger
Agreement a written notice of intent to demand the fair value of the shares
owned by such shareholder and must not vote his or her shares in favor of the
Merger Agreement. A beneficial owner must also submit a consent from the
record shareholder. A shareholder may withdraw or cancel his or her demand
rights by either: (i) filing a written notice of intent to withdraw or cancel
his or her demand with NOW prior to the shareholder vote on the Merger
Agreement; or (ii) voting his or her shares in favor of the Merger Agreement.
A shareholder filing the demand notice will not lose dissenter's rights if the
holder does not vote at all or "votes" to abstain. However, a shareholder who
signs a proxy without indicating a voting preference will waive his or her
dissenter's rights.
After the proposed Merger has been approved by the NOW Board of Directors
and the NOW Shareholders, NOW must send a written notice to all shareholders
who have dissented as provided above of:
(1) the address to which a demand for payment and certificates for shares
must be sent in order to obtain payment and the date by which they must be
received;
(2) any restrictions on transfer of uncertificated shares that will apply
after the demand for payment is received;
(3) a form to be used to certify the date on which the shareholder, or the
beneficial owner on whose behalf the shareholder dissents, acquired the shares
or an interest in them and to demand payment; and
(4) a copy of Sections 302A.471 and 302A.473 of the MBCA and a brief
description of the procedures to be followed to obtain payment of the fair
value for the shares.
In order to receive the fair market value of the shares, a dissenting
shareholder must demand payment and deposit certificated shares or comply with
any restrictions on transfer of uncertificated shares within 30 days after the
notice was given, but the dissenter retains all other rights of a shareholder
until the Merger takes effect. A shareholder may not assert dissenters' rights
as to less than all of the shares registered in the name of the shareholder,
unless the shareholder dissents with respect to all the shares that are
beneficially owned by another person but registered in the name of the
shareholder and discloses the name and address of each beneficial owner on
whose behalf the shareholder dissents. In that event, the rights of the
dissenter will be determined as if the shares as to which the shareholder has
dissented and the other shares were registered in the names of different
shareholders.
Procedures Following an Assertion of Dissenters' Rights. After the Effective
Time or after NOW receives a valid demand for payment, whichever is later, NOW
will remit to each dissenting shareholder who has complied with the above-
described procedures the amount NOW estimates to be the fair value of the
shares, plus interest. Payment must be accompanied by certain information,
including prescribed financial statements, a statement of the method used in
arriving at the estimate of fair value and a copy of Sections 302A.471 and
302A.473 of the MBCA.
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NOW may withhold the above-described remittance from a person who was not a
shareholder on the date the Merger Agreement was first announced to the public
or who is dissenting on behalf of a person who was not a beneficial owner on
that date. If such dissenter has not voted his or her shares in favor of the
proposed Merger Agreement and has filed with NOW before the vote on the
proposed Merger Agreement a written notice of intent to demand the fair value
of the shares owned by such shareholder, NOW must forward to such dissenter
the materials described in the preceding paragraph, a statement of reason for
withholding the remittance, and an offer to pay to such dissenter the amount
listed in the materials if the dissenter agrees to accept that amount in full
satisfaction. Such dissenter may decline the offer and demand payment of such
dissenter's own estimate of the fair value of the shares, plus interest, by
written notice to NOW. Failure to do so entitles such dissenter only to the
amount offered. If such dissenter makes demand, the procedures, costs, fees
and expenses described below for petitioning the court shall apply.
If NOW fails to remit payment within 60 days of the deposit of certificates
or the imposition of transfer restrictions on uncertificated shares, it must
return all deposited certificates and cancel all transfer restrictions.
However, NOW may again give notice as described above and require deposit or
restriction on transfer at a later time.
If a dissenter believes that the amount remitted by NOW is less than the
fair value of the shares plus interest, the dissenter may give written notice
to NOW of the dissenter's own estimate of the fair value of shares, plus
interest, within 30 days after NOW mails the remittance, and demand payment of
the difference (a "Demand"). Otherwise, a dissenter is entitled only to the
amount remitted by NOW.
If NOW receives a Demand, it must, within 60 days after receiving the
Demand, either pay to the dissenter the amount demanded, or an amount agreed
to by the dissenter after discussion with NOW, or file in court a petition
requesting that the court determine the fair value of the shares, plus
interest. The petition must be filed in Hennepin County, Minnesota. The
petition must name as parties all dissenters who made a Demand and who have
not reached agreement with NOW. The jurisdiction of the court is plenary and
exclusive. The court may appoint appraisers, with powers and authorities the
court deems proper, to receive evidence on and recommend the amount of the
fair value of the shares. The fair value of the shares as determined by the
court (which may be computed by any method that the court, in its discretion,
sees fit to use, whether or not used by NOW or a dissenter) is binding on all
shareholders, wherever located. A dissenter is entitled to judgment for the
amount by which the fair value of the shares as determined by the court, plus
interest, exceeds the amount, if any, remitted by NOW, but shall not be liable
to NOW for the amount, if any, by which the amount, if any, remitted to the
dissenter exceeds the fair value of the shares as determined by the court,
plus interest.
The court will assess the costs and expenses associated with a court
proceeding to determine the fair value of the shares against NOW, except that
the court may assess part or all of those costs and expenses against a
dissenter whose Demand is found to be arbitrary, vexatious or not in good
faith. If the court finds that NOW has failed to comply substantially with
Section 302A.473 of the MBCA, the court may assess all fees and expenses of
any experts or attorneys as the court deems equitable. These fees and expenses
may also be assessed against a person who has acted arbitrarily, vexatiously
or not in good faith in bringing the proceeding, and may be awarded to a party
injured by those actions. The court may award, in its discretion, fees and
expenses to an attorney for the dissenters out of the amount awarded to the
dissenters, if any.
FAILURE TO FOLLOW STRICTLY THE PROCEDURES REQUIRED BY SECTION 302A.473 FOR
ASSERTING DISSENTERS' RIGHTS WILL RESULT IN THE LOSS OF A NOW SHAREHOLDER'S
RIGHTS TO DEMAND A DETERMINATION OF THE FAIR VALUE OF HIS OR HER SHARES OF NOW
COMMON STOCK UNDER THE DISSENTERS' STATUTE.
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EFFECTIVE TIME OF THE MERGER
The Merger will become effective upon the filing of Articles of Merger,
executed in accordance with the relevant provisions of the MBCA, with the
Secretary of State of the State of Minnesota and the filing of a Certificate
of Merger, executed in accordance with the relevant provisions of the Delaware
General Corporation Law (the "DGCL"), with the Secretary of State of the State
of Delaware. Under the Merger Agreement, this filing is expected to be made as
soon as reasonably practicable after the satisfaction or waiver of all
conditions to the Merger. The closing of the Merger will occur on the second
business day (the "Closing Date") after the day on which all of the closing
conditions to the Merger shall have been satisfied or waived, or such other
date as the parties shall otherwise agree. The parties anticipate that the
Closing will be held immediately following the special meeting.
CONDITIONS TO THE MERGER
The obligation of each of ATMI and NOW to consummate the Merger is subject
to certain conditions, including the following: (i) the Merger Agreement and
the consummation of the Merger shall have been approved by the affirmative
vote of the holders of at least 51% of the NOW Common Stock; (ii) any waiting
period applicable to the consummation of the Merger under the HSR Act shall
have expired or been terminated; (iii) no temporary restraining order,
preliminary or permanent injunction or other order issued by any government
entity of competent jurisdiction shall be in effect; (iv) no action shall have
been taken and no statute, rule, regulation or order shall have been enacted,
promulgated or issued or deemed applicable to the Merger by any government
entity which would make the consummation of the Merger illegal or render NOW,
ATMI or Merger Subsidiary unable to consummate the Merger, except for any
waiting period provisions; (v) Ernst & Young LLP, ATMI's independent auditors,
shall have rendered its opinion to ATMI, in form and substance satisfactory to
ATMI, regarding such firm's concurrence with the conclusions of management for
ATMI as to the appropriateness of pooling-of-interests accounting for the
Merger under Accounting Principles Board Opinion No. 16; (vi) Ernst & Young
LLP shall have rendered its opinion to ATMI to the effect that the Merger has
been structured in a manner which is tax-free with respect to ATMI and its
stockholders and NOW and the NOW Shareholders; (vii) the Registration
Statement of which this Proxy Statement/Prospectus forms a part shall have
been declared effective under the Securities Act and shall not be subject to
any stop order; and (viii) ATMI, NOW and the NOW Shareholders shall have
executed and delivered the Escrow Agreement.
The obligation of ATMI to consummate the Merger is subject to, among others,
the following additional conditions unless waived by ATMI: (i) the
representations and warranties of NOW contained in the Merger Agreement shall
be true and correct in all material respects as of the Closing as though made
on and as of such date; (ii) NOW shall have performed in all material respects
all obligations and covenants required to be performed by it under the Merger
Agreement prior to or as of the Closing; (iii) NOW shall have obtained any and
all consents and approvals required to be obtained in connection with the
Merger as set forth in the Merger Agreement; (iv) there shall not have been
any material adverse change in the general affairs, business, business
prospects, properties, management, condition (financial or otherwise) or
results of operations of NOW, whether or not arising from transactions in the
ordinary course of business, and NOW shall not have sustained any material
loss or interference with its business or properties from fire, explosion,
flood or other casualty, whether or not covered by insurance, or from any
labor dispute or any court or legislative or other governmental action, order
or decree; and (v) Deloitte & Touche LLP, NOW's independent auditors, shall
have delivered to NOW a letter stating that Deloitte & Touche LLP knows of
nothing in respect of NOW that would prohibit ATMI from accounting for the
Merger as a pooling of interests.
Additionally, under the terms of the Merger Agreement, at the Closing, NOW
shall be required to deliver the following, among other items, to ATMI: (i)
affiliate agreements as described in the Merger Agreement from each affiliate
of NOW; (ii) employment agreements as described in the Merger Agreement from
certain key employees of NOW; (iii) releases executed by each director and
each officer of NOW releasing NOW from any and all liabilities and obligations
owed by NOW to him or her; and (iv) agreements and consents in connection with
the current lease of NOW's facilities as described in the Merger Agreement.
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The obligation of NOW to consummate the Merger is subject to, among others,
the following additional conditions, unless waived by NOW: (i) the
representations and warranties of ATMI and Merger Subsidiary contained in the
Merger Agreement shall be true and correct in all material respects as of the
Closing as though made on and as of such date; (ii) ATMI and Merger Subsidiary
shall have performed in all material respects all obligations and covenants
required to be performed by them under the Merger Agreement prior to or as of
the Closing; (iii) ATMI and Merger Subsidiary shall have obtained any and all
consents and approvals required to be obtained in connection with the Merger
as set forth in the Merger Agreement; (iv) Ernst & Young LLP shall have
rendered its opinion to ATMI, in form and substance satisfactorily to ATMI,
regarding such firm's concurrence with the conclusion of management for ATMI
as to the appropriateness of pooling-of-interests accounting for the Merger
under Accounting Principals Board Opinion No. 16; (v) Ernst & Young LLP shall
have rendered its opinion to ATMI to the effect that the Merger has been
structured in a manner which is tax-free with respect to ATMI and its
stockholders and NOW and the NOW Shareholders; and (vi) there shall not have
been any material adverse change in the general affairs, business, business
prospects, properties, management, condition (financial and otherwise) or
results of operations of ATMI, whether or not arising from transactions in the
ordinary course of business, and ATMI shall not have sustained any material
losses or interference with its business or properties from fire, explosion,
flood or other casualty, whether or not covered by insurance, or from any
labor dispute or any court or legislative or other governmental action, order
or decree.
REGULATORY APPROVALS
The HSR Act provides that certain business mergers (including the Merger)
may not be consummated until certain information has been furnished to the DOJ
and the FTC and certain waiting period requirements have been satisfied. ATMI
and NOW each made its filing with the DOJ and the FTC with respect to the
Merger on April 6, 1998 and the specified waiting period under the HSR Act
expired on May 7, 1998. Notwithstanding the expiration of the waiting period
of the HSR Act filing, the FTC, the DOJ or others could take action under the
antitrust laws, including, prior to the Effective Time, seeking to enjoin the
consummation of the Merger or, after the Effective Time, seeking the
divestiture by ATMI of all or any part of the assets of NOW acquired in the
Merger. There can be no assurance that a challenge to the Merger on antitrust
grounds will not be made or, if such a challenge is made, that it would not be
successful.
BUSINESS PENDING THE MERGER
The Merger Agreement provides that, during the period from the date of the
Merger Agreement to the Effective Time, NOW will: (i) conduct its business
only in the usual and ordinary manner; (ii) not make any change in its
authorized or issued shares or in its capital structure; (iii) not increase
the compensation payable to any of its employees or make any bonus payment to
any such employee, except in each case in the ordinary course of business
consistent with past practice; (iv) not embark upon any new venture, enter
into or amend any material leases or agreements, purchase any material fixed
assets or equipment, amend any loan agreements, guarantee any obligation or
increase any existing line of credit; and (v) not sell, dispose, transfer,
assign or otherwise remove any of its material assets except in the ordinary
course of business and consistent with past practice.
The Merger Agreement further provides that, during the period from the date
of the Merger Agreement to the Effective Time, NOW will (i) use its reasonable
best efforts to preserve the business organization and assets of NOW and to
keep available the services of its current employees and not to impair
relationships with suppliers, customers and others having business relations
with NOW; (ii) in all material respects, timely pay and discharge all bills
and monetary obligations and timely and properly perform all of its
obligations and commitments under all existing contracts and agreements
pertaining to or affecting NOW; and (iii) maintain in effect all of its
insurance policies.
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NOW has also agreed to refrain from taking any action, other than in the
ordinary course of business, except with the prior written consent of ATMI,
which would render any representation, warranty or agreement of NOW in the
Merger Agreement inaccurate or breached as of the Closing. NOW has further
agreed to cause its officers, directors, employees, agents and representatives
not to initiate, solicit or encourage any proposal regarding the acquisition
of NOW or any part thereof or any merger or consolidation thereof, or enter
into or continue discussions with any person with respect to any such
acquisition (the "Non-Solicitation Provision").
In addition, under the Merger Agreement, ATMI, Merger Subsidiary and NOW
will use their respective best efforts to: (i) take, or cause to be taken, all
appropriate action, and do, or cause to be done, all things necessary under
applicable law or required to be taken by any government entity to consummate
the Merger as promptly as practicable; (ii) obtain from any government
entities any consents, licenses, permits, waivers, approvals, authorizations
or orders required to be obtained or made by NOW, ATMI or Merger Subsidiary in
connection with the Merger Agreement and the Merger; (iii) as promptly as
practicable, make all necessary filings with respect to the Merger Agreement
and the Merger required under any applicable law; and (iv) obtain any third
party consents necessary or required to be obtained in connection with the
Merger Agreement.
TERMINATION
The Merger Agreement may be terminated and the Merger abandoned at any time
prior to the Effective Time, whether before or after approval of the Merger
Agreement by the NOW Shareholders: (i) by mutual written consent of ATMI and
NOW; (ii) by either ATMI or NOW, if the Merger has not been consummated by
July 31, 1998, unless the failure of the Effective Time to occur by such date
shall be due to the failure of the party seeking to terminate the Merger
Agreement to fulfill any of its obligations under the Merger Agreement; (iii)
by either ATMI or NOW if there is any law that makes consummation of the
Merger illegal or otherwise prohibited or if any court of competent
jurisdiction or other government shall have issued an order, decree or ruling
or taken any other action restraining, enjoining or otherwise prohibiting the
Merger and such order, decree, ruling or any other action shall have become
final and non-appealable, provided the party seeking to terminate the Merger
Agreement shall have complied with its obligations under the Merger Agreement
to take all appropriate action and do all things necessary under applicable
law or required by any government entity to consummate the Merger; (iv) by
either ATMI or NOW, if the other party shall fail to satisfy its conditions to
closing as described in the Merger Agreement and such failure has not be
waived; (v) by ATMI or NOW, if there shall have been any material breach by
the other party of any representation, warranty, covenant or agreement
contained in the Merger Agreement which has not been cured or is not curable
by July 31, 1998; (vi) by ATMI, if the Board of Directors of NOW withdraws or
changes its recommendation of the Merger to the NOW Shareholders in a manner
adverse to ATMI or recommends to the NOW Shareholders any other merger,
combination, asset sale or similar transaction involving NOW; and (vii) by
ATMI, if more than 10% of the NOW Shareholders dissent to the Merger in
accordance with the MBCA.
In the event the Merger Agreement is terminated as provided above, the
Merger Agreement shall become void, and there will be no liability on the part
of any of the parties or their respective affiliates, directors, officers or
stockholders except: (i) in the case of a termination by either ATMI or NOW
because of a material misrepresentation or a breach of a material covenant by
the other party, the breaching party shall be liable to and shall pay to the
terminating party $2.2 million within 15 business days after the breaching
party's receipt of written notice of termination; (ii) in the case of a
termination by ATMI because the Board of Directors of NOW withdraws or changes
its recommendation to the NOW Shareholders in a manner adverse to ATMI or
recommends to the NOW Shareholders any other merger, combination, asset sale
or similar transaction involving NOW, NOW shall be liable to and shall pay to
ATMI $2.2 million within 15 business days after NOW's receipt of written
notice of termination; (iii) in the event the Merger shall not have been
approved by the affirmative vote of the holders of at least 51% of the voting
securities of NOW,
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NOW shall be liable to and shall pay to ATMI $2.2 million within 15 business
days after the meeting of the NOW Shareholders called to consider and vote
upon the Merger; and (iv) in the event more than 10% of the NOW Shareholders
dissent to the Merger and NOW enters into any other agreement involving a
merger, combination, assets sale or similar transaction involving NOW before
February 19, 1999, NOW shall be liable to and shall pay to ATMI $2.2 million
within 15 business days of entering into such transaction.
The parties have agreed that such payments are the exclusive remedy for
termination of the Merger Agreement, except in the case of a breach by NOW of
the Non-Solicitation Provision. In the event of a breach of the Non-
Solicitation Provision by NOW, ATMI may pursue any and all remedies available
to it at law or in equity; provided, however, that the amount of any monetary
damages awarded to ATMI in any such action would be reduced by the amount of
the termination payment received by ATMI.
INDEMNIFICATION AND ESCROW
Under the terms of the Merger Agreement, ATMI and Merger Subsidiary will
jointly and severally indemnify and hold harmless NOW and the NOW Shareholders
against any and all losses incurred in connection with the breach by ATMI or
Merger Subsidiary of any of their respective representations, warranties or
covenants contained in the Merger Agreement. Losses do not include any loss
resulting from a diminution in the value of ATMI Common Stock received in the
Merger. In addition, pursuant to the terms of the Merger Agreement, NOW and
the NOW Shareholders will indemnify and hold harmless ATMI, Merger Subsidiary
and NOW against any and all losses incurred in connection with the breach by
NOW of any of its representations, warranties or covenants contained in the
Merger Agreement.
The Merger Agreement sets forth certain limits on the parties'
indemnification obligations, such as deductibles that must be reached before a
claim may be made, time deadlines before which claims must be made, and
limitations on the amount of indemnification which may be paid. No indemnified
party may seek recovery until the claims for indemnification exceed $100,000.
The NOW Shareholders, in the aggregate, shall not be liable for any losses in
excess of the aggregate value of the shares of ATMI Common Stock in the escrow
fund (as described below) valued at (i) the Initial Price of $28.29 per share,
if the Closing Price is equal to or greater than $24.05 and less than or equal
to $32.54, or (ii) the Closing Price, if the Closing Price is less than $24.05
or greater than $32.54. By definition, however, the Closing Price may not be
less than $21.55 or greater than $35.04.
An indemnified party generally may not make any claim for indemnification
after the first anniversary of the Effective Time, and no such claim may be
brought after the date of issuance of the first independent audit report with
respect to the financial statements of ATMI after the Effective Time if such
claim is of a type expected to be encountered in the course of an audit
performed in accordance with generally accepted auditing standards.
As security for the indemnification obligations of the NOW Shareholders
described above, certificates representing five percent of the Merger
Consideration to be delivered to the NOW Shareholders pursuant to the Merger
will be deposited in escrow. The escrow fund will be ATMI's sole recourse for
indemnification. The escrow fund will be required to remain in existence from
the Closing Date for a period of one year.
While management of ATMI believes that the indemnification provided by the
NOW Shareholders will be adequate, because of the various limitations
discussed above, a possibility exists that the losses experienced by ATMI
could exceed the value of the shares held in escrow because the shares held in
escrow are insufficient in number or, due to market conditions and potential
stock price volatility, in value to adequately compensate the parties entitled
to indemnification for any losses which are the subject of the
indemnification. Furthermore, a possibility exists that the losses which are
the subject of the indemnification will be incurred during periods other than
those for which claims may be made with respect to such losses. Consequently,
losses for which there is insufficient indemnification could have a material
adverse effect on ATMI. In any event, if ATMI were to incur losses in
connection with the breach by NOW of any of its representations,
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warranties or covenants contained in the Merger Agreement, such losses may
have a material adverse effect on ATMI's operating results regardless of
whether the indemnification provided by the NOW Shareholders is sufficient to
compensate for such losses.
EMPLOYMENT AGREEMENTS
At the Effective Time, NOW will enter into employment agreements with each
of Terry J. Nagel, Michael L. Osgar and Joshua P. Waldman, each of whom is
currently employed by NOW (the "NOW Key Employees"). Pursuant to the
agreements, Messrs. Nagel, Osgar and Waldman will act as President, Vice
President of Engineering and Vice President of Technology, respectively, of
NOW after the Effective Time. The starting annual salaries of Messrs. Nagel,
Osgar and Waldman will be $170,000, $120,000 and $115,000, respectively.
Salaries are subject to increase from time to time to take into account
appropriate cost of living adjustments and general compensation increases
based on performance, in the discretion of the Board of Directors of ATMI.
Each NOW Key Employee will also be entitled to vacation in accordance with
ATMI's vacation policy and all other employee benefits generally available to
employees of ATMI and its subsidiaries, as the same may be in effect from time
to time.
The agreements expire on the second anniversary of the Effective Time,
provided that employment may be terminated: (i) at any time immediately for
cause; (ii) at any time without cause, provided that NOW pay certain severance
benefits; or (iii) in the event of death or total disability. Under the terms
of the agreements, if NOW terminates the NOW Key Employee without cause, or if
the NOW Key Employee terminates the agreement for just cause, or in the event
of death or total disability of the NOW Employee, NOW will pay the NOW Key
Employee his annual base salary then in effect for a period of eighteen months
after termination in the case of Mr. Nagel and for a period of nine months
after termination in the case of Messrs. Osgar and Waldman. NOW will also
provide the NOW Key Employee during such period with medical, dental, life and
disability insurance benefits on the same basis NOW would have provided the
NOW Key Employee during such period had the NOW Key Employee continued to be
an employee of NOW.
The agreements restrict each NOW Key Employee from competing with NOW during
the term of the agreement and for a period of the later of 60 months from the
date of the employment agreement or 36 months after the termination of
employment in the case of Mr. Nagel or 24 months after the termination of
employment in the case of Messrs. Osgar and Waldman. In the event ATMI or NOW
should seek to enforce such non-competition provisions in court, the court
may, in exercising its discretionary authority, determine not to enforce, or
to limit enforcement of, such provisions against a NOW Key Employee.
ACCOUNTING TREATMENT
It is a condition to the consummation of the Merger that ATMI shall have
received a letter from Ernst & Young LLP, ATMI's independent auditors, as to
the appropriateness of pooling-of-interests accounting for the Merger under
Accounting Principles Board Opinion No. 16 and that NOW shall have received a
letter from Deloitte & Touche LLP, NOW's independent auditors, stating that it
knows of nothing with respect to NOW that would prohibit ATMI from accounting
for the Merger as a pooling of interests. ATMI and NOW have agreed not to take
any action that would prevent the Merger from being accounted for as a pooling
of interests.
Under the pooling-of-interests method of accounting, the historical basis of
the assets and liabilities of ATMI and NOW will be combined at the Closing
Date and carried forward at their previously recorded amounts, the
stockholders' equity accounts of ATMI and NOW will be combined on the
consolidated balance sheet of ATMI and no goodwill or other intangible assets
will be created. Consolidated financial statements of ATMI issued after the
Merger will be restated retroactively to reflect the consolidated operations
of ATMI and NOW as if the Merger had taken place prior to the periods covered
by such consolidated financial statements.
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CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The parties to the Merger have not sought and do not intend to seek a ruling
from the Internal Revenue Service (the "IRS") as to the federal income tax
consequences of the Merger. Instead, ATMI has obtained the opinion of Ernst &
Young LLP (the "Merger Tax Opinion") as to certain of the expected federal
income tax consequences of the Merger, a copy of which is attached as an
exhibit to the Registration Statement of which this Proxy Statement/Prospectus
forms a part and the terms of which are summarized below. The Merger Tax
Opinion is based upon the Code, applicable Treasury Regulations thereunder,
judicial decisions, and current administrative rulings and practices, all as
in effect on the date of the Merger Tax Opinion. The Merger Tax Opinion is
limited to the matters set forth therein and does not address any other
issues, including, but not limited to, any state, local, foreign, consolidated
return, employee benefit, and Code Section 382 issues related to the
limitations on the utilization of net operating loss carryforwards, or
alternative minimum tax consequences to the parties to the Merger. Further,
the Merger Tax Opinion does not address the qualification of the Merger as a
statutory merger under state law or any valuation issues which may arise in
connection with the Merger.
The Merger Tax Opinion assumes that NOW Common Stock will be held as capital
assets by the holders thereof immediately prior to the Effective Time and does
not address the tax consequences that may be relevant to a particular
stockholder subject to special treatment under certain federal income tax
laws, such as dealers in securities, banks, insurance companies, tax-exempt
organizations, non-United States persons and shareholders who acquired shares
of NOW Common Stock pursuant to the exercise of options or otherwise as
compensation or through a tax-qualified retirement plan.
The delivery of the Merger Tax Opinion was conditioned upon the receipt of
certain representations from executive officers of ATMI and NOW and certain
other information, data, documentation and materials as deemed necessary, none
of which has been independently verified by Ernst & Young LLP, and certain
limitations set forth therein. The Merger Tax Opinion will not be updated for
any changes to the Code or authorities interpreting the Code that may occur
after the date of the issuance of such opinion and assumes that the Merger
will be consummated as described herein. The Merger Tax Opinion is not binding
on the IRS or any court, and the IRS or a court may disagree with the
conclusions expressed in the Merger Tax Opinion.
NOW SHAREHOLDERS ARE ADVISED TO CONSULT THEIR OWN TAX ADVISORS AS TO THE
SPECIFIC TAX CONSEQUENCES OF THE MERGER TO THEM, INCLUDING THE APPLICATION AND
EFFECT OF STATE, LOCAL AND FOREIGN INCOME AND OTHER TAX LAWS.
The Merger Tax Opinion, upon which the following discussion is based, is
limited to certain material United States federal income tax consequences of
the Merger, which are as follows: The Merger will constitute a
"reorganization" within the meaning of Section 368(a) of the Code, and ATMI,
Merger Subsidiary and NOW will each be a "party to a reorganization" within
the meaning of Section 368(b) of the Code. Neither NOW nor ATMI will recognize
any gain or loss as a result of the Merger. No gain or loss will be recognized
by a NOW Shareholder who receives solely shares of ATMI Common Stock upon the
conversion of NOW Common Stock. A holder of NOW Common Stock who receives cash
in lieu of a fractional interest in a share of ATMI Common Stock will
recognize gain or loss, which will be capital gain or loss, equal to the
difference between the amount of cash received and the ratable portion of the
holder's tax basis in the shares of NOW Common Stock being converted pursuant
to the Merger that is allocated to such fractional interest. The tax basis of
the shares of ATMI Common Stock will be the same as the tax basis of the
shares of NOW Common Stock converted pursuant to the Merger, reduced by the
ratable portion of such tax basis that is allocable to any fractional interest
in a share of NOW Common Stock with respect to which the cash is being
received. The holding period of the shares of ATMI Common Stock will include
the period during which the shares of NOW Common Stock converted pursuant to
the Merger were held. The exchange of options to purchase NOW Common Stock for
options to purchase ATMI Common Stock, to be determined in accordance with the
Exchange Ratio, and subject to the provisions of NOW's 1987 and 1997 Stock
Option Plans, will not cause NOW option holders to realize taxable income at
the date of the exchange.
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RESALE OF MERGER SHARES
The shares of ATMI Common Stock to be issued to the NOW Shareholders in
connection with the Merger have been registered under the Securities Act. ATMI
Common Stock received by the NOW Shareholders upon consummation of the Merger
will be freely transferable under the Securities Act, except for shares issued
to any person who may be deemed an "Affiliate" (as defined below) of NOW
within the meaning of Rule 145 under the Securities Act. "Affiliates" are
generally defined as persons who control, are controlled by, or are under
common control with NOW at the time the Merger is submitted for vote or
consent (generally, directors and executive officers of NOW and major holders
of NOW Common Stock). Affiliates of NOW may not sell their shares of ATMI
Common Stock acquired in connection with the Merger, except pursuant to an
effective registration statement under the Securities Act covering such shares
or in compliance with Rule 145 or another applicable exemption from the
registration requirements of the Securities Act. In general, under Rule 145,
for one year following the Closing Date, an Affiliate (together with certain
related persons) would be entitled to sell shares of ATMI Common Stock
acquired in connection with the Merger only through unsolicited "brokers'
transactions" or in transactions directly with a "market maker," as such terms
are defined in Rule 144 under the Securities Act. Additionally, the number of
shares to be sold by an Affiliate (together with certain related persons and
certain persons acting in concert) during such one-year period within any
three-month period for purposes of Rule 145 may not exceed the greater of 1%
of the outstanding shares of ATMI Common Stock or the average weekly trading
volume of such stock during the four calendar weeks preceding such sale. Rule
145 would remain available to Affiliates only if ATMI remained current with
its periodic filings with the Commission under the Exchange Act. Beginning one
year after the Closing Date, an Affiliate would be able to sell such ATMI
Common Stock without such manner of sale or volume limitations, provided that
ATMI was current with its Exchange Act filings and such Affiliate was not then
an affiliate of ATMI. Beginning two years after the Closing Date, an Affiliate
would be able to sell such shares of ATMI Common Stock without any
restrictions so long as such Affiliate had not been an affiliate of ATMI for
at least three months prior to the date of such sale. Affiliates of ATMI are
subject to further limitations and may not sell their shares of ATMI Common
Stock except pursuant to an effective registration statement under the
Securities Act covering such shares or in compliance with Rule 144 or another
applicable exemption from the registration requirements of the Securities Act.
Rule 144 permits affiliates to sell shares subject to the volume and manner-
of-sale provisions described above and subject to the availability of certain
public information about ATMI and the filing of certain notices of sale.
NASDAQ LISTING
ATMI will file a Notification Form for the Listing of Additional Shares
prior to the Closing Date with the Nasdaq National Market relating to the
shares of ATMI Common Stock to be issued in the Merger to the NOW
Shareholders. Although no assurance can be given that the Nasdaq National
Market will accept the shares of ATMI Common Stock to be so issued for
listing, ATMI anticipates that such shares of ATMI Common Stock will be
listed. It is a condition to the consummation of the Merger that such shares
of ATMI Common Stock be listed on the Nasdaq National Market prior to the
Effective Time subject to notice of issuance.
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DESCRIPTION OF CAPITAL STOCK OF ATMI
The authorized capital stock of ATMI consists of 50,000,000 shares of ATMI
Common Stock, par value $.01 per share, and 2,000,000 shares of Preferred
Stock, par value $.01 per share. The description of ATMI's capital stock
contained in this Proxy Statement/Prospectus summarizes the material
provisions of ATMI's Certificate of Incorporation and Bylaws and is qualified
in its entirety by reference to ATMI's Certificate of Incorporation and Bylaws
that are included as exhibits to the Registration Statement of which this
Proxy Statement/Prospectus forms a part and by the provisions of applicable
law.
COMMON STOCK
As of the May 31, 1998, there were 20,442,142 shares of ATMI Common Stock
outstanding, held by approximately 185 holders of record. In addition,
2,154,103 shares of ATMI Common Stock are reserved for future grants under
ATMI's 1995, 1997 and 1998 Stock Plans. Furthermore, as of May 31, 1998, there
were outstanding options and warrants to purchase 1,876,761 shares of ATMI
Common Stock. Subject to preferences that may be applicable to any outstanding
Preferred Stock, holders of ATMI Common Stock are entitled to dividends from
funds legally available therefor, when, as and if declared by the ATMI Board
of Directors and are entitled to share ratably in all of the assets of ATMI
available for distribution to holders of ATMI Common Stock upon the
liquidation, dissolution or winding up of the affairs of ATMI. ATMI Common
Stock has no preemptive or conversion rights or other subscription rights.
There are no redemption or sinking fund provisions applicable to ATMI Common
Stock, and the outstanding shares of ATMI Common Stock are, and the shares to
be issued in the Merger will be, when issued pursuant to the Merger Agreement,
fully paid and nonassessable.
