<PAGE>
As filed with the Securities and Exchange Commission on March 8, 2000
Registration No. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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ATMI, INC.
(Exact name of registrant as specified in its charter)
Delaware 06-1481060
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
-----------------------------------
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)
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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. Keith F. Higgins, Esq.
Shipman & Goodwin LLP Ann L. Milner, Esq.
One American Row Ropes & Gray
Hartford, Connecticut 06103 One International Place
Telephone No.: (860) 251-5000 Boston, Massachusetts 02110
Facsimile No.: (860) 251-5999 Telephone No.: (617) 951-7000
Facsimile No.: (617) 951-7050
-----------------------------------
Approximate date of commencement of proposed sale to the public: As soon as
practicable after the effective date of this Registration Statement.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. |_|
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, 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, please 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(c)
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 delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. |_|
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CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
=====================================================================================================================
Proposed Proposed
Title of Each Class Amount Maximum Maximum
of Securities to be to be Offering Price Aggregate Amount of
Registered Registered (1) per Share (2) Offering Price (2) Registration Fee
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, par value
$0.01 per share............ 3,565,000 shares $48.4375 $172,679,688 $45,587.44
=====================================================================================================================
(1) Includes up to 465,000 shares of Common Stock that the Underwriters have
the option to purchase from ATMI and certain of the selling stockholders to
cover over-allotments, if any.
(2) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(c) under the Securities Act of 1933 based on the
average of the high and low sales prices reported on the Nasdaq National
Market for ATMI's common stock on March 7, 2000.
-----------------------------------
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.
=====================================================================================================================
</TABLE>
<PAGE>
The information in this preliminary prospectus is not complete and may be
changed. These securities may not be sold until the registration statement filed
with the Securities and Exchange Commission is effective. This preliminary
prospectus is not an offer to sell nor does it seek an offer to buy these
securities in any jurisdiction where the offer or sale is not permitted.
Subject To Completion. Dated March 8, 2000.
3,100,000 Shares
[LOGO] ATMI, INC.
Common Stock
-----------------------------------
ATMI, Inc. is offering 1,500,000 of the shares to be sold in the offering.
The selling stockholders identified in this prospectus are offering an
additional 1,600,000 shares. ATMI will not receive any of the proceeds from the
sale of shares being sold by the selling stockholders.
The common stock is quoted on the Nasdaq National Market under the symbol
"ATMI". The last reported sale price of our common stock on March 7, 2000 was
$47.81 per share.
See "Risk Factors" beginning on page 6 to read about factors you should
consider before buying shares of our common stock.
-----------------------------------
Neither the Securities and Exchange Commission nor any other regulatory
body has approved or disapproved of these securities or passed upon the accuracy
or adequacy of this prospectus. Any representation to the contrary is a criminal
offense.
-----------------------------------
<TABLE>
<CAPTION>
Per Share Total
<S> <C>
Initial price to public......................................... $ $
Underwriting discount........................................... $ $
Proceeds, before expenses, to ATMI.............................. $ $
Proceeds, before expenses, to the selling stockholders.......... $ $
</TABLE>
To the extent that the underwriters sell more than 3,100,000 shares of
common stock, the underwriters have the option to purchase up to an additional
225,000 shares from ATMI and 240,000 shares from certain of the selling
stockholders at the initial price to the public less the underwriting discount.
-----------------------------------
The underwriters expect to deliver the shares against payment in New York,
New York on , 2000.
Goldman, Sachs & Co.
Banc of America Securities LLC
Deutsche Banc Alex. Brown
Prudential Volpe Technology
a unit of Prudential Securities
-----------------------------------
Prospectus dated , 2000.
<PAGE>
PROSPECTUS SUMMARY
This summary highlights information contained elsewhere in this prospectus.
You should read this entire prospectus carefully. Unless otherwise indicated,
all information in this prospectus assumes that the underwriters will not
exercise their over-allotment option. This prospectus contains forward-looking
statements that involve risks, uncertainties and assumptions. The actual results
could differ materially from those anticipated in these forward-looking
statements as a result of certain factors, including but not limited to those
set forth under "Risk Factors" and elsewhere in this prospectus.
ATMI
We are a leading supplier of materials, equipment and related services used
worldwide in the manufacture of semiconductor devices. We specifically target
the "front-end" semiconductor materials market. This market includes the
processes used to convert a bare silicon wafer into a fully functional wafer
that contains many copies of a semiconductor device or "chip". To complete the
manufacturing process, this functional wafer is taken through a "back-end"
manufacturing process that includes wafer dicing into chips, packaging and
testing. Our customers include most of the leading semiconductor manufacturers
in the world, including Intel, Taiwan Semiconductor, Hyundai, Texas Instruments
and IBM.
We have further refined our market focus to target only specialty materials
used in front-end semiconductor manufacture. These specialty materials are used
in eight key process steps that are used repetitively to add functionality to a
silicon wafer. In recent years, the semiconductor industry has grown worldwide,
and front-end manufacturing processes have become increasingly complex,
resulting in rapidly changing requirements for semiconductor materials. We have
capitalized on the growth of the semiconductor industry in general, and
front-end processing in particular, through:
. a comprehensive research and development program that has provided a
stream of proprietary and patented products for this market;
. a strategy of delivering a complete materials solution to our customers
including materials, packaging, delivery systems, sensing and abatement;
and
. an aggressive mergers and acquisitions effort that has allowed us to
more rapidly move towards one-stop purchasing for our customers.
We have organized our operations along two business segments: ATMI
Materials and ATMI Technologies. ATMI Materials provides:
. a broad range of ultrahigh purity semiconductor materials; and
. semiconductor materials packaging and delivery systems;
ATMI Technologies provides:
. sensors for the workplace and environment that detect materials as they
move through the workplace;
. point-of-use environmental equipment that abates materials; and
. specialty thin film deposition services that provide coated wafers
directly to our customers.
3
<PAGE>
We also conduct our venture activities and our government funded research and
development activities through ATMI Technologies.
Over the last five years, we have achieved a leadership position by
providing a more complete line of products than our competitors through
innovation and acquisitions. We plan to continue our growth through product line
expansion in each of our existing market segments and to leverage our core
technology to create new high growth businesses.
Our principal executive offices are located at 7 Commerce Drive, Danbury,
Connecticut 06810, and our telephone number is (203) 794-1100. Our Internet
address is www.atmi.com. The information contained on our website is not
incorporated by reference in this prospectus. Unless the context otherwise
requires, references in this prospectus to "ATMI", "we", "us" and "our" refer to
ATMI, Inc. and our subsidiaries. This prospectus contains some of our trademarks
and trade names as well as trademarks and trade names of other companies.
The Offering
<TABLE>
<S> <C>
Shares offered by ATMI................................... 1,500,000 shares
Shares offered by selling stockholders................... 1,600,000 shares
Shares to be outstanding after the offering.............. 29,518,868 shares
Nasdaq National Market symbol............................ ATMI
Use of proceeds.......................................... For general corporate purposes and working
capital, including potential acquisitions,
capital expenditures and research and
development.
</TABLE>
The shares of common stock to be outstanding after the offering exclude
3,115,375 shares issuable upon the exercise of outstanding stock options and
warrants issued by us as of March 3, 2000 at a weighted average exercise
price of $21.61 per share.
4
<PAGE>
Summary Consolidated Financial Information
(in thousands, except per share data)
<TABLE>
<CAPTION>
Year Ended December 31,
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1995 1996 1997 1998 1999
---- ---- ---- ---- ----
(unaudited)
<S> <C> <C> <C> <C> <C>
Consolidated Statement of
Income Data:
Revenues.................................... $115,984 $154,390 $192,012 $165,106 $196,236
Gross profit................................ 59,204 80,717 99,451 81,687 103,266
Operating income............................ 14,150 17,968(1) 15,522(3) 6,432(4) 14,688(5)(6)
Net income ................................. $ 8,401 $ 13,093(2) 6,395 4,935 10,546
Net income per share -
assuming dilution......................... $ 0.36 $ 0.54(2) $ 0.25 $ 0.18 $ 0.37
Weighted average shares
outstanding - assuming
dilution.................................. 23,051 24,318 25,660 27,423 28,319
</TABLE>
<TABLE>
<CAPTION>
December 31, 1999
-------------------------
Actual As Adjusted
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(unaudited)
<S> <C> <C>
Consolidated Balance Sheet Data:
Cash, cash equivalents and marketable securities........................... $ 92,174 $159,707
Working capital............................................................ 121,199 188,732
Total assets............................................................... 232,656 300,189
Long-term debt, less current portion....................................... 6,280 6,280
Total stockholders' equity................................................. 174,805 242,338
</TABLE>
The as adjusted column above reflects our sale of 1,500,000 shares of
common stock at an assumed public offering price of $47.81 per share, after
deducting the estimated underwriters' discounts and commissions and offering
expenses payable by us.
- ------------------------
(1) Includes $2.0 million accrued in connection with patent litigation involving
Lawrence Semiconductor Laboratories (prior to our acquisition of that
company), which resulted in a settlement payment in May 1997.
(2) Net income and net income per share - assuming dilution in 1996 include the
effect of the treatment of our ADCS subsidiary as an S-Corporation for a
portion of 1996 (which was prior to our acquisition of ADCS). If ADCS had
been taxed as a C-Corporation for all of 1996, our net income and net income
per share - assuming dilution would have been approximately $11.6 million
and $0.48, respectively, for the year ended December 31, 1996.
(3) Includes costs of $9.0 million incurred in investigating, analyzing and
completing our acquisitions of ADCS and Lawrence Semiconductor Laboratories.
(4) Includes costs of $1.7 million incurred in connection with the completion of
our acquisition of NOW Technologies.
(5) Includes $2.3 million for severance for several former executives
within ATMI Materials and ATMI Technologies.
(6) Includes $3.3 million incurred in connection with the completion of our
acquisitions of MST Analytics and Newform and $7.2 million incurred in
connection with our acquisitions of Delatech, ACSI and TeloSense offset by a
reversal of $0.6 million for previously accrued merger related costs.
5
<PAGE>
RISK FACTORS
You should carefully consider the following risks, together with other
information contained or incorporated by reference in this prospectus, before
making an investment decision. Any of the following risks could adversely affect
our business, operating results and financial condition. The trading price of
our common stock could decline due to any of these risks, and you could lose all
or part of your investment.
Our operating results are materially dependent upon economic and business
conditions in the semiconductor industry, and we are vulnerable to industry
downturns.
Substantially all of our sales are to customers in the worldwide
semiconductor industry. As a result, our operating results are materially
dependent upon economic and business conditions in the semiconductor industry.
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. The
semiconductor industry experienced a significant downturn in 1998, which
resulted in a reduction in our revenues and earnings. Any future industry
downturn will likely have a similar impact. Although the semiconductor industry
is recovering from the 1998 downturn, we cannot assure you that:
. conditions in the semiconductor industry will continue to improve;
. the semiconductor industry will not experience other, possibly more
severe and prolonged, downturns in the future; or
. the current recovery will continue to result in increased demand for
semiconductor materials, capital equipment and wafer processing services
by the semiconductor industry.
The end of the current recovery or any future downturn in the semiconductor
industry will have a material adverse effect on our business, operating results
and financial condition.
Our quarterly operating results may fluctuate, and our stock price may be
volatile as a result.
Our quarterly operating results may fluctuate in the future as a result of
a number of factors, including:
. the general demand for semiconductors;
. the cyclical nature of the semiconductor manufacturing equipment market;
. our product mix;
. our success in developing, introducing and shipping new products;
. competition;
. the timing of significant orders from, and shipments to, customers;
. the timing and market acceptance of new products;
. seasonality of sales; and
. the effect of various non-recurring expenses.
6
<PAGE>
As a result, our operating results in any quarter are not necessarily a good
predictor of our results for any future period. In the future, we will likely
experience quarterly or annual fluctuations. In one or more future quarters, our
operating results may fall below the expectations of public market analysts or
investors, and the price of our common stock could decline significantly.
We may have difficulty managing our growth and attracting and retaining highly
skilled scientific, technical, managerial and marketing personnel, which could
adversely affect our revenues and increase our operating expenses.
We have grown and intend to continue to grow our business. The management
of our growth requires qualified personnel, systems and other resources. Our
future success will depend in part on our ability to attract and retain highly
skilled scientific, technical, managerial and marketing personnel. Competition
for such personnel in the semiconductor industry is intense, and our competitors
are often larger and more established than we are. We may not be successful in
attracting and retaining qualified personnel. In addition, our expansion may
also significantly strain operational, management, financial, sales and
marketing and other resources. To manage growth effectively, we must continue to
enhance our information technology infrastructure, systems and controls and
successfully expand, train and manage our employee base. We may not be able to
manage this expansion effectively, including providing satisfactory levels of
customer service and technical support.
Our business, operating results and financial condition could be negatively
impacted if we are unable to integrate businesses we acquire.