Stockholders of ATMI are entitled to one vote for each share of ATMI Common
Stock held of record on matters submitted to a vote of stockholders. The ATMI
Common Stock does not have cumulative voting rights. As a result, the holders
of more than 50% of the shares of ATMI Common Stock voting for the election of
directors can elect all of the directors if they choose to do so, and, in such
event, the holders of the remaining shares of ATMI Common Stock will not be
able to elect any person or persons to the ATMI Board of Directors.
PREFERRED STOCK
The ATMI Board of Directors is authorized, subject to any limitations
prescribed by law, without further stockholder approval, to issue from time to
time up to 2,000,000 shares of Preferred Stock in one or more series. Each
such series of Preferred Stock shall have such number of shares, designations,
powers, preferences, rights, qualifications, limitations and restrictions as
shall be determined by the ATMI Board of Directors, which may include, among
others, dividend rights, voting rights, redemption and sinking fund
provisions, liquidation preferences and conversion rights, which in any case
could be superior to the rights associated with ATMI Common Stock.
The purpose of authorizing the ATMI Board of Directors to issue Preferred
Stock and determine its rights and preferences is to eliminate delays
associated with a stockholder vote on specific issuances. The issuance of
Preferred Stock, while providing desirable flexibility in connection with
possible acquisitions and other corporate purposes, could make it more
difficult for a third party to acquire, or could discourage a third party from
attempting to acquire, a majority of the outstanding voting stock of ATMI.
ATMI has no present plans to issue any shares of Preferred Stock.
DELAWARE LAW AND CERTAIN CHARTER AND BYLAW PROVISIONS
Classified Board of Directors. ATMI's Certificate of Incorporation and
Bylaws provide for the ATMI Board of Directors to be divided into three
classes of directors: Class I, Class II and Class III, as nearly equal in
number as is reasonably possible. Other than the initial directors in Class I
and Class II who will serve for
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one-year terms and two-year terms, respectively, each director is elected for
a three-year term, with one class of directors being elected at each annual
meeting of stockholders. In the event of any increase or decrease in the
authorized number of directors, directorships will be apportioned among the
classes by the ATMI Board of Directors to ensure that no one class has more
than one director more than any other class, to the extent possible. Since
only one third of the directors of the classified Board of Directors are
subject to election each year, it is more difficult for the stockholders of
ATMI to change the management of ATMI than if the ATMI Board of Directors were
not classified. In addition, the presence of a classified Board of Directors
could make it more difficult for a third party to acquire, or could discourage
a third party from attempting to acquire, control of ATMI and, therefore, may
limit the price that certain investors might be willing to pay in the future
for shares of ATMI Common Stock.
Changes in Board of Directors. ATMI's Certificate of Incorporation and
Bylaws provide that vacancies on the ATMI Board of Directors may be filled by
a vote of a majority of the ATMI Board of Directors then in office. Also, the
Bylaws provide that any increase or decrease in the number of directors
requires the approval of a majority of the directors then in office. These
provisions of ATMI's Certificate of Incorporation and Bylaws could make it
more difficult for a third party to acquire, or could discourage a third party
from attempting to acquire, control of ATMI and, therefore, may limit the
price that certain investors might be willing to pay in the future for shares
of ATMI Common Stock.
Stockholder Action. ATMI's Certificate of Incorporation and Bylaws provide
that any action required or permitted to be taken by the stockholders of ATMI
may be taken only at a duly called annual or special meeting of the
stockholders and may not be taken by written consent. These provisions could
have the effect of delaying until the next annual stockholders' meeting
stockholder actions which are favored by the holders of a majority of the
outstanding voting securities of ATMI, because special meetings of
stockholders may be called only by a majority of the ATMI Board of Directors
or the Chairman of the Board. These provisions may also discourage another
person or entity from making a tender offer for ATMI Common Stock, because
such person or entity, even if it acquired a majority of the outstanding
voting securities of ATMI, would be able to take action as a stockholder only
at a duly called stockholders' meeting and not by written consent.
Advance Notice Provisions for Stockholder Proposals and Stockholder
Nominations of Directors. ATMI's Certificate of Incorporation and Bylaws
establish an advance notice procedure with regard to the nomination, other
than by or at the direction of the ATMI Board of Directors, of candidates for
election as directors (the "ATMI Nomination Procedure") and with regard to
other matters to be brought by stockholders before an annual meeting of
stockholders of ATMI (the "ATMI Business Procedure").
The ATMI Nomination Procedure requires that a stockholder give to the
Secretary of ATMI prior written notice, in proper form, of a planned
nomination for the ATMI Board of Directors. ATMI's Bylaws specify the
requirements for the form and timing of that notice. If the Chairman of the
ATMI Board of Directors determines that a person was not nominated in
accordance with the ATMI Nomination Procedure, such person will not be
eligible for election as a director.
Under the ATMI Business Procedure, a stockholder seeking to have any
business conducted at an annual meeting must give prior written notice, in
proper form, to the Secretary of ATMI. ATMI's Bylaws specify the requirements
for the form and timing of that notice. If the Chairman of the ATMI Board of
Directors determines that the other business was not properly brought before
such meeting in accordance with the ATMI Business Procedure, such business
will not be conducted at such meeting.
Although ATMI's Bylaws do not give the ATMI Board of Directors any power to
approve or disapprove stockholder nominations for the election of directors or
of any other business desired by stockholders to be conducted at an annual or
any other meeting, ATMI's Bylaws (i) may have the effect of precluding a
nomination for the election of directors or precluding the conduct of business
at a particular annual meeting if the proper procedures are not followed or
(ii) may discourage or deter a third party from conducting a solicitation of
proxies to elect its own slate of directors or otherwise attempting to obtain
control of ATMI, even if the conduct of such solicitation or such attempt
might be beneficial to ATMI and its stockholders.
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Delaware Takeover Statute. ATMI is subject to Section 203 of the DGCL.
Subject to certain exceptions, this section prohibits certain publicly held
Delaware corporations from engaging in a "business combination" with an
"interested stockholder" for a period of three years following the date of the
transaction in which the person or entity became an interested stockholder,
unless the business combination is approved in a prescribed manner or certain
other exemptions apply. For purposes of Section 203, "business combination" is
defined broadly to include reorganizations, asset sales and other transactions
resulting in a financial benefit to the interested stockholder. Generally, an
"interested stockholder" is any person or entity who, together with affiliates
and associates, owns (or within the three immediately preceding years did own)
15% or more of the corporation's voting stock.
Limitation on Liability and Indemnification of Directors. ATMI's Certificate
of Incorporation contains certain provisions permitted under the DGCL relating
to the liability of directors. To the extent permitted by the DGCL, the
provisions eliminate a director's personal liability for monetary damages for
a breach of fiduciary duty. The provisions also indemnify directors and
officers to the fullest extent permitted by the DGCL.
REGISTRATION RIGHTS
As of the date of this Proxy Statement/Prospectus, the holders of
approximately 9,497,276 shares of ATMI Common Stock and warrants to purchase
approximately 30,000 shares of ATMI Common Stock are entitled to certain
rights with respect to the registration of such shares under the Securities
Act. If ATMI proposes to register any of its securities under the Securities
Act, either for its own account or the account of other security holders
exercising registration rights, such holders are entitled to notice of such
registration and are entitled to include shares of such ATMI Common Stock
therein at ATMI's expense, subject to certain conditions and limitations,
including the right of the underwriters of any offering to limit the number of
such shares included in such registration. In addition, as of the date of this
Proxy Statement/Prospectus, holders of approximately 9,326,026 shares of ATMI
Common Stock have the right to require ATMI, on not more than two occasions
with respect to the holders of approximately 3,562,500 shares and on not more
than one occasion with respect to the holders of approximately 5,763,526
shares, to file a registration statement under the Securities Act at ATMI's
expense with respect to such shares of ATMI Common Stock, and ATMI is required
to use its best efforts to effect such registration, subject to certain
conditions and limitations. Further, the holders of approximately 3,693,750
shares of ATMI Common Stock may require ATMI to register all or a portion of
their shares of ATMI Common Stock on Form S-3, subject to certain conditions
and limitations. Of the approximately 9,497,276 shares of ATMI Common Stock
subject to registration rights, an aggregate of approximately 3,668,125
shares, other than any shares which may be held by affiliates of ATMI, are
freely tradeable without registration under the Securities Act. ATMI believes,
therefore, that the holders of such shares are unlikely to exercise their
registration rights with respect to such shares.
ATMI is required to bear substantially all registration and selling expenses
in connection with the registration of registrable shares in such
registrations. In addition, ATMI will, subject to certain limitations,
indemnify any selling stockholders against certain liabilities, including
liabilities under the Securities Act, in connection with such registrations.
TRANSFER AGENT AND REGISTRAR
The Transfer Agent and Registrar for ATMI Common Stock is BankBoston, N.A.
87
<PAGE>
COMPARISON OF ATMI COMMON STOCK AND NOW COMMON STOCK
NOW is incorporated in Minnesota, and the rights of holders of shares of NOW
Common Stock are currently governed by the MBCA and the NOW Articles of
Incorporation and Bylaws. Upon consummation of the Merger, holders of shares
of NOW Common Stock would become holders of shares of ATMI Common Stock and,
as such, their rights would be governed by the DGCL and the ATMI Certificate
of Incorporation and Bylaws. The following is a summary of material
differences between the rights of holders of NOW Common Stock as compared to
the rights of holders of ATMI Common Stock. The summary is qualified in its
entirety by reference to the DGCL, the MBCA and the full text of the
respective governing instruments of NOW and ATMI.
AUTHORIZED CAPITAL STOCK
NOW's Articles of Incorporation provide that NOW has authority to issue
5,000,000 shares of capital stock at a par value of $.01 per share, of which
4,000,000 shares are NOW Common Stock and 1,000,000 shares are undesignated
shares. As of May 31, 1998, there were 1,838,000 shares of NOW Common Stock
outstanding. The NOW Board of Directors has never designated any series of
preferred stock.
ATMI's Certificate of Incorporation provides that ATMI has authority to
issue 50,000,000 shares of ATMI Common Stock and 2,000,000 shares of preferred
stock. The preferred stock would have such rights preferences and designations
as determined by the ATMI Board of Directors. As of May 31, 1998, there were
20,442,142 shares of ATMI Common Stock and no shares of preferred stock
outstanding.
BOARD OF DIRECTORS
NOW's Bylaws provide that the number of directors which shall constitute the
whole board shall be not less than one. The NOW Bylaws provide for the
election of directors at the annual meeting of shareholders. Each director
elected shall hold office until the expiration of the term for which the
director was elected and until a successor has been elected. Vacancies
resulting from the death, resignation or removal of a director may be filled
by the affirmative vote of the majority of the remaining directors then in
office. Vacancies resulting from newly created directorships may be filled by
the affirmative vote of two-thirds of the directors serving at the time of the
increase.
ATMI's Certificate of Incorporation and Bylaws provide for the ATMI Board of
Directors to be divided into three classes of directors: Class I, Class II and
Class III, as nearly equal in number as is reasonably possible. Other than the
initial directors in Class II who are serving two-year terms, each director is
elected for a three-year term, with one class of directors being elected at
each annual meeting of stockholders. ATMI's Bylaws provide that the number of
directors shall be determined by a majority of the directors then in office;
provided however, that the number of directors shall not be less than two nor
more than fifteen. In the event of any increase or decrease in the authorized
number of directors, directorships will be apportioned among the classes by
the ATMI Board of Directors to ensure that no one class has more than one
director more than any other class, to the extent possible.
REMOVAL OF DIRECTORS
Under the MBCA, because NOW's Articles of Incorporation do not permit
cumulative voting, the holders of a majority of the outstanding shares
entitled to vote at an election of directors may remove a NOW director at any
time at a duly called special or annual meeting of the shareholders. Under the
MBCA, a director may also be removed by the affirmative vote of a majority of
the directors present at a meeting of the board of directors with or without
cause if that director was named by the board to fill a vacancy and was not
subsequently re-elected by the shareholders.
Under the DGCL, because the ATMI Board of Directors is divided into three
classes of directors and ATMI's Certificate of Incorporation does not
otherwise provide, directors may only be removed for cause.
88
<PAGE>
LIMITATIONS ON THE LIABILITY OF MANAGEMENT
NOW's Articles of Incorporation provide that, to the fullest extent
permitted by the MBCA, a director shall not be liable to the corporation or
its shareholders for breach of fiduciary duty as a director. NOW's Bylaws
require NOW to indemnify its directors, officers and employees to the fullest
extent permitted by the MBCA.
ATMI's Certificate of Incorporation provides that, to the fullest extent
permitted by the DGCL, directors shall be indemnified by the corporation and
shall not be liable to the corporation or its stockholders for breach of
fiduciary duty as a director. ATMI's Bylaws provide that each person who is or
was an officer, director, employee or agent of ATMI, or is or was serving at
the request of ATMI as an officer, director, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, shall be
indemnified to the fullest extent permitted by the DGCL.
AMENDMENT OF BYLAWS
NOW's Bylaws may be amended by the affirmative vote of a majority of the NOW
Board of Directors.
ATMI's Bylaws may be amended by the ATMI Board of Directors or stockholders
holding 70% of the voting shares of capital stock.
SPECIAL MEETINGS OF STOCKHOLDERS
NOW's Bylaws provide that a special meeting of the shareholders may be
called by the chief executive officer, two or more members of the NOW Board of
Directors, or one or more shareholders holding 10% or more of the voting power
of all shares entitled to vote.
ATMI's Certificate of Incorporation and Bylaws provide that a special
meeting of stockholders may be called by the Chairman of the ATMI Board of
Directors (or, if none is designated, the President) and shall be called by
the President or Secretary at the request in writing of a majority of the ATMI
Board of Directors.
ACTION BY WRITTEN CONSENT OF STOCKHOLDERS
NOW's Bylaws provide that any action required or permitted to be taken at a
meeting of the shareholders may be taken without a meeting if authorized in
writing by all the shareholders who would be entitled to vote on that action.
ATMI's Certificate of Incorporation and Bylaws provide that any action
required or permitted to be taken by the stockholders of the corporation must
be effected at a duly called annual or special meeting of such stockholders;
no action by the stockholders may be taken by written consent in lieu of a
meeting.
LIQUIDITY
There is no trading market for NOW Common Stock.
ATMI Common Stock is listed on the Nasdaq National Market. However, ATMI
Common Stock received by the NOW Shareholders may be subject to certain
securities laws restrictions as described in "THE MERGER--Resale of Merger
Shares."
TRANSFERABILITY
There is no restriction on the transferability of NOW Common Stock, except
as may be imposed by applicable securities laws.
The ATMI Common Stock will be freely transferable (subject only to
securities laws restrictions as described in "THE MERGER--Resale of Merger
Shares").
89
<PAGE>
REPORTING REQUIREMENTS
NOW is not subject to the periodic reporting requirements of the Exchange
Act.
ATMI is subject to the periodic reporting requirements of the Exchange Act.
TAKEOVER STATUTES
NOW is not an "issuing public corporation" and therefore is not subject to
the business combinations provisions of the MBCA which limit business
transactions between a public corporation and an interested shareholder.
ATMI is subject to Section 203 of the DGCL. Subject to certain exceptions,
this section prohibits certain publicly held Delaware corporations from
engaging in a "business combination" with an "interested stockholder" for a
period of three years following the date of the transaction in which the
person or entity became an interested stockholder, unless the business
combination is approved in a prescribed manner or certain other exemptions
apply. For purposes of Section 203, "business combination" is defined broadly
to include reorganizations, asset sales and other transactions resulting in a
financial benefit to the interested stockholder. Generally, an "interested
stockholder" is any person or entity who, together with affiliates and
associates, owns (or within the three immediately preceding years did own) 15%
or more of the corporation's voting stock.
LEGAL MATTERS
The validity of the shares of ATMI Common Stock to be issued to the NOW
Shareholders pursuant to the Merger Agreement will be passed upon by Shipman &
Goodwin LLP, Hartford, Connecticut. As of the date of this Proxy
Statement/Prospectus, 7,000 shares of ATMI Common Stock are beneficially owned
by lawyers employed at Shipman & Goodwin LLP.
EXPERTS
The consolidated financial statements of ATMI at December 31, 1997 and 1996
and for each of the three years in the period ended December 31, 1997,
appearing in the Proxy Statement of NOW Technologies, Inc. and this Prospectus
and Registration Statement have been audited by Ernst & Young LLP, independent
auditors, as set forth in their report thereon appearing elsewhere herein
which, as to the years 1996 and 1995, are based in part on the reports of
Price Waterhouse LLP, independent accountants for Lawrence Semiconductor
Laboratories, Inc. and its affiliate prior to its acquisition by ATMI. The
financial statements referred to above are included in reliance upon such
reports given upon the authority of such firms as experts in accounting and
auditing.
The consolidated financial statements of NOW as of March 31, 1997 and 1996
and for each of the three years in the period ended March 31, 1997 included in
this Proxy Statement/Prospectus have been audited by Deloitte & Touche LLP,
independent auditors, as stated in their report appearing herein, and have
been so included in reliance upon the report of such firm given upon their
authority as experts in accounting and auditing.
90
<PAGE>
ATMI, INC.
CONSOLIDATED FINANCIAL STATEMENTS
CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Ernst & Young LLP.............................................. F-2
Report of Price Waterhouse LLP........................................... F-3
Audited Financial Statements for the years ended December 31, 1995, 1996
and 1997
Consolidated Balance Sheets............................................ F-4
Consolidated Statements of Income...................................... F-5
Consolidated Statements of Stockholders' Equity........................ F-6
Consolidated Statements of Cash Flows.................................. F-7
Notes to Consolidated Financial Statements............................. F-8
Unaudited Financial Statements for the three months ended March 31, 1997
and 1998
Consolidated Balance Sheet............................................. F-22
Consolidated Statements of Income...................................... F-23
Consolidated Statements of Cash Flows.................................. F-24
Notes to Consolidated Interim Financial Statements..................... F-25
</TABLE>
NOW TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Independent Auditors' Report.............................................. F-28
Audited Consolidated Financial Statements
Consolidated Balance Sheets as of March 31, 1996 and 1997............... F-29
Consolidated Statements of Income for the years ended March 31, 1995,
1996 and 1997.......................................................... F-30
Consolidated Statements of Stockholders' Equity for the years ended
March 31, 1995, 1996 and 1997.......................................... F-31
Consolidated Statements of Cash Flows for the years ended March 31,
1995, 1996 and 1997.................................................... F-32
Notes to Consolidated Financial Statements for the years ended March 31,
1995, 1996 and 1997.................................................... F-33
Unaudited Condensed Consolidated Financial Statements
Condensed Consolidated Balance Sheet as of December 31, 1997............ F-40
Condensed Consolidated Statements of Operations for the nine months
ended December 31, 1996 and 1997....................................... F-41
Condensed Consolidated Statements of Cash Flows for the nine months
ended December 31, 1996 and 1997....................................... F-42
Notes to Condensed Consolidated Financial Statements for the nine months
ended December 31, 1996 and 1997....................................... F-43
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Board of Directors and Stockholders of
ATMI, Inc.
We have audited the accompanying consolidated balance sheets of ATMI, Inc.
as of December 31, 1997 and 1996, and the related consolidated statements of
income, stockholders' equity, and cash flows for each of the three years in
the period ended December 31, 1997. These financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits. We did not audit
the financial statements of Lawrence Semiconductor Laboratories, Inc., a
wholly-owned subsidiary, as of December 31, 1996 and for the two years then
ended. These financial statements reflect total assets constituting 33% at
December 31, 1996, and total revenues constituting 23%, and 24%, respectively,
for each of the two years in the period ended December 31, 1996, and were
audited by other auditors whose report has been furnished to us, and our
opinion, insofar as it relates to data included for Lawrence Semiconductor
Laboratories, Inc., is based solely on the report of the other auditors.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits and the report of other
auditors provide a reasonable basis for our opinion.
In our opinion, based on our audits and the report of other auditors, the
financial statements referred to above present fairly, in all material
respects, the consolidated financial position of ATMI, Inc. at December 31,
1997 and 1996, and the consolidated results of its operations and its cash
flows for each of the three years in the period ended December 31, 1997, in
conformity with generally accepted accounting principles.
ERNST & YOUNG LLP
Stamford, Connecticut
February 11, 1998
F-2
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholder
of Lawrence Semiconductor Laboratories, Inc. and Affiliate
In our opinion, the combined balance sheet and the related combined
statements of income and retained earnings and of cash flows of Lawrence
Semiconductor Laboratories, Inc. and Affiliate (not presented separately
herein) present fairly, in all material respects, the financial position of
Lawrence Semiconductor Laboratories, Inc. and Affiliate at December 31, 1996,
and the results of their operations and their cash flows for each of the two
years in the period ended December 31, 1996, in conformity with generally
accepted accounting principles. These financial statements are the
responsibility of the company's management; our responsibility is to express
an opinion on these financial statements based on our audits. We conducted our
audits of these statements in accordance with generally accepted auditing
standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for the opinion expressed above.
Price Waterhouse LLP
Phoenix, Arizona
May 17, 1997, except for the
last paragraph of Note 3
which is as of July 29, 1997
and the last paragraph of
Note 6 which is as of
December 18, 1997
F-3
<PAGE>
ATMI, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------
1996 1997
----------- ------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents (Note 1)................ $12,574,000 $ 11,550,000
Marketable securities (Notes 1 and 2)............. 18,238,000 17,461,000
Accounts receivable, net of allowance for doubtful
accounts of $361,000 in 1996, and $405,000
in 1997 (Note 3)................................. 13,804,000 19,784,000
Notes and other receivables (Note 3).............. 2,933,000 1,197,000
Inventories (Notes 1 and 4)....................... 6,503,000 7,717,000
Other............................................. 1,984,000 2,873,000
----------- ------------
Total current assets............................ 56,036,000 60,582,000
Property and equipment, net (Notes 1 and 5)......... 30,660,000 36,032,000
Goodwill and other long-term assets, net (Notes 1
and 10)............................................ 6,495,000 6,532,000
----------- ------------
$93,191,000 $103,146,000
=========== ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable, current portion (Note 6)........... $ 2,059,000 $ 2,655,000
Capital lease obligations, current portion (Note
7)............................................... 1,837,000 2,671,000
Accounts payable.................................. 5,219,000 4,977,000
Accrued expenses.................................. 4,226,000 6,436,000
Accrued commissions............................... 1,379,000 2,113,000
Accrued litigation settlement (Note 11)........... 2,000,000 --
Income taxes payable (Note 8)..................... 741,000 1,078,000
Deferred income taxes (Note 8).................... 1,989,000 719,000
----------- ------------
Total current liabilities....................... 19,450,000 20,649,000
Notes payable, less current portion (Note 6)........ 10,342,000 8,288,000
Capital lease obligations (Note 7).................. 5,427,000 6,238,000
Deferred income taxes (Note 8)...................... 1,873,000 4,829,000
Other long-term liabilities......................... 81,000 675,000
Minority interest................................... 545,000 595,000
Stockholders' equity (Note 9):
Preferred stock, par value $.01: 2,000,000 shares
authorized;
none issued and outstanding...................... -- --
Common stock, par value $.01: 30,000,000 shares
authorized;
Issued 17,873,128 in 1996, and 18,149,676 in
1997............................................. 179,000 181,000
Additional paid-in capital........................ 37,431,000 40,451,000
Cumulative translation adjustment................. (55,000) (1,099,000)
Retained earnings................................. 17,918,000 22,339,000
----------- ------------
Total stockholders' equity...................... 55,473,000 61,872,000
----------- ------------
$93,191,000 $103,146,000
=========== ============
</TABLE>
See accompanying notes.
F-4
<PAGE>
ATMI, INC.
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------
1995 1996 1997
----------- ----------- ------------
<S> <C> <C> <C>
Revenues (Note 1):
Product revenues.................... $51,460,000 $78,815,000 $ 92,757,000
Contract revenues................... 8,712,000 9,846,000 9,120,000
----------- ----------- ------------
Total revenues........................ 60,172,000 88,661,000 101,877,000
Cost of revenues:
Cost of product revenues............ 22,232,000 32,890,000 40,817,000
Cost of contract revenues........... 7,491,000 8,341,000 7,867,000
----------- ----------- ------------
Total cost of revenues................ 29,723,000 41,231,000 48,684,000
----------- ----------- ------------
Gross profit.......................... 30,449,000 47,430,000 53,193,000
Operating expenses:
Research and development (Note 1)... 5,697,000 9,838,000 10,581,000
Selling, general and
administrative..................... 15,886,000 20,590,000 23,153,000
Non-recurring expenses (Notes 10 and
11)................................ -- 2,000,000 9,000,000
----------- ----------- ------------
21,583,000 32,428,000 42,734,000
----------- ----------- ------------
Operating income...................... 8,866,000 15,002,000 10,459,000
Interest income....................... 963,000 1,639,000 1,482,000
Interest expense (Note 6)............. (1,320,000) (1,635,000) (1,810,000)
Other income (expense), net........... (543,000) 18,000 233,000
----------- ----------- ------------
Income before taxes and minority
interest............................. 7,966,000 15,024,000 10,364,000
Income taxes (Note 8)................. 2,888,000 3,158,000 5,941,000
----------- ----------- ------------
Income before minority interest....... 5,078,000 11,866,000 4,423,000
Minority interest..................... 10,000 151,000 (2,000)
----------- ----------- ------------
Net income............................ $ 5,088,000 $12,017,000 $ 4,421,000
=========== =========== ============
Net income per share--basic (Notes 1
and 9)............................... $ 0.32 $ 0.70 $ 0.26
=========== =========== ============
Net income per share--assuming
dilution (Notes 1 and 9)............. $ 0.30 $ 0.65 $ 0.24
=========== =========== ============
Weighted average shares outstanding
(Notes 1 and 9)...................... 16,040,000 17,266,000 17,288,000
=========== =========== ============
Weighted average shares outstanding--
assuming dilution (Notes 1 and 9).... 17,127,000 18,394,000 18,660,000
=========== =========== ============
</TABLE>
See accompanying notes.
F-5
<PAGE>
ATMI, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
ADDITIONAL CUMULATIVE
COMMON PAID-IN TRANSLATION RETAINED
STOCK CAPITAL ADJUSTMENT EARNINGS TOTAL
-------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Balance at December 31,
1994................... $161,000 $19,644,000 $ -- $ 2,605,000 $22,410,000
Issuance of 137,571
common shares pursuant
to the exercise of
employee stock
options................ 1,000 183,000 -- -- 184,000
Sale of 1,525,000 common
shares, net of issuance
costs of $1,489,000.... 16,000 17,177,000 -- -- 17,193,000
Issuance of 20,000
common shares pursuant
to the acquisition of
Epitronics............. -- 203,000 -- -- 203,000
Compensation from the
issuance of common
stock options.......... -- 50,000 -- -- 50,000
Cumulative translation
adjustment............. -- -- (10,000) -- (10,000)
Net income.............. -- -- -- 5,088,000 5,088,000
-------- ----------- ----------- ----------- -----------
Balance at December 31,
1995................... 178,000 37,257,000 (10,000) 7,693,000 45,118,000
Issuance of 54,199
common shares pursuant
to the exercise of
employee stock
options................ 1,000 174,000 -- -- 175,000
Distributions to
stockholders........... -- -- -- (1,792,000) (1,792,000)
Cumulative translation
adjustment............. -- -- (45,000) -- (45,000)
Net income.............. -- -- -- 12,017,000 12,017,000
-------- ----------- ----------- ----------- -----------
Balance at December 31,
1996................... 179,000 37,431,000 (55,000) 17,918,000 55,473,000
Issuance of 82,520
common shares pursuant
to the exercise of
employee stock
options................ -- 411,000 -- -- 411,000
Issuance of 151,250
common shares pursuant
to the exercise of
warrants............... 2,000 1,688,000 -- -- 1,690,000
Compensation for the
issuance of common
shares................. -- 243,000 -- -- 243,000
Tax benefit related to
nonqualified stock
options................ -- 678,000 -- -- 678,000
Cumulative translation
adjustment............. -- -- (1,044,000) -- (1,044,000)
Net income.............. -- -- -- 4,421,000 4,421,000
-------- ----------- ----------- ----------- -----------
Balance at December 31,
1997................... $181,000 $40,451,000 $(1,099,000) $22,339,000 $61,872,000
======== =========== =========== =========== ===========
</TABLE>
See accompanying notes.
F-6
<PAGE>
ATMI, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------
1995 1996 1997
----------- ----------- -----------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income.............................. $ 5,088,000 $12,017,000 $ 4,421,000
Adjustments to reconcile net income to
net cash provided by operating
activities:
Depreciation and amortization.......... 3,179,000 4,678,000 5,274,000
Stock compensation..................... 50,000 -- 243,000
Bad debt expense....................... 16,000 191,000 365,000
Deferred income taxes.................. 1,160,000 1,205,000 1,686,000
Loss on sale/leaseback of equipment.... 542,000 -- --
Minority interest in net earnings of
subsidiaries.......................... (10,000) (151,000) 2,000
Changes in operating assets and
liabilities
Increase in accounts and notes
receivable........................... (5,505,000) (2,031,000) (4,609,000)
Increase in inventory................. (830,000) (4,415,000) (1,214,000)
Increase in other assets.............. (249,000) (186,000) (1,881,000)
Increase (decrease) in accounts
payable.............................. 1,341,000 313,000 (242,000)
Increase in accrued expenses.......... 1,062,000 3,350,000 944,000
Increase (decrease) in other
liabilities.......................... 1,352,000 (1,701,000) 931,000
----------- ----------- -----------
Total adjustments..................... 2,108,000 1,253,000 1,499,000
----------- ----------- -----------
Net cash provided by operating
activities.......................... 7,196,000 13,270,000 5,920,000
----------- ----------- -----------
INVESTING ACTIVITIES
Capital expenditures.................... (6,328,000) (11,591,000) (6,256,000)
Long-term investment.................... (1,000,000) -- (250,000)
Sale (purchase) of marketable
securities, net........................ (11,213,000) 3,617,000 777,000
Advances to LSL stockholder on notes
receivable............................. (256,000) (286,000) --
Payments for acquisitions............... (550,000) (4,000,000) --
Proceeds from sale of assets............ 384,000 619,000 --
----------- ----------- -----------
Net cash used by investing
activities.......................... (18,963,000) (11,641,000) (5,729,000)
----------- ----------- -----------
FINANCING ACTIVITIES
Proceeds from issuance of notes
payable................................ 3,226,000 4,447,000 141,000
Principal payments on notes payable..... (1,933,000) (2,553,000) (1,599,000)
Distribution to ADCS stockholders....... -- (1,792,000) --
Repayment of amounts borrowed........... (235,000) (135,000) --
Payments on capital lease obligations... (995,000) (1,274,000) (2,447,000)
Proceeds from sale of common stock,
net.................................... 17,193,000 -- --
Investment by minority stockholder...... 539,000 161,000 48,000
Tax benefit of nonqualified stock
options................................ -- -- 678,000
Proceeds from exercise of stock options
and warrants........................... 113,000 174,000 2,101,000
----------- ----------- -----------
Net cash provided (used) by financing
activities.......................... 17,908,000 (972,000) (1,078,000)
----------- ----------- -----------
Effects of exchange rate changes on
cash................................... (10,000) (45,000) (137,000)
----------- ----------- -----------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS............................ 6,131,000 612,000 (1,024,000)
CASH AND CASH EQUIVALENTS, BEGINNING OF
YEAR................................... 5,831,000 11,962,000 12,574,000
----------- ----------- -----------
CASH AND CASH EQUIVALENTS, END OF YEAR.. $11,962,000 $12,574,000 $11,550,000
=========== =========== ===========
</TABLE>
See accompanying notes.
F-7
<PAGE>
ATMI, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
Advanced Technology Materials, Inc. underwent a reorganization involving the
creation of a new holding company (ATMI, Inc. the successor registrant of
Advanced Technology Materials, Inc.) by means of a merger resulting in the
prior registrant becoming a wholly-owned subsidiary of the holding company. In
addition, these statements give retroactive effect to the acquisitions of
Advanced Delivery & Chemical Systems Nevada, Inc. and related entities (the
"ADCS Group") and Lawrence Semiconductor Laboratories, Inc. and affiliate
("LSL") which have been accounted for using the pooling-of-interests method.
Both of these acquisitions occurred on October 10, 1997, as part of the
consummation of the transactions described in Note 10.
Certain amounts have been reclassified to conform to current year
presentation.
Company's Activities
ATMI, Inc. together with its subsidiaries (the "Company") is a leading
supplier of thin film materials, equipment and services used worldwide in the
manufacture of semiconductor devices. The Company targets high growth
consumable and equipment markets within the semiconductor industry with
proprietary and patented products based on chemical vapor deposition ("CVD")
technology. Specifically, the Company provides a broad range of ultrahigh
purity thin film materials and related delivery systems, a full line of point-
of-use semiconductor environmental equipment and services, and specialty
epitaxial thin film deposition services.
Principles of Consolidation
The consolidated financial statements include the accounts of ATMI, Inc. and
all wholly and majority owned subsidiaries. All significant intercompany
accounts and transactions have been eliminated in consolidation.
Revenue Recognition
Product revenues are recognized upon shipment of goods. Contract revenues
under fixed-price contracts and cost-reimbursement-type contracts are
recognized using the percentage-of-completion method based upon costs incurred
and estimated future costs. Provisions for expected losses on contracts are
recorded in the period when incurred. Revenues under fixed-price contracts
from the U.S. Government were $4,542,000, $4,046,000, and $3,708,000 for the
years ended December 31, 1995, 1996, 1997, respectively. Revenues under cost-
reimbursement-type contracts from the U.S. Government were $4,170,000,
$5,800,000, and $5,412,000 for the years ended December 31, 1995, 1996, 1997,
respectively.
Use of Estimates
The preparation of the financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results may differ from those estimates.
Research and Development
Research and development costs, including materials, labor, and overhead
related to self-funded projects, are expensed as incurred. External funding
provided to the Company through cost-reimbursement contracts with the U.S.
Government are expensed as cost of contract revenues.
F-8
<PAGE>
ATMI, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Cash and Cash Equivalents
The Company considers all highly liquid investments with a maturity of three
months or less when purchased to be cash equivalents.
Marketable Securities
Marketable securities are classified as available for sale and are reported
at fair value, which approximates cost. Management determines the appropriate
classification of debt securities at the time of purchase and reevaluates such
designation as of each balance sheet date. The cost of securities sold is
based on the specific identification method. Interest on these securities is
included in interest income.
Inventories
Inventories are stated at the lower of cost or market using the first-in,
first-out (FIFO) method.
Property and Equipment
Property and equipment is stated at cost. Depreciation and amortization of
property and equipment is computed using the straight-line method over the
estimated useful lives of the assets, which vary from three to thirty-five
years.
Foreign Currency Translation
Adjustments relating to the translation of foreign currency to U.S. dollars
are reported as a separate component of stockholders' equity. Gains or losses
resulting from foreign currency transactions are included in other income
(expense) and are immaterial.
Taxes
The Company accounts for income taxes in accordance with Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes" (FAS
109). Under FAS 109, the liability method is used in accounting for income
taxes. Under this method, deferred tax assets and liabilities are determined
based upon differences between financial reporting and tax basis of assets and
liabilities and are measured using the enacted tax rates and laws that will be
in effect when the differences are expected to reverse.
Fair Values of Financial Instruments
The Company's financial instruments include cash and cash equivalents,
accounts receivable, short-term investments and debt. Marketable securities
are accounted for at fair value. All other financial instruments are accounted
for on an historical cost basis which, due to the nature of these instruments,
approximates fair value at the balance sheet dates.
Long-Lived Assets
The Company reviews on a periodic basis the value of its long-lived assets
to determine whether an impairment exists. At December 31, 1997, no such
impairment existed. Goodwill and other long-term assets are stated net of
accumulated amortization of $293,000, and $585,000 at December 31, 1996 and
1997, respectively.
F-9
<PAGE>
ATMI, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Stock Based Compensation
Effective in fiscal year 1996, the Company adopted Financial Accounting
Statement No. 123, "Accounting for Stock-Based Compensation." This statement
defines a fair value based method of accounting for employee stock
compensation plans. However, it also allows an entity to continue to measure
compensation cost for those plans in accordance with Accounting Principle
Board (APB) Opinion No. 25, "Accounting for Stock Issued to Employees." Under
APB No. 25, compensation cost is the excess, if any, of the quoted market
price of the stock at the grant date over the amount the employee must pay to
acquire the stock. The Company has elected to continue to account for its
employee stock compensation plans under APB No. 25. Pro forma disclosures of
net income, net income per share-basic and net income per share-assuming
dilution, as if the fair value based method of accounting had been applied,
are presented in Note 9.
Per Share Data
In 1997, the Financial Accounting Standards Board (FASB) issued SFAS No.
128, "Earnings per Share," which was adopted in the fourth quarter of 1997.
This new rule changes the way earnings per share is calculated and requires
restatement of all reported prior period amounts. Under the new requirements,
basic earnings per share is calculated by dividing net earnings by the
weighted-average number of common shares outstanding during the period. The
diluted earnings per share computation includes the effect of shares which
would be issuable upon the exercise of outstanding stock options, reduced by
the number of shares which are assumed to be purchased by the Company from the
resulting proceeds at the average market price during the period.
New Accounting Pronouncements
During 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive Income"
and SFAS No. 131. "Disclosures about Segments of an Enterprise and Related
Information." SFAS No. 130 is effective for the first quarter of 1998, while
SFAS No. 131 is effective for the year-end financial reporting in 1998 and on
an interim basis thereafter. Both of these pronouncements require additional
disclosures, but the Company expects no material impact upon adoption.
2. MARKETABLE SECURITIES
Marketable securities are comprised of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------
1996 1997
----------- -----------
<S> <C> <C>
Corporate obligations............................... $ 7,431,000 $10,590,000
U.S. Government obligations......................... 9,538,000 6,407,000
Certificates of deposit............................. 1,269,000 464,000
----------- -----------
$18,238,000 $17,461,000
=========== ===========
</TABLE>
All of the Company's marketable securities have maturities of less than two
years.
F-10
<PAGE>
ATMI, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
3. ACCOUNTS AND NOTES RECEIVABLE
Amounts due from various agencies of the U.S. Government were approximately
$2,063,000, and $2,619,000 of accounts receivable at December 31, 1996, and
1997, respectively. Unbilled accounts receivable were $757,000, and
$1,019,000, and customer advances, included in other liabilities, were
$276,000, and $612,000 at December 31, 1996 and 1997, respectively.
Notes receivable from a stockholder assumed in the LSL transaction
represents advances which bear interest at 8% and are due upon demand. The
balances at December 31, 1996, and 1997 were $1,099,000, and $1,197,000,
respectively and included accrued interest of $126,000, and $196,000
respectively. Interest income on the notes totaled $32,000, $56,000, and
$70,000 in the years ended December 31, 1995, 1996, and 1997, respectively.
Credit is extended to commercial customers based on an evaluation of their
financial condition, and collateral is not generally required. The evaluation
of financial condition is performed to reduce the risk of loss. The Company
has not experienced any material losses due to uncollectible accounts
receivable since inception. Certain transactions with foreign customers are
supported by letters of credit. The Company maintains an allowance for
doubtful accounts at a level that management believes is sufficient to cover
potential credit losses.
4. INVENTORIES
Inventories are comprised of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
1996 1997
---------- ----------
<S> <C> <C>
Raw materials........................................ $5,538,000 $6,682,000
Work in process...................................... 687,000 946,000
Finished goods....................................... 937,000 1,074,000
---------- ----------
7,162,000 8,702,000
Obsolescence reserve................................. (659,000) (985,000)
---------- ----------
$6,503,000 $7,717,000
========== ==========
</TABLE>
5. PROPERTY AND EQUIPMENT
Property and equipment is comprised of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------
1996 1997
------------ ------------
<S> <C> <C>
Land............................................. $ 1,751,000 $ 1,323,000
Buildings........................................ 4,947,000 7,243,000
Machinery and equipment.......................... 33,646,000 40,963,000
Furniture and fixtures........................... 1,157,000 1,590,000
Leasehold improvements........................... 3,788,000 4,494,000
------------ ------------
45,289,000 55,613,000
Accumulated depreciation and amortization........ (14,629,000) (19,581,000)
------------ ------------
$ 30,660,000 $ 36,032,000
============ ============
</TABLE>
Depreciation expense for the years ended December 31, 1995, 1996 and 1997,
was $3,104,000, $4,277,000, and $4,976,000, respectively.
F-11
<PAGE>
ATMI, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
6. NOTES PAYABLE
Notes payable consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------
1996 1997
----------- -----------
<S> <C> <C>
Note payable in conjunction with acquisition of
Guardian Systems, bearing interest at 8.5%, due in
three annual installments beginning January 1,
1999................................................ $ 2,000,000 $ 2,000,000
Term loans with Connecticut state agency, bearing
interest ranging between 5%-6%, due between April
2001-June 2002...................................... 1,800,000 1,713,000
Equipment credit line with a commercial bank, bearing
interest at 9%, due through June 2000............... 1,701,000 1,128,000
Notes payable with commercial banks and leasing
companies, bearing interest ranging between 7.3%-
12.42%, due between April 1997-February 2009........ 6,835,000 6,102,000
Other notes payable.................................. 65,000 --
----------- -----------
12,401,000 10,943,000
Less current portion................................. (2,059,000) (2,655,000)
----------- -----------
$10,342,000 $ 8,288,000
=========== ===========
</TABLE>
The approximate aggregate debt maturities are as follows as of December 31,
1997:
<TABLE>
<S> <C>
1998........................................................ $ 2,655,000
1999........................................................ 2,113,000
2000........................................................ 1,111,000
2001........................................................ 1,442,000
2002........................................................ 340,000
Thereafter.................................................. 3,282,000
-----------
$10,943,000
===========
</TABLE>
The term loans of $1,713,000 are collateralized by various equipment,
leasehold improvements and renovations in the Company's Connecticut facility.
The Company's equipment credit line bears interest at prime plus 1/2% per
annum and is collateralized by certain assets. The Company is in compliance
with or has obtained waivers for the credit line covenants, including
maintaining certain liquidity, leverage, and tangible net worth levels.
The majority of the Company's notes payable are secured by the related real
property or equipment. Certain of the notes payable contain covenants
requiring the Company to maintain compliance with debt to tangible net worth,
debt service coverage and current assets to current liabilities ratios as
defined in the related agreements. The Company is in compliance with the notes
payable covenants.
Interest paid was $1,318,000, $1,631,000, and $1,808,000, for the years
ended December 31, 1995, 1996, and 1997, respectively.
The Company has never declared or paid cash dividends on its capital stock.
The Company does not anticipate paying any cash dividends in the foreseeable
future. Certain of the Company's subsidiaries' financing agreements contain
limitations or prohibitions on the payment of dividends without the lender's
consent or in conjunction with the subsidiary's failure to comply with various
financial covenants.
F-12
<PAGE>
ATMI, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
7. LEASES
The Company is obligated under capital leases for certain machinery and
equipment that expire at various dates during the next five years. The gross
amount of machinery and equipment under the capital leases and the related
accumulated depreciation were as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------
1996 1997
----------- -----------
<S> <C> <C>
Machinery and equipment............................ $10,151,000 $14,060,000
Accumulated depreciation........................... (2,230,000) (3,346,000)
----------- -----------
$ 7,921,000 $10,714,000
=========== ===========
</TABLE>
The following is a schedule of future minimum lease payments for capital
leases as of December 31, 1997:
<TABLE>
<CAPTION>
CAPITAL LEASES
--------------
<S> <C>
1998........................................................ $ 3,337,000
1999........................................................ 2,934,000
2000........................................................ 2,147,000
2001........................................................ 1,560,000
2002........................................................ 366,000
-----------
Total lease payments.......................................... 10,344,000
Less amount representing interest............................. (1,435,000)
-----------
Present value of net capital lease payments................... 8,909,000
Less current portion.......................................... (2,671,000)
-----------
Long-term portion............................................. $ 6,238,000
===========
</TABLE>
The Company leases office and manufacturing facilities, and certain
manufacturing equipment under several operating leases. The lease for its
Danbury, Connecticut facility expires in August 2005 while the EcoSys San
Jose, California facility leases expire in March 2003 and the Epitronics
Phoenix, Arizona facility lease expires in August 1999. ADCS leases office
space under a lease which expires in May 2000. The manufacturing equipment
leases expire in years 1998 through 2002. Rental expense was $1,018,000,
$2,322,000, and $2,507,000, for the years ended December 31, 1995, 1996 and
1997, respectively.
The following is a schedule of future minimum lease payments for operating
leases as of December 31, 1997:
<TABLE>
<CAPTION>
OPERATING
LEASES
-----------
<S> <C>
1998.......................................................... $ 2,636,000
1999.......................................................... 2,516,000
2000.......................................................... 1,742,000
2001.......................................................... 1,268,000
2002.......................................................... 878,000
Thereafter.................................................... 1,392,000
-----------
Total minimum lease payments.................................... $10,432,000
===========
</TABLE>
F-13
<PAGE>
ATMI, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
8. INCOME TAXES
Significant components of the provision for income taxes for the periods
presented are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------------
1995 1996 1997
---------- ---------- ----------
<S> <C> <C> <C>
Current:
Federal...................................... $1,254,000 $1,421,000 $3,845,000
State........................................ 305,000 532,000 410,000
---------- ---------- ----------
Total current.................................. 1,559,000 1,953,000 4,255,000
Deferred:
Federal...................................... 1,092,000 914,000 1,433,000
State........................................ 237,000 291,000 253,000
---------- ---------- ----------
Total deferred................................. 1,329,000 1,205,000 1,686,000
---------- ---------- ----------
$2,888,000 $3,158,000 $5,941,000
========== ========== ==========
</TABLE>
Significant components of the Company's deferred tax assets and liabilities
are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------
1996 1997
----------- -----------
<S> <C> <C>
Deferred tax assets:
Accrued liabilities................................. $ 1,063,000 $ 392,000
Net operating loss carryforwards and tax credits.... 829,000 --
Inventory reserves.................................. 577,000 382,000
Other, net.......................................... 702,000 86,000
----------- -----------
3,171,000 860,000
Valuation allowance................................. (1,706,000) --
----------- -----------
Net deferred tax assets............................... 1,465,000 860,000
Deferred tax liabilities:
Depreciation........................................ 1,136,000 2,068,000
Capital leases...................................... 1,033,000 1,182,000
Other, net.......................................... 3,158,000 3,158,000
----------- -----------
(5,327,000) (6,408,000)
----------- -----------
Net deferred tax liabilities.......................... $(3,862,000) $(5,548,000)
=========== ===========
</TABLE>
For financial reporting purposes, a valuation allowance of $1,706,000 at
December 31, 1996 was established primarily to recognize the cumulative loss
status of the Company's predecessor. As a result of the Company's continued
profitability and the acquisitions of the ADCS Group and LSL, such valuation
allowance was no longer required.
Income taxes paid for the years ended December 31, 1995, 1996, and 1997 were
$273,000, $3,170,000, and $3,566,000.
F-14
<PAGE>
ATMI, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
8. INCOME TAXES (CONTINUED)
The reconciliation of income tax computed at the U.S. federal statutory tax
rates to the Company's tax expense is:
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
-----------------------------------
1995 1996 1997
---------- ----------- ----------
<S> <C> <C> <C>
U.S. statutory rate................... $2,712,000 $ 5,160,000 $3,524,000
State income taxes.................... 407,000 669,000 415,000
Effect of nondeductible acquisition
expenses............................. -- -- 3,420,000
Income not subject to federal income
taxation............................. -- (1,483,000) --
Net operating loss carryforward and
tax credit utilization............... (263,000) (1,263,000) (237,000)
Reversal of valuation allowance....... -- -- (1,163,000)
Other, net............................ 32,000 75,000 (18,000)
---------- ----------- ----------
$2,888,000 $ 3,158,000 $5,941,000
========== =========== ==========
</TABLE>
Prior to ATMI's acquisition of the ADCS Group, the stockholders of Advanced
Delivery & Chemical Systems Nevada, Inc. ("ADCS Nevada") elected S-Corporation
status effective April 1, 1996. In October 1996, as a result of a transfer of
shares to an ineligible S-Corporation shareholder, the S status was
terminated. During the period that ADCS Nevada was an S-Corporation, its
earnings were not subject to federal corporate income tax. Additional federal
corporate income tax of $1,483,000 would have resulted if ADCS Nevada had been
taxed as a C-Corporation for all of 1996, and the pro forma consolidated net
income and net income per share-assuming dilution for ATMI for the year ended
December 31, 1996 would have been $10,534,000 and $0.57, respectively.
South Korea has granted the Company a five year full income tax exemption
from the year in which ADCS-Korea Co., Ltd. ("ADCS-Korea") has taxable income
and an additional three year 50% exemption. Since ADCS-Korea has not yet
generated any taxable income, the expiration date is not currently
determinable.
The former securityholders of the ADCS Group have agreed to indemnify the
Company against losses arising out of certain tax matters. As security for
these tax matters, the former securityholders of the ADCS Group have delivered
700,000 shares of the Company's common stock which they received into escrow.
Any claim for such tax matters adversely determined against the Company,
regardless of the escrow, would result in a charge to the Company's results of
operations. The former securityholders of the ADCS Group believe that any
exposure would be immaterial, and the Company believes that any successful
challenge to the tax matters is not probable. While the possible exposures, if
any, are difficult to quantify, the Company believes that, regardless of the
probability that liabilities arise, the potential exposures range from $0 to
$22 million depending on the tax matter.
9. STOCKHOLDERS' EQUITY
In October 1995, the Company completed a public offering of 1,600,000 shares
of common stock at $12.25 per share. Net proceeds to the Company of
$17,193,000 were from 1,525,000 shares sold by the Company while 75,000 shares
were sold for various selling stockholders. Costs of the offering, including
underwriting commissions, were $1,489,000.
Stock Plans
In May 1997, the Company's stockholders approved the adoption of the 1997
Stock Plan ("1997 Plan"), which provides for the granting of up to 900,000
nonqualified stock options, "incentive stock options" ("ISOs") and stock
appreciation rights to employees, directors and consultants of the Company.
F-15
<PAGE>
ATMI, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
9. STOCKHOLDERS' EQUITY (CONTINUED)
In May 1995, the Company's stockholders approved the adoption of the 1995
Stock Plan ("1995 Plan"), which provides for the granting of up to 500,000
nonqualified stock options, ISOs and stock appreciation rights to employees,
directors and consultants of the Company. The Company's 1987 Stock Plan (the
"1987 Plan"), as amended, provided for the granting of up to 1,115,833
nonqualified stock options and ISOs. The 1987 Plan expired in 1997.
Under the terms of these stock plans, nonqualified options granted may not
be at a price of less than 50% of the fair market value of the common stock,
and ISOs granted may not be at a price of less than 100% of fair market value
of the common stock on the date of grant.
Options are generally exercisable commencing one year after the date of
grant at the rate of 20% per annum on a cumulative basis. Nonqualified options
expire up to ten years and one month from the date of grant, and ISOs expire
five to ten years from the date of grant.
<TABLE>
<CAPTION>
NUMBER OF OPTION PRICE
SHARES PER SHARE
--------- ---------------
<S> <C> <C>
Options outstanding at December 31, 1994.......... 833,596 $ 0.28 - $ 7.00
Granted......................................... 305,950 $ 6.88 - $13.88
Canceled........................................ (27,670) $ 0.53 - $ 6.38
Exercised....................................... (137,571) $ 0.28 - $ 5.50
--------- ---------------
Options outstanding at December 31, 1995.......... 974,305 $ 0.28 - $13.88
Granted......................................... 92,500 $ 9.88 - $17.63
Canceled........................................ (54,390) $ 0.53 - $12.50
Exercised....................................... (54,199) $ 0.28 - $12.50
--------- ---------------
Options outstanding at December 31, 1996.......... 958,216 $ 0.28 - $17.63
Granted......................................... 900,490 $16.88 - $40.13
Canceled........................................ (348,250) $ 0.53 - $40.13
Exercised....................................... (82,520) $ 0.28 - $13.50
--------- ---------------
Options outstanding at December 31, 1997.......... 1,427,936 $ 0.28 - $29.38
========= ===============
</TABLE>
At December 31, 1995, 1996, and 1997 options for 498,204, 567,066, and
657,396 shares, respectively, were exercisable, and at December 31, 1997
options for 586,803 shares were available for grant. Exercise prices for
447,086 options outstanding ranged from $0.28-$5.00; for 351,850 options
outstanding ranged from $5.01-$13.00; and for 629,000 options outstanding
ranged from $13.01-$29.38 as of December 31, 1997.
The weighted average exercise price and remaining contractual life of
options outstanding at December 31, 1997 was $11.97 and 7.3 years,
respectively.
If compensation expense for the Company's plans had been determined for all
stock option grants based on the fair value at the grant dates for awards
under those plans, consistent with the method described in SFAS No. 123, the
Company's net income, net income per share-basic and net income per share-
assuming dilution would have been reduced to the pro forma amounts indicated
below:
<TABLE>
<CAPTION>
1995 1996 1997
---------- ----------- ----------
<S> <C> <C> <C>
Net income............................ $5,022,000 $11,695,000 $3,687,000
Net income per share--basic........... $ 0.31 $ 0.68 $ 0.21
Net income per share--assuming
dilution............................. $ 0.29 $ 0.64 $ 0.20
</TABLE>
F-16
<PAGE>
ATMI, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
9. STOCKHOLDERS' EQUITY (CONTINUED)
During the initial phase-in period, as required by SFAS No. 123, the pro
forma amounts were determined based on the stock option grants subsequent to
January 1, 1995. Therefore, the pro forma amounts presented may not be
indicative of the effects of compensation cost on net income, net income per
share-basic and net income per share-assuming dilution in future years due to
the timing of grants and considering that options generally vest over a five
year period.
The fair value of each option grant, for pro forma disclosure purposes, was
estimated on the date of grant using the Black-Scholes option pricing model
with the following weighted average assumptions for 1996 and 1997:
<TABLE>
<CAPTION>
1995 1996 1997
--------- --------- ---------
<S> <C> <C> <C>
Expected dividend yield..................... None None None
Risk free interest rate..................... 6.10% 6.25% 6.00%
Expected volatility......................... 58.2% 54.6% 56.0%
Expected life of options.................... 7.5 years 7.5 years 7.5 years
</TABLE>
The weighted average fair value of non-canceled stock options granted in
1995, 1996 and 1997 was $6.72, $8.21 and $17.04, respectively.
Warrants
Warrants have been granted to agencies of the State of Connecticut in
connection with certain loan agreements with those agencies. These warrants
are for an aggregate of 50,000 shares at an exercise prices ranging from
$11.13 to $11.75, of which 20,000 were exercisable as of December 31, 1997.
Earnings Per Share
The following table presents the computation of basic and diluted earnings
per share:
<TABLE>
<CAPTION>
1995 1996 1997
----------- ----------- -----------
<S> <C> <C> <C>
Numerator:
Net income........................... $ 5,088,000 $12,017,000 $ 4,421,000
=========== =========== ===========
Denominator:
Denominator for basic earnings per
share-weighted-average shares....... 16,040,000 17,266,000 17,288,000
Dilutive effect of contingent shares
related to the ADCS Group
acquisition......................... 700,000 700,000 700,000
Dilutive effect of employee stock
options and warrants................ 387,000 428,000 672,000
----------- ----------- -----------
Denominator for diluted earnings per
share............................... 17,127,000 18,394,000 18,660,000
----------- ----------- -----------
Net income per share--basic............ $ 0.32 $ 0.70 $ 0.26
=========== =========== ===========
Net income per share--assuming
dilution.............................. $ 0.30 $ 0.65 $ 0.24
=========== =========== ===========
</TABLE>
Options to purchase 138,000, 32,000 and 16,000 shares of common stock,
outstanding as of December 31, 1995, 1996 and 1997, respectively, were not
included in the computation of diluted earnings per share because their
exercise prices were greater than the average market price of the common
shares and, therefore, their inclusion would be antidilutive.
F-17
<PAGE>
ATMI, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
10. MERGERS, ACQUISITIONS AND JOINT VENTURES
On October 10, 1997, pursuant to an Agreement and Plan of Merger and
Exchange dated April 7, 1997 (the "Merger and Exchange Agreement"), the
Company issued 5,468,747 shares of its Common Stock in exchange for all the
ownership interests of the ADCS Group. The ADCS Group manufactures, markets
and designs ultrahigh purity specialty thin film materials and related
delivery equipment for the semiconductor and semiconductor equipment
manufacturing industries. The Company is continuing the business of the ADCS
Group and integrating its semiconductor thin film and delivery systems product
lines of the NovaMOS division into the business of the ADCS Group.
In order to accomplish the tax-free and pooling of interest treatment of the
transaction contemplated by the Merger and Exchange Agreement, Advanced
Technology Materials, Inc. underwent a reorganization involving the creation
of a new holding company (ATMI, Inc.--the successor registrant of Advanced
Technology Materials, Inc.) by means of a merger resulting in the prior
registrant becoming a wholly-owned subsidiary of the holding company. Pursuant
to the reorganization, each outstanding share of common stock of Advanced
Technology Materials, Inc. ("ATM") was converted into one share of the
Company's Common Stock. The reorganization has been accounted for as a pooling
of interests.
Also on October 10, 1997, pursuant to an Agreement and Plan of Merger, dated
as of May 17, 1997, as amended (the "Lawrence Merger Agreement"), the Company
issued 3,671,349 shares of the Company's Common Stock in exchange for all of
the outstanding common stock of LSL in a merger transaction. As a result, LSL
became a wholly-owned subsidiary of the Company. LSL is an outsourcer of
epitaxial processing of silicon wafers using chemical vapor deposition
technology to meet customer specifications. The Company is continuing the
business of LSL by integrating it with the Epitronics division of the Company
which develops, manufactures, distributes and sells high performance
substrates and thin film deposition services to the semiconductor industry.
The acquisition of LSL has been accounted for as a pooling of interests.
The former securityholders of the ADCS Group and LSL have agreed to
indemnify the Company and certain of its subsidiaries and affiliates from and
against certain losses arising out of breaches of representations and
warranties made by the respective securityholders and for certain tax matters.
As security for these obligations, the former securityholders of the ADCS
Group have delivered 750,000 shares of the Company's Common Stock which they
received and the former securityholders of LSL have delivered five percent of
the LSL consideration received into escrow in connection with the acquisitions
by the Company of the ADCS Group and LSL.
Non-recurring costs of approximately $9,000,000, primarily related to legal
costs, accounting costs, investment banker fees and a break-up fee in
connection with another transaction between LSL and another investor, have
been recorded as a one-time charge in 1997 in conjunction with the
investigation, analysis and October 1997 closings of the ADCS Group and LSL
transactions.
F-18
<PAGE>
ATMI, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
10. MERGERS, ACQUISITIONS AND JOINT VENTURES (CONTINUED)
The acquisitions of the ADCS Group and LSL were treated as a pooling of
interests. For the years ended December 31, 1995 and 1996 and for the nine
month period ended September 30, 1997, prior to the acquisition, revenues and
net income of ATM, the ADCS Group and LSL included in the financial statements
are as follows:
<TABLE>
<CAPTION>
NINE MONTHS ENDED
REVENUES: 1995 1996 SEPTEMBER 30, 1997
--------- ----------- ----------- ------------------
<S> <C> <C> <C>
ATM............................ $30,048,000 $46,350,000 $41,286,000
ADCS and LSL................... $30,124,000 $42,311,000 $32,262,000
<CAPTION>
NINE MONTHS ENDED
NET INCOME: 1995 1996 SEPTEMBER 30, 1997
----------- ----------- ----------- ------------------
<S> <C> <C> <C>
ATM............................ $ 554,000 $ 3,321,000 $ 3,979,000
ADCS and LSL................... $ 4,534,000 $ 8,696,000 $ 5,134,000
</TABLE>
On December 30, 1995, the Company acquired certain assets pertaining to the
Guardian Systems ("Guardian") product line of Messer Greisheim Industries,
Inc. for $6,000,000. In connection with this purchase, the Company recorded
approximately $4,900,000 in goodwill to be amortized over twenty years. The
Guardian product line consists of flame oxidation units used in the treatment
of effluent in the semiconductor industry. The product line has become part of
the Company's EcoSys operation.
On May 8, 1995, the ADCS Group entered into a joint venture agreement with
K.C. Tech Co., Ltd., an unrelated corporation organized under the laws of the
Republic of Korea, whereby the ADCS Group obtained a 70% interest in a South
Korean chusik hoesa, ADCS-Korea. The purpose of the joint venture is to
manufacture, sell and distribute chemicals to the semiconductor and related
industries in South Korea.
During 1995, the Company also acquired the assets of two businesses in
exchange for 20,000 shares of its Common Stock, $550,000 in cash and a
$700,000 promissory note bearing interest at prime plus 1%, payable in equal
quarterly installments beginning in September 1995. In 1996, one of those
businesses was subsequently sold, the $700,000 promissory note was paid in
full and a note receivable of approximately $498,000 was recorded. This note
receivable bears interest at 8% and is payable on October 31, 1999.
The pro forma unaudited results of operations for the year ended December
31, 1995, for the purchase business combinations indicated above, consummated
as of the beginning of the period presented, is as follows:
<TABLE>
<CAPTION>
1995
-----------
<S> <C>
Revenues..................................................... $65,590,000
Net income................................................... 5,347,000
Net income per share--basic.................................. $0.33
Net income per share--assuming dilution...................... $0.31
</TABLE>
F-19
<PAGE>
ATMI, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
11. COMMITMENTS AND CONTINGENCIES
On May 15, 1997, LSL settled patent infringement litigation with an
equipment manufacturer, related to equipment used by LSL that was purchased
from another manufacturer. Under the terms of the related settlement
agreement, LSL agreed to pay the manufacturer $2,000,000 and to purchase
reactors from the manufacturer assuming LSL's business conditions justify such
purchases. LSL has committed to purchase a reactor at an approximate fair
market value of $2,500,000. LSL accrued the $2,000,000 relating to this
settlement in the accompanying financial statements for the year ended
December 31, 1996. The amount was paid to the manufacturer during the year
ended December 31, 1997.
12. GEOGRAPHIC DATA
During 1995, 1996, and 1997 the Company had export sales of approximately
25%, 29%, and 22%, respectively. Sales to Asia, primarily South Korea, were
approximately 19%, 23%, and 17%, respectively, of the Company's revenues
during those same periods.
13. YEAR 2000 COMPLIANCE (UNAUDITED)
The Company is aware of the issues associated with the programming code in
existing computer systems as the year 2000 approaches. The Company is
utilizing both internal and external resources to identify, correct or
reprogram, and test its systems for Year 2000 compliance. Management is in the
process of completing its assessment of the Year 2000 compliance costs.
However, based on currently available information (excluding the possible
impact of vendor systems which management currently is not in a position to
evaluate), management does not believe that these costs will have a material
effect on the Company's earnings.
14. SUBSEQUENT EVENTS (UNAUDITED)
On February 20, 1998, the Company announced that it had entered into a
definitive merger agreement with NOW Technologies, Inc. ("NOW Technologies")
pursuant to which NOW Technologies would become a wholly-owned subsidiary of
the Company. The closing of the merger agreement is subject to the approval of
the shareholders of NOW Technologies and appropriate government agencies and
to the satisfaction of other customary conditions. While the exact number of
shares of Common Stock to be issued by the Company to the shareholders of NOW
Technologies will not be determined until the third trading day prior to the
closing, the number of shares to be issued will range from 1.20 million to
1.64 million (excluding shares issuable upon exercise of outstanding options).
The merger is intended to be treated as a tax-free reorganization and to be
accounted for as a pooling of interests. NOW Technologies is a manufacturer
and distributor of semiconductor materials packaging systems, particularly for
advanced photoresist materials. For the twelve months ended December 31, 1997,
NOW Technologies had total revenues of approximately $15 million.
On March 26, 1998, the Company commenced a registered underwritten public
offering of 4,720,000 shares of the Company's Common Stock. Of such shares,
2,000,000 shares were offered by the Company and 2,720,000 shares were offered
by certain stockholders of the Company. In addition, the Company and such
stockholders granted to the underwriters an option to purchase up to 257,291
and 450,709 additional shares of Common Stock, respectively, to cover over-
allotments, if any.
F-20
<PAGE>
QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
(THOUSANDS OF DOLLARS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
QUARTER YEAR
------------------------------- --------
1997 FIRST SECOND THIRD FOURTH 1997
- ---- ------- ------- ------- ------- --------
<S> <C> <C> <C> <C> <C>
Revenues......................... $22,513 $23,521 $27,514 $28,329 $101,877
Gross profit..................... 11,026 12,107 14,973 15,087 53,193
Net income (loss)................ 2,516 2,616 3,981 (4,692)(1) 4,421
Net income (loss) per share--
basic........................... $ 0.15 $ 0.15 $ 0.23 $ (0.27)(1) $ 0.26
Net income (loss) per share--
assuming dilution............... $ 0.13 $ 0.14 $ 0.21 $ (0.27)(1) $ 0.24
<CAPTION>
QUARTER YEAR
------------------------------- --------
1996 FIRST SECOND THIRD FOURTH 1996
- ---- ------- ------- ------- ------- --------
<S> <C> <C> <C> <C> <C>
Revenues......................... $21,185 $22,835 $23,056 $21,585 $ 88,661
Gross profit..................... 12,472 11,628 12,110 11,220 47,430
Net income....................... 2,915 3,258 4,390 1,454(2) 12,017
Net income per share--basic...... $ 0.17 $ 0.19 $ 0.26 $ 0.08(2) $ 0.70
Net income per share--assuming
dilution........................ $ 0.16 $ 0.18 $ 0.23 $ 0.08(2) $ 0.65
</TABLE>
(1) Includes a non-recurring charge of $9.0 million accrued in connection with
costs incurred in investigating, analyzing and completing the ADCS Group
and LSL acquisitions.