During the past three years, we have acquired several companies, including
Advanced Delivery and Chemical Systems, Lawrence Semiconductor Laboratories, NOW
Technologies, Delatech, Advanced Chemical Systems International, TeloSense,
Newform and MST Analytics. If opportunities exist, we intend to acquire other
businesses that we believe fit our business strategy. We may not achieve the
anticipated benefits from any acquisition, including the acquisitions listed
above, unless we successfully combine the acquired businesses with those of ATMI
in a timely and efficient manner. The integration of acquisitions requires
substantial attention from our management. The diversion of the attention of
management, and any difficulties encountered in the transition process, could
negatively impact our business, operating results and financial condition. In
addition, the process of integrating various businesses could cause the
interruption of, or a loss of momentum in, the activities of some or all of
these businesses as well as our ongoing business.
Our revenues and earnings could be negatively affected if we cannot anticipate
market trends, enhance our existing products and processes and develop and
commercialize new products and processes.
We believe that our future success will depend, in part, upon our ability
to anticipate rapidly changing technologies and market trends, to enhance our
existing products and processes and to develop and commercialize new products
and processes. The semiconductor industry markets we serve undergo frequent
technological changes which in turn create demand for new and improved products
and process technologies. We may not be able to improve our existing products
and process technologies or to develop and market new products and technologies
that will be cost-effective or introduced in a timely manner or accepted in the
marketplace. Our failure to develop or introduce enhanced and new products and
processes in a timely manner may negatively affect our revenues and earnings.
We are subject to operational, financial, political and exchange rate risks due
to our significant level of international operations and sales.
In the years ended December 31, 1997, 1998 and 1999, revenues outside the
United States accounted for 30.0%, 31.9% and 39.0%, respectively, of our
revenues for those years. We anticipate that international sales will continue
to account for a significant portion of our revenues. As a result, our
operations are subject to risks inherent in international business activities,
including:
7
<PAGE>
. export controls;
. unexpected changes in legal and regulatory requirements;
. 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 international operations;
. difficulties in protecting our intellectual property outside the United
States; and
. potentially adverse tax consequences.
Although our 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 our sales to customers outside the United States. In addition,
the recent acquisitions of Newform and MST have increased the amount of our
operations conducted in Europe with European currency. Also, expenses and
revenues of a portion of certain of our businesses are denominated in South
Korean, Taiwanese, German or Belgian currency and are exposed to risks
customarily associated with currency fluctuations. Any significant volatility in
South Korean, Taiwanese, German or Belgian currency, as it relates to invested
capital in our respective businesses in those countries, could have a material
adverse impact on stockholders' equity as reflected in currency translation
adjustments in our financial statements. We do not hedge our exposure with
respect to such fluctuations. To the extent that we expand our international
operations or change our pricing practices to denominate prices in other
currencies, we will be exposed to increased risks of currency fluctuations.
Certain of our businesses conduct a material portion of their activities in
Asia, primarily South Korea and Taiwan. Volatile economic conditions in the
region or in those countries, or instability in the currency of those countries
or in those countries' capital markets, may negatively impact our revenues and
earnings.
Our revenues would suffer if our major customers reduce their purchases of our
products or services.
In 1999, sales to our top five customers totaled approximately 13.5% of our
revenues. Our relationships with these customers are subject to various risks,
including:
. termination, reduction or modification in the event of changes in the
customer's requirements or budgetary constraints;
. risks of potential disclosure of our confidential information to third
parties; and
. the failure or inability of a customer to perform its prime contract
with its customer.
Our revenues would suffer if our major customers reduce their purchases of our
products or services or secure alternative sources for products or services.
Based on the current trend toward consolidation in the
8
<PAGE>
semiconductor industry, we expect that our customer base will continue to become
more concentrated with a limited number of customers accounting for a more
significant portion of our revenues.
We may have difficulty responding to rapidly changing semiconductor technology,
materials and processes and face competition from existing technologies.
Semiconductor technology, materials and processes change rapidly. We may
not be successful if we cannot keep pace with such advances. We are evaluating a
number of new opportunities to commercialize our core technology, but these
opportunities may not lead to commercial products that are timely or
competitive. The technological advances of others may render our current
products or development efforts obsolete, and other equipment or materials may
prove more advantageous to customers in the markets we serve. In addition,
certain of our current technologies face competition from other existing
technologies which may be superior to or more cost-effective than our current
technologies and products.
We face intense competition from a variety of sources, including larger
companies.
The markets for semiconductor thin film materials, packaging and delivery
systems, sensors, environmental equipment and thin film deposition services are
intensely competitive. A number of domestic and international companies engage
in commercial activities in the markets we serve. Many of these companies have
substantially greater financial, research and development, manufacturing and
marketing resources than we do. In addition, as this industry evolves, other
competitors may emerge. To remain competitive, we must continue to invest in and
focus upon research and development and product and process innovation. We may
not be successful if we cannot compete on:
. price;
. technical capabilities;
. quality;
. customer service; and
. the ability to provide full market-basket solutions to customers that
are increasingly seeking to streamline their vendor relationships.
We may incur various tax liabilities in connection with our acquisition of
Advanced Delivery and Chemical Systems that exceed our security for these
liabilities and which may negatively affect our earnings, cash flow and cash
position.
The former securityholders of Advanced Delivery and Chemical Systems have
agreed to indemnify us for possible tax liabilities of ADCS. As security for
these potential liabilities, the former securityholders of ADCS delivered into
escrow a portion of the shares of common stock they received in connection with
our acquisition of ADCS. We and the former securityholders of ADCS have
divergent views on any potential exposures related to the various tax matters
for which there will be indemnification. The former securityholders of ADCS
believe that any exposure would be immaterial. We believe that any successful
challenge to the tax matters is not probable. While the possible exposures are
difficult to quantify, we believe that, regardless of the probability that
liabilities arise, the potential exposures could range from $0 to $22 million
depending on the tax matter. We have been notified by the Internal Revenue
Service of an assessment of $2.1 million for certain of these tax matters.
Although we believe that this assessment is without merit and we intend to
vigorously defend our position on these tax matters, we cannot predict whether
we will be successful in defending against the assessment or the amount of any
final assessment against us. We have agreed that minimum amounts must be reached
before we have a right to recover our losses. The current value of the shares
held in
9
<PAGE>
escrow provides indemnity towards the upper range of the potential exposures. A
possibility exists that the losses could exceed the value of the shares held in
escrow because the shares held in escrow are too few in number or too low in
value to adequately compensate us for these losses. In any event, if we incur
actual tax liabilities, they will negatively affect our earnings, cash flow and
cash position.
Any prolonged disruption in manufacturing our products could negatively impact
our business.
The manufacture of semiconductors and related materials and equipment
involves highly complex manufacturing processes. We have established
manufacturing facilities for many of our products, including semiconductor
environmental equipment, thin film materials, packaging and delivery systems,
substrates and coated wafers. We have also established a facility to fabricate,
test and assemble semiconductor thin films, devices and circuits. In addition,
we subcontract for the manufacture of a significant portion of our gas delivery
systems. Any prolonged disruption in manufacturing our products, whether due to
technical or labor difficulties, delay or inability to obtain sufficient
quantities of production input or equipment, destruction or damage to any
facility, termination of our relationship with subcontractors or other reasons,
could negatively impact our ability to deliver products to customers. To be
financially successful, we must manufacture our products in commercial
quantities, at acceptable costs and on a timely basis, which we may not be able
to do.
Our business could be adversely affected if we cannot protect our proprietary
technology or if we infringe on the proprietary technology of others.
Our proprietary technology aids our ability to compete effectively with
other companies. Although we have been awarded, have filed applications for, or
have been licensed under, numerous patents in the United States and other
countries, these patents may not fully protect our technology or competitive
position. Further, our competitors may apply for and obtain patents that will
restrict our ability to make and sell our products.
Our competitors may intentionally infringe our patents. Third parties may
also assert infringement claims against us in the future. The defense and
prosecution of patent suits are both costly and time-consuming, even if the
outcome is favorable to us. Outside the United States, such proceedings can be
extremely expensive, and their outcome very unpredictable. An adverse outcome in
the defense of a patent suit could subject us to significant liabilities to
third parties or require us to license rights from third parties or to cease
selling our products. We also rely on unpatented proprietary technology that
others may independently develop or otherwise obtain access to. Our inability to
maintain the proprietary nature of our technologies could negatively affect our
revenues and earnings.
We face the risk of product liability claims.
The manufacture and sale of our products, which include thin film and other
toxic materials, involve the risk of product liability claims. In addition, a
failure of one of our products at a customer site could interrupt the business
operations of the customer. Our existing insurance coverage limits will not be
adequate to protect us from all liabilities that we might incur in connection
with the manufacture and sale of our products if a successful product liability
claim or series of product liability claims brought against us exceeds our
insurance coverage.
Our business is subject to substantial liabilities for failure to comply with
environmental regulations.
We use, generate and discharge toxic or otherwise hazardous chemicals and
wastes in our manufacturing, processing and research and development activities.
As a result, we are subject to a variety of governmental regulations related to
the storage, use and disposal of these materials. Our failure to comply with
present or future laws could result in fines or other liabilities being imposed
on us, suspension of production or a cessation of operations.
10
<PAGE>
The various premises we occupy, particularly the premises in Danbury,
Connecticut, may have been contaminated prior to occupancy. We are not aware of
any environmental investigation or action by government agencies involving these
premises. However, under 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 us for remediation costs
in connection with any pre-existing, on-site contamination or environmental
condition. However, this indemnification may not prove adequate to cover any
liability imposed on us related to the environmental condition of the premises
or the cost of defending an environmental action, either of which could be
substantial.
Our activities may also result in our being subject to additional
regulation. Such regulations could require us to acquire significant additional
equipment or to incur other substantial expenses to comply with environmental
laws. Our failure to control the use of hazardous substances could subject us to
substantial financial liabilities.
Provisions of our charter documents and Delaware law could discourage
potential acquisition proposals and could delay, deter or prevent a change in
control.
Provisions of our 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, a majority of our outstanding voting stock. These
provisions provide for:
. a classified board of directors;
. a prohibition on stockholder action through written consents;
. a requirement that special meetings of stockholders be called only by
the chairman of the board or the board of directors;
. advance notice requirements for stockholder proposals and nominations;
. limitations on the ability of stockholders to make changes in the board
of directors; and
. the authority of the board to issue, without stockholder approval,
preferred stock with such terms as the board may determine.
We will also be afforded the protections of Section 203 of the Delaware
General Corporation Law, which could have similar effects.
SPECIAL NOTE REGARDING FORWARD-LOOKING INFORMATION
This prospectus contains or incorporates "forward-looking statements"
within the meaning of Section 27A of the Securities Act of 1933 and Section 21E
of the Securities Exchange Act of 1934. You can identify these statements by
forward-looking words such as "believes", "anticipates", "plans", "expects",
"may", "will", "intends", "estimates" and similar words. We can give no
assurance that we will actually achieve these plans, intentions or expectations.
Our actual results could differ materially from the plans, intentions and
expectations disclosed in these forward-looking statements. We have included
important factors in the cautionary statements above that we believe could cause
our actual results to differ materially from our forward-looking statements. We
do not intend to update information contained in any of our forward-looking
statements.
11
<PAGE>
USE OF PROCEEDS
We estimate that the net proceeds from our sale of 1,500,000 shares of
common stock will be approximately $67.5 million, based on an assumed offering
price to the public of $47.81 per share and after deducting the estimated
underwriters' discounts and commissions and estimated offering expenses payable
by us. We will not receive any proceeds from the sale of shares of common stock
by the selling stockholders.
We expect to use the net proceeds from this offering for general corporate
purposes and working capital, including potential acquisitions to expand our
product and service offerings, capital expenditures and the funding of research,
development and commercialization programs. We cannot assure you that we will
make any acquisitions, and we have no current agreements or commitments with
respect to any acquisition that would use any of the net proceeds from this
offering. Pending these uses, we intend to invest the net proceeds of this
offering in investment-grade, interest-bearing securities.
DIVIDEND POLICY
We have never declared or paid any cash dividends on our capital stock. We
intend to retain any future earnings to finance future growth and do not
anticipate paying any cash dividends in the future. Certain financing agreements
of our subsidiaries contain limitations on the payment of dividends without the
lender's consent or in connection with a subsidiary's failure to comply with
various financial covenants.
PRICE RANGE OF COMMON STOCK
Our common stock is quoted on the Nasdaq National Market under the symbol
"ATMI". The following table sets forth, for the periods indicated, the high and
low intraday sales prices for our common stock as reported on the Nasdaq
National Market.
High Low
---- ---
1998
First Quarter $31.19 $20.00
Second Quarter 33.75 13.25
Third Quarter 20.00 10.88
Fourth Quarter 25.38 11.25
1999
First Quarter 31.00 16.88
Second Quarter 30.00 18.25
Third Quarter 38.00 27.50
Fourth Quarter 38.00 20.81
2000
First Quarter (through March 7, 2000) 51.94 29.13
On March 7, 2000, the closing sale price of our common stock as reported on
the Nasdaq National Market was $47.81 per share. As of December 31, 1999, we had
approximately 267 holders of record of our common stock.
12
<PAGE>
CAPITALIZATION
The following table sets forth our capitalization as of December 31, 1999:
. on an actual basis; and
. on an as adjusted basis to reflect the net proceeds from our sale of
1,500,000 shares of common stock, at an assumed offering price to the
public of $47.81 per share and after deducting the underwriters'
discounts and commissions and estimated offering expenses payable by us.
The common stock to be outstanding after this offering is based on shares
outstanding as of December 31, 1999 and excludes 2,874,555 shares of common
stock issuable upon the exercise of options and warrants outstanding as of such
date at a weighted average exercise price of $18.94 per share.
<TABLE>
<CAPTION>
December 31, 1999
----------------------------
Actual As Adjusted
------ -----------
(unaudited)
(in thousands)
<S> <C> <C>
Cash, cash equivalents and marketable securities................... $ 92,174 $159,707
========= ========
Total long-term debt, less current portion......................... 6,280 6,280
Minority interest.................................................. 1,109 1,109
Stockholders' equity:
Preferred Stock, par value $0.01: 2,000,000 shares - -
authorized; no shares issued and outstanding.....................
Common Stock, par value $0.01: 50,000,000 shares
authorized; 27,774,183 shares issued and outstanding;
29,274,183 shares issued and outstanding,
as adjusted...................................................... 278 293
Additional paid-in capital....................................... 122,536 190,054
Retained earnings................................................ 45,465 45,465
Cumulative other comprehensive income............................ 6,526 6,526
-------- --------
Total stockholders' equity..................................... 174,805 242,338
-------- --------
Total capitalization....................................... $182,194 $249,727
======== ========
</TABLE>
13
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
You should read the following selected consolidated financial data along
with "Management's Discussion and Analysis of Financial Condition and Results of
Operations" and our consolidated financial statements and notes to those
statements and other financial information included or incorporated in this
prospectus. The consolidated statement of income data for the years ended
December 31, 1996, 1997, 1998 and 1999 and the consolidated balance sheet data
at December 31, 1997, 1998 and 1999 have been derived from our audited
consolidated financial statements. The consolidated statement of income data for
the year ended December 31, 1995 and the consolidated balance sheet data at
December 31, 1995 and 1996 have been derived from our unaudited consolidated
financial statements. The unaudited consolidated financial statements include
all adjustments, consisting of normal recurring accruals, which we consider
necessary for a fair presentation of our financial position and results of
operations for these periods. The historical results presented below are not
necessarily indicative of future results.
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------------------------------------------------
1995 1996 1997 1998 1999
---- ---- ---- ---- ----
(in thousands, except per share data)
<S> <C> <C> <C> <C> <C>
Consolidated Statement of Income Data:
Revenues.............................. $115,984 $154,390 $192,012 $165,106 $196,236
Cost of revenues...................... 56,780 73,673 92,561 83,419 92,970
-------- -------- -------- -------- --------
Gross profit.......................... 59,204 80,717 99,451 81,687 103,266
Operating expenses:
Research and development.......... 7,892 12,314 14,336 16,630 18,359
Selling, general and administrative 37,162 48,435 60,593 56,925 60,305(5)
Merger costs and related expenses.. - 2,000(1) 9,000(3) 1,700(4) 9,914(6)
-------- -------- -------- -------- --------
Total operating expenses..... 45,054 62,749 83,929 75,255 88,578
-------- -------- -------- -------- --------
Operating income...................... 14,150 17,968 15,522 6,432 14,688
Interest income (expense), net........ (338) (375) (877) 2,487 3,117
Other income (expense), net........... (474) 94 340 539 724
-------- -------- -------- -------- --------
Income before income taxes and
minority interest................... 13,338 17,687 14,985 9,458 18,529
Income taxes.......................... 4,947 4,745 8,588 4,412 7,720
-------- -------- -------- -------- --------
Income before minority interest....... 8,391 12,942 6,397 5,046 10,809
Minority interest..................... 10 151 (2) (111) (263)
-------- -------- -------- -------- --------
Net income............................ $ 8,401 $ 13,093(2) $ 6,395 $ 4,935 $ 10,546
======== ======== ======== ======== ========
Net income per share - assuming dilution $ 0.36 $ 0.54(2) $ 0.25 $ 0.18 $ 0.37
======== ======== ======== ======== ========
Weighted average shares outstanding -
assuming dilution................... 23,051 24,318 25,660 27,423 28,319
December 31,
-----------------------------------------------------------------
<CAPTION>
1995 1996 1997 1998 1999
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Consolidated Balance Sheet Data: (in thousands)
Cash, cash equivalents and marketable
securities........................ $ 38,256 $ 35,966 $ 32,903 $ 86,169 $ 92,174
Working capital....................... 35,093 37,118 48,878 103,938 121,199
Total assets.......................... 105,545 125,873 153,529 208,652 232,656
Long-term debt, less current portion.. 12,461 18,499 19,763 12,559 6,280
Minority interest..................... 535 545 595 846 1,109
Total stockholders' equity............ 54,661 66,049 83,303 152,720 174,805
</TABLE>
- ------------------------
(1) Represents costs accrued in connection with patent litigation involving
Lawrence Semiconductor Laboratories (prior to our acquisition of
that company), which resulted in a settlement payment in May 1997.
(2) Net income and net income per share - assuming dilution in 1996 include the
effect of the treatment of our ADCS subsidiary as an S-Corporation for a
portion of 1996 (which was prior to our acquisition of ADCS). If ADCS had
been taxed as a C-Corporation for all of 1996, our net income and net income
per share - assuming dilution would have been approximately $11.6 million
and $0.48, respectively, for the year ended December 31, 1996.
14
<PAGE>
(3) Represents costs incurred in investigating, analyzing and completing our
acquisitions of ADCS and Lawrence Semiconductor Laboratories.
(4) Represents costs incurred in connection with the completion of our
acquisition of NOW Technologies.
(5) Includes $2.3 million for severance for several former executives within
ATMI Materials and ATMI Technologies.
(6) Represents $3.3 million incurred in connection with the completion of our
acquisitions of MST Analytics and Newform and $7.2 million incurred in
connection with our acquisitions of Delatech, ACSI and TeloSense offset by a
reversal of $0.6 million for previously accrued merger related costs.
15
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of our financial condition and
results of operations should be read in conjunction with "Selected Consolidated
Financial Data" and our consolidated financial statements and related notes
appearing elsewhere in this prospectus. This discussion and analysis contains
forward-looking statements that involve risks, uncertainties and assumptions.
The actual results may differ materially from those anticipated in these
forward-looking statements as a result of certain factors, including but not
limited to those set forth under "Risk Factors" and elsewhere in this
prospectus.
Overview
We are a leading supplier of materials, equipment and related services used
worldwide in the manufacture of semiconductor devices. We specifically target
the "front-end" semiconductor materials market. This market includes the
processes used to convert a bare silicon wafer into a fully functional wafer
that contains many copies of a semiconductor device or "chip". Our customers
include most of the leading semiconductor manufacturers in the world.
We have organized our operations along two business segments: ATMI
Materials and ATMI Technologies. ATMI Materials provides products that are used
in the semiconductor manufacturing process and related packaging and delivery
systems. ATMI Technologies provides products that sense and environmentally
control these materials while also providing specialized thin film deposition
services to semiconductor device manufacturers. ATMI Technologies also conducts
our venture and government funded research and development activities.
We have entered into eight mergers since 1997, each of which has been
accounted for as a pooling of interests. As a result, our consolidated financial
statements have been restated to reflect the results of these merged companies.
Results of Operations
The following table sets forth selected financial data as a percentage of
total revenues for the periods indicated:
<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------------------------------------
1997 1998 1999
---- ---- ----
<S> <C> <C> <C>
Revenues................................. 100.0% 100.0% 100.0%
Cost of revenues......................... 48.2 50.5 47.4
------ ------ ------
Gross profit............................. 51.8 49.5 52.6
Operating expenses:
Research and development........... 7.5 10.1 9.4
Selling, general and administrative 31.6 34.5 30.7
Merger costs and related expenses.. 4.7 1.0 5.1
------- ------- -------
Total operating expenses. 43.8 45.6 45.2
------ ------ ------
Operating income......................... 8.0 3.9 7.4
Interest income (expense), net........... (0.5) 1.5 1.6
Other income, net........................ 0.2 0.3 0.4
------- ------- -------
Income before income taxes and
minority interest.................... 7.7 5.7 9.4
Income taxes............................. 4.5 2.7 3.9
------- ------- -------
Income before minority interest.......... 3.2 3.0 5.5
Minority interest........................ 0.0 (0.1) (0.1)
------- -------- --------
Net income............................... 3.2% 2.9% 5.4%
======= ======= =======
</TABLE>
16
<PAGE>
Segment Data
During 1998, we adopted FASB Statement No. 131 "Disclosure About Segments
of an Enterprise and Related Information". We have two segments: ATMI Materials
and ATMI Technologies. The reportable segments are each managed separately
because they manufacture and distribute distinct products with different
production processes. We evaluate performance and allocate resources based on
operating profit or loss, not including interest and other income or expense and
income taxes. The accounting policies of the reportable segments are the same as
those described in the summary of significant accounting policies in our
consolidated financial statements. Intercompany sales are not material among
segments or operating divisions.
The following tables provide reported results for each of these segments:
<TABLE>
<CAPTION>
Year Ended December 31,
----------------------------------------
1997 1998 1999
---- ---- ----
(in thousands)
<S> <C> <C> <C>
Revenues
ATMI Materials....................................... $ 83,060 $ 71,279 $ 96,711
ATMI Technologies.................................... 108,952 93,827 99,525
-------- -------- --------
Consolidated revenues................................ $192,012 $165,106 $196,236
======== ======== ========
1997 1998 1999
---- ---- ----
Operating Income
ATMI Materials....................................... $ 17,757 $ 11,373 $ 19,335
ATMI Technologies.................................... 6,765 (3,241) 5,267
Merger costs and related expenses.................... (9,000) (1,700) (9,914)
-------- -------- --------
Consolidated operating income........................ $ 15,522 $ 6,432 $ 14,688
======== ======== ========
</TABLE>
Comparison of Years Ended December 31, 1999, 1998 and 1997
Revenues. Our revenues increased 18.9% to $196.2 million in 1999 from
$165.1 million in 1998, following a decrease of 14.0% in 1998 from $192.0
million in 1997. The 1999 increase in revenues was primarily attributable to the
semiconductor industry's recovery, particularly for consumable products, as seen
by ATMI Materials' 35.7% growth in revenue. ATMI Materials experienced
significant gains related to our SDS, NOW dispensing and packaging products and
liquid materials product lines in 1999 as compared to 1998. ATMI Technologies'
revenues for 1999 increased 6.1% from 1998 levels. Semiconductor manufacturing
capacity expansion began to rebound in the middle of 1999 leading to improved
sales of EcoSys environmental and sensing products and Epitronics thin film
deposition services.
Soft market conditions in 1998, evidenced by a decline in semiconductor
unit demand in the second and third quarters of 1998 and a significant reduction
in semiconductor equipment spending during most of 1998, were the primary causes
for the 14.0% revenue decline for both ATMI Materials and ATMI Technologies when
comparing 1998 with 1997. The decline in semiconductor unit demand during 1998
slowed sales of many of ATMI Materials' product offerings. Semiconductor
manufacturing capacity expansion substantially declined during 1998, which
caused a decrease in EcoSys and Epitronics product sales.
17
<PAGE>
Gross Profit. Gross profit increased 26.4% to $103.3 million in 1999 from
$81.7 million in 1998. Gross margin increased to 52.6% in 1999 from 49.5% in
1998. This increase was due principally to margin growth related to
manufacturing efficiencies from increased sales and a shift in product mix
towards SDS, NOW dispensing and packaging systems and liquid materials product
lines. Gross profit decreased 17.9% to $81.7 million in 1998 from $99.5 million
in 1997. Gross margin decreased to 49.5% in 1998 from 51.8% in 1997, primarily
as a result of less efficient fixed cost absorption in connection with the
decrease in revenues experienced in 1998, particularly within the EcoSys,
Epitronics and NOW product lines. Volume declines within the photoresist
stripping product lines, driven by the softening semiconductor industry
conditions, also contributed to the reduction in gross margins in 1998.
Research and Development Expenses. Research and development expenses
increased 10.4% to $18.4 million in 1999 from $16.6 million in 1998. Increased
efforts to expand SDS technology beyond ion implant applications into CVD, etch
and bulk gas delivery, and continued product development activities within ATMI
Materials and the Emosyn venture resulted in growth of the research and
development efforts. As a percentage of revenues, research and development
expenses decreased to 9.4% in 1999 from 10.1% in 1998. Research and development
expenses increased 16.0% to $16.6 million in 1998 from $14.3 million in 1997.