(2) Includes a non-recurring charge of $2.0 million ($1.2 million, net of
taxes) accrued in connection with patent litigation involving LSL, which
resulted in a settlement payment in May 1997.
F-21
<PAGE>
ATMI, INC.
CONSOLIDATED BALANCE SHEET
(UNAUDITED)
<TABLE>
<CAPTION>
MARCH 31,
1998
ASSETS ------------
<S> <C>
Current assets:
Cash and cash equivalents...................................... $ 12,628,000
Marketable securities.......................................... 71,449,000
Accounts receivable, net of allowance for doubtful accounts of
$448,000...................................................... 20,164,000
Notes and other receivables.................................... 1,212,000
Inventory...................................................... 9,291,000
Other.......................................................... 2,700,000
------------
Total current assets......................................... 117,444,000
Property and equipment, net...................................... 36,810,000
Goodwill and other long-term assets, net......................... 6,493,000
------------
$160,747,000
============
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C>
Current liabilities:
Accounts payable............................................... $ 5,286,000
Accrued expenses............................................... 6,260,000
Accrued commissions............................................ 2,464,000
Notes payable, current portion................................. 2,163,000
Capital lease obligations, current portion..................... 2,395,000
Income taxes and other current payables........................ 722,000
------------
Total current liabilities.................................... 19,290,000
Notes payable, less current portion.............................. 8,414,000
Capital lease obligations........................................ 5,621,000
Deferred income taxes and other long-term liabilities............ 4,439,000
Minority interest................................................ 650,000
Stockholders' equity
Preferred stock, par value $.01: 2,000,000 shares authorized;
none issued and outstanding................................... --
Common stock par value $.01: 30,000,000 shares authorized;
20,181,701 issued and outstanding............................. 202,000
Additional paid-in capital..................................... 96,253,000
Cumulative translation adjustment.............................. (926,000)
Retained earnings.............................................. 26,804,000
------------
Total stockholders' equity................................... 122,333,000
------------
$160,747,000
============
</TABLE>
See accompanying notes.
F-22
<PAGE>
ATMI, INC.
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
-----------------------
1997 1998
----------- -----------
<S> <C> <C>
Revenues:
Product revenues.................................... $19,895,000 $25,021,000
Contract revenues................................... 2,618,000 2,355,000
----------- -----------
Total revenues........................................ 22,513,000 27,376,000
Cost of revenues:
Cost of product revenues............................ 9,329,000 10,625,000
Cost of contract revenues........................... 2,158,000 1,721,000
----------- -----------
Total cost of revenues................................ 11,487,000 12,346,000
----------- -----------
Gross profit.......................................... 11,026,000 15,030,000
Operating expenses:
Research and development............................ 2,465,000 2,788,000
----------- -----------
Selling, general and administrative................. 5,155,000 5,590,000
----------- -----------
7,620,000 8,378,000
----------- -----------
Operating income...................................... 3,406,000 6,652,000
Interest income....................................... 392,000 400,000
Interest expense...................................... (376,000) (412,000)
Other income (expense), net........................... (5,000) 108,000
----------- -----------
Income before taxes and minority interest............. 3,417,000 6,748,000
Income taxes.......................................... 920,000 2,228,000
----------- -----------
Income before minority interest....................... 2,497,000 4,520,000
Minority interest..................................... 19,000 (55,000)
----------- -----------
Net income............................................ $ 2,516,000 $ 4,465,000
=========== ===========
Net income per share--basic........................... $ 0.15 $ 0.25
=========== ===========
Net income per share--assuming dilution............... $ 0.13 $ 0.24
=========== ===========
Weighted average shares outstanding................... 17,352,000 17,586,000
=========== ===========
Weighted average shares outstanding--assuming
dilution............................................. 18,732,000 18,853,000
=========== ===========
</TABLE>
See accompanying notes.
F-23
<PAGE>
ATMI, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
------------------------
1997 1998
----------- -----------
<S> <C> <C>
OPERATING ACTIVITIES
Net income.......................................... $ 2,516,000 $ 4,465,000
Adjustments to reconcile net income to cash provided
by operating activities:
Depreciation and amortization..................... 1,306,000 1,493,000
Deferred income taxes............................. 333,000 3,000
Minority interest in net earnings of
subsidiaries..................................... (19,000) 55,000
Changes in operating assets and liabilities
Increase in accounts and notes receivable....... (2,392,000) (395,000)
Increase in inventory........................... (871,000) (1,574,000)
(Increase) decrease in other assets............. (1,603,000) 280,000
Increase in accounts payable.................... 1,546,000 309,000
Increase in accrued expenses.................... 351,000 175,000
Increase (decrease) in other liabilities........ 96,000 (2,143,000)
----------- -----------
Total adjustments............................. (1,253,000) (1,797,000)
----------- -----------
Net cash provided by operating activities... 1,263,000 2,668,000
----------- -----------
INVESTING ACTIVITIES
Capital expenditures................................ (3,330,000) (2,197,000)
Long-term investment................................ (250,000) --
Sale (purchase) of marketable securities, net....... 493,000 (53,988,000)
----------- -----------
Net cash used by investing activities....... (3,087,000) (56,185,000)
----------- -----------
FINANCING ACTIVITIES
Principal payments on capital lease obligations..... (443,000) (893,000)
Principal payments on notes payable................. (350,000) (366,000)
Proceeds from sale of common shares, net............ -- 55,722,000
Proceeds from exercise of stock options and
warrants........................................... 141,000 101,000
----------- -----------
Net cash (used) provided by financing
activities................................. (652,000) 54,564,000
----------- -----------
Effects of exchange rate changes on cash............ (27,000) 31,000
----------- -----------
NET (DECREASE) INCREASE IN CASH AND CASH
EQUIVALENTS........................................ (2,503,000) 1,078,000
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD...... 12,574,000 11,550,000
----------- -----------
CASH AND CASH EQUIVALENTS, END OF PERIOD............ $10,071,000 $12,628,000
=========== ===========
</TABLE>
See accompanying notes.
F-24
<PAGE>
ATMI, INC.
NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS
(UNAUDITED)
1. BASIS OF PRESENTATION
The accompanying unaudited consolidated interim financial statements of
ATMI, Inc. ("ATMI" or the "Company") have been prepared in accordance with
Rule 10.01 of Regulation S-X and do not include all of the financial
information and disclosures required by generally accepted accounting
principles.
In the opinion of the management of ATMI, Inc., the financial information
contained herein has been prepared on the same basis as the audited
Consolidated Financial Statements for the year ended December 31, 1997, and
includes adjustments (consisting only of normal recurring adjustments)
necessary to present fairly the unaudited quarterly results set forth herein.
The Company's quarterly results have, in the past, been subject to fluctuation
and, thus, the operating results for any quarter are not necessarily
indicative of results for any future fiscal period.
2. PER SHARE DATA
In 1997, the Financial Accounting Standards Board (FASB) issued SFAS No.
128, "Earnings per Share," which was adopted in the fourth quarter of 1997.
This new rule changes the way earnings per share is calculated and requires
restatement of all reported prior period amounts. Under the new requirements,
basic earnings per share is calculated by dividing net earnings by the
weighted-average number of common shares outstanding during the period. The
diluted earnings per share computation includes the effect of shares which
would be issuable upon the exercise of outstanding stock options, reduced by
the number of shares which are assumed to be purchased by the Company from the
resulting proceeds at the average market price during the period.
The following table presents the computation of basic and diluted earnings
per share for the three months ended March 31:
<TABLE>
<CAPTION>
1997 1998
---------- ----------
<S> <C> <C>
Numerator:
Net income............................................. $2,516,000 $4,465,000
========== ==========
Denominator:
Denominator for basic earnings per share-weighted-
average shares........................................ 17,352,000 17,586,000
Dilutive effect of contingent shares related to the
ADCS Group acquisition................................ 700,000 700,000
Dilutive effect of employee stock options and warrants,
net of tax benefit.................................... 680,000 567,000
---------- ----------
Denominator for diluted earnings per share............. 18,732,000 18,853,000
========== ==========
Net income per share-basic............................... $ 0.15 $ 0.25
========== ==========
Net income per share-assuming dilution................... $ 0.13 $ 0.24
========== ==========
</TABLE>
F-25
<PAGE>
ATMI, INC.
NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS--(CONTINUED)
(UNAUDITED)
3. INVENTORY
Inventory is comprised of the following:
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1997 1998
------------ -----------
<S> <C> <C>
Raw materials......................................... $6,682,000 $ 7,954,000
Work in progress...................................... 946,000 934,000
Finished goods........................................ 1,074,000 1,386,000
---------- -----------
8,702,000 10,274,000
Obsolescence reserve.................................. (985,000) (983,000)
---------- -----------
$7,717,000 $ 9,291,000
========== ===========
</TABLE>
4. COMPREHENSIVE INCOME
During the first quarter of 1998, the Company adopted SFAS No. 130,
"Reporting Comprehensive Income." SFAS 130 requires the reporting of
comprehensive income in addition to net income from operations. Comprehensive
income is a more inclusive financial reporting methodology that includes
disclosure of certain financial information that historically has not been
recognized in the calculation of net income.
During the first quarter of 1998, the Company had a foreign currency
translation adjustment relating to its South Korean operations of $173,000.
The following table presents the computation of comprehensive income at March
31:
<TABLE>
<CAPTION>
1997 1998
---------- ----------
<S> <C> <C>
Net income............................................... $2,516,000 $4,465,000
Other comprehensive income:
Foreign currency translation adjustments............... (27,000) 173,000
---------- ----------
Other comprehensive income............................... $2,489,000 $4,638,000
========== ==========
</TABLE>
5. MERGER AND ACQUISITION
On February 20, 1998, the Company announced that it had entered into a
definitive merger agreement with NOW Technologies, Inc. ("NOW Technologies")
pursuant to which NOW Technologies would become a wholly-owned subsidiary of
the Company. The closing of the merger agreement is subject to the approval of
the shareholders of NOW Technologies and appropriate government agencies and
to the satisfaction of other customary conditions. While the exact number of
shares of Common Stock to be issued by the Company to the shareholders of NOW
Technologies will not be determined until the third trading day prior to the
closing, the number of shares to be issued will range from 1.32 million to
1.59 million (excluding shares issuable upon exercise of outstanding options).
The merger is intended to be treated as a tax-free reorganization and to be
accounted for as a pooling of interests. NOW Technologies is a manufacturer
and distributor of semiconductor materials packaging systems, particularly for
advanced photoresist materials. A non-recurring charge of approximately $2.0
million will be expensed in conjunction with this merger in the period when
the transaction is completed.
F-26
<PAGE>
ATMI, INC.
NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS--(CONTINUED)
(UNAUDITED)
6. PUBLIC OFFERING
On March 31, 1998, the Company completed a registered underwritten public
offering of 4,720,000 shares of the Company's Common Stock. Of such shares,
2,000,000 shares were sold by the Company, and 2,720,000 shares were sold by
certain stockholders of the Company. In addition, the Company and those
certain stockholders granted to the underwriters an option to purchase up to
257,291 and 450,709 additional shares of Common Stock, respectively, to cover
over-allotments, if any. On April 2, 1998, the over-allotment was exercised in
full.
As a result of the offering at the end of March and exercise by the
underwriters of the over-allotment in early April, the Company received net
proceeds of approximately $55.7 million and $7.2 million, respectively, from
the sale of 2,257,291 shares.
Proceeds of approximately $55.7 million, net of $0.5 million of issuance
costs have been reflected in the balance sheet at March 31, 1998.
F-27
<PAGE>
INDEPENDENT AUDITORS' REPORT
Board of Directors
NOW Technologies, Inc. and Subsidiaries
Bloomington, Minnesota
We have audited the accompanying consolidated balance sheets of NOW
Technologies, Inc. and Subsidiaries (the Company) as of March 31, 1997 and
1996 and the related consolidated statements of income, stockholders' equity,
and cash flows for each of the three years in the period ended March 31, 1997.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of the Company as of March 31,
1997 and 1996 and the results of their operations and their cash flows for
each of the three years in the period ended March 31, 1997, in conformity with
generally accepted accounting principles.
/s/ Deloitte & Touche, llp
Minneapolis, Minnesota
May 8, 1997
(April 27, 1998 as to Note 9)
F-28
<PAGE>
NOW TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
MARCH 31,
---------------------
1996 1997
---------- ----------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents (Note 1)..................... $ 818,593 $ 876,382
Trade accounts receivable.............................. 1,244,580 1,464,715
Inventories............................................ 1,252,435 1,121,215
Prepaid expenses and other ............................ 167,996 183,207
Refundable income taxes................................ 4,483 --
Deferred income taxes.................................. 89,000 137,000
---------- ----------
Total current assets................................. 3,577,087 3,782,519
Property and equipment, at cost:
Deposits on equipment.................................. 665,230 187,800
Equipment.............................................. 4,946,515 5,758,326
Leasehold improvements................................. 716,984 745,879
---------- ----------
6,328,729 6,692,005
Less accumulated depreciation and amortization......... 875,748 1,693,844
---------- ----------
5,452,981 4,998,161
Deferred income taxes.................................... -- 2,000
Other assets, primarily patents, less accumulated
amortization of $88,500 and $118,587, respectively...... 179,952 171,415
---------- ----------
$9,210,020 $8,954,095
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable....................................... $ 549,074 $ 314,464
Customer advances...................................... 14,114 35,550
Accrued expenses....................................... 480,188 484,640
Income taxes payable................................... -- 44,646
Industrial revenue bond payable and current maturities
of long-term debt (Note 2)............................ 3,600,000 3,408,214
---------- ----------
Total current liabilities............................ 4,643,376 4,287,514
Deferred income taxes (Note 6)........................... 117,000 --
Long-term debt (Note 2).................................. -- 18,389
Commitments and contingencies (Note 4)
Stockholders' equity (Note 5):
Undesignated stock, 1,000,000 shares authorized, none
issued or outstanding; Common Stock, par value $.01 per
share, 4,000,000 shares authorized, 1,817,000 and
1,821,000 shares issued and outstanding, respectively.. 18,170 18,210
Additional paid-in capital.............................. 1,395,320 1,409,280
Retained earnings....................................... 3,100,154 3,284,702
---------- ----------
4,513,644 4,712,192
Less stockholders' receivables......................... 64,000 64,000
---------- ----------
Total stockholders' equity........................... 4,449,644 4,648,192
---------- ----------
$9,210,020 $8,954,095
========== ==========
</TABLE>
See notes to consolidated financial statements.
F-29
<PAGE>
NOW TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
------------------------------------
1995 1996 1997
---------- ----------- -----------
<S> <C> <C> <C>
Sales (Note 7).......................... $8,202,228 $10,518,474 $10,110,625
Cost of sales........................... 4,051,206 5,329,592 5,527,458
---------- ----------- -----------
Gross profit.......................... 4,151,022 5,188,882 4,583,167
Operating expenses:
Selling, general, and administrative.. 2,233,864 3,660,580 4,256,769
Research and development.............. 87,720 156,771 195,308
---------- ----------- -----------
2,321,584 3,817,351 4,452,077
---------- ----------- -----------
Operating income........................ 1,829,438 1,371,531 131,090
Other income (expense):
Interest income....................... 39,303 98,506 45,153
Interest expense...................... -- (110,292) (149,393)
Royalty income and other.............. (28,671) 130,868 133,698
---------- ----------- -----------
10,632 119,082 29,458
---------- ----------- -----------
Income before income taxes.............. 1,840,070 1,490,613 160,548
(Provision) benefit for income taxes
(Note 6)............................... (670,000) (544,000) 24,000
---------- ----------- -----------
Net income.............................. $1,170,070 $ 946,613 $ 184,548
========== =========== ===========
Net income per share--basic (Note 9).... $ 0.65 $ 0.52 $ 0.10
========== =========== ===========
Net income per share--assuming dilution
(Note 9)............................... $ 0.64 $ 0.51 $ 0.10
========== =========== ===========
Weighted average shares outstanding--
basic (Note 9)......................... 1,800,667 1,816,333 1,820,333
========== =========== ===========
Weighted average shares outstanding--
assuming dilution (Note 9)............. 1,833,583 1,851,417 1,873,667
========== =========== ===========
</TABLE>
See notes to consolidated financial statements.
F-30
<PAGE>
NOW TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL
----------------- PAID-IN RETAINED STOCKHOLDERS'
SHARES AMOUNT CAPITAL EARNINGS RECEIVABLES
--------- ------- ---------- ---------- -------------
<S> <C> <C> <C> <C> <C>
BALANCES AT MARCH 31,
1994.................... 1,793,000 $17,930 $1,301,560 $ 983,471 $(48,000)
Net income............. 1,170,070
Exercise of stock
options at $2.00 per
share, including tax
benefits.............. 20,000 200 70,800 (40,000)
--------- ------- ---------- ---------- --------
BALANCES AT MARCH 31,
1995.................... 1,813,000 18,130 1,372,360 2,153,541 (88,000)
Net income............. 946,613
Payments received on
stockholders'
receivables........... 32,000
Exercise of stock
options at $2.00 per
share, including tax
benefits.............. 4,000 40 22,960 (8,000)
--------- ------- ---------- ---------- --------
BALANCES AT MARCH 31,
1996.................... 1,817,000 18,170 1,395,320 3,100,154 (64,000)
Net income............. 184,548
Exercise of stock
options at $3.50 per
share................. 4,000 40 13,960
--------- ------- ---------- ---------- --------
BALANCES AT MARCH 31,
1997.................... 1,821,000 $18,210 $1,409,280 $3,284,702 $(64,000)
========= ======= ========== ========== ========
</TABLE>
See notes to consolidated financial statements.
F-31
<PAGE>
NOW TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (NOTE 8)
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
----------------------------------
1995 1996 1997
---------- ----------- ---------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income................................ $1,170,070 $ 946,613 $ 184,548
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization............ 211,916 386,990 853,343
Deferred income taxes.................... 48,000 (6,000) (167,000)
Tax benefits from exercise of stock
options................................. 31,000 15,000 --
Change in current assets and current
liabilities:
(Increase) decrease in:
Trade accounts receivable.............. (529,710) (178,808) (220,135)
Inventories............................ (418,126) (380,581) 131,220
Prepaid expenses and other............. (49,430) (68,342) (15,211)
Refundable income taxes................ 141,913 (309,324) --
Increase (decrease) in:
Accounts payable....................... 218,440 255,911 (234,610)
Customer advances...................... (85,170) (50,716) 35,121
Accrued expenses....................... 519,878 (290,734) 4,452
Income taxes payable................... -- -- 49,129
---------- ----------- ---------
Net cash provided by operating
activities........................... 1,258,781 320,009 620,857
Cash flows from investing activities:
Sale of short-term investments............ 349,000 290,693 --
Purchase of short-term investments........ (424,693) -- --
Deposits on equipment..................... (297,549) (665,230) (248,733)
Additions to property and equipment....... (523,346) (3,894,962) (133,388)
Proceeds from sale of property and
equipment................................ -- 49,051 --
Additions to other assets................. (46,975) (137,599) (21,550)
---------- ----------- ---------
Net cash used in investing
activities........................... (943,563) (4,358,047) (403,671)
Cash flows from financing activities:
Payment under working capital line........ -- (500,000) (150,000)
Borrowings under working capital line..... -- 500,000 150,000
Borrowings of industrial revenue bonds and
long-term debt........................... -- 3,600,000 28,219
Payments received on stockholders'
receivables.............................. -- 32,000 --
Payments of industrial revenue bonds and
long-term debt........................... -- -- (201,616)
Proceeds of stock issuance................ -- -- 14,000
---------- ----------- ---------
Net cash provided by (used in)
financing activities................. -- 3,632,000 (159,397)
---------- ----------- ---------
Net increase (decrease) in cash and cash
equivalents.............................. 315,218 (406,038) 57,789
Cash and cash equivalents at beginning of
year..................................... 909,413 1,224,631 818,593
---------- ----------- ---------
Cash and cash equivalents at end of year.. $1,224,631 $ 818,593 $ 876,382
========== =========== =========
</TABLE>
See notes to consolidated financial statements.
F-32
<PAGE>
NOW TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED MARCH 31, 1995, 1996, AND 1997
1. BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Business--NOW Technologies, Inc. (the Company) manufactures advanced high-
purity containers and dispensing systems for chemicals used primarily in the
microelectronics industry.
Principles of Consolidation--The consolidated financial statements include
the accounts of NOW Technologies, Inc. and its subsidiaries, NOW Technologies
International, Ltd. and NOW Technologies FSC, Ltd., a foreign sales
corporation. All significant intercompany balances and transactions have been
eliminated.
Cash and Cash Equivalents--Cash and cash equivalents include amounts on
demand deposit at banks and money market accounts.
Inventories--Inventories, primarily raw materials, are carried at the lower
of average cost (first-in, first-out method) or market.
Property and Equipment--Property and equipment are stated at cost and
depreciated over five- to ten-year estimated useful lives using the straight-
line method. Leasehold improvements, carried at cost, are amortized over the
current lease term with intended extensions.
Patents--Patents are being amortized by the straight-line method over five
years.
Estimates--The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Stock-Based Compensation--Effective April 1, 1996, the Company adopted SFAS
No. 123, Accounting for Stock-Based Compensation. SFAS No. 123 requires
expanded disclosures of stock-based compensation arrangements with employees
and encourages, but does not require, compensation cost to be measured based
on the fair value of the equity instrument awarded. Companies are permitted,
however, to continue to apply Accounting Principles Board (APB) Opinion No.
25, which recognizes compensation cost based on the intrinsic value of the
equity instrument awarded. The Company continues to apply APB Opinion No. 25
with regard to measurement of compensation cost.
Fair Value Disclosures of Financial Instruments--The estimated fair value of
cash, accounts receivable, notes receivable, accounts payable, and long-term
debt approximates the carrying value.
Revenue Recognition--Revenue is recognized when products are shipped.
2. FINANCING
The Company has a $750,000 revolving line of credit, a $3,557,316 letter of
credit facility, and a $250,000 term loan. There were no amounts outstanding
and payable on any facility at March 31, 1997. Interest on the line and term
loan is at the bank base rate (8.50% at March 31, 1997). The line, term loan,
and letter of credit facility are secured by substantially all assets of the
Company. Advances on the line of credit are restricted to 80% or less of
eligible accounts receivable. The credit facilities contain various covenants,
including the maintenance of a ratio of net income plus depreciation and
amortization to current maturities of long-term debt, maintenance of a ratio
of debt to tangible net worth, and maintenance of a minimum tangible net
worth. The revolving line of credit will expire on October 31, 1997. The
letter of credit facility is restricted as to use
F-33
<PAGE>
NOW TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
YEARS ENDED MARCH 31, 1995, 1996, AND 1997
for only bond payments and expires July 20, 2000. Any borrowings made under
the term loan agreement would be structured for repayment through October 1,
2000.
The Company has an industrial revenue bond arrangement with the City of
Bloomington for $3,400,000. The proceeds of the bonds were used for equipment
and leasehold improvements for the new leased facility. The interest on the
bonds is variable (3.85% at March 31, 1997) with a 10% cap and is paid
monthly. The bond is secured by the letter of credit.
The bondholders may tender the bonds at any time for the principal amount
plus accrued interest. The initial funds for the tendered bonds come from the
letter of credit. The Company's remarketing agent will attempt to remarket the
bonds and replenish the letter of credit with the proceeds. If the remarketing
agent cannot remarket the bonds, the Company must pay on demand an amount to
replenish the letter of credit. Even though the bonds have a long-term
maturity, they have been classified as a current liability due to the
possibility of the letter of credit being payable on demand.
The Company has an option to convert the bonds to a fixed rate provided all
bonds can be remarketed at the fixed rate. If converted to a fixed rate, the
Company has optional redemption dates at which it can redeem bond principal in
whole at any time or in part at interest payment dates. The first fixed rate
optional redemption date would be July 1 of the year that is halfway between
the conversion date and July 1, 2005. If redeemed, the Company must pay 102%
and 101% of bond principal in the first and second years following the first
fixed rate optional redemption date, respectively. Prior to conversion to a
fixed rate, the Company has the option to redeem the bonds without premium on
any business day after January 1, 1996.
<TABLE>
<CAPTION>
MARCH 31,
---------------------
1996 1997
---------- ----------
<S> <C> <C>
City of Bloomington Industrial Revenue Bond, interest
rate is variable (3.85% at March 31, 1997), quarterly
payments of $100,000................................. $3,600,000 $3,400,000
Promissory note, First Bank Energy Financing Program,
interest rate is 5.9%, monthly payments of principal
and interest of $808 until June 2000................. -- 26,603
---------- ----------
3,600,000 3,426,603
Less current portion.................................. 3,600,000 3,408,214
---------- ----------
$ -- $ 18,389
========== ==========
</TABLE>
The principal payments required (assuming no payments are required under the
letter of credit described above), as of March 31, 1997, are as follows:
<TABLE>
<S> <C>
Fiscal year ending March 31,
1998...................................................... $ 408,214
1999...................................................... 408,718
2000...................................................... 409,253
2001...................................................... 400,418
2002...................................................... 400,000
Thereafter................................................ 1,400,000
----------
Total principal........................................... $3,426,603
==========
</TABLE>
F-34
<PAGE>
NOW TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
YEARS ENDED MARCH 31, 1995, 1996, AND 1997
3. EMPLOYEE BENEFIT PLAN
The Company maintains a savings plan in compliance with Section 401(k) of
the Internal Revenue Code. Employees are eligible to participate in the plan
after completing six months (one year prior to January 1, 1996) of service and
attaining the age of twenty-one. Company contributions to the plan are at the
discretion of the Board of Directors and were insignificant for the years
ended March 31, 1995, 1996, and 1997.
4. COMMITMENTS
Leases--The Company leases office and production facilities under
noncancelable operating leases. The building lease requires monthly base rent
payments through August 2000. In addition to the base rent, the Company is
required to pay its share of building operating expenses and real estate
taxes.
The minimum lease payments due under the operating leases are as follows:
<TABLE>
<S> <C>
Fiscal year ending March 31,
1998...................................................... $ 292,800
1999...................................................... 292,800
2000...................................................... 292,800
2001...................................................... 122,000
----------
$1,000,400
==========
</TABLE>
Total rent expense under operating leases was $140,962, $315,901, and
$418,899 for the years ended March 31, 1995, 1996, and 1997, respectively.
Litigation--There is no pending or threatened litigation against the
Company.
F-35
<PAGE>
NOW TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
YEARS ENDED MARCH 31, 1995, 1996, AND 1997
5. STOCKHOLDERS' EQUITY
The authorized capital stock of the Company is 5,000,000 shares, consisting
of 4,000,000 shares of common stock, par value $.01 per share, and 1,000,000
undesignated shares.
The Company's Board of Directors established a stock option plan which
expired in February 1997 and reserved 250,000 common shares for options that
may be granted to employees and others providing services to the Company. The
options generally become exercisable in 25% increments on the four anniversary
dates following the date of grant. Changes in stock options outstanding are as
follows:
<TABLE>
<CAPTION>
OPTION OPTIONS
PRICE OUTSTANDING
----------- -----------
<S> <C> <C>
Granted during year ended:
March 31, 1989........................................ $1.00-$2.00 53,000
March 31, 1990........................................ 2.00 16,000
March 31, 1992........................................ 3.50 16,000
March 31, 1994........................................ 3.50 28,000
March 31, 1995........................................ 5.00 40,000
March 31, 1996........................................ 6.00 20,000
Forfeited during year ended:
March 31, 1992........................................ 1.00 (4,000)
March 31, 1997........................................ 5.00 (8,000)
Exercised during year ended:
March 31, 1992........................................ 1.00 (17,000)
March 31, 1994........................................ 2.00 (24,000)
March 31, 1995........................................ 2.00 (20,000)
March 31, 1996........................................ 2.00 (4,000)
March 31, 1997........................................ 3.50 (4,000)
----------- -------
Balance at March 31, 1997............................... $3.50-$6.00 92,000
=========== =======
</TABLE>
The option exercise price is based on the Board of Directors' estimate of
fair market value at the date of grant. Of the 92,000 options outstanding at
March 31, 1997, 58,000 are currently exercisable at prices ranging from $3.50-
$6.00 per share. The weighted average exercise price at March 31, 1997 was
$4.57.
As consideration for the options exercised by the Company's Directors during
the years ended March 31, 1995 and 1996, the Company received promissory notes
with interest payable annually at 8%. The principal is payable at the earlier
of (i) 3 years from the date of the note, (ii) 30 days after the holder is no
longer on the Board of Directors, or (iii) 90 days after the death of the
holder. The notes are reflected as a reduction of stockholders' equity.
The Company applies APB Opinion No. 25 in accounting for stock option plans.
Accordingly, no compensation expense has been recognized as the option
exercise price at least equals the estimated fair value of the common stock on
the date of grant. There were no options granted for the year ended March 31,
1997.
F-36
<PAGE>
NOW TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
YEARS ENDED MARCH 31, 1995, 1996, AND 1997
If compensation cost for employee stock options granted in 1996 had been
determined based on the fair value at the grant date, consistent with the
methods provided in SFAS No. 123, the Company's net income and earnings per
share would have been as follows:
<TABLE>
<CAPTION>
YEAR ENDED
MARCH 31,
-----------------
1996 1997
-------- --------
<S> <C> <C>
Net income:
As reported........................................... $946,613 $185,548
Pro forma............................................. 939,907 176,263
Income per share:
As reported:
Basic............................................... $ 0.52 $ 0.10
Diluted............................................. 0.51 0.10
Pro forma:
Basic............................................... 0.52 0.10
Diluted............................................. 0.51 0.09
</TABLE>
The fair value of each option grant is estimated on the grant data using the
Black-Scholes option-pricing model with the following assumptions: no dividend
yield or expected volatility; risk free interest rates ranging 6.35% to 6.48%,
and an expected life of 5 to 8 years.
The principal stockholders of the Company have entered into an agreement
providing for restrictions on the transfer of the shares of the Company. Any
principal stockholder desiring to sell or transfer his/her shares must first
offer the shares to the other principal stockholders on the same terms and
conditions as the selling stockholder proposes to sell the shares.
6. INCOME TAXES
The (provision) benefit for federal and state income taxes for the periods
presented are as follows:
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
-------------------------------
1995 1996 1997
--------- --------- ---------
<S> <C> <C> <C>
Current:
Federal.................................. $(581,000) $(515,000) $(133,000)
State.................................... (41,000) (35,000) (10,000)
--------- --------- ---------
(622,000) (550,000) (143,000)
Deferred, primarily federal................ (48,000) 6,000 167,000
--------- --------- ---------
$(670,000) $(544,000) $ 24,000
========= ========= =========
</TABLE>
The following is a reconciliation of the expected ordinary federal income
(tax) benefit (at the statutory rate) to the actual income (tax) benefit
provided:
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
------------------------------
1995 1996 1997
--------- --------- --------
<S> <C> <C> <C>
Expected federal income tax................. $(626,000) $(507,000) $(56,000)
State income tax, net of federal benefit.... (37,000) (31,000) (3,000)
Benefit of foreign sales corporation........ -- -- 50,000
Research and development credit............. -- -- 38,000
Other....................................... (7,000) (6,000) (5,000)
--------- --------- --------
$(670,000) $(544,000) $ 24,000
========= ========= ========
</TABLE>
F-37
<PAGE>
NOW TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
YEARS ENDED MARCH 31, 1995, 1996, AND 1997
Deferred income taxes are provided for the temporary differences between the
financial reporting basis and tax basis of the Company's assets and
liabilities. Deferred tax assets (liabilities) comprising the net deferred
taxes shown on the consolidated balance sheets are as follows:
<TABLE>
<CAPTION>
MARCH 31,
-------------------
1996 1997
--------- --------
<S> <C> <C>
Current:
Prepaid expenses deducted for income tax purposes... $ (5,000) $ (7,000)
Accruals not currently deductible................... 37,000 62,000
Inventory costs capitalized for income tax
purposes........................................... 57,000 82,000
--------- --------
$ 89,000 $137,000
========= ========
Noncurrent:
Excess of tax over depreciation and amortization.... $(120,000) $(85,000)
Net operating loss carryforward..................... 3,000 --
Inventory and other reserves........................ -- 36,000
Research and development credit carryforward........ -- 38,000
Alternative minimum tax credit carryforward......... -- 13,000
--------- --------
$(117,000) $ 2,000
========= ========
</TABLE>
State income taxes currently payable for the years ended March 31, 1996 and
1997 were reduced by net operating loss carryforwards. At March 31, 1997, the
Company had no state net operating loss carryforwards.
7. MAJOR CUSTOMERS AND MARKETS
A summary of the Company's significant customers for the years ended March
31, 1995, 1996, and 1997 are as follows:
<TABLE>
<CAPTION>
1995 1996 1997
---- ---- ----
<S> <C> <C> <C>
Customer A.................................................... 7% 12% 15%
Customer B.................................................... 12% 7% 12%
Customer C.................................................... 18% 14% 11%
Customer D.................................................... 10% 10% 7%
</TABLE>
Sales to companies located in the United States and in countries on the
Pacific Rim accounted for 59% and 39% of total sales in 1995, 66% and 32% in
1996, and 57% and 41% in 1997, respectively. The remainder of sales were to
companies located in Europe.
8. SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash (received) paid was as follows:
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
----------------------------
1995 1996 1997
-------- -------- --------
<S> <C> <C> <C>
Interest received............................ $(41,045) $(98,420) $(47,244)
Income taxes paid............................ 450,500 844,323 83,870
Interest paid................................ -- 110,292 138,918
</TABLE>
F-38
<PAGE>
NOW TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
YEARS ENDED MARCH 31, 1995, 1996, AND 1997
Noncash activity was as follows:
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
----------------------
1995 1996 1997
------- ------ -------
<S> <C> <C> <C>
Issuance of note payable to bank for leasehold
improvements....................................... -- -- $28,219
Stockholder receivable from issuance of common stock
upon exercise of stock options..................... $40,000 $8,000 --
</TABLE>
9. SUBSEQUENT EVENT
Effective December 31, 1997, the Company adopted SFAS No. 128, "Earnings per
Share." Earnings per share amounts presented for 1995, 1996 and 1997 have been
restated for the adoption of SFAS No. 128. Basic earnings per share are
computed by dividing net income by the weighted average number of common
shares outstanding. Diluted earnings per share includes the effect of shares
which would be issuable upon the exercise of outstanding stock options,
reduced by the number of shares which are assumed to be purchased by the
Company from the resulting proceeds at the average market price during the
period, if dilutive.
<TABLE>
<CAPTION>
1995 1996 1997
---------- --------- ---------
<S> <C> <C> <C>
Numerator:
Net income.................................... $1,170,070 $946,613 $184,548
========== ========= =========
Denominator:
Denominator for basic earnings per share-
weighted average shares...................... 1,800,667 1,816,333 1,820,333
Dilutive effect of stock options.............. 32,916 35,084 53,334
---------- --------- ---------
Denominator for diluted earnings per share.... 1,833,583 1,851,417 1,873,667
---------- --------- ---------
Net income per share-basic...................... $ 0.65 $ 0.52 $ 0.10
========== ========= =========
Net income per share-assuming dilution.......... $ 0.64 $ 0.51 $ 0.10
========== ========= =========
</TABLE>
F-39
<PAGE>
NOW TECHNOLOGIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
(UNAUDITED)
<TABLE>
<CAPTION>
DECEMBER 31,
1997
------------
<S> <C>
ASSETS
Current assets:
Cash and cash equivalents....................................... $ 2,374,060
Trade accounts receivable....................................... 1,397,850
Inventories..................................................... 1,510,781
Prepaid expenses and other ..................................... 147,185
Deferred income taxes........................................... 137,000
-----------
Total current assets.......................................... 5,566,876
Property and equipment, at cost:
Deposits on equipment........................................... 129,605
Equipment....................................................... 6,029,242
Leasehold improvements.......................................... 745,879
-----------
6,904,726
Less accumulated depreciation and amortization.................. 2,391,771
-----------
4,512,955
Deferred income taxes............................................. 2,000
Other assets, primarily patents, less accumulated amortization of
$144,377......................................................... 174,247
-----------
$10,256,078
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable................................................ $ 172,329
Customer advances............................................... 35,550
Accrued expenses................................................ 725,325
Income taxes payable............................................ 106,516
Industrial revenue bond payable and current maturities of long-
term debt...................................................... 3,108,214
-----------
Total current liabilities..................................... 4,147,934
Long-term debt.................................................... 12,477
Stockholders' equity:
Undesignated stock, 1,000,000 shares authorized, none issued or
outstanding; Common Stock, par value $.01 per share, 4,000,000
shares authorized, 1,833,000 shares issued and outstanding..... 18,330
Additional paid-in capital...................................... 1,463,160
Retained earnings............................................... 4,692,177
-----------
6,173,667
Less stockholders' receivables.................................... 78,000
-----------
Total stockholders' equity.................................... 6,095,667
-----------
$10,256,078
===========
</TABLE>
See notes to unaudited condensed consolidated financial statements.
F-40
<PAGE>
NOW TECHNOLOGIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
DECEMBER 31,
-----------------------
1996 1997
---------- -----------
<S> <C> <C>
Sales................................................ $6,657,770 $11,696,662
Cost of sales........................................ 3,909,111 5,686,090
---------- -----------
Gross profit......................................... 2,748,659 6,010,572
Operating expenses:
Selling, general, and administrative............... 3,015,097 3,664,664
Research and development........................... 154,041 179,139
---------- -----------
3,169,138 3,843,803
---------- -----------
Operating (loss) income.............................. (420,479) 2,166,769
Other income (expense):
Interest income.................................... 25,776 65,126
Interest expense................................... (106,011) (91,259)
---------- -----------
Royalty income and other........................... 104,402 24,710
---------- -----------
24,167 (1,423)
---------- -----------
(Loss) income before income taxes.................... (396,312) 2,165,346
Benefit (provision) for income taxes................. 200,635 (757,871)
---------- -----------
Net (loss) income.................................... $ (195,677) $ 1,407,475
========== ===========
Net (loss) income per share--basic................... $ (0.11) $ 0.77
========== ===========
Net (loss) income per share--assuming dilution....... $ (0.11) $ 0.75
========== ===========
Weighted average shares outstanding--basic........... 1,820,111 1,829,444
========== ===========
Weighted average shares outstanding--assuming
dilution............................................ 1,820,111 1,869,188
========== ===========
</TABLE>
See notes to unaudited condensed consolidated financial statements.
F-41
<PAGE>
NOW TECHNOLOGIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
DECEMBER 31,
---------------------
1996 1997
--------- ----------
<S> <C> <C>
Cash flows from operating activities:
Net (loss) income...................................... $(195,677) $1,407,475
Adjustments to reconcile net (loss) income to net cash
provided by operating activities:
Depreciation and amortization......................... 635,112 729,124
Deferred income taxes................................. (15,000) --
Change in current assets and current liabilities:
(Increase) decrease in:
Trade accounts receivable........................... 104,462 66,865
Inventories......................................... 295,418 (389,566)
Prepaid and other expenses.......................... (42,227) 36,022
Increase (decrease) in:
Accounts payable.................................... (271,370) (142,135)
Accrued expenses.................................... 123,123 240,685
Income taxes payable................................ (279,505) 61,870
--------- ----------
Net cash provided by operating activities............ 354,336 2,010,340
Cash flows from investing activities:
Deposits on equipment................................. 56,174 58,195
Additions to property and equipment................... (203,326) (276,323)
Additions to other assets............................. (14,020) (28,622)
--------- ----------
Net cash used in investing activities............... (161,172) (246,750)
Cash flows from financing activities:
Payments under working capital line................... (150,000) --
Borrowings under working capital line................. 150,000 --
Payments of long-term debt............................ (100,000) (305,912)
Proceeds of stock issuances........................... 14,000 40,000
--------- ----------
Net cash used in financing activities............... (86,000) (265,912)
--------- ----------
Net increase in cash and cash equivalents............... 107,164 1,497,678
Cash and cash equivalents at beginning of period........ 818,593 876,382
--------- ----------
Cash and cash equivalents at end of period.............. $ 925,757 $2,374,060
========= ==========
</TABLE>
See notes to unaudited condensed consolidated financial statements.
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NOW TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. BASIS OF PRESENTATION
The condensed consolidated financial statements of NOW Technologies, Inc.
(the Company) as of December 31, 1997 and for the nine months ended December
31, 1996 and 1997 are unaudited. In the opinion of management, such unaudited
condensed consolidated financial statements include all adjustments,
consisting of only normal, recurring accruals, necessary for a fair
presentation thereof. The results of operations for any interim period are not
necessarily indicative of the results of operations for the year.
2. 1997 STOCK OPTION PLAN
On June 6, 1997, the Board of Directors of the Company approved and adopted
the 1997 Stock Option Plan (the 1997 Plan) to replace the 1987 Stock Option
Plan (the 1987 Plan) which expired under its original terms in February 1997.
The Company has reserved 350,000 common shares for options under this plan.
The options generally become exercisable in 25% increments on the four
anniversary dates following the date of grant.
Also, on June 6, 1997, the Company granted options to purchase 192,000
shares of common stock under the 1997 Plan to 23 employees and Directors. The
option price of $7 was based on the Board of Directors' estimate of fair
market value. At December 31, 1997, 77,669 of these options were exercisable.
3. SUBSEQUENT EVENT
On February 19, 1998, the Company entered into a definitive merger agreement
with ATMI, Inc. (ATMI) pursuant to which the Company would become a wholly-
owned subsidiary of ATMI in connection with a merger. The closing of the
merger agreement is subject to the approval of the stockholders of NOW and
appropriate government agencies and to the satisfaction of other customary
conditions. The merger is intended to be treated as a tax-free reorganization
and to be accounted for as a pooling of interests.
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APPENDIX A
MERGER AGREEMENT
EFFECTIVE DATE: February 19, 1998
PARTIES: ATMI, Inc.
7 Commerce Drive
Danbury, CT 06810-4169 ("Parent")
Glide Acquisition, Inc.
7 Commerce Drive
Danbury, CT 06810-4169 ("Subsidiary")
NOW Technologies, Inc.
10779 Hampshire Avenue South
Minneapolis, MN 55438 ("NOW")
RECITALS:
A. NOW is engaged in the business of manufacturing container and
dispensing systems for advanced purity chemicals used in the manufacture of
microelectronics.
B. Parent with its subsidiaries is engaged in the business of developing,
manufacturing and selling specialty thin film materials and delivery
systems, point-of-use environmental equipment and epitaxial processing
services for the semiconductor industry.
C. All of the issued and outstanding capital stock of Subsidiary is owned
by Parent.
D. The respective Boards of Directors of NOW, Parent and Subsidiary have
determined that it is in the respective best interests of NOW, Parent and
Subsidiary and their respective shareholders to combine their businesses
under common management and control. As a result, the parties mutually
desire that NOW be merged with Subsidiary with NOW being the surviving
corporation upon the terms and subject to the conditions set forth in this
Agreement.
E. The parties desire the merger of NOW with Subsidiary to be a tax-free
reorganization under the Internal Revenue Code of 1986, as amended, and for
such transaction to be accounted for as a pooling of interests.
AGREEMENT:
The parties hereto, each intending to be legally bound, agree as follows:
ARTICLE 1.
Definitions
As used herein, the following words and terms shall have the meanings set
forth below:
"Agreement" shall mean this Merger Agreement (together with all Exhibits and
Schedules hereto) as from time to time assigned, supplemented, modified,
amended, or restated or as the terms hereby may be waived.
"Ceiling Lower Limit" shall mean the Initial Price plus 15%.
"Ceiling Upper Limit" shall mean the Ceiling Lower Limit plus $2.50.
"Closing" has the meaning set forth in Section 2.4 below.
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"Closing Date" shall mean the date on which the Closing occurs.
"Closing Price" shall mean the average of the closing prices of Parent
Common Stock for the 20 trading day period ending the third trading day prior
to the Closing Date; provided, however, that if the Closing Price exceeds the
Ceiling Upper Limit, the Closing Price shall be deemed to be the Ceiling Upper
Limit, and if the Closing Price is less than the Floor Lower Limit, the
Closing Price shall be deemed to be the Floor Lower Limit.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Competing Transaction" shall mean any of the following (other than the
Merger): (i) any merger, consolidation, share exchange, business combination,
or other similar transaction involving NOW, (ii) any sale, lease, exchange,
mortgage, pledge, transfer or other disposition of the assets of NOW in a
single transaction or series of transactions not in the ordinary course of
business, (iii) any tender offer or exchange offer for shares of NOW Common
Stock, or (iv) any agreement to engage in any of the foregoing.
"DGCL" shall mean the Delaware General Corporation Law.
"Effective Time" shall mean the time that the Merger becomes effective
pursuant to Section 2.2 below.
"Environmental Laws" means the Comprehensive Environmental Response
Compensation and Liability Act ("CERCLA") as amended by the Superfund
Amendments and Reauthorization Act of 1986 ("SARA"), 42 U.S.C.(S)(S) 9601 et
seq.; the Federal Resource Conservation and Recovery Act of 1976 ("RCRA"), 42
U.S.C. (S)(S) 6901 et seq.; the Clean Water Act, 33 U.S.C. (S)(S) 1321 et
seq.; the Clean Air Act, 42 U.S.C. (S)(S) 7401 et seq., and any other federal,
state, county, local, foreign or other governmental statute, regulation, or
ordinance, as now in existence, that relates to or deals with employee safety
and human health, pollution, health or the environment including, but not
limited to, the use, generation, discharge, transportation, disposal,
recordkeeping, notification and reporting of Hazardous Materials (defined in
Section 4.16 below).
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended.
"Escrow Agent" shall mean State Street Bank and Trust Company or its
authorized successors and assigns pursuant to the Escrow Agreement.
"Escrow Agreement" shall mean the escrow agreement attached hereto as
EXHIBIT 9.5 which shall be executed and delivered by the parties thereto at
the Closing.
"Escrow Fund" shall mean the funds being held in escrow from time to time
pursuant to the Escrow Agreement.
"Floor Lower Limit" shall mean the Floor Upper Limit less $2.50.
"Floor Upper Limit" shall mean the Initial Price less 15%.
"Governmental Entity" shall mean any federal, state, local or foreign
governmental body, agency, official or authority (including courts,
administrative agencies, commissions, self-regulatory agencies or authorities
or other governmental authority or instrumentality).
"HSR Act" shall mean the Hart-Scott-Rodino Antitrust Improvements Act of
1976.
"Initial Price" shall mean the average of the closing prices of Parent
Common Stock for the 20 trading day period ending 10 trading days after the
filing of the Form S-1 with the Securities and Exchange Commission filed or to
be filed by Parent on or about the date hereof; provided, however, that
notwithstanding the foregoing, the Initial Price shall not be greater than
$31.50 nor less than $27.50.
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"Knowledge" shall mean knowledge of the executive management of NOW, Parent
or Subsidiary, as the case may be, after making reasonable inquiry of the
knowledge of officers or senior management employees having responsibility for
those operations or transactions to which such representation and warranty
relates. An individual will be deemed to have "knowledge" of a particular fact
or other matter if:
(i) such individual is actually aware of such fact or other matter; or
(ii) a reasonably prudent individual could be expected to discover or
otherwise become aware of such fact or other matter in the course of making
reasonable inquiry of the knowledge of other officers or employees having
general responsibility for those operations or transactions to which such
representation and warranty relates.
"Material Adverse Effect" when used with respect to any entity shall mean a
material adverse effect on the business, assets, liabilities, financial
condition or results of operations of such entity and its subsidiaries,
individually or in the aggregate.
"MBCA" shall mean the Minnesota Business Corporation Act.
"Merger" shall mean the merger of NOW and Subsidiary more fully described
herein.
"NOW" shall mean NOW Technologies, Inc., a Minnesota corporation.
"NOW Common Stock" shall mean NOW's Common Stock, par value $.01 per share.
"NOW Options" has the meaning set forth in Section 3.6 below.
"NOW Share Price" shall mean $21.9372.
"NOW Shares" shall mean the shares of NOW Common Stock outstanding as of the
effective time.
"Parent" shall mean ATMI, Inc., a Delaware corporation.
"Parent Common Stock" shall mean Parent's Common Stock, par value $.01 per
share.
"Product Liability Claims" has the meaning set forth in Section 4.12 below.
"SEC" shall mean the Securities and Exchange Commission.
"Shareholders" shall mean all of the shareholders of NOW.
"Shareholders' Meeting" shall mean the meeting of the shareholders of NOW to
be called to approve the Merger and this Agreement.
"Subsidiary" shall mean Glide Acquisition, Inc., a Delaware corporation.
"Surviving Corporation" shall mean the corporation that is the surviving
corporation in the Merger.
ARTICLE 2.
The Merger
2.1) The Merger. Upon the terms and subject to the conditions set forth in
this Agreement, at the Effective Time, Subsidiary shall be merged with and
into NOW in accordance with the MBCA and the DGCL, whereupon the separate
existence of Subsidiary shall cease, and NOW shall continue as the Surviving
Corporation.
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2.2) Articles of Merger; Effective Time. As soon as practicable after
satisfaction or, to the extent permitted hereunder, waiver of all conditions
to the Merger set forth in Article 7 below, the parties hereto shall cause the
Merger to be consummated by filing Articles of Merger with the Secretary of
State of the State of Minnesota, and a Certificate of Merger with the
Secretary of State of the State of Delaware and making all other filings or
recordings required by the MBCA and the DGCL in connection with the Merger and
the transactions contemplated by this Agreement. The Merger shall become
effective (a) at the later of such time as the Articles of Merger are duly
filed with the Secretary of State of the State of Minnesota or the Certificate
of Merger is duly filed with the Secretary of State of the State of Delaware
or (b) at such later time as may be agreed by the parties in writing and
specified in the Articles of Merger or the Certificate of Merger.
2.3) Effect of Merger. From and after the Effective Time, the Surviving
Corporation shall possess all the rights, privileges, powers and franchises
and be subject to all of the restrictions, disabilities and duties of NOW and
Subsidiary, all as provided under the MBCA and the DGCL.
2.4) Closing. The closing of the Merger will take place at 10:00 a.m. on a
date to be specified by the parties, which shall be no later than the second
business day after satisfaction or waiver of the conditions set forth in
Article 7 at the offices of Shipman & Goodwin LLP in Hartford, Connecticut,
unless another date, time or place is agreed to in writing by the parties (the
"Closing").
2.5) Articles of Incorporation; By-laws.
(a) The articles of incorporation of the Surviving Corporation shall be
the articles of incorporation of NOW, as amended in connection with the
Merger to read in their entirety (other than with respect to the name of
the corporation) as the certificate of incorporation of Subsidiary in
effect immediately prior to the Effective Time, with such changes as Parent
may determine are necessary or proper to comply with Minnesota law, until
thereafter amended as provided by law.
(b) The by-laws of the Surviving Corporation shall be the by-laws of NOW,
as amended in connection with the Merger to read in their entirety (other
than with respect to the name of the corporation) as the by-laws of
Subsidiary in effect immediately prior to the Effective Time, with such
changes as Parent may determine are necessary or proper to comply with
Minnesota law, until thereafter amended as provided by law.
2.6) Directors and Officers. The directors of Subsidiary immediately prior
to the Effective Time and Terry Nagel shall be the initial directors of the
Surviving Corporation, each to hold office in accordance with the articles of
incorporation and by-laws of the Surviving Corporation, and the officers of
NOW immediately prior to the Effective Time and Daniel P. Sharkey shall be the
initial officers of the Surviving Corporation, in each case until their
respective successors are duly elected or appointed and qualified.
ARTICLE 3.
Conversion Of Securities; Exchange Of Certificates
3.1) Conversion of Shares. At the Effective Time, by virtue of the Merger
and without any action on the part of the holder thereof:
(a) The shares of Subsidiary common stock which shall be outstanding
immediately prior to the Effective Time shall be converted into a number of
shares of common stock of the Surviving Corporation equal to the number of
shares of common stock of Subsidiary then outstanding.
(b) Each NOW Share outstanding immediately prior to the Effective Time
shall, at the Effective Time, by virtue of the Merger and without any
action on the part of the holder thereof, be converted into the right to
receive that fractional share of Parent Common Stock determined by
multiplying one share of Parent Common Stock times the Exchange Ratio.
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(c) All per share prices or amounts referred to in this Agreement shall
be appropriately adjusted to reflect the effect of any stock splits, stock
dividends, stock combinations or similar transactions.
3.2) Exchange Ratio. The Exchange Ratio shall be determined as follows:
(a) If the Closing Price is less than or equal to the Ceiling Lower Limit
and greater than or equal to the Floor Upper Limit, the Exchange Ratio
shall be equal to the NOW Share Price divided by the Initial Price.
(b) If the Closing Price is less than or equal to the Ceiling Upper Limit
and greater than the Ceiling Lower Limit, the Exchange Ratio shall be equal
to the NOW Share Price plus 15% divided by the Closing Price.
(c) If the Closing Price is less than the Floor Upper Limit and greater
than or equal to the Floor Lower Limit, the Exchange Ratio shall be equal
to the NOW Share Price less 15% divided by the Closing Price.
(d) If the Closing Price is greater than the Ceiling Upper Limit, the
Exchange Ratio shall be equal to the NOW Share Price plus 15% divided by
the Ceiling Upper Limit.
(e) If the Closing Price is less than the Floor Lower Limit, the Exchange
Ratio shall be equal to the NOW Share Price less 15% divided by the Floor
Lower Limit.
(f) Notwithstanding any other provision of this Section 3.2, in the event
that before the Effective Time an announcement is made with respect to a
business combination involving the acquisition of Parent or a substantial
portion of Parent's assets, the Closing Price shall mean the average of the
closing prices of Parent Common Stock for the 20 trading day period ending
10 days prior to the public announcement of the business combination.
3.3) Stock Options. At Closing, Parent shall assume all of the options to
purchase NOW Common Stock outstanding as of the Effective Time (the "NOW
Options"). Each of the NOW Options shall be converted without any action on
the part of the holder thereof into an option to purchase shares of Parent
Common Stock as of the Effective Time under Parent's 1997 Stock Plan. The
holder of a NOW Option shall be entitled to purchase from Parent up to a
number of whole shares of Parent Common Stock equal to the product of (i) the
number of shares of NOW Common Stock subject to such NOW Option multiplied by
(ii) the Exchange Ratio, at a price per share of Parent Common Stock
determined by dividing the exercise price per share of NOW Common Stock
provided for in such NOW Option by the Exchange Ratio. The assumption and
conversion of the NOW Options as provided herein shall not give the holders of
such NOW Options additional benefits which they did not have immediately prior
to the Effective Time or relieve the holders of any obligations or
restrictions applicable to their NOW Options or the shares obtainable upon
exercise of the NOW Options. Parent shall reserve out of its authorized but
unissued shares of Parent Common Stock sufficient shares to provide for the
exercise of the NOW Options.
3.4) Exchange of NOW Shares.
(a) Immediately following the Effective Time, each record holder (a
"Shareholder") of any certificate or certificates which, immediately prior
to the Effective Time, represented outstanding NOW Shares (the
"Certificates") whose NOW Shares were converted into the right to receive
shares of Parent Common Stock shall be entitled to surrender his, her or
its Certificates to Parent for cancellation in exchange for the shares of
Parent Common Stock into which such NOW Shares have been converted, ninety-
five percent (95%) of which amount shall be issued to the Shareholder
thereof upon the surrender of the Certificates in accordance with this
Section 3.4, and five percent (5%) of which amount (the "Indemnification
Escrow Shares") shall be held by the Escrow Agent pursuant to the Escrow
Agreement. If any Shareholder shall fail to surrender his, her or its
Certificates promptly following the Effective Time, the Parent shall send
to such Shareholder notice of the Merger and instructions for use in
effecting the surrender of the Certificates in exchange for the shares of
Parent Common Stock into which such NOW Shares have been converted, and the
holder of such Certificates shall be entitled to receive in
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<PAGE>
exchange therefor solely the shares of Parent Common Stock into which such
NOW Shares have been converted less any applicable stock transfer taxes. No
interest shall be paid or accrued for the benefit of holders of the
Certificates on the consideration payable upon the surrender of the
Certificates. It shall be a condition of exchange that the Certificate so
surrendered shall be properly endorsed or otherwise in proper form for
transfer.
(b) From and after the Effective Time, there shall be no transfers on the
stock transfer books of the Surviving Corporation of the NOW Shares which
were outstanding immediately prior to the Effective Time. If, after the
Effective Time, Certificates are presented to the Surviving Corporation for
exchange, they shall be canceled and exchanged for the shares of Parent
Common Stock into which such NOW Shares have been converted in accordance
with the procedures set forth in this Section.
(c) At or prior to the Effective Time, Parent shall deliver to the Escrow
Agent certificates evidencing the Indemnification Escrow Shares to be held
in escrow in accordance with the terms of the Escrow Agreement, together
with appropriate stock powers executed by each Shareholder, to be held in
escrow in accordance with the terms of the Escrow Agreement.
(d) Notwithstanding the foregoing, any NOW Shares issued and outstanding
immediately prior to the Effective Time which are held by Shareholders who
have dissented from the Merger and have demanded appraisal rights as
provided by the MBCA (the "Dissenting Shareholders") shall not be converted
into shares of Parent Common Stock in the manner contemplated by Section
3.1(b) above, and the rights of holders of the Dissenting Shareholders
shall be governed by the applicable provisions of the MBCA.
3.5) No Further Rights in NOW Shares. All shares of Parent Common Stock
received by any Shareholder pursuant to this Agreement shall be deemed to have
been delivered and received in full satisfaction of all rights pertaining to
such Shareholder's NOW Shares. At the Effective Time, the holders of
Certificates representing outstanding NOW Shares shall cease to have any
rights with respect to such shares (other than such rights as they may have as
dissenting shareholders under the MBCA), and their sole right shall be to
receive the shares of Parent Common Stock into which such NOW Shares have been
converted. Dissenting Shareholders shall have the rights accorded to them by
the MBCA.
3.6) No Fractional Securities. No fractional shares of Parent Common Stock
shall be issuable by Parent to any Shareholder in connection with the Merger.
In lieu of any such fractional shares, each Shareholder who would otherwise
have been entitled to receive a fraction of a share of Parent Common Stock
shall be entitled to receive instead an amount in cash equal to such
fractional share multiplied by the Closing Price.
3.7) Tax and Accounting Treatment. The parties intend that the Merger will
be treated as a reorganization within the meaning of Section 368 of the Code
and a pooling of interests for accounting purposes.
ARTICLE 4.
Representations And Warranties Of Glide
NOW makes the following representations and warranties to Parent and
Subsidiary with the intention that Parent and Subsidiary may rely upon the
same, notwithstanding any investigation by Parent or Subsidiary or on their
behalf:
4.1) Organization; Permits. NOW is a corporation duly organized, validly
existing and in good standing under the laws of the state of Minnesota and has
all requisite power and authority, corporate and otherwise, to own its
properties and assets and conduct its business as it is now being conducted.
NOW has all business licenses, permits and approvals necessary to conduct its
business as presently conducted, except where the failure to have such permit
or approval does not have a Material Adverse Effect. NOW conducts its business
under the trade names and other assumed names set forth on Exhibit 4.1. The
current officers and directors of NOW and each of its subsidiaries are set
forth on Exhibit 4.1.
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4.2) Qualification. NOW is qualified to do business and in good standing as
a foreign corporation in all states in which qualification is required by the
nature of its business and in which the failure to so qualify would have a
Material Adverse Effect on NOW.
4.3) Corporate Authority. NOW has all requisite power and authority to
execute, perform and carry out the provisions of this Agreement. NOW has taken
all requisite corporate action authorizing and empowering NOW to enter into
this Agreement and to consummate the Merger. This Agreement constitutes the
legal, valid and binding obligation of NOW enforceable against it in
accordance with the terms hereof. NOW is not subject to any charter, mortgage,
lien, lease, agreement, contract, instrument, law, rule, regulation, order,
judgment or decree, or any other restriction of any kind or character, which
would prevent or inhibit the consummation of the Merger.
4.4) Capitalization. The authorized capital stock of NOW consists of
4,000,000 shares of NOW Common Stock, $.01 par value, and 1,000,000
undesignated shares. As of the date of this Agreement, there are outstanding
1,833,000 shares of NOW Common Stock and no other shares of capital stock of
NOW. As of the date hereof, all persons having record ownership of shares of
the capital stock of NOW or having any right to purchase, acquire or obtain
any of the capital stock of NOW are as set forth on Exhibit 4.4. All
outstanding shares of NOW Common Stock have been duly authorized and validly
issued and are fully paid and nonassessable and were issued in compliance with
all applicable federal and state securities laws. As of the date of this
Agreement, there are options to acquire 264,000 shares of NOW Common Stock
outstanding. Except as set forth in this Section 4.4, there are outstanding
(a) no shares of NOW Common Stock or other voting securities of NOW, (b) no
securities of NOW convertible into or exchangeable for shares of NOW Common
Stock or voting securities of NOW and (c) no options, warrants or other rights
to acquire from NOW, and no obligation of NOW to issue, any capital stock,
voting securities or securities convertible into or exchangeable for capital
stock or voting securities of NOW. There are no outstanding obligations of NOW
to repurchase, redeem or otherwise acquire any NOW Common Stock. To NOW's
Knowledge, no officer, director, or Shareholder of NOW would be unable to give
the representation that none of the events or circumstances described in Rule
262 of Regulation A under the Securities Act of 1933, as amended (the
"Securities Act") have occurred.
4.5) Subsidiaries, Joint Ventures or Partnerships. Except as set forth on
Exhibit 4.5 hereto, NOW does not have any subsidiaries, and NOW is not a
shareholder, partner or joint venturer with any other person or legal entity.
4.6) Financial Statements.
(a) Financial Statements. NOW has furnished Parent a true and complete
copy of its audited balance sheets and statements of income for its fiscal
years ended March 31, 1996 and 1997 and has furnished internally-prepared
interim financial statements for the 9-month period ending December 24,
1997 (collectively the "Financial Statements"). The Financial Statements
have been prepared in conformance with generally accepted accounting
principles ("GAAP") applied on a basis consistent with prior periods, and
fairly present in all material respects the financial condition of NOW as
of the represented dates thereof and the results of NOW's operations for
the periods covered thereby. For purposes of this Agreement, the Financial
Statements shall be deemed to include any notes thereto. Except as set
forth in Exhibit 4.6(a), neither NOW nor any subsidiary has, nor at the
Effective Time will have, any liabilities or obligations, either absolute,
accrued, contingent or otherwise, which individually or in the aggregate
are material to the financial condition and business of NOW or any
subsidiary and which (i) have not been reflected in the Financial
Statements, (ii) have not been described in this Agreement or in any of the
Exhibits hereto, or (iii) have been incurred since December 24, 1997, other
than in the ordinary course of its business consistent with past practice.
(b) NOW's Books and Records. NOW's books of account and records
(including customer order files, employment records and production and
manufacturing records) are complete, true and correct in all material
respects.
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(c) No Adverse Changes. Since December 24, 1997 and through the date
hereof, there has not occurred or arisen (whether or not in the ordinary
course of business) any Material Adverse Effect with respect to NOW, and
NOW has not (i) declared any dividend or made any payment or other
distribution in respect of any shares of its capital stock, (ii) acquired
or disposed of any shares of its capital stock or granted any options,
warrants or other rights to acquire or convert any obligation into any
shares of its capital stock, (iii) entered into any material transaction
with any officer, director, employee or any known relative thereof or any
entity in which such person has an interest, except (A) the payment of
rent, salaries, wages and expense reimbursement in the ordinary course of
business, and (B) termination agreements pursuant to this Agreement, (iv)
incurred any material obligation or liability (contingent or otherwise),
except for (A) this Agreement and NOW's agreement with BT Alex. Brown
Incorporated, (B) normal trade and other obligations incurred in the
ordinary course of business consistent with past practice and (C)
obligations under contracts, agreements and leases incurred in the ordinary
course of business consistent with past practice, the performance of which
has not and will not, individually or in the aggregate, have a Material
Adverse Effect on NOW, (v) discharged or satisfied any material lien or
other encumbrance or paid any material obligation or liability (fixed or
contingent), except in the ordinary course of business or as contemplated
by this Agreement, (vi) mortgaged, pledged or subjected to any lien or
other encumbrance any of its material assets (whether tangible or
intangible), (vii) sold, assigned, transferred, conveyed, leased or
otherwise disposed of or agreed to sell, lease or otherwise dispose of any
of its material assets except for sales of inventory or other assets for
fair consideration in the ordinary course of business or as contemplated by
this Agreement, (viii) canceled or compromised any material debt or claim,
except in the ordinary course of business, (ix) waived or released any
material rights, except for waivers or releases made in the ordinary course
of business consistent with past practice, (x) made any single capital
expenditure in excess of $50,000, or entered into any commitment therefor,
or (xi) suffered any material casualty loss or damage, whether or not
covered by insurance, or any adverse ruling, judgment or award, whether or
not amounts were reserved on NOW's books, which would have a Material
Adverse Effect on NOW.
4.7) Tax Reports and Returns.