Similar to the increase in 1999, the 1998 increase was due to the development
efforts to extend the SDS technology beyond existing applications, as well as
the development of new chemical mechanical polishing materials and increased
research efforts to expand our sensing and monitoring product lines.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased 5.9% to $60.3 million in 1999 from $56.9
million in 1998. Despite decreases in expenses associated with decreased
administrative costs and cost savings resulting from the integration of recent
business acquisitions, expenses incurred related to the organization of our
Taiwanese subsidiary and the commencement of our enterprise system software
implementation caused selling, general and administrative expenses to increase
in 1999. Additionally, the 1999 expenses included $2.3 million in severance
for several former executives within ATMI Materials and ATMI Technologies.
As a percentage of revenues, these expenses decreased to 30.7% in 1999 from
34.5% in 1998. Selling, general and administrative expenses decreased 6.1% to
$56.9 million in 1998 from $60.6 million in 1997. The 1998 decrease was
primarily due to a significant reduction in executive compensation paid to
members of management of certain acquired businesses (Delatech, ACSI and
TeloSense) due to weaker operating performance, a reduction of administrative
costs resulting from reductions in personnel and decreased commissions on lower
product revenues.
Merger Costs and Related Expenses. The 1999 operating results included
merger and related costs of $9.9 million, including $3.3 million of professional
fees and transactions costs related to our November 1999 acquisitions of MST and
Newform and $2.8 million of investment banking, legal and accounting fees in
connection with the investigation, analysis and May 1999 closing of the
TeloSense, Delatech and ACSI transactions. The 1999 merger related costs
included a $0.6 million reversal of previously accrued merger costs for prior
acquisitions. The acquisition of Delatech also resulted in a $4.4 million asset
impairment charge during the second quarter of 1999 for inventory ($1.0 million)
and goodwill ($3.4 million) associated with an existing environmental equipment
product line which was determined to be impaired. The 1998 operating results
included merger related charges of $1.7 million incurred in completing the NOW
acquisition.
Operating Income. Operating income, including the recognition of merger
related costs, increased 128.4% in 1999 to $14.7 million from $6.4 million in
1998 which was a 58.6% decrease from $15.5 million in 1997. ATMI Materials'
operating income for 1999 increased 70.0% to $19.3 million from $11.4 million in
1998. This increase reflected the gains made due to the improved market
conditions within the industry and increased market share penetration during
1999. The significant revenue increase in 1999 combined
18
<PAGE>
with stronger margins and cost containment initiatives resulted in higher
operating income within ATMI Materials. ATMI Materials' operating income, as a
percentage of revenues, was 20.0% and 16.0% for 1999 and 1998, respectively.
ATMI Technologies' operating income improved to $5.3 million in 1999 compared to
a $3.2 million loss in 1998. The profitability increase was attributable to the
growth in both EcoSys and Epitronics revenues, the attendant product margin
improvements and a favorable product mix shift along with an improvement in
profitability of various contract programs. Investments in research and product
development within Emosyn and our other ventures are reflected in ATMI
Technologies' operating income. ATMI Technologies' operating income, as a
percentage of revenues, was 5.3% and (3.5)% in 1999 and 1998, respectively.
ATMI Materials' operating income declined 36.0% to $11.4 million in fiscal
1998 from $17.8 million in 1997. The revenue decline in 1998 reduced gross
margins within ATMI Materials and, combined with an increase in research and
development spending, drove the operating income decline. ATMI Materials'
operating income, as a percentage of revenues, was 21.4% in 1997. ATMI
Technologies' operating income declined to a loss of $3.2 million in fiscal 1998
compared to operating income of $6.8 million in 1997. These losses were
attributable to the severe decline in sales of EcoSys products, reduced
Epitronics operating results caused by revenue declines on a relatively fixed
cost base and an increase in research and development efforts focused on our
Emosyn business and other new business ventures.
Other Income, Net. Other income, net increased to approximately $3.8
million in 1999 from $3.0 million in 1998. The increase in 1999 related to a
significant increase in interest income due to increased cash levels on hand
throughout all of 1999 compared to only part of 1998. These increased cash
levels resulted from a public offering that was completed at the beginning of
the second quarter of 1998. Increased interest rate levels in 1999 also resulted
in increased interest income. Interest expense declined in 1999 due to lower
levels of debt outstanding at December 31, 1999 compared to December 31, 1998.
Other income, net increased to $3.0 million in 1998 from a net expense of $0.5
million in 1997 as a direct result of the increased cash and marketable
securities that resulted from our public offering in the first quarter of 1998.
Interest expense decreased 26.5% to $1.3 million in 1999 from $1.7 million in
1998, and decreased 34.0% in 1998 from $2.6 million in 1997. The 1999 decrease
related to the retirement of a significant debt balance related to the Delatech
acquisition as well as final payments on several equipment leases within
Epitronics. The 1998 decrease was due to a conversion of outstanding debt at
ACSI into equity in late 1997 and lower overall debt balances outstanding during
1998, as capital lease lines were paid down and certain high-interest rate debt
was retired.
Income Taxes. Income tax expense increased 75.0% to $7.7 million in 1999
from $4.4 million in 1998. Income tax expense decreased 48.6% to $4.4 million in
1998 from $8.6 million in 1997. Our income tax expense related primarily to
United States federal, state and foreign tax liabilities, which were partially
offset by various foreign sales corporation benefits and research and
development credits. The 1999 effective tax rate was in line with statutory
rates at 42.3%. While no tax benefit was taken for a significant amount of
merger related costs in 1999, benefit was recognized based on changes in
estimates regarding the realizability of net operating loss and tax credit
carryforwards of certain acquired companies. The 1998 effective tax rate of
47.2% was higher than statutory rates because no tax benefit was taken for the
$1.7 million of merger costs related to the NOW acquisition, and no tax benefit
was recognized for operating losses sustained by ACSI in 1998. The significant
1997 effective tax rate of 57.3% was due in part to the 1997 operating results
including the $9.0 million for merger costs related to the ADCS and Lawrence
Semiconductor acquisitions for which no tax benefit was taken.
Minority Interest. Minority interest represents the 30.0% interest held by
K.C. Tech Co., Ltd. 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.
Net Income Excluding Transaction Related Costs and Other Expenses. Over the
last three years, we have used mergers and acquisitions to accelerate our growth
and broaden our product lines. As a result of this strategy, we have incurred
expenses to consummate these transactions and merge these acquired businesses
into existing operations. Excluding these merger costs and certain severance
19
<PAGE>
charges related to reorganizing the business pursuant to these acquisitions, net
income from recurring operations would have been $19.3 million, or $0.68 per
share-assuming dilution in 1999. This represents a 175.7% increase over $7.0
million, or $0.26 per share-assuming dilution in 1998. On a comparable basis,
1997 net income from recurring operations was $15.4 million, or $0.60 per share-
assuming dilution.
20
<PAGE>
Selected Quarterly Results of Operations
The following table sets forth certain unaudited consolidated quarterly
financial information for the eight quarters ended December 31, 1999, as well as
such data expressed as a percentage of our revenues for the periods indicated.
In the opinion of our management, this information has been prepared on the same
basis as the audited consolidated financial statements appearing elsewhere in
this prospectus and includes all adjustments (consisting only of normal
recurring adjustments) necessary to present fairly the unaudited quarterly
results when read in conjunction with our consolidated financial statements and
related notes included elsewhere in this prospectus. The results of operations
for any quarter are not necessarily indicative of future results of operations.
<TABLE>
<CAPTION>
Quarter Ended
---------------------------------------------------------------------------------------------------
Mar. 31 June 30 Sept. 30 Dec. 31 Mar. 31 June 30 Sept. 30 Dec. 31
------- ------- -------- ------- ------- ------- -------- -------
1998 1998 1998 1998 1999 1999 1999 1999
---- ---- ---- ---- ---- ---- ---- ----
(in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues.......................... $52,047 $44,446 $35,161 $33,452 $37,240 $49,323 $52,055 $57,618
Cost of revenues.................. 23,519 23,152 20,254 16,494 18,243 23,005 24,833 26,887
------- ------- ------- ------- ------- ------- ------- -------
Gross profit...................... 28,528 21,294 14,907 16,958 18,997 26,318 27,222 30,731
Operating expenses:
Research and development...... 3,944 4,501 4,132 4,053 4,023 4,462 5,009 4,865
Selling, general and
administrative.............. 15,623 14,727 12,893 13,682 12,941 15,251 13,668 18,445(1)
Merger costs and related
expenses.................... - - 1,700 - - 6,800 - 3,114
------- ------- ------- ------- ------- ------- ------- -------
Total operating
expenses ............. 19,567 19,228 18,725 17,735 16,964 26,513 18,677 26,424
------- ------- ------- ------- ------- ------- ------- -------
Operating income (loss)........... 8,961 2,066 (3,818) (777) 2,033 (195) 8,545 4,307
Other income, net................. 112 775 907 1,232 802 924 626 1,489
------- ------- ------- ------- ------- ------- ------- -------
Income (loss) before income taxes
and minority interest......... 9,073 2,841 (2,911) 455 2,835 729 9,171 5,796
Income taxes...................... 3,271 1,332 (566) 375 1,358 1,466 2,929 1,970
------- ------- ------- ------- ------- ------- ------- -------
Income (loss) before minority
interest....................... 5,802 1,509 (2,345) 80 1,477 (737) 6,242 3,826
Minority interest................. (55) (13) (3) (40) 1 (82) (110) (72)
------- ------- ------- ------- ------- ------- ------- -------
Net income (loss)................. $ 5,747 $ 1,496 $(2,348) $ 40 $ 1,478 $ (819) $ 6,132 $ 3,754
======= ======= ======= ======= ======= ======= ========= =========
<CAPTION>
Percentage of Revenues
--------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues.......................... 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of revenues.................. 45.2 52.1 57.6 49.3 49.0 46.6 47.7 46.7
------- ------- ------- ------- ------- ------- ------- -------
Gross profit...................... 54.8 47.9 42.4 50.7 51.0 53.4 52.3 53.3
Operating expenses:
Research and development...... 7.6 10.1 11.8 12.1 10.8 9.1 9.6 8.4
Selling, general and
administrative.............. 30.0 33.1 36.7 40.9 34.8 30.9 26.3 32.0(1)
Merger costs and related
expenses.................... - - 4.8 - - 13.8 - 5.4
------- ------- ------- ------- ------- ------- ------- -------
Total operating
expenses ............. 37.6 43.2 53.3 53.0 45.6 53.8 35.9 45.8
------- ------- ------- ------- ------- ------- ------- -------
Operating income (loss)........... 17.2 4.7 (10.9) (2.3) 5.4 (0.4) 16.4 7.5
Other income, net................. 0.2 1.7 2.6 3.6 2.2 1.9 1.2 2.6
------- ------- ------- ------- ------- ------- ------- -------
Income (loss) before income taxes
and minority interest......... 17.4 6.4 (8.3) 1.3 7.6 1.5 17.6 10.1
Income taxes...................... 6.3 3.0 (1.6) 1.1 3.6 3.0 5.6 3.5
------- ------- ------- ------- ------- ------- ------- -------
Income (loss) before
minority interest.............. 11.1 3.4 (6.7) 0.2 4.0 (1.5) 12.0 6.6
Minority interest................. (0.1) (0.0) (0.0) (0.1) 0.0 (0.2) (0.2) (0.1)
------- ------- ------- ------- ------- ------- ------- -------
Net income (loss)................. 11.0% 3.4% (6.7)% 0.1% 4.0% (1.7)% 11.8% 6.5%
======= ======= ======= ======= ======= ======= ========= =========
</TABLE>
- -----------------------------
(1) Includes $2.3 million for severance for several former executives
within ATMI Materials and ATMI Technologies.
21
<PAGE>
Our quarterly results have varied significantly and are likely to continue to
vary significantly due to a number of factors including the general demand for
semiconductors, the cyclical nature of the semiconductor manufacturing equipment
market, our product mix, our success in developing, introducing and shipping new
products, competition, the timing of significant orders from, and shipments to,
customers, the timing and market acceptance of new products, seasonality of
sales and the effect of various non-recurring expenses.
Liquidity and Capital Resources
To date, we have financed our activities through cash from operations, the
sale of equity, external research and development funding and various lease and
debt instruments. Our working capital increased to $121.2 million at December
31, 1999 from $103.9 million at December 31, 1998 and $48.9 million at December
31, 1997.
Net cash provided by operations was approximately $13.1 million during
1999, resulting primarily from improvements in working capital, as compared to
cash provided from operations of $13.3 million during 1998. The cash flow from
operations for 1999 related primarily to net income adjusted for non-cash
charges partially offset by the increase in working capital items, primarily
accounts receivable. In addition, the $9.9 million of merger costs and related
expenses, expensed in 1999, reduced the cash generated from operations by
approximately $4.3 million, as $4.4 million were non-cash charges and
approximately $1.2 million remained unpaid at December 31, 1999. The improvement
in working capital for 1999 was primarily caused by a decrease in other assets
and increases in accounts payable, accrued expenses and other liabilities. The
$1.7 million of merger costs and related expenses, expensed in the third quarter
of 1998, reduced the cash generated from operations by approximately $1.1
million, as approximately $0.6 million remained unpaid at December 31, 1998. Net
cash provided by operations in 1997 was approximately $4.1 million.
Additionally, the $9.0 million of merger costs and related expenses, expensed in
the fourth quarter of 1997, reduced the cash generated from operations by
approximately $7.0 million, as approximately $2.0 million remained unpaid at
December 31, 1997.
Our investing activities included capital expenditures of $10.2 million,
$15.0 million, and $9.1 million in the years 1999, 1998 and 1997, respectively.
The 1999 expenditures were made primarily to support the growth experienced at
several of our manufacturing facilities. The 1998 expenditures primarily related
to installation of additional manufacturing capacity in Danbury, Connecticut,
San Jose, California and our two Texas facilities. 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.
Among other investing activities, in 1998 we invested approximately $47.9
million raised primarily from a public offering of our common stock into
marketable securities for future working capital requirements and potential
merger and acquisition activities. In July 1997, prior to our acquisition of
MST, it used $5.6 million to purchase four businesses. In addition, we sold $0.8
million in marketable securities in 1997.
Our financing activities included a March 1998 registered underwritten
public offering of 5,428,000 shares of our common stock. Of such shares, we sold
2,257,000 shares and certain of our stockholders sold 3,171,000 shares. We
received net proceeds from the offering of approximately $62.4 million.
At December 31, 1999, we financed a significant portion of our capital
equipment purchases, particularly the silicon epitaxial capacity, through
capital leases with about $3.8 million of capital lease obligations outstanding.
During 1999 and 1998, we made payments on capital leases of approximately $2.5
million and $2.8 million, respectively. Financial institutions also provided
collateral-based loans for other equipment purchases. In 1999, we made $9.1
million of note payments and during 1998, we made payments on notes of
approximately $6.7 million, with the most significant payment being the
retirement of a mortgage on the Mesa, Arizona Epitronics facility. Our NOW
business has an industrial revenue bond arrangement outstanding in the amount of
$2.3 million, which was used for equipment and improvements at its manufacturing
facility and corporate office. At December 31, 1999, $13.2 million of loans,
bonds and
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financing remained outstanding. Our management believes that our debt service
obligations can be adequately satisfied by cash flows from operations.
We believe that our existing cash balances, marketable securities, existing
sources of liquidity and anticipated funds from operations will satisfy our
projected working capital and other cash requirements through at least the end
of 2000. However, we also believe the level of financing resources available to
us is an important competitive factor in our industry and we may seek additional
capital prior to the end of that period. Additionally, we consider, on a
continuing basis, potential acquisitions of technologies and businesses
complementary to our current business. There are no present agreements with
respect to any such acquisitions. However, any such transactions may affect our
future capital needs.
Year 2000 Compliance
We formed an internal compliance team to evaluate our internal information
technology infrastructure and application systems and other non-IT
infrastructure systems to determine whether such systems would operate correctly
with regard to the import, export and processing of date information, including
correct handling of leap years, in connection with the change in the calendar
year from 1999 to 2000, and to evaluate the Year 2000 issue with respect to the
systems of third party partners and suppliers with which we have a material
relationship.
We completed an inventory analysis and risk assessment. As previously
planned and budgeted, we upgraded our core IT Systems to incorporate additional
desired features and functionality including Year 2000 compliant operators. We
completed the necessary upgrades to make the recently acquired businesses Year
2000 compliant by December 31, 1999. In connection with such upgrades, we expect
that our core IT Systems are Year 2000 compliant, and no significant issues have
arisen to date from the calendar change to January 2000. We do not expect that
any additional costs of addressing the Year 2000 issue will have a material
adverse impact on our financial position and results of operations or cash
flows.
We also completed a non-IT system inventory analysis and risk assessment.
As a result of the analysis, no remediation actions were required in order to be
Year 2000 compliant. We believe the number of non-IT systems is relatively small
and, therefore, do not expect that any additional costs of addressing the Year
2000 issue for these systems will have a material adverse impact on our
operations or our financial position, results of operations or cash flows.
We completed a third party inventory and risk assessment and verified
material Year 2000 compliance of these systems by December 31, 1999. We believe
the number of material third party systems is relatively small. However, until
Year 2000 compliance of all third party systems if ascertained, the risk to our
operations and any additional costs relating to these systems is unknown. We
believe that any problems that might arise would involve third party systems
rather than our internal systems. We believe that majority of the risks
associated with Year 2000 non-compliance have been averted as the calendar
turned. Any further risk might be the partial shutdown of a supplier or
strategic partner and its inability to provide supplies and services to us on a
timely basis. We developed a contingency plan addressing potential issues,
ensuring that adequate levels of critical supplies used in our manufacturing
processes were on hand at the end of 1999.
We tested our products for Year 2000 compliance and determined that all of
our products currently available for sale have either successfully passed Year
2000 compliance testing or are not subject to Year 2000 compliance because such
products do not import, export or process date information in any manner.
We incurred approximately $600,000 relating to inventory analysis and risk
assessment of potential Year 2000 difficulties. The funds to cover the costs
incurred were derived from general operations. The costs primarily related to
desktop compliance and standardization to Year 2000 compliance. These Year 2000
expenditures were within our planned organizational budgets and included the
costs of reviewing key
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operating systems. No IT Systems projects were deferred because of problems
associated with the Year 2000 Issue.
Operations Outside the United States
For the years ended December 31, 1999, 1998 and 1997, export sales outside
the United States, including Asia and Europe, accounted for 39.0%, 31.9%, and
30.0%, respectively, of our revenues. We anticipate that our sales outside the
United States will continue to account for a significant percentage of our
revenues. The November 1999 acquisitions of MST and Newform have increased our
European operations. In addition, we have a wholly-owned subsidiary in Taiwan
where we sell and service several of our product lines. We also have a
wholly-owned subsidiary in South Korea that manufactures and markets
environmental abatement equipment in South Korea and a joint venture agreement
with K.C. Tech pursuant to which we have a 70.0% 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.
Quantitative and Qualitative Disclosures About Market Risks
Interest Rate Risk
As of December 31, 1999, our cash included money market securities and
commercial paper. Due to the short duration of our investment portfolio, an
immediate 10% change in interest rates would not have a material effect on the
fair market value of our portfolio, therefore, we would not expect our operating
results or cash flows to be affected to any significant degree by the effect of
a sudden change in market interest rates on our securities portfolio.
Foreign Currency Exchange Risk
A substantial portion of our sales are denominated in U.S. dollars and, as
a result, we have relatively little exposure to foreign currency exchange risk
with respect to sales made. This exposure may change over time as business
practices evolve and could have a material adverse impact on our financial
results in the future. We do not use forward exchange contracts to hedge
exposures denominated in foreign currencies or any other derivative financial
instruments for trading or speculative purposes. The effect of an immediate 10%
change in exchange rates would not have a material impact on our future
operating results or cash flows.
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BUSINESS
Market data used throughout this prospectus were obtained from internal
surveys and from industry publications, including information generated by
Dataquest Inc. and the Semiconductor Industry Association. We have not
independently verified such information. This information was not commissioned
by, or prepared at the request of, us or any of our affiliates. Similarly,
internal surveys, while believed to be reliable, have not been verified by an
independent source.
We are a leading supplier of materials, equipment and related services used
worldwide in the manufacture of semiconductor devices. We specifically target
the "front-end" semiconductor materials market. This market includes the
processes used to convert a bare silicon wafer into a fully functional wafer
that contains many copies of a semiconductor device or "chip". To complete the
manufacturing process, this functional wafer is taken through a "back-end"
manufacturing process that includes wafer dicing into chips, packaging and
testing. Our customers include most of the leading semiconductor manufacturers
in the world, including Intel, Taiwan Semiconductor, Hyundai, Texas Instruments
and IBM.
We have further refined our market focus to target only specialty materials
used in front-end semiconductor manufacture. These specialty materials are used
in eight key process steps that are used repetitively to add functionality to a
silicon wafer. In recent years, the semiconductor industry has grown worldwide
and front-end manufacturing processes have become increasingly complex,
resulting in rapidly changing requirements for semiconductor materials. We have
capitalized on the growth of the semiconductor industry in general, and
front-end processing in particular, through:
. a comprehensive research and development program that has provided a
stream of proprietary and patented products for this market;
. a strategy of delivering a complete materials solution to our customers
including materials, packaging, delivery systems, sensing and
abatement; and
. an aggressive mergers and acquisitions effort that has allowed us to
more rapidly move towards one-stop purchasing for our customers.
We have organized our operations along two business segments: ATMI
Materials and ATMI Technologies. ATMI Materials provides:
. a broad range of ultrahigh-purity semiconductor materials; and
. semiconductor materials packaging and delivery systems.
ATMI Technologies provides:
. sensors for the workplace and environment that detect materials as they
move through the workplace;
. point-of-use environmental equipment that abates materials; and
. specialty thin film deposition services that provide coated wafers
directly to our customers.
We also conduct our venture activities and our government funded research and
development activities through ATMI Technologies.
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Our business has evolved to consist of an equal mix of consumables and
services that track wafer starts, or the number of silicon wafers processed into
fully functional semiconductor devices, and equipment purchases, which generally
track the expansion of industry capacity. Consequently, we believe that our
overall business is less volatile than that of a typical semiconductor capital
equipment supplier. ATMI Materials and ATMI Technologies accounted for
approximately 49% and 51%, respectively, of our revenues in 1999, and
approximately 43% and 57%, respectively, of our revenues in both 1998 and 1997.
Over the last five years, we have achieved a leadership position by
providing a more complete line of products than our competitors through
innovation and acquisitions. We plan to continue our growth through product line
expansion in each of our existing market segments and to leverage our core
technology to create new high growth businesses.
Semiconductor Industry Background
The semiconductor industry has grown in recent years as the use of
semiconductor devices has proliferated in a wide variety of consumer and
industrial products, especially in computing, networking and communications
equipment. According to the Semiconductor Industry Association, the
semiconductor industry achieved worldwide sales in 1999 of $149 billion and is
estimated to achieve worldwide sales of over $200 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 supplier relationships and reduce the number of
suppliers upon which they rely. In turn, this 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 various kinds of materials deposition (physical vapor deposition,
chemical vapor deposition, electrochemical deposition, ion implant and spin-on),
etch, wafer preparation (chemical mechanical polishing) and patterning
(photolithography).
During deposition processes, 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 most mature processes for thin film deposition and modification are
physical vapor deposition, also known as PVD or sputtering, ion implantation and
spin-on deposition. In PVD, which is used primarily for the deposition of
conducting or metal layers, a high energy beam is directed at a high purity
metal target which in turn causes the displacement of metal atoms that are
showered over the wafer coating it with a thin metallic film. Ion implantation
is a gas based process used principally to modify (or dope) semiconducting
layers with a high energy beam of material that is "implanted" into an existing
thin film. In spin-on deposition, a spinning wafer is treated with a solution of
materials and solvent. The solvent is vaporized leaving the material in place
which is usually further heat treated to form the desired thin film.
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Chemical vapor deposition, or CVD, is a newer process used in the
deposition of semiconducting and insulating thin films. In the CVD process,
wafers are placed in a sophisticated reaction chamber, and a specially designed
gas or vaporized liquid material is introduced. Simultaneously, a form of
energy, such as 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.
The advantages of CVD over PVD based processes include:
. the relative thinness of the films applied to the wafer;
. conformality (ability to coat evenly, especially in holes and trenches
designed into the device);
. purity; and
. the 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.
An even more recently developed process called electrochemical deposition,
or ECD, is now growing rapidly as a result of the industry's desire to use
copper as the conducting layer in certain devices. In ECD, the wafer is
submerged in a bath of copper electroplating solution which, when appropriately
charged, deposits a thin film of copper on the wafer.
Etch is a process that selectively erodes away certain thin film materials.
It is carried out either "dry" with corrosive gases or "wet" with energized
liquids. Chemical mechanical polishing, or CMP, is used to prepare a wafer for
photolithography. As wafers are processed, thin film thicknesses inevitably vary
across the surface of the wafer. Due to the fine line widths used in
photolithography, present day wafers need to be perfectly flat. CMP flattens the
processed wafer by polishing the wafer using a mechanical polishing pad and a
slurry, which is an abrasive solution containing solid materials and chemicals
which selectively erodes away the appropriate excess materials.
Photolithography is the process whereby patterns are developed on the wafer
surface. The process is begun by spinning a photosensitive material called a
"photoresist" or "resist" onto the wafer surface and shining light through a
patterned photomask to selectively harden the resist. The resist is then
developed by stripping or otherwise removing excess resist material and allowing
for the fabrication of the wafer's circuitry.