(a) Except as set forth on Exhibit 4.7(a), (i) all Returns (defined in
Subsection 4.7(b) below) in respect of Taxes (defined in Subsection 4.7(b)
below) required to be filed with respect to NOW (including any consolidated
federal income tax return and any state Tax return that includes NOW or any
of its related companies on a consolidated, combined or unitary basis) have
been timely filed, none of such Returns contains, or is required to
contain, a disclosure statement under section 6661 or 6662 of the Code or
any similar provision of state, local or foreign law, and no extension of
time within which to file any such Return has been requested, which Return
has not since been timely filed; (ii) all Taxes whether or not shown on
such Returns have been timely paid and all payments of estimated Taxes
required to be made with respect to NOW under section 6655 of the Code or
any comparable provision of state, local or foreign law have been made;
(iii) all such Returns are true, correct and complete in all material
respects; (iv) no adjustment relating to any of such Returns has been
proposed formally or informally by any Tax authority; (v) there are no
outstanding subpoenas or requests for information with respect to any
Returns of NOW or the Taxes reflected on such Returns; (vi) there are no
pending or to NOW's Knowledge threatened actions or proceedings for the
assessment or collection of Taxes against NOW or any corporation that was
included in the filing of a Return with NOW on a consolidated, combined or
unitary basis; (vii) no consent under section 341(f) of the Code has been
filed with respect to NOW; (viii) there are no Tax liens on any assets of
NOW except liens for Taxes not yet due and payable or being contested in
good faith by appropriate proceedings for which adequate reserves have been
established; (ix) no acceleration of the vesting schedule for any property
that is nonvested within the meaning of the regulations under section 83 of
the Code will occur in connection with the transactions contemplated by
this Agreement; (x) NOW is not now nor has it at any time been subject to
any accumulated earnings tax or personal holding company tax; (xi) NOW owes
no amounts pursuant to any written or unwritten Tax sharing agreement or
arrangement and will not have any liability after the date hereof in
respect of any written or unwritten Tax sharing agreement or arrangement
executed or agreed
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to prior to the date hereof; (xii) all Taxes required to be withheld,
collected or deposited by NOW have been timely withheld, collected or
deposited and, to the extent required, have been paid to the relevant Tax
authority; (xiii) any adjustment of Taxes of NOW made by the Internal
Revenue Service that is required to be reported to any state, local or
foreign Tax authority has been so reported and any additional Tax due as a
result thereof has been paid in full; (xiv) there are no outstanding
waivers or agreements extending the statute of limitations for any period
with respect to any Tax to which NOW may be subject; (xv) to NOW's
Knowledge there are no requests for rulings or information currently
outstanding that could affect the Taxes of NOW, or any similar matters
pending with respect to any Tax authority; (xvi) no Tax authority has
proposed reassessments of any property owned or leased by NOW that could
increase the amount of any Tax to which NOW would be subject; (xvii) no
power of attorney that is currently in force has been granted with respect
to any matter relating to Taxes that could affect NOW; and (xviii) with
respect to each Return that has been examined by the relevant Tax
authority, such examination is closed and final without any adjustment
having been made to such Return (including adjustments not affecting the
amount of Tax due with respect to such Return).
(b) For purposes of this Agreement, "Tax" or "Taxes" shall mean any and
all taxes, charges, fees, levies, and other governmental assessments and
impositions of any kind, payable to any federal, state, local or foreign
governmental entity or taxing authority or agency, including, without
limitation, (i) income, franchise, profits, gross receipts, minimum,
alternative minimum, estimated, ad valorem, value added, sales, use,
service, real or personal property, capital stock, license, payroll,
withholding, disability, employment, social security, workers'
compensation, unemployment compensation, utility, severance, production,
excise, stamp, occupation, premiums, windfall profits, transfer and gains
taxes, (ii) customs duties, imposts, charges, levies or other similar
assessments of any kind, and (iii) interest, penalties and additions to tax
imposed with respect thereto; and "Returns" shall mean any and all returns,
reports, and information statements with respect to Taxes required to be
filed with the Internal Revenue Service or any other Governmental Entity or
Tax authority or agency, whether domestic or foreign including, without
limitation. consolidated, combined and unitary tax returns. For the
purposes of this Section 4.7, references to NOW shall include former
subsidiaries of NOW identified on Exhibit 4.7(b), if any, for the periods
during which any such subsidiaries were owned, directly or indirectly, by
NOW.
4.8) Assets. NOW is the owner of or otherwise has the right to use all
assets material to the conduct of its business as now conducted and as
reflected on the Financial Statements. NOW holds title to all assets owned by
it free and clear of all liens, charges, encumbrances or third party claims or
interests of any kind whatsoever, except as disclosed in Exhibit 4.8 hereto.
The assets of NOW, including real, personal and mixed, tangible and
intangible, necessary or useful to the operation of its business (the
"Assets") are in good condition and repair, ordinary wear and tear excepted,
and suitable for the uses intended. Except as disclosed in Exhibit 4.8 hereto,
(i) the Assets comply with and are operated in conformity with all applicable
laws, ordinances, regulations, orders, permits and other requirements relating
thereto adopted or currently in effect; (ii) the leases and other agreements
or instruments under which NOW holds, leases, subleases or is entitled to the
use of any of the Assets are in full force and effect, and all rentals,
royalties or other payments payable thereunder have been duly paid or provided
for by adequate reserves; and (iii) no default or event of default by NOW
exists, and no event which, with notice or lapse of time or both, would
constitute a default by NOW, has occurred and is continuing, under the terms
or provisions of any such lease, agreement or other instrument or under the
terms or provisions of any agreement to which any of such Assets is subject,
nor has NOW received notice of any claim of such default.
4.9) Intellectual Property.
(a) Exhibit 4.9(a) contains an accurate and complete list of: (i) all
patents, applications for patents, registrations of trademarks (including
service marks) and applications therefor, registrations of copyrights and
applications therefor that are owned by NOW and that are part of the
business of NOW as presently conducted; (ii) all other intellectual
property rights that are owned by NOW and that are material to the conduct
of business as presently conducted; (iii) all unexpired licenses relating
to such of NOW's intellectual property rights that have been granted to or
by NOW and that are material to the conduct of
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the business of NOW as presently conducted; and (iv) all other agreements
relating to intellectual property rights that are material to the conduct
of the business of NOW as presently conducted (collectively, items (i)-(iv)
are referred to as "Intellectual Property Rights").
(b) NOW owns and has the right to use, and license others to use, all
Intellectual Property Rights that are material to the conduct of the
business of NOW as presently conducted, and such ownership and right to
use, and license of others to use, are free and clear of, and without
liability under, all liens and security interests of third parties. Such
ownership and right to use, and license of others to use, are free and
clear of, and without liability under, all claims and rights of third
parties that, if determined to be legally protectable, could have a
Material Adverse Effect.
(c) NOW has taken reasonable steps sufficient to safeguard and maintain
the secrecy and confidentiality of, and its proprietary rights in, the
unpatented know-how, technology, proprietary processes, formulae, and other
information that is material to the conduct of the business of NOW as
presently conducted (the "Proprietary Information"). Without limiting the
generality of the foregoing, NOW has obtained confidentiality and
inventions assignment agreements from all of NOW's past and present
employees and independent contractors involved in the creation or
development of Intellectual Property Rights and Proprietary Information
including, without limitation, from all employees and contractors who are
inventors, authors, creators or developers of Intellectual Property Rights
that are material to the conduct of the business as presently conducted. To
NOW's Knowledge, Exhibit 4.9(c) lists all nondisclosure agreements to which
NOW is a party or by which it is bound.
(d) Except as set forth on Exhibit 4.9(d) and except for payments made
with respect to patents and patent applications, there are no royalties,
honoraria, fees or other payments payable by NOW to any person by reason of
the ownership, use, license, sale or disposition of any Intellectual
Property Right or any Proprietary Information.
(e) Except as set forth on Exhibit 4.9(e), NOW has not received notice
that NOW is infringing in the conduct of the business upon the right or
claimed right of any other party with respect to any Intellectual Property
Rights or Proprietary Information, nor does NOW have Knowledge of any
alleged or claimed infringement by any product or process manufactured,
used, sold or under development by or for NOW in the conduct of the
business of NOW as presently conducted.
(f) To NOW's Knowledge, the Intellectual Property Rights and Proprietary
Information are free of any unresolved ownership disputes with respect to
any third party, and there is no unauthorized use, infringement or
misappropriation of any of such Intellectual Property Rights or Proprietary
Information by any third party, including any employee or former employee
of NOW.
(g) For purposes of this Section 4.9, "use" with respect to intellectual
property rights includes make, reproduce, display or perform (publicly or
otherwise), prepare derivative works based on, sell, distribute, disclose
and otherwise exploit such intellectual property rights and products
incorporating or subject to such intellectual property rights.
4.10) Agreements, Contracts and Commitments.
(a) Material Contracts. Exhibit 4.10(a) hereto contains an accurate and
complete list of all agreements, contracts, leases and commitments written
or oral to which NOW is a party or is bound and which involve more than
$50,000 singly or $100,000 in the aggregate or which is a (i) consulting
agreement not terminable on sixty (60) days or less notice involving the
payment of more than $50,000 per annum, (ii) joint venture agreement, (iii)
noncompetition or similar agreement that restricts NOW from engaging in a
line of business, (iv) agreement with any executive officer or other
employee of NOW the benefits of which are contingent, or the terms of which
are materially altered, upon the occurrence of a transaction involving NOW
of the nature contemplated by this Agreement, (v) agreement with respect to
any executive officer of NOW or any subsidiary providing any term of
employment or compensation guaranty in excess of $50,000 per annum, (vi)
agreement or plan, including any stock option plan, stock appreciation
rights plan, restricted stock plan or stock purchase plan, any of the
benefits of which will be increased, or the vesting of the benefits of
which will be accelerated, by the
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occurrence of any of the transactions contemplated by this Agreement or the
value of any of the benefits of which will be calculated on the basis of
any of the transactions contemplated by this Agreement, (vii) (A) any
agreement providing for disposition of any line of business, material
assets or securities of NOW, (B) any agreement with respect to the
acquisition of any line of business, material assets or securities of any
other business, or (C) any agreement of merger or consolidation or letter
of intent with respect to the foregoing, or (viii) any agreement to
indemnify any other party with respect to an adverse environmental
condition.
(b) Union and Employment Contracts and Other Employment Matters.
(i) Except as set forth in Exhibit 4.10(b) hereto, NOW is not a party to
any collective bargaining agreement or any other written employment
agreement, nor is NOW a party to any other contract or understanding (oral
or written) that contains any severance pay liabilities or obligations,
except for accrued, unused vacation pay or accrued and unused sick leave
pay. Exhibit 4.10(b) sets forth a list of the names, employment status,
location of employment, and rates of compensation (including salaries,
wages, commissions and bonuses) of all employees of NOW. Except as
described in Exhibit 4.10(b), NOW has no written or oral contract of
employment with any employee of NOW, and NOW is not a party to or subject
to any collective bargaining agreement nor has NOW been a party to or
subject to any collective bargaining agreement or collective bargaining
plan during the last five (5) years. Except as described in Exhibit
4.10(b), NOW is not a party to any pending nor, to NOW's Knowledge,
threatened labor dispute affecting the business of NOW. NOW has complied in
all material respects with all applicable foreign, federal, state and local
laws, ordinances, rules and regulations and requirements relating to the
employment of labor, including, but not limited to, the provisions thereof
relative to wages, hours, collective bargaining, drug testing, personnel
policies and practices, payment of Social Security, unemployment and
withholding taxes, and equal opportunity employment. NOW is not liable for
any arrears of wages or any taxes or penalties for failure to comply with
any of the foregoing. Except as set forth in Exhibit 4.10(b), NOW has not
received notice from any employee earning a base salary in excess of
$40,000 that such employee is terminating his or her employment with NOW,
nor to NOW's Knowledge, does any such employee intend to terminate his or
her employment with NOW.
(ii) Except as set forth in Exhibit 4.10(b) hereto, NOW has no, and on
the Closing Date will not have, any obligations to NOW's directors,
officers, employees or agents other than obligations arising in the
ordinary course of business on account of wages, salaries and commissions
for prior services performed or business produced.
(c) Breach. Except as disclosed in Exhibit 4.10(c) hereto, NOW has performed
all material obligations required to be performed by NOW to date under any
material contract, commitment or arrangement of any kind to which NOW is a
party or by which NOW is bound, including those listed on Exhibit 4.10(a); and
neither NOW nor to NOW's Knowledge, any other party is in default under any
material contract, commitment or arrangement of any kind to which NOW is a
party or by which NOW is bound, including those listed on Exhibit 4.10(a). To
NOW's Knowledge, except as disclosed in Exhibit 4.10(c), no event has occurred
which after the giving of notice or the lapse of time or otherwise would
constitute a default under, or result in a breach of by NOW or any other
party, any material contract, commitment, or arrangement to which NOW is a
party or by which NOW is bound, including those listed on Exhibit 4.10(a).
(d) Copies of Contracts; Terms and Binding Effect. True, complete and
correct copies of all written contracts, commitments, understandings and other
documents referred to in the Exhibits have been delivered or made available to
Parent; there are no amendments to or modifications of, or agreements of the
parties relating to, any such contracts, commitments, and understandings which
have not been delivered or made available to Parent; and each such contract,
commitment, or understanding, as amended, is valid and binding on the parties
to it in accordance with its respective terms.
4.11) Contracts with Related Parties. Except as disclosed in Exhibit 4.11
hereto, there are no material agreements or contracts between NOW and any of
its officers, directors or shareholders. Without limiting the
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generality of the foregoing, as of the date hereof, none of the Shareholders
or any other present officer or director of NOW, or any person related to,
controlling, controlled by or under common control with any of the foregoing
(i) has any material direct or indirect interest in any entity which does
business with NOW, (ii) has any direct or indirect interest in any property,
asset or right which is used by NOW in the conduct of its business, or (iii)
has any contractual relationship with NOW other than such relationships which
occur from being an employee, officer, or director of NOW.
4.12) Product Liability Claims. Except as set forth on Exhibit 4.12, all
products which NOW has sold have been merchantable, free from material defects
in material or workmanship, and suitable for the purpose for which they were
sold. Except as set forth in Exhibit 4.12 hereto, NOW has not received any
claims based upon an alleged breach of product warranty, strict liability in
tort, negligent manufacture of product, or any other allegation of liability
arising from NOW's manufacture or sale of its products (hereafter collectively
referred to as "Product Liability Claims"), during the sixty months
immediately preceding the date hereof which Product Liability Claim exceeds
$25,000. To NOW's Knowledge there are no existing facts or conditions which
reasonably would be expected to give rise to any claim exceeding $25,000. All
liability from any actual and potential Product Liability Claims, whether or
not asserted on or before the Closing, are fully covered, except for the
deductible amounts, including all costs of defense and investigation, by NOW's
product liability insurance policies.
4.13) Insurance. All of the Assets are covered by such fire, casualty,
product liability, and other insurance policies issued by reputable companies
as are customarily obtained to cover comparable properties and assets by
businesses in the region in which such Assets are located, in amounts, scope
and coverage which are reasonable in light of existing conditions. Exhibit
4.13 sets forth a list of the policies of insurance and fidelity or surety
bonds carried by NOW, including, but not limited to, fire, flood, liability,
workers' compensation, and officers' life insurance policies. NOW has not
failed to give any notice or present any material claim under any insurance
policy in due and timely fashion, and all insurance premiums due and payable
by NOW in connection with the policies set forth on Exhibit 4.13 prior to the
Effective Time have been or will be paid. There are no outstanding written
requirements or written recommendations by any insurance company that issued a
policy with respect to any of the Assets of NOW by any Board of Fire
Underwriters or other body exercising similar functions or by any governmental
authority requiring or recommending any repairs or other work to be done on or
with respect to any of the Assets of NOW or requiring or recommending any
equipment or facilities to be installed on or in connection with any of the
Assets. The unemployment insurance ratings and contributions of NOW are also
set forth on Exhibit 4.13.
4.14) Litigation and Related Matters. Except as set forth on Exhibit 4.14,
as of the date of this Agreement: (i) there is no action, suit, judicial or
administrative proceeding, arbitration or investigation pending or, to NOW's
Knowledge, threatened against or involving NOW or any of its properties or
rights, before any court, arbitrator, or administrative or governmental body;
(ii) there is no judgment, decree, injunction, rule or order of any court,
governmental department, commission, agency, instrumentality or arbitrator
outstanding against NOW; and (iii) NOW is not in violation any term of any
judgments, decrees, injunctions or orders outstanding against it. An action
suit, proceeding, arbitration or investigation shall be considered
"threatened" for purposes of this Section 4.14 if NOW has received written
notice or otherwise has Knowledge that such event may be commenced. Except as
set forth on Exhibit 4.14, to NOW's Knowledge there are no existing facts or
conditions which reasonably would be expected to give rise to any charge,
claim, litigation, proceeding, or investigation.
4.15) Laws and Regulations. In all material respects, NOW has complied, and
is in compliance, with applicable laws, statutes, orders, rules, regulations
and requirements promulgated by governmental or other authorities relating to
its business, including, without limitation, any relating to wages, hours,
hiring, promotion, retirement, working conditions, air, water, solid or liquid
waste pollution, nondiscrimination, health, safety, pensions, benefits, the
production, processing, advertising or sale of products, trade regulation,
antikickback, export licensing, antitrust, antiboycott, warranties, or control
of foreign exchange; and NOW has
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not received any notice of any sort of alleged violation of any such statute,
order, rule, regulation or requirement.
4.16) Environmental Protection. Exhibit 4.16 completely and accurately sets
forth the following: (a) a list of, to NOW's Knowledge, all above-ground
storage tanks or underground storage tanks for Hazardous Materials (as defined
below) on real property now or at any time in the past owned, leased or
occupied by NOW (such real property referred to in this Section as the "Real
Property"); (b) the identity of any Hazardous Materials (as defined below)
used, generated, transported or disposed of by NOW now or at any time in the
past, together with a brief description and location of each activity using
such Hazardous Materials; (c) a summary of the identity of, to NOW's
Knowledge, any Hazardous Materials that have been disposed of or found on,
above or below any Real Property; and (d) a list of all reports, studies or
tests in the possession of NOW or initiated by NOW pertaining to the existence
of Hazardous Materials on, above or below any Real Property or any property
adjoining or which could reasonably be expected to affect Real Property, or
concerning compliance with or liability under the Environmental Laws (as
defined below). NOW has heretofore delivered to Parent complete and accurate
copies of such reports, studies or tests.
NOW has obtained, and maintained in full force and effect, all required
environmental permits and other governmental approvals and is in compliance
with all applicable Environmental Laws (as defined below), except where the
failure to so obtain and maintain or to be in compliance would not have a
Material Adverse Effect on NOW. NOW has never received a written or oral
notice or Claim (as defined below) alleging potential liability under any of
the Environmental Laws or alleging a violation of the Environmental Laws and
does not have any Knowledge that such a notice or Claim may be issued in the
future. NOW does not have any Knowledge of any notices to or Claims against
any persons, or reasonable basis therefor, alleging potential liability under
any of the Environmental Laws with respect to the Real Property or any
adjoining properties or which could reasonably be expected to affect the Real
Property. There is no proceeding or investigation pending or, to the Knowledge
of NOW, threatened by any Governmental Entity with respect to the
Environmental Laws. NOW has no Knowledge of any conditions or circumstances
that could reasonably be expected to result in the determination of liability
against NOW relating to the Environmental Laws that would have a Material
Adverse Effect. No Hazardous Materials have been or are threatened to be
discharged, omitted or released into the air, water, soil, or subsurface at or
from any Real Property by NOW or, to NOW's Knowledge, by any other person.
For purposes of this Section 4.16, the following terms shall have the
following meanings: (i) "Hazardous Materials" means asbestos, urea
formaldehyde, polychlorinated biphenyls, nuclear fuel or materials, chemical
waste, radioactive materials, explosives, known human carcinogens, petroleum
products or other substances or materials listed, identified or designated as
toxic or hazardous or as a pollutant or contaminant in, or the use, release or
disposal of which is regulated by, the Environmental Laws; (ii) "Environmental
Laws" means the Comprehensive Environmental Response Compensation and
Liability Act ("CERCLA") as amended by the Superfund Amendments and
Reauthorization Act of 1986 ("SARA"), 42 U.S.C. (S)(S) 9601 et seq.; the
Federal Resource Conservation and Recovery Act of 1976 ("RCRA"), 42 U.S.C.
(S)(S) 6901 et seq.; the Clean Water Act, 33 U.S.C.(S)(S) 1321 et seq.; the
Clean Air Act, 42 U.S.C. (S)(S)7401 et seq., and any other federal, state,
county, local, foreign or other governmental statute, regulation, or
ordinance, as now in existence, that relates to or deals with employee safety
and human health, pollution, health or the environment including, but not
limited to, the use, generation, discharge, transportation, disposal,
recordkeeping, notification and reporting of Hazardous Materials; and (iii)
"Claim" means any and all claims, demands, causes of actions, suits,
proceedings, administrative proceedings, losses, judgments, decrees, debts,
damages, liabilities, court costs, penalties, attorneys' fees and any other
expenses incurred, assessed, sustained or alleged by or against NOW.
4.17) Breaches of Contracts; Required Consents. Neither the execution and
delivery of this Agreement by NOW, nor compliance by NOW with the terms and
provisions of this Agreement will:
(a) Conflict with or result in a breach of (i) any of the terms, conditions
or provisions of the articles of incorporation, by-laws or other governing
instruments of NOW, (ii) any judgment, order, decree or
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ruling to which NOW is a party, (iii) any injunction of any court or
governmental authority to which it is subject, or (iv) any agreement, contract
or commitment listed in Exhibit 4.10(a) or which is material to NOW; or
(b) Except as disclosed in Exhibit 4.17(b) hereto, require the affirmative
consent or approval of or filing with any third party or Governmental Entity.
4.18) Brokers. Except for its financial advisor, BT Alex. Brown & Sons
Incorporated, no broker, finder or financial advisor is entitled to any
brokerage, finder's or other fee or commission in connection with the Merger
based upon arrangements made by or on behalf of NOW, and a true and correct
copy of the engagement letter or agreement between NOW and BT Alex. Brown
Incorporated has been previously provided to Parent.
4.19) Employee Benefit Plans.
(a) Exhibit 4.19(a) lists each "employee benefit plan" (within the meaning
of section 3(3) of ERISA) that is maintained or otherwise contributed to by
NOW for the benefit of its employees (including, without limitation, pension,
profit sharing, stock bonus, medical reimbursement, life insurance, disability
and severance pay plans) (collectively, "Company Plans") and all other
employee benefit plans providing for deferred compensation, bonuses, stock
options, employee insurance coverage or any similar compensation or welfare
benefit plan (collectively, "Benefit Arrangements" and, together with Company
Plans, collectively referred to as "Employee Benefit Programs").
(b) With respect to each of the Company Plans, NOW has made available to
Parent a current, accurate and complete copy (or, to the extent no such copy
exists, an accurate description) thereof (including all existing amendments
thereto that shall become effective at a later date) and, to the extent
applicable, (i) any related trust agreement, annuity contract or other funding
instrument; and (ii) any summary plan description.
(c) (i) Each of the Employee Benefit Programs has been established and
administered in compliance with any applicable provisions of ERISA, the Code,
and the terms of all documents relating to such programs; (ii) each Company
Plan that is intended to be qualified within the meaning of section 401(a) of
the Code has received a favorable determination letter as to its
qualification; (iii) as of the date of this Agreement, no "reportable event"
(as such term is used in section 4043 of ERISA) other than an event of a type
as to which the Pension Benefit Guaranty Corporation has waived the reporting
requirements, "prohibited transaction" (as such term is used in section 4975
of the Code or section 406 of ERISA) or "accumulated funding deficiency" (as
such term is used in section 412 or 4971 of the Code) has heretofore occurred
with respect to any Company Plan; and (iv) there are no pending or, to NOW's
Knowledge, threatened, actions, claims or lawsuits which have been asserted or
instituted against the Employee Benefit Programs, the assets of any of the
trusts under such plans or the plan sponsor or the plan administrator, or
against any fiduciary of the Employee Benefit Programs with respect to the
operation of such plans (other than routine benefit claims).
(d) NOW does not maintain or contribute to any "multiemployer plan" (as such
term is defined in section 3(37) of ERISA) and has not incurred any material
liability that remains unsatisfied with respect to any such plans.
(e) No Employee Benefit Program (other than one which is an employee pension
benefit plan within the meaning of Section 3(2)(A) of ERISA) provides benefits
(including, without limitation, death, health or medical benefits, whether or
not insured) with respect to current or former employees of NOW beyond their
retirement or other termination of service with NOW, other than (a) coverage
mandated by applicable law, (b) deferred compensation benefits which have been
accrued as liabilities on the books of NOW, (c) benefits the full cost of
which is borne by the current or former employees (or their beneficiaries), or
(d) benefits which have already been satisfied in full.
4.20) Indebtedness.
(a) Except as set forth on Exhibit 4.20(a), NOW does not have any obligation
for money borrowed or under any guarantee nor any agreement or arrangement to
borrow money or to enter into any such
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guarantee, and as of the Effective Time, except as set forth on Exhibit
4.20(a), NOW will not have any obligation for money borrowed nor any agreement
or arrangement to borrow money, and NOW will not have any guarantee
outstanding nor any agreement or commitment to enter into any such guarantee.
(b) Except as set forth on Exhibit 4.20(b), NOW has not loaned or advanced
any funds to any person. All obligations listed on Exhibit 4.20(b) are
current, and, to NOW's Knowledge, no default or event of default by any
borrower, and no event which, with notice or lapse of time or both, would
constitute a default by any borrower has occurred and is continuing, under the
terms or provisions of any agreement or other instrument evidencing or
securing such indebtedness.
4.21) Accounts Receivable. No amount included in the accounts receivable of
NOW in the Financial Statements has been released for an amount less than the
value at which it was included or is or will be regarded as unrecoverable in
whole or in part except to the extent there shall have been an appropriate bad
debt reserve therefor. Such receivables are not, to NOW's Knowledge, subject
to any counterclaim, refusal to pay or setoff not reflected in the reserves
set forth on the NOW Financial Statements.
4.22) Hart-Scott-Rodino. The "total assets" and the "annual net sales" of
the "ultimate parent entity" of NOW (as such terms are used within the meaning
of Section 7A.(a)(2)(A) of the HSR Act) are shown on Exhibit 4.22.
4.23) Customers and Suppliers. Except as set forth in Exhibit 4.23, NOW has
not received any notice or has any Knowledge that any customer from whom NOW
received more than $50,000 in gross receipts during the 1997 or 1998 fiscal
years (i) has ceased, or will cease, to use the products, goods or services of
its business, (ii) has substantially reduced, or will substantially reduce,
the use of products, goods or services of its business or (iii) has sought, or
is seeking, to reduce the price it will pay for products, goods or services of
its business. NOW has not received any notice nor has any Knowledge that any
supplier from whom NOW purchased more than $50,000 in goods during the 1997 or
1998 fiscal years will not sell raw materials, supplies, merchandise and other
goods to NOW at any time after the Effective Time on terms and conditions
similar to those used in the current sales to NOW, subject to general and
customary price increases and unforeseeable supply or demand changes.
4.24) Stock Ownership. Other than through mutual funds or other similar
investment vehicles over which no investment discretion is retained, neither
NOW nor, to NOW's Knowledge, any Shareholder owns any securities issued by
Parent or has any warrants, options or other rights to purchase or otherwise
acquire or convert any obligations into securities issued by Parent.
4.25) Powers of Attorney. Except as set forth in Exhibit 4.25, no person has
any power of attorney to act on behalf of NOW in connection with any of its
properties or business affairs other than such powers to so act as normally
pertain to the officers of NOW.
4.26) Tax-Free Reorganization; Pooling. To its Knowledge, NOW has not taken,
or failed to take, any action that would jeopardize the treatment of the
Merger as a tax-free reorganization for tax purposes or a pooling of interests
for accounting purposes.
4.27) Information in Registration Statement. None of the information
supplied or to be supplied by NOW or any Shareholder for inclusion or
incorporation by reference in any registration statement filed in connection
with this Agreement will, at the time such registration statement is filed
with the SEC and at the time it becomes effective under the Securities Act,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they are made, not
misleading.
4.28) No Misrepresentations. Neither this Agreement nor any certificate or
Exhibit or other information by or on behalf of NOW or any Shareholder
pursuant to this Agreement contains any untrue statement of a material fact
or, when this Agreement and such certificates, Exhibits and other information
are
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taken in their entirety, omits to state a material fact necessary to make the
statements contained herein or therein not misleading.
ARTICLE 5.
Representations And Warranties Of Parent And Subsidiary
Parent and Subsidiary make the following representations and warranties to
NOW with the intention that NOW may rely upon the same.
5.1) Organization. Each of Parent and Subsidiary is a corporation duly
organized, validly existing and in good standing under the laws of the state
of Delaware and has the corporate power to carry on its business as it is now
being conducted or presently proposed to be conducted and to own all of its
properties and assets.
5.2) Corporate Authority. Each of Parent and Subsidiary has the corporate
power to enter into this Agreement and to carry out its obligations hereunder.
The execution and delivery of this Agreement by Parent and Subsidiary and the
consummation by each of Parent and Subsidiary of the transactions contemplated
hereby have been duly authorized by the respective Boards of Directors of
Parent and Subsidiary, and this Agreement and each of the transactions
contemplated hereby has been approved by Parent as the sole stockholder of
Subsidiary. No other corporate proceedings on the part of either Parent or
Subsidiary are necessary to approve this Agreement or the transactions
contemplated hereby, and this Agreement constitutes the valid and binding
obligations of Parent and Subsidiary, enforceable against each in accordance
with its terms.
5.3) Breaches of Contracts; Required Consents. Except as set forth on
Exhibit 5.3 and except for applicable requirements of state or foreign laws
relating to takeovers, federal and state securities or blue sky laws, filings
with the Nasdaq Stock Market, Inc. and filing of an Agreement of Merger under
the MBCA and a Certificate of Merger under the DGCL, no filing with, and no
permit, authorization, consent or approval of, any public body or authority is
necessary for the consummation by Parent or Subsidiary of the transactions
contemplated by this Agreement. Except as set forth on Exhibit 5.3, neither
the execution and delivery of this Agreement by Parent or Subsidiary, nor the
consummation by Parent or Subsidiary of the transactions contemplated hereby,
nor compliance by Parent or Subsidiary with any of the provisions hereof, will
(i) result in any breach of the certificate of incorporation or by-laws of
Parent or Subsidiary, (ii) result in a violation or breach of, or constitute
(with or without due notice or lapse of time or both) a default (or give rise
to any right of termination, cancellation or acceleration) under, any of the
terms, conditions or provisions of any note, bond, mortgage, indenture,
license, contract, agreement or other instrument or obligation to which Parent
or any of its subsidiaries is a party or by which any of them or any of their
properties or assets may be bound or (iii) violate any order, writ,
injunction, decree, statute, rule or regulation applicable to Parent, any of
its subsidiaries or any of their properties or assets, except in the case of
clauses (ii) and (iii) for violations, breaches or defaults that would not
have a Material Adverse Effect.
5.4) SEC Filings. Parent and any predecessor of Parent have filed all forms,
reports and documents with the SEC required to be filed by them pursuant to
the federal securities laws and the rules and regulations of the SEC
(together, the "SEC Documents"). As of their respective filing dates, the SEC
Documents complied in all material respects with the requirements of the
Securities Exchange Act of 1934, as amended or the Securities Act, and none of
the SEC Documents contained any untrue statement of a material fact or omitted
to state a material fact required to be stated therein or necessary in order
to make the statements made therein, in light of the circumstances under which
they were made, not misleading, except to the extent corrected by a
subsequently filed SEC Document.
5.5) Capitalization. The authorized capital stock of Parent consists of
30,000,000 shares of Common Stock, $.01 par value, and 2,000,000 shares of
Preferred Stock, $.01 par value. As of the date of this
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Agreement, there are outstanding 18,166,283 shares of Parent Common Stock and
no shares of Preferred Stock of Parent. All outstanding shares of Parent
Common Stock have been duly authorized and validly issued and are fully paid
and nonassessable and were issued in compliance with all applicable federal
and state securities laws. As of the date of this Agreement, there are options
and warrants to acquire 1,802,711 and 50,000 shares, respectively, of Parent
Common Stock outstanding. Except as set forth in this Section 5.5, there are
outstanding (a) no shares of Parent Common Stock or other voting securities of
Parent, (b) no securities of Parent convertible into or exchangeable for
shares of Parent Common Stock or voting securities of Parent and (c) no
options, warrants or other rights to acquire from Parent, and no obligation of
Parent to issue, any capital stock, voting securities or securities
convertible into or exchangeable for capital stock or voting securities of
Parent. There are no outstanding obligations of Parent to repurchase, redeem
or otherwise acquire any Parent Common Stock. To Parent's Knowledge, no
officer, director, or Shareholder of Parent would be unable to give the
representation that none of the events or circumstances described in Rule 262
of Regulation A under the Securities Act have occurred.
5.6) Financial Statements. The audited supplemental consolidated balance
sheets of Parent and its subsidiaries at December 31, 1995, 1996, and 1997 and
the statements of income and changes in stockholders' equity and cash flows
for the years ended December 31, 1995, 1996, and 1997 (the "Parent Financial
Statements"), fairly present the financial position and results of operations
of Parent and its subsidiaries as for the periods then ended and the financial
position of Parent and its subsidiaries at the dates thereof in accordance
with GAAP applied on a consistent basis with prior periods (a copy of the 1997
Parent Financial Statements are to be delivered within 10 days of the date of
this Agreement). Parent has maintained its books of account in accordance with
applicable laws, rules and regulations of government authorities and with GAAP
applied on a consistent basis with prior periods, and such books of account
are and, during the period covered by Parent Financial Statements, were
correct and complete in all material respects, fairly and accurately reflect
or reflected the income, expenses, assets and liabilities of Parent, including
the nature thereof and the transactions giving rise thereto, and provide or
provided a fair and accurate basis for the preparation of the Parent Financial
Statements.