Materials and Delivery Systems
The market for semiconductor thin film materials 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 has experienced ongoing innovation. This innovation has been
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.
Because thin film materials 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 segmented into a wide variety of material types and
forms. For example, many 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
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and/or hazardous, leading to the development of safer alternatives including the
use of liquid or solid materials and the adoption of gas handling technologies
and delivery systems that minimize the danger of a catastrophic release of toxic
gas. We estimate that the total annual market in 1999 for specialty thin film
deposition, etch, CMP, photolithography materials and delivery systems exceeded
$3 billion.
Materials Packaging. Semiconductor materials have exceptional purity
requirements due to the extremely low tolerances for impurities and particulates
in semiconductor processing. Gases are in a form whereby particulates can be
readily managed. Liquids and solids, however, require special packaging to
minimize exposure to air and particulates.
Materials Sensing and Monitoring. Semiconductor gases pose unique toxicity
and environmental difficulties. As a result, the need for devices to sense and
warn personnel of leaks or possible catastrophic releases of these gases is
compelling. To that end, a market for toxic gas sensing devices and systems has
grown up in tandem with the semiconductor industry. Semiconductor fabs are now
outfitted with a high level of sensing technology to protect the workplace and
the environment. Furthermore, this technology is being integrated with factory
operations to prevent and/or minimize damage or productivity of the plant and
its personnel. We believe the market for this type of materials sensing
equipment exceeded $150 million in 1999.
Sensors are also required to monitor materials purity and concentration.
The ability to integrate sensors to control processing equipment is also
critical to the productivity of the high capital intensive semiconductor fabs.
So-called "in-process sensing" is growing rapidly with the increasing complexity
of semiconductor processing.
Environmental Equipment
The use of gas and vapor based processes has led to the development of
environmental equipment designed to abate gaseous effluent. For example, less
than 40% 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, variations in the processes used 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. We believe the market for this type of
point-of-use environmental equipment exceeded $200 million in 1999.
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. Epitaxial, or "epi", wafers are wafers on which CVD thin films
have been deposited. A merchant market for epitaxial wafers, primarily silicon
epitaxial wafers, has in recent years developed due to the high degree of
expertise and significant capital expenditures required by epitaxy. According to
Dataquest Inc. this market was $2.0 billion in 1998. This market is subdivided
into "generic" wafers for high volume applications such as dynamic random access
memory, or 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. We believe that specialty epi products accounted for approximately 15%
of the total epi wafer market or
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$300 million in 1998 and will constitute a significant portion of the overall
growth of the merchant market for epitaxial wafers.
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 uses 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. We
believe the market for all wide bandgap materials for both electronic and
optoelectronic applications was $9.0 billion in 1999.
ATMI's Strategy
Our objective is to establish and enhance leadership positions in each of
the market segments we serve. Our strategy consists of the following key
elements:
. We target high growth, high margin specialty markets that use our core
materials technologies and require products that are consumed in the
production process.
. We seek to provide full market-basket solutions, or "one-stop
shopping", through innovation and acquisitions in each of our target
markets to help our customers streamline supplier relationships.
. We provide added value through advanced packaging and dispensing
systems designed to meet the demands of users for greater levels of
purity, productivity, safety and environmental responsiveness.
. We leverage our technology leadership by investing extensively in
developing proprietary and patented materials and materials handling
technology which we use to commercialize new products to meet customer
requirements.
. We form strategic alliances, including joint development programs and
collaborative marketing efforts, to accelerate the introduction of our
products into markets that have manufacturing and/or distribution
barriers.
Businesses and Products
We conduct our operations through two primary business segments: ATMI
Materials and ATMI Technologies.
ATMI Materials
We believe ATMI Materials is one of the fastest growing suppliers of
ultrahigh purity semiconductor materials and related packaging and delivery
systems to the semiconductor industry. We have taken advantage of the changes in
the market for materials and delivery systems by:
. developing and commercializing a wide range of "front-end"
semiconductor materials;
. commercializing innovative bulk delivery systems which automatically
deliver materials of the highest purity and consistency to a process;
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. developing innovative packaging systems that allow for the introduction
of low volatility liquids and solids to semiconductor processes;
. developing and commercializing patented low-pressure gas delivery
systems for safe handling and delivery of toxic and hazardous gases to
semiconductor process equipment; and
. developing manufacturing processes to meet the critical purity and
integrity requirements of the microelectronics industry.
In meeting the needs of our customers, which include semiconductor device
manufacturers, chemical suppliers and OEMs located throughout the world, and
anticipating their future requirements, we seek:
. to offer the most complete line of consumable and delivery and
packaging system products;
. to offer the most consistent, highest purity materials available;
. to offer the most reliable, innovative equipment products;
. to improve the level of customer service, technical support and
response offered and to remain cost-effective to our customers;
. to meet customer needs for statistical quality and process control and
dock-to-stock programs; and
. to continue to meet the industry's needs for advanced materials
required for future generation devices.
Products and Services. ATMI Materials has four primary product lines, which
consist of liquid materials, liquid delivery systems, gas delivery systems and
advanced packaging and dispensing systems. ATMI Materials also provides services
relating to each of these product lines.
Liquid Materials. We produce a broad range of materials that are used in
making semiconductor devices. In addition to the widely used CVD precursors such
as TEOS and related dopants, we also sell thin film materials used in other
semiconductor manufacturing processes, including phosphorous and boron halides
used for doping by diffusion processing. We also manufacture and sell 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. We believe that our cleaning and container technology produces
the most consistent, highest purity chemicals in the industry and ensures their
quality as delivered into the reactor.
We also produce a wide range of liquid products for photoresist stripping,
edge bead removal, developing and cleaning. In addition, we recently entered the
rapidly growing market for CMP slurries. We now provide high performance oxide
polishing slurries, and we expect to introduce advanced metal slurries.
Liquid Delivery Systems. We design, manufacture and sell proprietary
continuous refill and delivery systems. These systems are designed to deliver
ultrahigh-purity thin film materials to the CVD reactors under the desired
physical conditions. Our delivery systems 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.
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We believe that our 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. Our 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 (the SDS or Safe Delivery System). Our patented SDS
product line uses a standard gas cylinder containing an adsorbent material. The
cylinder is filled with gas under conditions such that the gas is adsorbed onto
the material, and the SDS cylinder is at sub-atmospheric pressure, minimizing
any potential leak of hazardous gas and allowing more gas to be introduced into
the cylinder than would be possible under traditional high pressure conditions.
Consequently, material delivery via SDS is safer and provides significantly
higher rates of productivity than traditional methods. Since most semiconductor
processes operate at reduced pressure and the gas can be 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, we have introduced products using the SDS technology to deliver
several gases, including arsine, phosphine, boron trifluoride, silicon
tetrafluoride and germanium tetrafluoride. Each is used to "dope" silicon wafers
using ion implant processes. All of these SDS products 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
us, and for us by Matheson Gas Products, our exclusive distributor for SDS used
in ion implant applications.
We also believe that significant markets for SDS exist outside ion implant.
We are now commercializing SDS for CVD applications. We have also undertaken
extensive development efforts to identify new markets and products for the SDS
technology. We believe that certain etch gases used in the semiconductor
industry and certain gases normally delivered in bulk within the semiconductor
industry are possible candidates for the SDS process.
Advanced Packaging and Delivery Systems. We manufacture three different
types of NOWPak container assemblies: "Bag-in-a-Bottle"; "Bag-in-a-Can"; and
"Bag-in-a-Drum". 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 which allows virtually
all chemicals to be delivered to the manufacturing process in an unaltered
state. 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.
The largest market for NOWPak's packaging is materials for photoresists.
These materials are typically packaged in one liter through ten liter
Bag-in-a-Bottle containers. The NOWPak's market applications for photoresists
used in the manufacture of active matrix flat panel displays as well as for the
pharmaceutical, biotech and laboratory markets are typically in 18-20 liter
Bag-in-a-Bottle and Bag-in-a-Can containers. Additionally, applications have
recently expanded beyond photolithography chemicals in the semiconductor niche
to include ancillary chemicals, CMP slurries and process chemicals for which the
new 200 liter Bag-in-a-Drum is well suited.
We also produce packages for high purity solids under the Newform brand
name. We make high-purity flexible Ultra Clean packaging for the semiconductor
and pharmaceutical industries. With our Newform products, we package critical
solids-sputter targets, wafer and disc shippers, cleanroom parts and container
overwraps. With the NOWPak liquid packaging system and Newform solids packaging,
we are addressing all facets of critical packaging for the microelectronics
market.
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ATMI Technologies
We have taken advantage of our expertise in semiconductor materials
technology to build a comprehensive product portfolio around this core
technology. Effectively, ATMI Materials' business ends with the delivery of a
specialty material to a semiconductor industry process tool. Through its common
core technical understanding of these materials, ATMI Technologies delivers
products and services that allow its customers to manage materials flow through
the remainder of the semiconductor factory. ATMI Technologies addresses its
customers' needs by providing:
. sensing products that protect both the workplace and the environment;
. monitoring products for certain processes that ensure the quality of
the thin film product being produced;
. a full range of abatement products that remove potential environmental
threats from the process exhaust stream; and
. specialty thin film deposition services for those customers who do not
desire to perform this operation within their own facilities.
As a result of this strategy, we believe ATMI Technologies is the leading
supplier of sensing products, point-of-use abatement systems and specialty
epitaxial deposition services to the worldwide semiconductor industry. ATMI
Technologies also manages our ventures portfolio, which includes the Emosyn
smart card device product line and our optoelectronic materials activities,
until these ventures mature to market critical mass.
Products and Services. ATMI Technologies includes three primary product
lines and services, which consist of sensing products, point-of-use
semiconductor environmental equipment and deposition services.
Sensing Products. We provide life safety systems to the semiconductor
industry. Because the gases used in semiconductor manufacturing are so toxic,
manufacturers must install systems which protect employees from accidental
releases. We believe that we are now the only company offering a range of
technologies capable of detecting all of the gases used in semiconductor
manufacturing. Combined with our worldwide systems integration capabilities, we
are able to provide customers with a single contact for the design,
installation, commissioning and sustaining service on complete life safety
systems.
Satellite series electrochemical sensors provide distributed sensors
located at each point requiring gas detection. Electrochemical sensors provide
cost effective and reliable detection of most gases used in semiconductor
fabrication. This sensor's self-check feature and auto-calibration feature
provide maximum reliability and ease of use and are the leading sensor
technology for acid gases in a fab.
ACM Air Composition Monitors allow the fab to determine the exact
composition of any gas that is emitted in the fab. This system allows the fab to
determine exactly the composition of unknown odors that fab personnel may
detect. It also is the only known detection device in the industry that can
measure NF3 without the need to decompose it into another species for detection.
TGM Toxic Gas Monitors use molecular emissions spectroscopy to measure and
speciate toxic gases. This system is the leading technology for sensing the very
toxic hydride gases used to dope semiconductor films.
H2M Hydrogen Monitors use a patented acoustical technology that measures
the time of flight of hydrogen in a enclosed tube. We believe this system is the
only system on the market that can detect hydrogen without interference from
other gases such as hydrocarbons. As a result, we believe this system is the
most reliable way to detect hydrogen.
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Semi-Chem Fluid Process Monitors are unique liquid sensing devices that use
multiple liquid analysis technologies. These devices analyze the signals they
receive with complex algorithms and measure the precise assay of materials that
effect the overall yield of a device.
We also provide a unique and high value added liquid chemical analysis and
control tool. We believe that we are a market leader in the analysis and control
of the active ingredients in CMP slurries. In addition, we believe that we are
well positioned to provide leading technology to the semiconductor copper
plating market through product development activities with industry leaders.
Point-of-Use Semiconductor Environmental Equipment. We believe we are 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,
we believe we are a global market leader in the manufacture and sale of
point-of-use semiconductor effluent abatement equipment. Our strategy is to grow
our market share through the continued development and acquisition of new
semiconductor environmental products and services. We believe that this full
line of semiconductor environmental products, coupled with a comprehensive
service and sensing strategy, will allow for continued market penetration by
this business.
We have four primary environmental equipment product lines. Each of the
four 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. We believe that, through our patented adsorption
materials, we are a market leader for point-of-use semiconductor effluent dry
scrubbing throughout the world. This technology is typically used for ion
implant applications, in conjunction with our SDS product line. It is also used
for etch and certain CVD applications.
Vector wet 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 and, with its optional
air-oxidation inlet, pyrophoric gases. The Vector scrubber is typically used in
CVD and etch applications. It is the leading treatment system for multi-wafer
chamber CVD tools.
Guardian active oxidation scrubbers treat a variety of combustible
materials used in semiconductor processing. The Guardian product line is
designed for high reliability and very high flow rates of combustible gases
typically used in CVD and flat panel display applications.
Delatech CDO oxidation and water treatment scrubbers use a combination of
thermal oxidation and wet scrubbing to treat solid particulate and acid gas
applications in a single unit. This system can also be used to treat PFCs
(perfluorinated compounds believed to be responsible for global warming). This
system is the industry's leading treatment solution for single wafer chamber CVD
tools.
Deposition Services. 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 these 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 contract manufacture of epi wafers using CVD
processes.
ATMI Technologies operates 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
33
<PAGE>
are specified by the customer and developed in collaboration with us. 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. Our fundamental competitive advantages include the manufacture
of high quality epitaxial layers with high yield. In addition, we differentiate
ourselves by offering quality epitaxial deposition services with fast turnaround
and in flexible volumes.
We believe that we are the only provider offering CVD thin film deposition
services for each of the key materials used in semiconductor devices today, and
that we are now a world leader in specialty epitaxial deposition services. Our
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.
We provide commercial epitaxial deposition services for silicon and III-V
materials. III-V epitaxial wafers are finding increasing use in wireless
communications, satellites and optoelectronics for data and telecommunication
markets. Epitaxial services for wide bandgap semiconductors and several new
products in silicon and gallium arsenide are in development. We are currently
engaged in several collaborations to develop wide bandgap epitaxial wafers for
future optoelectronic, sensor and power device products. Furthermore, we are
developing a silicon germanium epitaxial process for use in silicon-based
heterojunction devices for high speed communication and computation integrated
circuits and a ultrathin silicon on sapphire process for use in high frequency,
low power applications. We are also continuing development of epitaxial
structures for gallium arsenide-based electronics devices including
heterojunction bipolar transistors and high electron mobility transistors in
collaboration with our customers.
Ventures. We also maintain an active in-house venture program. The primary
goal of this program is to develop next-generation semiconductor materials
technology that is beyond the product development scope of our existing core
businesses. The research and development funding that we apply to this program
is enhanced through federal government contract or partner funding in nearly all
cases.
Smart Card Device Venture. We are currently developing and commercializing
integrated circuits for use in smart cards. Smart cards are credit card-like
devices that operate through a chip on the card as opposed to the more familiar
magnetic strip. The smart card is read through insertion into a "reader" that
clamps down on the device and simultaneously powers it up and performs a
multitude of operations. The smart card market is growing rapidly, especially in
Europe, in the mobile phone, health care and transportation industries. Long
term, we expect that smart cards will see wide use in secure internet
transactions.
We entered this market to leverage certain proprietary advanced
non-volatile materials technology. To facilitate the development of these
integrated circuits, we have entered into a strategic alliance with a subsidiary
of SMH Swatch, the largest watch maker in Switzerland, to design, develop,
manufacture and distribute these products. In November 1998, we also entered
into a strategic alliance with Xicor, Inc. that gives us the right to become
Xicor's exclusive sales channel for Xicor integrated circuit products targeting
smart card applications. We also hold an option to purchase this product line
beginning in 2001.
Our first smart card products are targeted at the fast-growing market for
micro-controller-based smart card IC's. The combination of our expertise in
non-volatile memory technology with SMH Swatch's expertise in ultra-low power
and radio frequency technology has enabled the launch of a device called
"Theseus" which provides high density, speed, power and memory partitioning. Our
approach to memory technology design provides a smart card solution that
significantly reduces the major problem of time-to-market for the card
manufacturers with no increase in device size. We are now working to specify our
products with smart card manufacturers, and in the fourth quarter of 1999, we
shipped our first commercial product.
Other Venture Activities - Optomaterials. We have oriented much of our
effort in the ventures program area towards the development of optoelectronic
materials, especially gallium nitride. We believe
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<PAGE>
that our unique technology in this area, in both substrate and epi layer
manufacture, will allow us to enter new rapidly growing markets as either a
supplier of these materials or as a partner in the development of advanced
optoelectronic devices such as blue laser diodes and high performance light
emitting diodes.
Customers, Sales and Marketing
We sell and distribute our products worldwide, both directly and through
manufacturers' representatives. Many of our customers have relationships with
more than one of our segments or are acting as collaborators on our development
programs.
We distribute our materials and delivery system products to end-use
customers, chemical suppliers and equipment suppliers through our direct sales
force in North America, Europe and Taiwan, and through regional manufacturing
representatives in other parts of Asia. Additionally, our equipment product
lines are marketed and sold to semiconductor equipment OEMs, who in turn resell
to end users. NOWPak containers are generally sold to chemical suppliers. The
chemical companies then sell their high purity chemicals in NOWPak containers at
the request of end-users. Newform packaging products have historically been sold
directly to semiconductor and pharmaceutical companies, predominately in Europe.
We sell our SDS product into the ion implant market through an exclusive
distribution agreement with Matheson.
The businesses within ATMI Technologies distribute products both directly
and through various manufacturing representatives.
We distribute our point-of-use environmental equipment and life safety
monitoring equipment through manufacturers' representatives throughout the
world. Direct sales personnel serve as regional managers who coordinate the
representatives' activity within their respective regions. Additionally, we
market environmental equipment product lines directly to semiconductor end-user
facility managers to provide full-fab environmental and monitoring solutions as
well as installation and on-going service.
We market and sell our 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.
Substantially all of our sales are to customers in the worldwide
semiconductor industry. Our results of operations, therefore, are materially
dependent upon economic and business conditions in the semiconductor industry.
The semiconductor industry has historically experienced significant growth;
however, periods of reduced semiconductor unit demand and manufacturing
overcapacity could result in significantly reduced demand for semiconductor
materials, capital equipment and wafer processing services.
35
<PAGE>
Manufacturing
The following table summarizes the location, products and size of our
various manufacturing facilities as of December 31, 1999.
<TABLE>
<CAPTION>
------------------- --------------------------- --------------------------- -----------------------------
<S> <C> <C> <C>
Location Products Square Footage
--------------------------- --------------------------- -----------------------------
Bloomington, MN . chemical containers 70,000
and dispensing systems
--------------------------- --------------------------- -----------------------------
Burnet, TX . liquid materials 30,000
. delivery systems
--------------------------- --------------------------- -----------------------------
ATMI Carrollton, TX . liquid materials 30,000
. delivery systems
Materials --------------------------- --------------------------- -----------------------------
Danbury, CT . liquid materials 72,000
(Corporate Headquarters) . delivery systems
. SDS
--------------------------- --------------------------- -----------------------------
Anseong, South Korea . liquid materials 9,000
--------------------------- --------------------------- -----------------------------
Hoegaarden, Belgium . packaging products 30,000
------------------- --------------------------- --------------------------- -----------------------------
Buffalo Grove, IL . monitoring equipment 33,000
--------------------------- --------------------------- -----------------------------
Danbury, CT . proprietary 72,000
(Corporate adsorbents for gas
Headquarters) treatment products
. wide bandgap
epitaxial wafers
. high performance thin
films
--------------------------- --------------------------- -----------------------------
Mesa, AZ . specialty silicon 33,000
epitaxial wafers
--------------------------- --------------------------- -----------------------------
ATMI Napa, CA . point-of-use 40,000
environmental
Technologies equipment
--------------------------- --------------------------- -----------------------------
Phoenix, AZ . III-V epitaxial wafers 15,000
--------------------------- --------------------------- -----------------------------
San Jose, CA . point-of-use 45,000
environmental
equipment
--------------------------- --------------------------- -----------------------------
Bonn, Germany . monitoring equipment 12,000
--------------------------- --------------------------- -----------------------------
Munich, Germany . monitoring equipment 30,000
--------------------------- --------------------------- -----------------------------
Seoul, South Korea . point-of-use 3,000
environmental
equipment
------------------- --------------------------- --------------------------- -----------------------------
</TABLE>
36
<PAGE>
Competition
ATMI Materials
Our primary competitors in semiconductor materials in the United States are
the Schumacher Division of Air Products Corporation and the Diffusion Systems
Division of Arch Chemical (in CVD precursors) and the EKC division of ChemFirst
Corporation and the ACT division of Ashland Chemical (in photolithography
ancillaries). We compete with these companies outside of the United States and
also with Yamanaka Hutech Corporation and Kojundo in Asia, and Merck in Europe.
There are a number of other smaller participants in these markets.
There are currently no direct competitors to our patented SDS product.
Several companies, however, provide gases in high-pressure containers that
compete with the process capability of SDS. There are numerous domestic and
foreign companies that offer products that compete with our packaging and
chemical dispensing system products. However, we believe that our ability to
compete in the markets for containers and dispensing systems is dependent
largely upon our patented NOWPak technology and our proven ability to
continually enhance and improve our products and technologies.
ATMI Technologies
Our competitors in effluent abatement include CS GmbH, Ebara, Japan
Pionics, and the Edwards Division of British Oxygen Corporation. Our primary
competitors in sensing products include MDA in the United States and Europe and
Riken in Japan.
We have different competitors in each of our primary deposition services
areas. In silicon epi, we compete with Moore Technologies, Reaction Technologies
and a number of specialty wafer manufacturers with their own epi capabilities.
In some product areas, we compete with the major silicon wafer manufacturers
including Wacker, Mitsubishi Silicon America and Sumitomo. In III-V epi, we
compete with Kopin, Epitaxial Products International, Emcore and a number of
other manufacturers.
Our Emosyn business is evolving as a commercial presence in a very large
smart card IC marketplace. Several large companies are also working to provide
semiconductor devices into that marketplace, including Phillips, Atmel and
Samsung.
Research and Development
Our research and development expenses consist of personnel and other direct
and indirect costs for internally funded project development. Our external
funding is almost exclusively from various agencies of the federal government.
We also participate in joint development efforts with certain semiconductor
manufacturers and semiconductor equipment OEMs. Total sums expended for research
and development for the years ended December 31, 1999, 1998 and 1997 were $23.1
million, $22.5 million and $22.2 million, respectively. Of those amounts, $4.7
million, $5.9 million and $7.9 million, respectively, were externally funded and
are classified within cost of revenues on our consolidated financial statements,
and $18.4 million, $16.6 million and $14.3 million, respectively, were
internally funded expenditures and are classified as research and development
expenses on our consolidated financial statements. Total research and
development expenditures from internal and external funding represented 11.8%,
13.6% and 11.6% of our revenues in 1999, 1998 and 1997, respectively.
Strategic Alliances
We form strategic alliances, including joint development programs and
collaborative marketing efforts, to accelerate the introduction of our products
into markets that have manufacturing and/or distribution barriers. These
programs have led to significant technological advances, including the
development of proprietary advanced materials and semiconductor manufacturing
processes. Most of our strategic
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<PAGE>
alliances are with leading semiconductor manufacturers or OEMs, such as IBM,
Lucent Technologies, Micron Technology, Siemens and Texas Instruments, each of
which has participated with us in advanced materials development programs. These
programs enhance our core technology base, promote the introduction of targeted
products and reduce our need to make research and development and capital
expenditures.
Patents and Proprietary Rights
We have made a significant investment in securing intellectual property
protection for our technology and products. We protect our technology by, among
other things, filing patent applications for technology considered important to
the development of our business. We also rely upon trade secrets, unpatented
know-how, continuing technological innovation and the aggressive pursuit of
licensing opportunities to help develop and maintain our competitive position.
As of February 24, 2000, we had been awarded 171 United States patents and
had 164 United States patent applications pending. Foreign counterparts of
certain of these applications have been filed, or may be filed at an appropriate
time. We decide on a case-by-case basis whether, and in what countries, we will
file counterparts of a United States patent application outside the United
States. Our United States patents expire between 2006 and 2019. We also hold 20
United States registered trademarks. We are actively using all United States
trademarks.
Our ability to compete effectively with other companies will depend, in
part, on our ability to maintain the proprietary nature of our technology.
Although we have been awarded, have filed applications for, or have 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.
We require 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 us. These agreements provide that all confidential
information developed or made known to the individual during the course of the
individual's relationship with us is to be kept confidential and not disclosed
to third parties except in specific circumstances. All of our employees have
entered into agreements providing for the assignment of rights to inventions
made by them while employed by us.
Employees
As of December 31, 1999, we employed a total of 902 individuals, including
355 in sales and administration, 462 in operations and 85 in research and
development. Of these employees, 38 hold Ph.D. degrees and 21 hold other
advanced degrees in electrical engineering, materials science, chemistry,
physics or related fields. None of our employees are covered by collective
bargaining agreements. We have not experienced any work stoppages, and consider
our relations with our employees to be strong.
Legal Proceedings
We have been notified by the Internal Revenue Service of an assessment of
$2.1 million for certain tax matters related to our Advanced Delivery and
Chemical Systems subsidiary. Although we believe that this assessment is without
merit and we intend to vigorously defend our position on these tax matters, we
cannot predict whether we will be successful in defending against the assessment
or the amount of any final assessment against us.