5.7) No Undisclosed Liabilities. Except as set forth in Exhibit 5.7, neither
Parent nor any subsidiary has, nor at the Effective Time will have, any
liabilities or obligations, either absolute, accrued, contingent or otherwise,
which individually or in the aggregate are material to the financial condition
and business of Parent or any subsidiary and which (i) have not been reflected
in the Parent Financial Statements, (ii) have not been described in this
Agreement or in any of the Exhibits hereto, or (iii) have been incurred since
September 30, 1997, other than in the ordinary course of its business
consistent with past practice.
5.8) Information in Registration Statement. None of the information supplied
or to be supplied by Parent for inclusion or incorporation by reference in any
registration statement filed in connection with this Agreement will, at the
time such registration statement is filed with the SEC and at the time it
becomes effective under the Securities Act, contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances
under which they are made, not misleading. Any registration statement will
comply as to form in all material respects with the provisions of the
Securities Act and the rules and regulations thereunder, except that no
representation is made by Parent with respect to statements made therein based
on information supplied by NOW or any Shareholder or inclusion in any
registration statement.
5.9) Subsidiary. Subsidiary was formed solely for the purpose of engaging in
the transactions contemplated by this Agreement. As of the date hereof and the
Effective Time, except for obligations or liabilities incurred in connection
with its incorporation or organization and the transactions contemplated by
this Agreement, Subsidiary does not have and will not have incurred any
obligations or liabilities or engaged in any business activities of any type
or kind whatsoever or entered into any agreements or arrangements with any
person.
5.10) Tax-Free Reorganization: Pooling. To its Knowledge, Parent has not
taken, or failed to take, any action that would jeopardize the treatment of
the Merger as tax-free reorganization for tax purposes or a pooling of
interests for accounting purposes.
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5.11) No Misrepresentations. Neither this Agreement nor any certificate or
Exhibit or other information furnished by or on behalf of Parent pursuant to
this Agreement contains any untrue statement of a material fact or, when this
Agreement and such certificates, Exhibits and other information are taken in
their entirety, omits to state a material fact necessary to make the
statements contained herein not misleading.
5.12) Laws and Regulations. In all material respects, Parent has complied,
and is in compliance, with applicable laws, statutes, orders, rules,
regulations and requirements promulgated by governmental or other authorities
relating to its business, including, without limitation, any relating to
wages, hours, hiring, promotion, retirement, working conditions, air, water,
solid or liquid waste pollution, nondiscrimination, health, safety, pensions,
benefits, the production, processing, advertising or sale of products, trade
regulation, antikickback, export licensing, antitrust, antiboycott,
warranties, or control of foreign exchange; and Parent has not received any
notice of any sort of alleged violation of any such statute, order, rule,
regulation or requirement.
5.13) Litigation and Related Matters. Except as set forth in Exhibit 5.13,
as of the date of this Agreement, (i) there is no action, suit, judicial or
administrative proceeding, arbitration or investigation pending or, to
Parent's Knowledge, threatened against or involving Parent or any of its
properties or rights, before any court, arbitrator, or administrative or
governmental body; (ii) there is no judgment, decree, injunction, rule or
order of any court, governmental department, commission, agency,
instrumentality or arbitrator outstanding against Parent; and (iii) Parent is
not in violation any term of any judgments, decrees, injunctions or orders
outstanding against it. An action, suit, proceeding, arbitration or
investigation shall be considered "threatened" for purposes of this Section
5.13 if Parent has received written notice or otherwise has Knowledge that
such event may be commenced. Except as set forth on Exhibit 5.13, to Parent's
Knowledge there are no existing facts or conditions which reasonably would be
expected to give rise to any charge, claim, litigation, proceeding, or
investigation.
ARTICLE 6.
Additional Agreements
6.1) Access to Information. During the period prior to the Closing, NOW
shall give to Parent and its attorneys, accountants or other authorized
representatives, full access to all of the property, books, contracts and
records of NOW and shall furnish to Parent during such period all such
information concerning its business as Parent reasonably may request.
6.2) Restrictions. Except as disclosed in Exhibit 6.2 hereto, NOW covenants
that during the period from the date of this Agreement to the Closing (except
as Parent otherwise has consented in writing):
(a) The business of NOW will be conducted only in the usual and ordinary
manner.
(b) No change will be made in NOW's authorized or issued corporate shares or
in its capital structure.
(c) No increase will be made in the compensation payable to or to become
payable to any employee of NOW, and no bonus payment will be made by NOW to
any such employee, except in each case in the ordinary course of business
consistent with past practice.
(d) NOW will not embark upon any new venture, enter into or amend any
material leases or agreements, purchase any material fixed assets or
equipment, amend any loan agreements, guarantee any obligation or increase any
existing lines of credit.
(e) NOW will not sell, dispose, transfer, assign or otherwise remove any of
its material assets except in the ordinary course of business and consistent
with past practice.
(f) NOW, in all material respects, will timely pay and discharge all bills
and monetary obligations and timely and properly perform all of its
obligations and commitments under all existing contracts and agreements
pertaining to or affecting NOW.
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(g) NOW shall use its reasonable best efforts to preserve the business
organization and assets of NOW and to keep available to Parent the services
of NOW's present employees, and not to impair relationships with suppliers,
customers and others having business relations with NOW.
(h) NOW will maintain all insurance policies listed on Exhibit 4.13
hereto in effect.
6.3) Preserve Accuracy of Representations and Warranties. NOW shall refrain
from taking any action, other than in the ordinary course of business, except
with the prior written consent of Parent, which would render any
representation, warranty or agreement of NOW in this Agreement inaccurate or
breached as of the Closing. At all times prior to the Closing, NOW will
promptly inform Parent in writing with respect to any matters that arise after
the date of this Agreement which, if existing or occurring at the date of this
Agreement, would have been required to be set forth or described in the
Exhibits. NOW promptly will notify Parent in writing of all lawsuits, claims,
proceedings and investigations that may be threatened, brought, asserted or
commenced against NOW or NOW's officers or directors.
6.4) No Solicitation of Transactions. NOW shall cause its officers,
directors, employees, agents and representatives (including, without
limitation, any investment banker, attorney or accountant retained by it) not
to initiate, solicit or encourage, directly or indirectly (including by way of
furnishing non-public information or assistance), or take any other action to
facilitate any inquiries or the making of any proposal that constitutes, or
may reasonably be expected to lead to, any Competing Transaction, or enter
into or continue discussions or negotiations with any person or entity in
furtherance of such inquiries or to obtain a Competing Transaction, or agree
to or endorse any Competing Transaction, or authorize any of their respective
officers, directors or employees or any investment banker, financial advisor,
attorney, accountant or other representative retained by them to take any such
action, and NOW shall notify Parent of all inquiries or proposals which it
receives relating to any of such matters.
6.5) Public Announcements. NOW understands that Parent is a public company,
and that until the transactions contemplated by this Agreement are made
public, NOW and the Shareholders and those whom they advise of this
transaction (which shall only be on a "need to know basis") may be privy to
material inside information; accordingly, NOW understands, and NOW has
apprised those of its officers, directors and employees who know of the
potential transaction, of the need for confidentiality and the potential
consequences of any trading in Parent Common Stock. No public announcements
shall be made concerning the negotiations between the parties, this Agreement
or the transactions contemplated herein, without the prior mutual consent of
NOW and Parent, except as may be required by law or the rules or regulations
of The Nasdaq Stock Market. The parties agree that, to the maximum extent
feasible, they will advise and confer with each other prior to the issuance of
any reports, statements or releases pertaining to this Agreement or the
transactions contemplated herein. In addition, the parties agree to respond to
all inquiries with respect to the Merger by stating that it is their policy
not to comment on such matters.
6.6) Appropriate Action; Consents; Filings.
(a) NOW, Parent and Subsidiary shall use their respective best efforts to
(i) take, or cause to be taken, all appropriate action, and do, or cause to
be done, all things necessary, proper or advisable under applicable law or
required to be taken by any Governmental Entity or otherwise to consummate
the Merger as promptly as practicable, (ii) obtain from any Governmental
Entities any consents, licenses, permits, waivers, approvals,
authorizations or orders required to be obtained or made by NOW, Parent or
Subsidiary in connection with the authorization, execution and delivery of
this Agreement and the consummation of the Merger, and (iii) as promptly as
practicable, make all necessary filings, and thereafter make any other
required submissions, with respect to this Agreement and the Merger
required under any applicable law; provided that NOW and Parent shall
cooperate with each other in connection with the making of all such
filings, including providing copies of all such documents to the other
party and its advisors prior to filing and, if requested, to accept all
reasonable additions, deletions or changes suggested in connection
therewith. NOW and Parent shall use reasonable best efforts to furnish to
the
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other party all information required for any application or other filing to
be made pursuant to the rules and regulations of any applicable law in
connection with the Merger and this Agreement.
(b) (i) NOW, Parent and Subsidiary shall give any notices to third
parties, and use, their reasonable best efforts to obtain any third party
consents, (A) necessary to consummate the Merger, (B) disclosed or required
to be disclosed in the exhibits to this Agreement or (C) required to
prevent a Material Adverse Effect on NOW, Parent or Subsidiary.
(ii) In the event that NOW, Parent or Subsidiary shall fail to obtain any
third party consent described in subsection (b)(i) above, each party, as
appropriate, shall use its reasonable best efforts, and shall take any such
actions reasonably requested by any other party, to minimize any adverse
effect on NOW, Parent or Subsidiary which could reasonably be expected to
result after the Effective Time, from the failure to obtain such consent.
(c) From the date of this Agreement until the Effective Time, the parties
shall each promptly notify each other of any pending or threatened action,
proceeding or investigation by any Governmental Entity or any other person
(i) challenging or seeking damages in connection with the Merger or (ii)
seeking to restrain or prohibit the consummation of the Merger.
6.7) Tax-Free Reorganization: Pooling. None of NOW, Parent or Subsidiary
shall take any action which would jeopardize the treatment of the Merger as a
tax-free reorganization or which would prevent the Merger from being accounted
for as a pooling of interests.
6.8) Preparation of S-4. Parent shall prepare and file as promptly as
practicable after the execution of this Agreement with the SEC a registration
statement on Form S-4 (the "S-4"). NOW shall furnish all information
concerning NOW and the Shareholders as may be reasonably requested in
connection with the S-4. Parent shall use its best efforts to have the S-4
declared effective under the Securities Act as promptly as practicable after
such filing. Parent shall also take any action (other than qualifying to do
business in any jurisdiction in which it is not now so qualified) required to
be taken under any applicable state securities laws in connection with the
issuance of Parent Common Stock in the Merger, and NOW shall furnish all
information concerning NOW and the Shareholders as may be reasonably requested
in connection with any such action.
6.9) Nasdaq Listing. Parent will make such filings as are necessary with The
Nasdaq Stock Market regarding the transactions contemplated hereby, including
filing a Notification Form for Listing of Additional Shares with respect to
the shares of Parent Common Stock to be issued in the Merger.
6.10) HSR Act. In the event that the parties determine that the proposed
transactions are subject to a waiting period under HSR Act, NOW and Parent
shall promptly file or cause to be filed on behalf of itself and any other
acquired or acquiring persons under the HSR Act, Premerger Notification and
Report Forms with respect to the transactions contemplated herein, respond to
any requests for additional information and documents and provide the
necessary information and make the necessary filings under the HSR Act. The
Effective Time shall be reasonably extended as necessary to allow the period
specified in the HSR Act and any extensions thereof to expire prior to such
date.
6.11) Shareholder Matters. NOW shall call a meeting of its Shareholders for
the purpose of voting upon matters relating to this Agreement and the Merger
to be held as soon as practicable after the date hereof. NOW will, through its
Board of Directors, recommend to its Shareholders approval of this Agreement,
the Merger and the other transactions contemplated hereby or thereby and will
use its reasonable best efforts to cause its Shareholders to approve the
Merger.
6.12) Tax Matters. Each of the parties agrees to prepare and file any and
all tax returns, reports and other filings regarding the tax treatment of the
Merger in a manner which is consistent in all respects with the intent and
expectation set forth herein.
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ARTICLE 7.
Conditions Of Closing; Abandonment Of Transaction
7.1) Conditions of Each Party's Obligations to Effect the Merger. The
respective obligations of NOW, Parent and Subsidiary to consummate the Merger
are subject to the satisfaction upon or prior to the Closing of the following
conditions:
(a) Shareholder Approval. This Agreement and the Merger shall have been
approved by the affirmative vote of the holders of at least 51% of shares of
outstanding NOW Common Stock in accordance with the MBCA and the articles of
incorporation and by-laws of NOW.
(b) HSR Approval. Any waiting period applicable to the consummation of the
merger under the HSR Act shall have expired or been terminated.
(c) No Injunctions or Restraints. No temporary restraining order,
preliminary or permanent injunction or other order issued by any Governmental
Entity of competent jurisdiction nor other legal restraint or prohibition
preventing the consummation of the Merger shall be in effect.
(d) Statutes. No action shall have been taken, and no statute, rule,
regulation or order shall have been enacted, promulgated or issued or deemed
applicable to the Merger by any Governmental Entity which would (i) make the
consummation of the Merger illegal or (ii) render NOW, Parent or Subsidiary
unable to consummate the Merger, except for any waiting period provisions.
(e) Accountant's Letters. Ernst & Young LLP, independent accountants to
Parent, shall have rendered its opinion(s), addressed to Parent, in form and
substance satisfactory to Parent as to the appropriateness of pooling of
interest accounting for the Merger under Accounting Principles Board Opinion
No. 16, and Ernst & Young LLP shall have rendered its opinion to Parent to the
effect that the Merger has been structured in a manner which is tax-free with
respect to Parent and its stockholders and NOW and the Shareholders.
(f) Form S-4. The S-4 registering the issuance and delivery of the shares of
Parent Common Stock shall have been declared effective in accordance with the
provisions of the Securities Act, and no stop order suspending the
effectiveness of the S-4 shall have been issued by the SEC. All other filings
necessary under federal and state securities laws to permit the issuance and
delivery of the shares of Parent Common Stock in compliance therewith shall
have been made, and any authorizations in connection therewith from all
applicable securities regulatory authorities shall have been obtained.
(g) Escrow Agreement. Parent, NOW and the Shareholders shall have executed
and delivered to the Escrow Agent the Escrow Agreement.
7.2) Conditions of Obligations of Parent and Subsidiary. The respective
obligations of Parent and Subsidiary to consummate the Merger are subject to
the satisfaction prior to or upon the Closing of the following conditions,
unless waived by Parent.
(a) Representations and Warranties. The representations and warranties of
NOW set forth in this Agreement shall be true and correct in all material
respects as of the Closing, as though made on and as of such date (provided
that those representations or warranties made as of a particular date need
only be true and correct as of such date).
(b) Performance of Obligations of NOW. NOW shall have performed in all
material respects all obligations and covenants required to be performed by it
under this Agreement prior to or as of the Closing.
(c) Consents. The consents, approvals and authorizations described (or
required to be described) on Exhibit 4.17(b) hereto shall have been obtained
in form and in substance reasonably satisfactory to Parent.
(d) No Material Adverse Changes. There shall not have been a material
adverse change in the general affairs, business, business prospects,
properties, management, condition (financial or otherwise) or results of
operations of NOW, whether or not arising from transactions in the ordinary
course of business, and NOW
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shall not have sustained any material loss or interference with its business
or properties from fire, explosion, flood or other casualty, whether or not
covered by insurance, or from any labor dispute or any court or legislative or
other governmental action, order or decree.
(e) Affiliate Agreements. NOW shall have delivered (or cause to be
delivered) duly executed Affiliate Agreements substantially in the form of
Exhibit 7.2(e) from each affiliate of NOW.
(f) Employment Agreements. NOW shall have delivered (or cause to be
delivered) duly executed Employment Agreements substantially in the form of
Exhibit 7.2(f) from Terry Nagel, Mike Osgar and Josh Waldman.
(g) Accountant's Letter. Deloitte & Touche LLP, independent accountants to
NOW, shall have rendered its opinion, addressed to NOW, but upon which Ernst &
Young LLP may rely, in form and substance satisfactory to NOW as to the
appropriateness of pooling of interest accounting for the Merger under
Accounting Principles Board Opinion No. 16.
(h) Stock Powers. NOW shall have delivered (or caused to be delivered) duly
executed stock powers from each Shareholder, with signatures guaranteed, with
respect to the Indemnification Escrow Shares substantially in the form of
Exhibit 7.2(h).
(i) Releases. NOW shall have delivered (or cause to be delivered) duly
executed releases substantially in the form on Exhibit 7.2(i) hereto, executed
by each director and each officer of NOW, releasing NOW from any and all
liabilities and obligations owed by NOW to him or her, including but not
limited to those owed to him or her in his or her capacity as a director,
officer, shareholder and/or employee of NOW.
(j) Jennifer Development Lease. NOW shall have delivered a letter agreement
with Jennifer Development in which the current lease of NOW's facilities is
effectively amended to allow NOW to store, use and dispose of hazardous
materials necessary to the conduct of its business so long as such storage,
use and disposal conforms to applicable law. NOW shall use its reasonable best
efforts to: (i) obtain from Jennifer Development a release of any liens
Jennifer Development may have pursuant to its lease with NOW; (ii) obtain a
non-disturbance agreement from mortgagees of Jennifer Development; (iii)
obtain Jennifer Development's acknowledgment that the Merger is not an
assignment under the terms of its lease; and (iv) obtain Jennifer
Development's consent to NOW's sublease of lab facilities.
7.3) Conditions of Obligations of NOW. The obligation of NOW to effect the
Merger is subject to the satisfaction prior to or upon the Closing of the
following conditions, unless waived by NOW:
(a) Representations and Warranties. The representations and warranties of
Parent and Subsidiary set forth in this Agreement shall be true and correct in
all material respects as of the Closing, as though made on and as of such date
(provided that those representations or warranties made as of a particular
date need only be true and correct as of such date).
(b) Performance of Obligations of Parent and Subsidiary. Parent and
Subsidiary shall have performed in all material respects all obligations and
covenants required to be performed by them under this Agreement prior to or as
of the Closing.
(c) Consents. The consents, approvals and authorizations described (or
required to be described) on Exhibit 5.3 hereto shall have been obtained in
form and in substance reasonably satisfactory to NOW.
(d) Accountant's Letters. Ernst & Young LLP, independent accountants to
Parent, shall have rendered its opinion(s), addressed to Parent, in form and
substance satisfactory to Parent as to the appropriateness of pooling of
interest accounting for the Merger under Accounting Principles Board Opinion
No. 16, and Ernst & Young LLP shall have rendered its opinion to Parent to the
effect that the Merger has been structured in a manner which is tax-free with
respect to Parent and its stockholders and NOW and the Shareholders.
(e) No Material Adverse Changes. There shall not have been a material
adverse change in the general affairs, business, business prospects,
properties, management, condition (financial or otherwise) or results of
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operations of Parent, whether or not arising from transactions in the ordinary
course of business, and Parent shall not have sustained any material loss or
interference with its business or properties from fire, explosion, flood or
other casualty, whether or not covered by insurance, or from any labor dispute
or any court or legislative or other governmental action, order or decree.
ARTICLE 8.
Termination, Amendment And Waiver
8.1) Termination. This Agreement may be terminated and the Merger may be
abandoned at any time prior to the Effective Time, notwithstanding any
requisite approval of this Agreement and the Merger by the shareholders of NOW
only in accordance with the following provisions:
(a) by mutual written consent of each of NOW, Parent and Subsidiary; or
(b) by NOW if either (i) the Effective Time shall not have occurred on or
before June 30, 1998; provided, however, that the right to terminate this
Agreement under this Section 8.1(b) shall not be available to NOW if its
failure to fulfill any obligation under this Agreement has been the cause of,
or resulted in, the failure of the Effective Time to occur on or before such
date, or (ii) there shall be any law that makes consummation of the Merger
illegal or otherwise prohibited or if any court of competent jurisdiction or
Governmental Entity shall have issued an order, decree, ruling or taken any
other action restraining, enjoining or otherwise prohibiting the Merger and
such order, decree, ruling or other action shall have become final and
unappealable; provided that NOW shall have complied with its obligations under
Section 6.6 above, or (iii) any of the conditions provided in Section 7.3 have
not been satisfied or waived; or
(c) by Parent if either (i) the Effective Time shall not have occurred on or
before June 30, 1998; provided, however, that the right to terminate this
Agreement under this Section 8.1(c) shall not be available to Parent if
Parent's or Subsidiary's failure to fulfill any obligation under this
Agreement has been the cause of, or resulted in, the failure of the Effective
Time to occur on or before such date, or (ii) there shall be any law that
makes consummation of the Merger illegal or otherwise prohibited or if any
court of competent jurisdiction or Governmental Entity shall have issued an
order, decree, ruling or taken any other action restraining, enjoining or
otherwise prohibiting the Merger and such order, decree, ruling or other
action shall have become final and unappealable; provided that Parent and
Subsidiary shall have complied with their obligations under Section 6.6 above,
or (iii) any of the conditions provided in Section 7.2 have not been satisfied
or waived; or
(d) by Parent, if the Board of Directors of NOW withdraws, modifies or
changes its recommendation of this Agreement or the Merger in a manner adverse
to Parent or shall have resolved to do any of the foregoing or the Board of
Directors of NOW shall have recommended to the shareholders of NOW any
Competing Transaction or resolved to do so; or
(e) by Parent if more than 10% of the Shareholders shall have dissented to
the Merger in accordance with the applicable provisions of the MBCA; or
(f) by NOW, in the event of a material breach by Parent or Subsidiary of any
representation, warranty, covenant or agreement contained herein which has not
been cured or is not curable by June 30, 1998; or
(g) by Parent, in the event of a material breach by NOW of any
representation, warranty, covenant or agreement contained herein which has not
been cured or is not curable by June 30, 1998.
8.2) Termination; Termination Payment. In the event of termination of this
Agreement, this Agreement shall forthwith become void, and there shall be no
liability on the part of any of the parties hereto or their respective
affiliates, directors, officers, or stockholders, except as provided below and
except for those obligations intended to survive termination. In the event
that: (i) either Parent or NOW shall terminate this Agreement because of
material misrepresentation or a breach of a material covenant by the other
party; or
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(ii) Parent shall terminate this Agreement pursuant to Section 8.1(d); or
(iii) the Merger shall not have been approved by the affirmative vote of the
holders of at least 51% of the voting securities of NOW; or (iv) the number of
Dissenting Shareholders exceeds 10% and NOW enters into a Competing
Transaction within one year of the date hereof with any person or entity other
than Parent, (A) in the case of (i) and (ii), the nonterminating party shall
be liable to and shall pay to the terminating party by wire transfer the sum
of $2,200,000 in full satisfaction of all claims within fifteen (15) business
days after the nonterminating party's receipt of written notice of
termination, and (B) in the case of (iii) and (iv), NOW shall be liable to and
shall pay to the Parent by wire transfer the sum of $2,200,000 in full
satisfaction of all claims within fifteen (15) business days after the
Shareholders' Meeting, in the case of (iii) and the entering into of such
Competing Transaction, in the case of (iv). It is agreed that the payments due
hereunder are the exclusive remedy for termination of this Agreement.
Notwithstanding the foregoing, in the event of a breach by NOW of Section 6.4,
Parent may pursue any and all remedies available to it at law or in equity.
Recovery by Parent of a termination payment under this Section 8.2 shall not
bar any such action for breach of Section 6.4, but the amount of any monetary
damages awarded to Parent in such action shall be reduced by the termination
payment actually received by Parent.
8.3) Amendment. This Agreement may be amended by the parties hereto by
action taken by or on behalf of their respective Boards of Directors at any
time prior to the Effective Time; provided, however, that, after the approval
of this Agreement and the Merger by the shareholders of NOW, no amendment may
be made which would reduce the timing, certainty or number of the shares of
Parent Common Stock. This Agreement may not be amended except by an instrument
in writing signed by the parties hereto.
8.4) Waiver. At any time prior to the Effective Time, any party hereto may
(a) extend the time for the performance of any obligation or other act of any
other party hereto, (b) waive any inaccuracy in the representations and
warranties contained herein or in any document delivered pursuant hereto and
(c) waive compliance with any agreement or condition contained herein. Any
such extension or waiver shall be valid if set forth in any instrument in
writing signed by the party or parties to be bound thereby.
ARTICLE 9.
General Provisions
9.1) Certain Employee Benefit Matters. Parent confirms to NOW that it is
Parent's present intent to provide after the Effective Time to continuing
employees of NOW employee benefit programs that in the aggregate are generally
not less favorable to such employees than those being provided to Parent's
employees on the date of this Agreement. To the extent Parent's employee
benefit programs provide medical or dental welfare benefits after the Closing
Date, Parent shall use reasonable efforts to cause all pre-existing condition
exclusions to be waived, and Parent shall provide that any expenses incurred
on or before the Closing Date shall be taken into account under the Parent
employee benefit programs for purposes of satisfying the applicable
deductible, coinsurance and maximum out-of-pocket provisions for such
employees and their covered dependents.
9.2) Director and Officer Indemnification. Until the date of issuance of the
first independent audit report with respect to the financial statements of
Parent after the Effective Time, Parent and the Surviving Corporation each
agrees that for acts occurring prior to the Effective Time, all rights to
indemnification and advancement of expenses existing in favor of the directors
and officers of NOW under the provisions existing on the date hereof of the
Articles of Incorporation, Bylaws and indemnification agreements of NOW shall
survive the Effective Time, and Parent and the Surviving Corporation each
agrees to indemnify and advance expenses to such directors and officers to the
full extent required or permitted under the provisions existing on the date
hereof of NOW's Articles of Incorporation and Bylaws and indemnification
agreements. To the extent that any matter which is properly the subject of
indemnification with respect to such continuing
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director and officer indemnification obligations results from a breach of a
representation, warranty or covenant under this Agreement, Parent shall not be
relieved of its requirements to honor such continuing indemnification
obligations but shall itself be entitled to seek indemnification pursuant to
the terms of this Agreement. If such a claim by Parent is indemnified under
Section 9.5, no director or officer shall thereafter be entitled to seek
indemnification under the articles of incorporation or by-laws of NOW or
director and officer indemnity agreements for any amounts required to be paid
pursuant to this Agreement.
9.3) Expenses. All costs and expenses incurred in connection with this
Agreement and the transactions contemplated hereby (whether or not the Merger
is consummated) shall be paid by the party incurring such expenses, except
that if the Merger is not consummated Parent and NOW shall share equally the
expenses incurred in connection with filings under the HSR Act.
9.4) Survival of Representations and Warranties. The representations and
warranties in this Agreement and in any instrument delivered pursuant to this
Agreement shall survive the Effective Time for a period of twelve months.
9.5) Indemnification.
(a) Subject to the limitations set forth in Section 9.5(b) below, Parent and
Subsidiary, jointly and severally, shall indemnify and hold NOW and the
shareholders of NOW harmless at all times from and after the date of this
Agreement against and in respect of all damages, losses, costs and expenses
(including reasonable attorney fees but not including any loss resulting from
a diminution in the value of Parent Common Stock received in the Merger) which
NOW and/or the shareholders of NOW may suffer or incur in connection with the
breach by Parent or Subsidiary of any of their respective representations,
warranties or covenants in this Agreement.
(b) NOW and the shareholders of NOW shall not assert any claim under Section
9.5(a) above unless and until such claims exceed an aggregate of $100,000 and
any claim under Section 9.5(a) above must be asserted within twelve months
from the Effective Time or be forever barred. Notwithstanding the foregoing or
anything in this Agreement to the contrary, no claim seeking indemnification
with respect to matters set forth in Section 9.5(a) may be brought after the
date of issuance of the first independent audit report with respect to the
financial statements of Parent after the Effective Time if such claim is of a
type expected to be encountered in the course of an audit performed in
accordance with generally accepted auditing standards.
(c) Subject to the limitations set forth in Section 9.5(d) below, NOW and
the shareholders of NOW shall indemnify and hold the Surviving Corporation,
Parent and Subsidiary harmless at all times from and after the date of this
Agreement, against and in respect of all losses, damages, costs and expenses
(including reasonable attorney fees) which the Surviving Corporation, Parent
and/or Subsidiary may suffer or incur in connection with the breach by NOW of
any of its representations, warranties or covenants in this Agreement.
(d) The Surviving Corporation, Parent and Subsidiary shall not assert any
claim under Section 9.5(c) above unless and until such claims exceed an
aggregate of $100,000; any claim under Section 9.5(c) above must be asserted
within twelve months from the Effective Time or be forever barred; and any
claim under Section 9.5(c) above must be made only against the Escrow Fund and
only in accordance with the terms of the Escrow Agreement. Notwithstanding the
foregoing or anything in this Agreement to the contrary, no claim seeking
indemnification with respect to matters set forth in Section 9.5(c) may be
brought after the date of issuance of the first independent audit report with
respect to the financial statements of Parent after the Effective Time if such
claim is of a type expected to be encountered in the course of an audit
performed in accordance with generally accepted auditing standards.
(e) If a claim by a third party is made against any of the indemnified
parties, and if any of the indemnified parties intends to seek indemnity with
respect to such claim under this Section 9.5, such indemnified party shall
promptly notify the indemnifying party of such claim. The indemnifying party
shall have thirty (30) days after receipt of the above-mentioned notice to
undertake, conduct and control, through counsel of such party's own choosing
(subject to the consent of the indemnified party, such consent not to be
unreasonably withheld) and at such party's expense, the settlement or defense
of it, and the indemnified party shall cooperate with
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the indemnifying party in connection with such efforts; provided that: (i) the
indemnifying party shall not by this Agreement permit to exist any lien,
encumbrance or other adverse charge upon any asset of any indemnified party,
(ii) the indemnifying party shall permit the indemnified party to participate
in such settlement or defense through counsel chosen by the indemnified party,
provided that the fees and expenses of such counsel shall be borne by the
indemnified party, (iii) the indemnifying party shall agree promptly to
reimburse the indemnified party for the full amount of any loss resulting from
such claim and all related expense incurred by the indemnified party pursuant
to this Article, and (iv) the indemnifying party will not compromise or settle
any claim without the prior consent of the indemnified party. So long as the
indemnifying party is reasonably contesting any such claim in good faith, the
indemnified party shall not pay or settle any such claim. If the indemnifying
party does not notify the indemnified party within thirty (30) days after
receipt of the indemnified party's notice of a claim of indemnity under this
Section 9.5 that such party elects to undertake the defense of such claim, the
indemnified party shall have the right to contest, settle or compromise the
claim in the exercise of the indemnified party's exclusive discretion at the
expense of the indemnifying party.
(f) In the event that Parent and/or Subsidiary have a claim against NOW,
that claim must be asserted against the Escrow Fund only and must be made in
accordance with the provisions of the Escrow Agreement.
(g) To the extent that Parent or Subsidiary make a claim against the
Indemnification Escrow Shares pursuant to the Escrow Agreement, and such claim
is paid in shares of Parent Common Stock, then for purposes of such payment,
the shares of Parent Common Stock shall be valued at the Initial Price, if
Section 3.2(a) is applicable, or at the Closing Price, if any of Sections
3.2(b)-(e) is applicable.
9.6) Notices. All notices, requests, claims, demands and other
communications to any party hereunder shall be in writing (including telecopy
or similar writing) and shall be deemed given if delivered personally, by
facsimile, by certified mail (postage prepaid, return receipt requested) or
sent by overnight courier (in each case, providing proof of delivery) to the
parties at the addresses and/or facsimile numbers set forth at the beginning
of this Agreement (or such other address or facsimile number for a party as
shall be specified in like notice).
9.7) Entire Agreement. This Agreement (including the Exhibits and Schedules
hereto) and the other documents referenced herein contain the entire agreement
between the parties with respect to the subject matter hereof and supersede
all prior arrangements and understandings, both written and oral, with respect
thereto.
9.8) Successors and Assigns. The provisions of this Agreement shall be
binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns, provided that no party may assign, delegate
or otherwise transfer any of its rights or obligations under this Agreement
without the consent of the other parties hereto.
9.9) Parties in Interest. This Agreement shall be binding upon and inure
solely to the benefit of each party hereto, and nothing in this Agreement,
express or implied, is intended to or shall confer upon any other person any
right, benefit or remedy of any nature whatsoever under or by reason of this
Agreement, other than (a) Section 3.3 above (which is intended to be for the
benefit of the persons holding the stock options referred to therein); (b)
Section 9.1 above (which is intended to be for the benefit of the employees of
NOW); and (c) Section 9.4 and Section 9.5(a) which are intended to be for the
benefit of the shareholders of NOW.
9.10) Enforcement. The parties agree that irreparable damage would occur in
the event that any of the provisions of this Agreement were not performed in
accordance with their specific terms or were otherwise breached. It is
accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions of this Agreement pursuant to Section 9.11 below,
this being in addition to any other remedy to which they are entitled at law
or in equity.
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9.11) Governing Law; Jurisdiction. This Agreement shall be governed and
construed in accordance with the laws of the State of Delaware without giving
effect to the provisions thereof relating to conflicts of law. Each party
hereto: (1) agrees that any proceeding arising out of this Agreement and the
Merger shall be brought in a state court or United States federal court
located in the State of New York; (2) consents to the jurisdiction of each
such court in any such proceeding; (3) waives any objection which such party
may have to the laying of venue of any such proceeding in any of such courts;
and (4) agrees that New York is the most convenient forum for litigation of
any such proceeding.
9.12) Counterparts; Effectiveness. This Agreement may be signed in any
number of counterparts, each of which shall be an original, with the same
effect as if the signatures thereto and hereto were upon the same instrument.
This Agreement shall become effective when each party hereto shall have
received counterparts hereof signed by all of the other parties hereto.
9.13) Delivery by NOW. NOW shall deliver or cause to be delivered to Parent
at Closing:
(i) A complete and correct copy of its articles of incorporation, as
amended to date, certified by the Secretary of State of the State of
Minnesota and its by-laws, as amended to date, certified by the Secretary
or an Assistant Secretary of NOW, and the original corporate stock ledgers,
corporate seal and minute book(s) of NOW.
(ii) Long form certificates of good standing or legal existence, as
appropriate, as of a recent date issued by (i) the Secretary of State of
the State of Minnesota to the effect that NOW is in good standing under the
laws of such state, and (ii) the Secretary of State of each state in which
NOW is authorized to transact business as a foreign corporation to the
effect that NOW is duly qualified as a foreign corporation in such state.
(iii) Such other certificates and representations as are reasonably
requested by Ernst & Young LLP in order to render its opinions.
(iv) With respect to each subsidiary of NOW, items (i) and (ii) above.
(v) Such further instruments or documents as Parent or its counsel may
reasonably request to assure the full and effective completion of the
Merger and to assure the effective completion of the transactions
contemplated hereby.
[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed as of the day and year first above written.
NOW Technologies, Inc.
/s/ Terry J. Nagel
By __________________________________
Name: Terry J. Nagel
Title: President and Chief
Executive Officer
ATMI, Inc.
/s/ Eugene G. Banucci
By __________________________________
Name: Eugene G. Banucci
Title: President and Chief
Executive Officer
Glide Acquisition, Inc.
/s/ Eugene G. Banucci
By __________________________________
Name: Eugene G. Banucci
Title: President and Chief
Executive Officer
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EXHIBITS
<TABLE>
<S> <C> <C>
Trade Names and Current Officers and
4.1 Directors Article 4, Section 4.1
Record Owners of Capital Stock and
4.4 Options Article 4, Section 4.4
4.5 Subsidiaries Article 4, Section 4.5
4.6(a) Undisclosed Liabilities Article 4, Section 4.6(a)
4.7(a) Taxes Article 4, Section 4.7(a)
4.7(b) Former Subsidiaries Article 4, Section 4.7(b)
4.8 Liens and Encumbrances Article 4, Section 4.8
4.9(a) Intellectual Property Article 4, Section 4.9(a)
4.9(c) Nondisclosure Agreements Article 4, Section 4.9(c)
4.9(d) Royalties Article 4, Section 4.9(d)
4.9(e) Infringement Article 4, Section 4.9(e)
4.10(a) Material Contracts Article 4, Section 4.10(a)
4.10(b) Employment Contracts and Employees Article 4, Section 4.10(b)
4.10(c) Breach of Contract Article 4, Section 4.10(c)
4.11 Contracts with Related Parties Article 4, Section 4.11
4.12 Product Liability Claims Article 4, Section 4.12
4.13 Insurance Article 4, Section 4.13
4.14 Litigation Article 4, Section 4.14
4.16 Environmental Matters Article 4, Section 4.16
4.17(b) Required Consents Article 4, Section 4.17(b)
4.19(a) Employee Benefit Plans Article 4, Section 4.19(a)
4.20(a) Indebtedness--Owed by NOW Article 4, Section 4.20(a)
4.20(b) Indebtedness--Owed to NOW Article 4, Section 4.20(b)
4.22 Hart-Scott-Rodino Article 4, Section 4.22
4.23 Customers and Suppliers Article 4, Section 4.23
4.25 Powers of Attorney Article 4, Section 4.25
5.3 Required Consents Article 5, Section 5.3
5.7 Undisclosed Liabilities Article 5, Section 5.7
5.13 Litigation Article 5, Section 5.13
6.2 Interim Operations Article 6, Section 6.2
7.2(e) Affiliate Agreement Article 7, Section 7.2(e)
7.2(f) Employment Agreement Article 7, Section 7.2(f)
7.2(h) Stock Power Article 7, Section 7.2(h)
7.2(i) Release Article 7, Section 7.2(i)
9.5 Escrow Agreement Article 1
</TABLE>
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APPENDIX B
302A.471. RIGHTS OF DISSENTING SHAREHOLDERS
SUBDIVISION 1. ACTIONS CREATING RIGHTS. A shareholder of a corporation may
dissent from, and obtain payment for the fair value of the shareholder's
shares in the event of, any of the following corporate actions:
(a) An amendment of the articles that materially and adversely affects
the rights or preferences of the shares of the dissenting shareholder in
that it:
(1) alters or abolishes a preferential right of the shares;
(2) creates, alters, or abolishes a right in respect of the
redemption of the shares, including a provision respecting a sinking
fund for the redemption or repurchase of the shares;
(3) alters or abolishes a preemptive right of the holder of the
shares to acquire shares, securities other than shares, or rights to
purchase shares or securities other than shares;
(4) excludes or limits the right of a shareholder to vote on a
matter, or to cumulate votes, except as the right may be excluded or
limited through the authorization or issuance of securities of an
existing or new class or series with similar or different voting
rights; except that an amendment to the articles of an issuing public
corporation that provides that section 302A.671 does not apply to a
control share acquisition does not give rise to the right to obtain
payment under this section;
(b) A sale, lease, transfer, or other disposition of all or substantially
all of the property and assets of the corporation, but not including a
transaction permitted without shareholder approval in section 302A.661,
subdivision 1, or a disposition in dissolution described in section
302A.725, subdivision 2, or a disposition pursuant to an order of a court,
or a disposition for cash on terms requiring that all or substantially all
of the net proceeds of disposition be distributed to the shareholders in
accordance with their respective interests within one year after the date
of disposition;
(c) A plan of merger, whether under this chapter or under chapter 322B,
to which the corporation is a party, except as provided in subdivision 3;
(d) A plan of exchange, whether under this chapter or under chapter 322B,
to which the corporation is a party as the corporation whose shares will be
acquired by the acquiring corporation, if the shares of the shareholder are
entitled to be voted on the plan; or
(e) Any other corporate action taken pursuant to a shareholder vote with
respect to which the articles, the bylaws, or a resolution approved by the
board directs that dissenting shareholders may obtain payment for their
shares.
SUBD. 2. BENEFICIAL OWNERS.
(a) A shareholder shall not assert dissenters' rights as to less than all
of the shares registered in the name of the shareholder, unless the
shareholder dissents with respect to all the shares that are beneficially
owned by another person but registered in the name of the shareholder and
discloses the name and address of each beneficial owner on whose behalf the
shareholder dissents. In that event, the rights of the dissenter shall be
determined as if the shares as to which the shareholder has dissented and
the other shares were registered in the names of different shareholders.
(b) The beneficial owner of shares who is not the shareholder may assert
dissenters' rights with respect to shares held on behalf of the beneficial
owner, and shall be treated as a dissenting shareholder under the terms of
this section and section 302A.473, if the beneficial owner submits to the
corporation at the time of or before the assertion of the rights a written
consent of the shareholder.
SUBD. 3. RIGHTS NOT TO APPLY.
(a) Unless the articles, the bylaws, or a resolution approved by the
board otherwise provide, the right to obtain payment under this section
does not apply to a shareholder of the surviving corporation in a merger,
if the shares of the shareholder are not entitled to be voted on the
merger.
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(b) If a date is fixed according to section 302A.445, subdivision 1, for
the determination of shareholders entitled to receive notice of and to vote
on an action described in subdivision 1, only shareholders as of the date
fixed, and beneficial owners as of the date fixed who hold through
shareholders, as provided in subdivision 2, may exercise dissenters'
rights.
SUBD. 4. OTHER RIGHTS. The shareholders of a corporation who have a right
under this section to obtain payment for their shares do not have a right at
law or in equity to have a corporate action described in subdivision 1 set
aside or rescinded, except when the corporate action is fraudulent with regard
to the complaining shareholder or the corporation.
302A.473. PROCEDURES FOR ASSERTING DISSENTERS' RIGHTS
SUBDIVISION 1. DEFINITIONS.
(a) For purposes of this section, the terms defined in this subdivision
have the meanings given them.
(b) "Corporation" means the issuer of the shares held by a dissenter
before the corporate action referred to in section 302A.471, subdivision 1
or the successor by merger of that issuer.
(c) "Fair value of the shares" means the value of the shares of a
corporation immediately before the effective date of the corporate action
referred to in section 302A.471, subdivision 1.
(d) "Interest" means interest commencing five days after the effective
date of the corporate action referred to in section 302A.471, subdivision
1, up to and including the date of payment, calculated at the rate provided
in section 549.09 for interest on verdicts and judgments.
SUBD. 2. NOTICE OF ACTION. If a corporation calls a shareholder meeting at
which any action described in section 302A.471, subdivision 1 is to be voted
upon, the notice of the meeting shall inform each shareholder of the right to
dissent and shall include a copy of section 302A.471 and this section and a
brief description of the procedure to be followed under these sections.
SUBD. 3. NOTICE OF DISSENT. If the proposed action must be approved by the
shareholders, a shareholder who is entitled to dissent under section 302A.471
and who wishes to exercise dissenters' rights must file with the corporation
before the vote on the proposed action a written notice of intent to demand
the fair value of the shares owned by the shareholder and must not vote the
shares in favor of the proposed action.
SUBD. 4. NOTICE OF PROCEDURE; DEPOSIT OF SHARES.
(a) After the proposed action has been approved by the board and, if
necessary, the shareholders, the corporation shall send to all shareholders
who have complied with subdivision 3 and to all shareholders entitled to
dissent if no shareholder vote was required, a notice that contains:
(1) The address to which a demand for payment and certificates of
certificated shares must be sent in order to obtain payment and the
date by which they must be received;
(2) Any restrictions on transfer of uncertificated shares that will
apply after the demand for payment is received;
(3) A form to be used to certify the date on which the shareholder,
or the beneficial owner on whose behalf the shareholder dissents,
acquired the shares or an interest in them and to demand payment; and
(4) A copy of section 302A.471 and this section and a brief
description of the procedures to be followed under these sections.
(b) In order to receive the fair value of the shares, a dissenting
shareholder must demand payment and deposit certificated shares or comply
with any restrictions on transfer of uncertificated shares within 30 days
after the notice required by paragraph (a) was given, but the dissenter
retains all other rights of a shareholder until the proposed action takes
effect.
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SUBD. 5. PAYMENT; RETURN OF SHARES.
(a) After the corporate action takes effect, or after the corporation
receives a valid demand for payment, whichever is later, the corporation
shall remit to each dissenting shareholder who has complied with
subdivisions 3 and 4 the amount the corporation estimates to be the fair
value of the shares, plus interest, accompanied by:
(1) The corporation's closing balance sheet and statement of income
for a fiscal year ending not more than 16 months before the effective
date of the corporate action, together with the latest available
interim financial statements;
(2) An estimate by the corporation of the fair value of the shares
and a brief description of the method used to reach the estimate; and
(3) A copy of section 302A.471 and this section, and a brief
description of the procedure to be followed in demanding supplemental
payment.
(b) The corporation may withhold the remittance described in paragraph
(a) from a person who was not a shareholder on the date the action
dissented from was first announced to the public or who is dissenting on
behalf of a person who was not a beneficial owner on that date. If the
dissenter has complied with subdivisions 3 and 4, the corporation shall
forward to the dissenter the materials described in paragraph (a), a
statement of the reason for withholding the remittance, and an offer to pay
to the dissenter the amount listed in the materials if the dissenter agrees
to accept that amount in full satisfaction. The dissenter may decline the
offer and demand payment under subdivision 6. Failure to do so entitles the
dissenter only to the amount offered. If the dissenter makes demand,
subdivisions 7 and 8 apply.
(c) If the corporation fails to remit payment within 60 days of the
deposit of certificates or the imposition of transfer restrictions on
uncertificated shares, it shall return all deposited certificates and
cancel all transfer restrictions. However, the corporation may again give
notice under subdivision 4 and require deposit or restrict transfer at a
later time.
SUBD. 6. SUPPLEMENTAL PAYMENT; DEMAND. If a dissenter believes that the
amount remitted under subdivision 5 is less than the fair value of the shares
plus interest, the dissenter may give written notice to the corporation of the
dissenter's own estimate of the fair value of the shares, plus interest,
within 30 days after the corporation mails the remittance under subdivision 5,
and demand payment of the difference. Otherwise, a dissenter is entitled only
to the amount remitted by the corporation.
SUBD. 7. PETITION; DETERMINATION. If the corporation receives a demand under
subdivision 6, it shall, within 60 days after receiving the demand, either pay
to the dissenter the amount demanded or agreed to by the dissenter after
discussion with the corporation or file in court a petition requesting that
the court determine the fair value of the shares, plus interest. The petition
shall be filed in the county in which the registered office of the corporation
is located, except that a surviving foreign corporation that receives a demand
relating to the shares of a constituent domestic corporation shall file the
petition in the county in this state in which the last registered office of
the constituent corporation was located. The petition shall name as parties
all dissenters who have demanded payment under subdivision 6 and who have not
reached agreement with the corporation. The corporation shall, after filing
the petition, serve all parties with a summons and copy of the petition under
the rules of civil procedure. Nonresidents of this state may be served by
registered or certified mail or by publication as provided by law. Except as
otherwise provided, the rules of civil procedure apply to this proceeding. The
jurisdiction of the court is plenary and exclusive. The court may appoint
appraisers, with powers and authorities the court deems proper, to receive
evidence on and recommend the amount of the fair value of the shares. The
court shall determine whether the shareholder or shareholders in question have
fully complied with the requirements of this section, and shall determine the
fair value of the shares, taking into account any and all factors the court
finds relevant, computed by any method or combination of methods that the
court, in its discretion, sees fit to use, whether or not used by the
corporation or by a dissenter. The fair value of the shares as determined by
the court is binding on all shareholders,
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wherever located. A dissenter is entitled to judgment in cash for the amount
by which the fair value of the shares as determined by the court, plus
interest, exceeds the amount, if any, remitted under subdivision 5, but shall
not be liable to the corporation for the amount, if any, by which the amount,
if any, remitted to the dissenter under subdivision 5 exceeds the fair value
of the shares as determined by the court, plus interest.
SUBD. 8. COSTS; FEES; EXPENSES.
(a) The court shall determine the costs and expenses of a proceeding
under subdivision 7, including the reasonable expenses and compensation of
any appraisers appointed by the court, and shall assess those costs and
expenses against the corporation, except that the court may assess part or
all of those costs and expenses against a dissenter whose action in
demanding payment under subdivision 6 is found to be arbitrary, vexatious,
or not in good faith.
(b) If the court finds that the corporation has failed to comply
substantially with this section, the court may assess all fees and expenses
of any experts or attorneys as the court deems equitable. These fees and
expenses may also be assessed against a person who has acted arbitrarily,
vexatiously, or not in good faith in bringing the proceeding, and may be
awarded to a party injured by those actions.
(c) The court may award, in its discretion, fees and expenses to an
attorney for the dissenters out of the amount awarded to the dissenters, if
any.
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PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Registrant's Certificate of Incorporation provides that the personal
liability of the directors of the Registrant shall be limited to the fullest
extent permitted by the provisions of Section 102(b)(7) of the General
Corporation Law of the State of Delaware (the "DGCL"). Section 102(b)(7) of
the DGCL generally provides that no director shall be liable personally to the
Registrant or its stockholders for monetary damages for breach of fiduciary
duty as a director; however, the Certificate of Incorporation does not
eliminate the liability of a director for (i) any breach of the director's
duty of loyalty to the Registrant or its stockholders; (ii) acts or omissions
not in good faith or that involve intentional misconduct or a knowing
violation of law; (iii) acts or omissions in respect of certain unlawful
dividend payments or stock redemptions or repurchases; or (iv) any transaction
from which such director derives improper personal benefit. The effect of this
provision is to eliminate the rights of the Registrant and its stockholders
(through stockholders' derivatives suits on behalf of the Registrant) to
recover monetary damages against a director for breach of his or her fiduciary
duty of care as a director (including breaches resulting from negligent or
grossly negligent behavior) except in the situations described in clauses (i)
through (iv) above. The limitations summarized above, however, do not affect
the ability of the Registrant or its stockholders to seek nonmonetary
remedies, such as injunction or rescission, against a director for breach of
his or her fiduciary duty.
In addition, the Certificate of Incorporation of the Registrant provides
that the Registrant shall, to the fullest extent permitted by Section 145 of
the DGCL, indemnify all persons whom it may indemnify pursuant to Section 145
of the DGCL. Section 145 of the DGCL permits a company to indemnify an officer
or director who was or is a party or is threatened to be made a party to any
proceeding because of his or her position, if the officer or director acted in
good faith and in a manner he or she reasonable believed to be in or not
opposed to the best interests of the Registrant and, with respect to any
criminal action or proceeding, had no reasonable cause to believe his or her
conduct was unlawful. Insofar as indemnification for liabilities arising under
the Securities Act of 1933, as amended (the "Securities Act") may be permitted
to directors, officers, or persons controlling the Registrant pursuant to the
foregoing provisions, the Registrant has been informed that in the opinion of
the Securities and Exchange Commission (the "Commission"), such
indemnification is against public policy as expressed in the Securities Act
and is therefore unenforceable.
The Registrant maintains insurance for officers and directors against
certain liabilities, including liabilities under the Securities Act. The
effect of this insurance is to indemnify any officer or director of the
Registrant against expenses, including, without limitation, attorneys' fees,
judgments, fines and amounts paid in settlement, incurred by an officer or
director upon a determination that such person acted in good faith. The
premiums for such insurance are paid by the Registrant.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) The following is a list of exhibits filed as a part of this registration
statement or incorporated by reference herein:
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<S> <C>
2.01 Merger Agreement by and among the Registrant, Glide Acquisition,
Inc. and NOW Technologies, Inc. dated as of February 19, 1998,
attached to this registration statement as Appendix A to the Proxy
Statement/Prospectus (Exhibit 2.03 to the Registrant's
Registration Statement on Form S-1, Registration No. 333-46609
(the "Form S-1 Registration Statement")).(1)
3.01(a) Certificate of Incorporation of the Registrant (Exhibit 3.01 to
the Registrant's Registration Statement on Form S-4, filed
September 10, 1997, Registration No. 333-35323 (the "Form S-4
Registration Statement")).(1)
</TABLE>
II-1
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<S> <C>
3.01(b) Certificate of Amendment to Certificate of Incorporation (Exhibit
4.1(b) to the Registrant's Post-Effective Amendment No. 1 to
Registration Statement on Form S-8, filed October 10, 1997,
Registration No. 33-77060).(1)
3.02 Bylaws of the Registrant (Exhibit 3.02 to the Form S-4
Registration Statement).(1)
4.01 Specimen of the Registrant's Common Stock Certificate (Exhibit
4.01 to the Form S-4 Registration Statement).(1)
5.01 Opinion and Consent of Shipman & Goodwin LLP as to the legality of
the shares to be registered.(2)
8.01 Opinion of Ernst & Young LLP as to certain federal income tax
consequences of the Merger.(2)
10.01 Employment Agreement between Eugene G. Banucci, Ph.D. and Advanced
Technology Materials, Inc. dated October 10, 1997 (Exhibit 10.01
to the Form S-1 Registration Statement).(1)
10.02 Employment Agreement between Daniel P. Sharkey and Advanced
Technology Materials, Inc. dated October 10, 1997 (Exhibit 10.02
to the Form S-1 Registration Statement).(1)
10.03 Employment Agreement between Duncan W. Brown and Advanced
Technology Materials, Inc. dated October 10, 1997 (Exhibit 10.03
to the Form S-1 Registration Statement).(1)
10.04 Employment Agreement between James M. Burns and Advanced
Technology Materials, Inc. dated December 31, 1996 (Exhibit 10.04
to the Form S-1 Registration Statement).(1)
10.05 Employment Agreement between Stephen H. Siegele and Advanced
Delivery & Chemical Systems Nevada, Inc. dated October 13, 1997
(Exhibit 10.05 to the Form S-1 Registration Statement).(1)
10.06 Consulting Agreement between Lawrence Semiconductor Laboratories,
Inc. and Lawrence Semiconductor Investments, Inc. dated October
10, 1997 (Exhibit 10.06 to the Form S-1 Registration Statement).(1)
10.07 Agreement of Lease between Melvyn J. Powers and Mary P. Powers
d/b/a/ M&M Realty and Advanced Technology Materials, Inc. dated
December 23, 1994 (Exhibit 10.09 to Advanced Technology Materials,
Inc. Annual Report on Form 10-K for the year ended December 31,
1994, File No. 0-22756 ("1994 Form 10-K")).(1)
10.08(a) Lease Agreement between Montague Oaks Associates Phase III and
ATMI EcoSys Corporation dated February 7, 1995 (Exhibit 10.10 to
1994 Form 10-K).(1)
10.08(b) First Amendment to Lease between Montague Oaks Associates Phase
III and ATMI EcoSys Corporation dated September 30, 1997 (Exhibit
10.08(b) to the Form S-1 Registration Statement).(1)
10.09 Lease Agreement between Montague Oaks Associates Phase I & II and
ATMI EcoSys Corporation dated September 30, 1997 (Exhibit 10.09 to
the Form S-1 Registration Statement).(1)
10.10(a) Standard Industrial Lease--Net between GKZ Investments and
Epitronics Corporation dated June 20, 1994 (Exhibit 10.10(a) to
the Form S-1 Registration Statement).(1)
10.10(b) Lease extension letter between GKZ Investments and Epitronics
Corporation dated September 18, 1996 (Exhibit 10.10(b) to the Form
S-1 Registration Statement).(1)
21.01 Subsidiaries of the Registrant.(2)
23.01 Consent of Shipman & Goodwin LLP, included in opinion filed as
Exhibit 5.01.(2)
23.02 Consent of Ernst & Young LLP.(3)
23.03 Consent of Price Waterhouse LLP.(3)
23.04 Consent of Deloitte & Touche LLP.(3)
24.01 Power of Attorney of Registrant, included in the signature page of
this registration statement.(2)
</TABLE>
- ---------------------
(1) Incorporated by reference.
(2) Previously filed.
(3) Filed herewith.
(b) Not required.
II-2
<PAGE>
ITEM 22. UNDERTAKINGS
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high and of the estimated
maximum offering range may be reflected in the form of prospectus
filled with the Commission pursuant to Rule 424(b) if, in the
aggregate, the changes in volume and price represent no more than 20
percent change in the maximum aggregate offering price set forth in the
"Calculation of Registration Fee" table in the effective registration
statement;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or
any material change to such information in the registration statement.
Provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not
apply if the registration statement is on Form S-3, Form S-8 or Form F-
3 and the information required to be included in a post-effective
amendment by those paragraphs is contained in periodic reports filed by
the registrant pursuant to Section 13 or Section 15(d) of the
Securities Exchange Act of 1934 that are incorporated by reference in
the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
(3) To remove from registration by means of post-effective amendment any
of the securities being registered which remain unsold at the termination
of the offering.
(b) (1) The undersigned registrant hereby undertakes as follows: that prior
to any public reoffering of the securities registered hereunder through use of
a prospectus which is a part of this registration statement, by any person or
party who is deemed to be an underwriter within the meaning of Rule 145(c),
the issuer undertakes that such reoffering will contain the information called
for by the applicable registration form with respect to reofferings by persons
who may be deemed underwriters, in addition to the information called for by
the other items of the applicable form.
(2) The registrant undertakes that every prospectus: (i) that is filed
pursuant to paragraph (1) immediately preceding, or (ii) that purports to
meet the requirements of Section 10(a)(3) of the Act and is used in
connection with an offering of securities subject to Rule 415, will be
filed as a part of an amendment to the registration statement and will not
be used until such amendment is effective, and that, for purposes of
determining any liability under the Securities Act of 1933, each such post-
effective amendment shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide
offering thereof.
(c) Insofar as indemnification for liabilities arising under the Securities
Act of 1993 may be permitted to the directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or otherwise,
the registrant has been advised that in the opinion of the Securities and
Exchange Commission
II-3
<PAGE>
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the
registrant in the successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in connection with
the securities being registered, the registrant will, unless in the opinion of
its counsel the matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question whether such indemnification by
it is against public policy as expressed in the Act and will be governed by
the final adjudication of such issue.
(d) The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Item 4, 10(b), 11 or 13 of this Form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through
the date of responding to the request.
(e) The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
(f) The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as part of
this registration statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be a part of this
registration statement as of the time it was declared effective.
(2) For the purposes of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
II-4
<PAGE>
SIGNATURES
PURSUANT TO REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT HAS
DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF DANBURY, STATE OF
CONNECTICUT, ON JUNE 16, 1998.
ATMI, Inc.
By: /s/ Eugene G. Banucci
---------------------------------
Eugene G. Banucci,
President, Chief Executive
Officer, Chairman of the Board and
Director
________________
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED.
SIGNATURE TITLE DATE
/s/ Eugene G. Banucci President, Chief June 16, 1998
- -------------------------------------
EUGENE G. BANUCCI Executive Officer,
Chairman of the
Board and Director
(principal executive
officer)
/s/ Daniel P. Sharkey Vice President, June 16,1998
- -------------------------------------
DANIEL P. SHARKEY Treasurer and Chief
Financial Officer
(principal financial
and accounting
officer)
Director
Mark A. Adley* June 16, 1998
- -------------------------------------
MARK A. ADLEY
John A. Armstrong* Director June 16, 1998
- -------------------------------------
JOHN A. ARMSTRONG
II-5
<PAGE>
SIGNATURE TITLE DATE
Robert S. Hillas* Director June 16, 1998
- -------------------------------------
ROBERT S. HILLAS
Lamonte H. Lawrence* Director June 16, 1998
- -------------------------------------
LAMONTE H. LAWRENCE
Stephen H. Mahle* Director June 16, 1998
- -------------------------------------
STEPHEN H. MAHLE
Stephen H. Siegele* Director June 16, 1998
- -------------------------------------
STEPHEN H. SIEGELE
By: /s/ Daniel P. Sharkey
- -------------------------------------
DANIEL P. SHARKEY,
ATTORNEY-IN-FACT
- ---------------------
* Each by his Attorney thereunto duly authorized by Power of Attorney.
II-6
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. EXHIBIT INDEX
----------- -------------
<S> <C>
2.01 Merger Agreement by and among the Registrant, Glide Acquisition,
Inc. and NOW Technologies, Inc. dated as of February 19, 1998,
attached to this registration statement as Appendix A to the Proxy
Statement/Prospectus (Exhibit 2.03 to the Registrant's
Registration Statement on Form S-1, Registration No. 333-46609
(the "Form S-1 Registration Statement")).(1)
3.01(a) Certificate of Incorporation of the Registrant (Exhibit 3.01 to
the Registrant's Registration Statement on Form S-4, filed
September 10, 1997, Registration No. 333-35323 (the "Form S-4
Registration Statement")).(1)
3.01(b) Certificate of Amendment to Certificate of Incorporation (Exhibit
4.1(b) to the Registrant's Post-Effective Amendment No. 1 to
Registration Statement on Form S-8, filed October 10, 1997,
Registration No. 33-77060).(1)
3.02 Bylaws of the Registrant (Exhibit 3.02 to the Form S-4
Registration Statement).(1)
4.01 Specimen of the Registrant's Common Stock Certificate (Exhibit
4.01 to the Form S-4 Registration Statement).(1)
5.01 Opinion and Consent of Shipman & Goodwin LLP as to the legality of
the shares to be registered.(2)
8.01 Opinion of Ernst & Young LLP as to certain federal income tax
consequences of the Merger.(2)
10.01 Employment Agreement between Eugene G. Banucci, Ph.D. and Advanced
Technology Materials, Inc. dated October 10, 1997 (Exhibit 10.01
to the Form S-1 Registration Statement).(1)
10.02 Employment Agreement between Daniel P. Sharkey and Advanced
Technology Materials, Inc. dated October 10, 1997 (Exhibit 10.02
to the Form S-1 Registration Statement).(1)
10.03 Employment Agreement between Duncan W. Brown and Advanced
Technology Materials, Inc. dated October 10, 1997 (Exhibit 10.03
to the Form S-1 Registration Statement).(1)
10.04 Employment Agreement between James M. Burns and Advanced
Technology Materials, Inc. dated December 31, 1996 (Exhibit 10.04
to the Form S-1 Registration Statement).(1)
10.05 Employment Agreement between Stephen H. Siegele and Advanced
Delivery & Chemical Systems Nevada, Inc. dated October 13, 1997
(Exhibit 10.05 to the Form S-1 Registration Statement).(1)
10.06 Consulting Agreement between Lawrence Semiconductor Laboratories,
Inc. and Lawrence Semiconductor Investments, Inc. dated October
10, 1997 (Exhibit 10.06 to the Form S-1 Registration Statement).(1)
10.07 Agreement of Lease between Melvyn J. Powers and Mary P. Powers
d/b/a/ M&M Realty and Advanced Technology Materials, Inc. dated
December 23, 1994 (Exhibit 10.09 to Advanced Technology Materials,
Inc. Annual Report on Form 10-K for the year ended December 31,
1994, File No. 0-22756 ("1994 Form 10-K")).(1)
10.08(a) Lease Agreement between Montague Oaks Associates Phase III and
ATMI EcoSys Corporation dated February 7, 1995 (Exhibit 10.10 to
1994 Form 10-K).(1)
10.08(b) First Amendment to Lease between Montague Oaks Associates Phase
III and ATMI EcoSys Corporation dated September 30, 1997 (Exhibit
10.08(b) to the Form S-1 Registration Statement).(1)
10.09 Lease Agreement between Montague Oaks Associates Phase I & II and
ATMI EcoSys Corporation dated September 30, 1997 (Exhibit 10.09 to
the Form S-1 Registration Statement).(1)
10.10(a) Standard Industrial Lease--Net between GKZ Investments and
Epitronics Corporation dated June 20, 1994 (Exhibit 10.10(a) to
the Form S-1 Registration Statement).(1)
10.10(b) Lease extension letter between GKZ Investments and Epitronics
Corporation dated September 18, 1996 (Exhibit 10.10(b) to the Form
S-1 Registration Statement).(1)
21.01 Subsidiaries of the Registrant.(2)
</TABLE>
1
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. EXHIBIT INDEX
- ----------- -------------
<S> <C>
23.01 Consent of Shipman & Goodwin LLP, included in opinion filed as Exhibit 5.01.(2)
23.02 Consent of Ernst & Young LLP.(3)
23.03 Consent of Price Waterhouse LLP.(3)
23.04 Consent of Deloitte & Touche LLP.(3)
24.01 Power of Attorney of Registrant, included in the signature page of this registration statement.(2)
</TABLE>
- ---------------------
(1) Incorporated by reference.
(2) Previously filed.
(3) Filed herewith.
(b) Not required.
2
<PAGE>
Exhibit 23.02
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" and to the
use of our report dated February 11, 1998, with respect to the consolidated
financial statements of ATMI, Inc. included in the proxy statement for NOW
Technologies, Inc. and in the Registration Statement (No. 333-51333) on Form S-4
and related Prospectus of ATMI, Inc. for the registration of 1,586,164 shares of
its common stock.
/s/ Ernst & Young LLP
Stamford, Connecticut
June 12, 1998
<PAGE>
Exhibit 23.03
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Prospectus constituting part of this
Registration Statement on Form S-4 of ATMI, Inc. of our report dated May 17,
1997, except for the last paragraph of Note 3 which is as of July 29, 1997 and
the last paragraph of Note 6 which is as of December 18, 1997 relating to the
combined financial statements of Lawrence Semiconductor Laboratories, Inc. and
Affiliate which appears in such Prospectus. It should be noted, however, that
such financial statements are not presented separately in such Form S-4. We also
consent to the reference to us under the headings "Experts" in such
Prospectus.
/s/ Price Waterhouse LLP
Price Waterhouse LLP
Phoenix, Arizona
June 12, 1998
<PAGE>
Exhibit 23.04
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Amendment No. 1 to Registration Statement No. 333-
51333 of ATMI, Inc. on Form S-4 of our report dated May 8, 1997 (April 27, 1998
as to Note 9), relating to the financial statements of NOW Technologies, Inc.
and Subsidiaries as of March 31, 1997 and 1996 and for each of the three years
in the period ended March 31, 1997, appearing in the Prospectus, which is part
of this Registration Statement, and to the reference to us under the heading
"Experts" in such Prospectus.
/s/ Deloitte & Touche LLP
Minneapolis, Minnesota
June 12, 1998