In December 1998, a former office employee (Cheryl Reed) of ADCS initiated
a legal proceeding against ADCS and us in the District Court for the 33rd
District in Burnet, Texas, alleging personal injuries to her minor child (then
unborn) allegedly resulting from her exposure to various chemicals while
employed by us. The plaintiffs have claimed damages of $25.0 million and
unspecified exemplary damages. We have denied the plaintiffs' legal allegations
and are vigorously defending this action. While we cannot predict the outcome of
this proceeding at this time, we believe it is without merit.
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<PAGE>
In addition, in the normal course of business, we are involved in various
lawsuits and claims. Although we cannot determine the ultimate outcome of any of
these legal proceedings at this time, management, including internal counsel,
does not believe that the outcome of these proceedings, individually or in the
aggregate, will have a material adverse effect on our financial position or
overall trends in results of operations.
39
<PAGE>
MANAGEMENT
The following table sets forth information about our directors and
executive officers as of March 3, 2000.
<TABLE>
<CAPTION>
Name Age Position
<S> <C> <C>
Eugene G. Banucci, Ph.D......................56 President, Chief Executive Officer and
Chairman of the Board
Peter S. Kirlin, Ph.D........................39 Executive Vice President - ATMI
Technologies
Douglas S. Neugold...........................41 Executive Vice President - ATMI
Materials
Daniel P. Sharkey............................43 Vice President, Chief Financial Officer
and Treasurer
Mark A. Adley................................40 Director
Robert S. Hillas.............................51 Director
Kam Law, Ph.D................................46 Director
Stephen H. Mahle.............................54 Director
Stephen H. Siegele...........................40 Director
</TABLE>
Eugene G. Banucci, Ph.D., a founder of ATMI, has served as President, Chief
Executive Officer and Chairman of the Board since 1986.
Peter S. Kirlin, Ph.D. has served as Executive Vice President of ATMI
Technologies since 1995. From 1991 to 1995, Dr. Kirlin served as Vice President
of the Microelectronics division of ATMI 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.
Douglas A. Neugold has served as Executive Vice President of ATMI Materials
since February 1999. In January 1998, Mr. Neugold joined ATMI as Vice President
of the former NovaSource division and served as President of that division from
July 1998 to February 1999. Previously, Mr. Neugold served in a variety of
executive and managerial positions with the Electronic Materials Division of
Johnson Matthey, a specialty chemicals company. From 1995 to 1997, he served as
Vice President, and later as President of its Semiconductor Packages business,
and from 1993 to 1995, he served as Director of Asian Operations.
Daniel P. Sharkey has served as Chief Financial Officer since joining ATMI
in 1990 and has served as Vice President and Treasurer since 1993.
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, an
investment banking firm, where he was a Director from 1994 to 1996.
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
40
<PAGE>
company, since April 1998. From 1993 to April 1998, Mr. Hillas served as a
Managing Director of E.M. Warburg, Pincus & Co. LLC, an asset management firm.
Mr. Hillas is also a director of Transition Systems, Inc. and United States
Filter Corporation.
Kam Law, Ph.D. has served as a director of ATMI since April 1999. Dr. Law
has been the Senior Vice President of Applied Komatsu Technology, a flat panel
display manufacturing equipment supplier, since October 1998. From April 1998 to
October 1998, Dr. Law served as General Manager of the Global Product
Organization of AKT, and from 1997 to April 1998, he served as Executive
Managing Director and General Manager - CVD Products at AKT. From 1994 to 1997,
Dr. Law served as Senior Director of AKT.
Stephen H. Mahle has served as a director of ATMI since 1996. Mr. Mahle has
been Senior Vice President of Medtronic, Inc., a medical device manufacturer,
and President of its cardiac rhythm management business since January 1998. From
1995 to 1998, he was President of the Brady Pacing Business, a division of
Medtronic. From 1989 to 1995, Mr. Mahle served as Vice President and General
Manager of the Brady Pacing Business.
Stephen H. Siegele has served as a director of ATMI since October 1997. He
served as Vice Chairman of ATMI's board of directors from February 1999 to
December 1999 and served as President of ATMI's former ADCS division from
October 1997 through December 1999. Mr. Siegele served as the President and
Chief Executive Officer of ADCS from February 1994 until October 1997, when it
was acquired by ATMI. From 1988 to 1994, Mr. Siegele served as Vice President of
ADCS.
41
<PAGE>
SELLING STOCKHOLDERS
The following table sets forth information about the beneficial ownership of
our common stock by each of the selling stockholders as of March 3, 2000. Each
of the stockholders has sole voting and investment power over the shares of
common stock shown as beneficially owned.
<TABLE>
<CAPTION>
Shares Beneficially Shares Beneficially
Owned Prior to Number Owned After
Offering of Shares Offering
--------------------- Being --------------------
Selling Stockholder Number Percent Offered Number Percent
- ------------------- --------- -------- ---------- --------- -------
<S> <C> <C> <C> <C> <C>
Stephen H. Siegele (1)............................. 2,525,534 9.0% 1,295,712 1,229,822 4.2%
The Lawrence Family Trust, 1995 (2)................ 1,400,922 5.0% 300,000 1,100,922 3.7%
RL Partners LLC.................................... 4,764 * 4,288 476 *
</TABLE>
- ------------------
* Less than 1%.
(1) Stephen H. Siegele has served as a director of ATMI since October 1997. He
served as Vice Chairman of ATMI's board of directors from February 1999 to
December 1999 and served as President of ATMI's former ADCS division from
October 1997 through December 1999.
(2) Lamonte H. Lawrence is a trustee and beneficiary of The Lawrence Family
Trust, 1995. Mr. Lawrence served as a director of ATMI from October 1997
to October 1999.
42
<PAGE>
DESCRIPTION OF CAPITAL STOCK
Our authorized capital stock consists of 50,000,000 shares of common stock,
par value $0.01 per share, and 2,000,000 shares of preferred stock, par value
$0.01 per share. The following summary of our securities and provisions of our
certificate of incorporation and our bylaws is not intended to be complete and
is qualified by reference to the provisions of applicable law and to our
certificate of incorporation and bylaws.
Common Stock
As of March 3, 2000, 28,018,868 shares of our common stock were issued and
outstanding, held by approximately 267 holders of record. In addition, 755,924
shares of common stock are reserved for future grants under our various stock
plans. Furthermore, as of March 3, 2000, there were outstanding options and
warrants to purchase 3,115,375 shares of common stock. Subject to preferences
that may be applicable to any outstanding preferred stock, holders of our common
stock are entitled to share ratably in all of the assets of ATMI available for
distribution to holders of common stock upon the liquidation, dissolution or
winding up of the affairs of ATMI. Our common stock has no preemptive or
conversion rights or other subscriptions rights. There are no redemption or
sinking fund provisions applicable to our common stock, and the outstanding
shares of common stock are fully paid and nonassessable.
Stockholders are entitled to one vote for each share of common stock held of
record on matters submitted to a vote of stockholders. Our common stock does not
have cumulative voting rights. As a result, the holders of more than 50% of the
shares of 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 common stock will not be able to elect any person or persons
to the board of directors.
Preferred Stock
Our board of directors has the authority, subject to any limitations
established 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. The board
of directors may fix the number of shares, designations, powers, preferences and
special rights of the preferred stock. The preferences, powers, rights and
restrictions of different series of preferred stock may differ. The issuance of
preferred stock could decrease the amount of earnings and assets available for
distribution to holders of our common stock or adversely affect the rights and
powers, including voting rights, of holders of common stock.
The purpose of authorizing our 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. We have no present plans to
issue any shares of preferred stock.
Delaware Law and Certain Charter and Bylaw Provisions
Classified Board of Directors. Our certificate of incorporation and bylaws
provide for our 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. 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 our 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 to change the management of ATMI than if the board of
43
<PAGE>
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 our common stock.
Changes in Board of Directors. Our certificate of incorporation and bylaws
provide that vacancies on the board of directors may be filled by a vote of a
majority of the board of directors then in office. Also, our 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 our 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 our common stock.
Stockholder Action. Our certificate of incorporation and bylaws provide that
any action required or permitted to be taken by the stockholders 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 our outstanding voting securities,
because special meetings of stockholders may be called only by a majority of the
board of directors or the Chairman of the Board. These provisions may also
discourage another person from making a tender offer for our common stock,
because such person, even if it acquired a majority of our outstanding voting
securities, 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 Nominations of Directors and
Stockholder Proposals. Our certificate of incorporation and bylaws establish
advance notice procedures with regard to the nomination, other than by or at the
direction of the board of directors, of candidates for election as directors and
with regard to other business to be brought by stockholders before an annual
meeting of stockholders.
Our nomination procedure requires that a stockholder give to our Secretary
prior written notice, in proper form, of a planned nomination for the board of
directors. Our bylaws specify the requirements for the form and timing of that
notice. If the Chairman of the Board determines that a person was not nominated
in accordance with our nomination procedure, such person will not be eligible
for election as a director.
Under our business procedure, a stockholder seeking to have any business
conducted at an annual meeting must give prior written notice, in proper form,
to our Secretary. Our bylaws specify the requirements for the form and timing of
that notice. If the Chairman of the Board determines that the other business was
not properly brought before such meeting in accordance with our business
procedure, such business will not be conducted at the meeting.
Although our bylaws do not give the 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, our bylaws:
. 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
. 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.
Delaware Takeover Statute. We are subject to Section 203 of the Delaware
General Corporation Law. Subject to certain exceptions, this section prohibits
certain publicly held Delaware corporations from
44
<PAGE>
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
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. Our certificate of
incorporation contains certain provisions permitted under Delaware corporate law
relating to the liability of directors. To the extent permitted by Delaware
corporate law, 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 Delaware corporate
law.
Registration Rights
The holders of a maximum of 9,246,143 shares of our common stock and
warrants to purchase approximately 10,000 shares of our common stock have
certain rights with respect to the registration of these shares under the
Securities Act of 1933. If we propose to register any of our securities under
the Securities Act, either for our own account or the account of other security
holders exercising registration rights, those holders are entitled to notice of
the registration and are entitled to include in the registration their shares of
common stock at our expense, subject to certain conditions and limitations,
including the right of the underwriters of any offering to limit the number of
shares included in the registration. In addition, holders of approximately
3,921,456 of these shares have the right to require us to file a registration
statement under the Securities Act at our expense with respect to these shares
of common stock, and we are required to use our best efforts to effect the
registration, subject to certain conditions and limitations. Of the
approximately 9,256,143 shares of common stock subject to registration rights,
1,600,000 shares will be sold in this offering, approximately 1,100,922 shares
are freely tradable without registration under the Securities Act but may not be
sold for a period of 45 days following the date of this prospectus without the
consent of the underwriters pursuant to a lock-up agreement between the
underwriters and the holder of these shares, approximately 5,330,399 shares are
covered by or have been sold under effective resale registration statements and
the remaining 1,224,822 shares are subject to a lock-up agreement between the
underwriters and the holder of these shares and may not be sold for a period of
90 days following the date of this prospectus without the consent of the
underwriters. We believe, therefore, that the holders of shares with
registration rights are unlikely to exercise their rights.
We are required to bear substantially all registration and selling expenses
in connection with the registration of registrable shares in these
registrations. In addition, we will, subject to certain limitations, indemnify
any selling stockholders against certain liabilities, including liabilities
under the Securities Act, in connection with these registrations.
Transfer Agent and Registrar
The transfer agent and registrar for our common stock is Boston
EquiServe L.P.
UNDERWRITING
ATMI, the selling stockholders and the underwriters for the offering named
below have entered into an underwriting agreement with respect to the shares
being offered. Subject to certain conditions, each underwriter has severally
agreed to purchase the number of shares indicated in the following table.
Goldman, Sachs & Co., Banc of America Securities LLC, Deutsche Bank Securities
Inc. and Prudential Securities Incorporated, are the representatives of the
underwriters.
45
<PAGE>
Underwriters Number of Shares
------------ ----------------
Goldman, Sachs & Co...................................
Banc of America Securities LLC........................
Deutsche Bank Securities Inc..........................
Prudential Securities Incorporated....................
Total........................................
----------------
================
If the underwriters sell more shares than the total number set forth in the
table above, the underwriters have an option to buy up to an additional 225,000
shares from ATMI and 240,000 shares from certain of the selling stockholders to
cover such sales. They may exercise that option for 30 days. If any shares are
purchased pursuant to this option, the underwriters will severally purchase
shares in approximately the same proportion as set forth in the table above.
The following tables show the per share and total underwriting discounts and
commissions to be paid to the underwriters by ATMI and the selling stockholders.
These amounts are shown assuming both no exercise and full exercise of the
underwriters' option to purchase additional shares.
Paid by ATMI
------------------------------
No Exercise Full Exercise
----------- -------------
Per Share.............................. $ $
Total.................................. $ $
Paid by the Selling
Stockholders
------------------------------
No Exercise Full Exercise
----------- -------------
Per Share.............................. $ $
Total.................................. $ $
Shares sold by the underwriters to the public will initially be offered at
the initial price to public set forth on the cover of this prospectus. Any
shares sold by the underwriters to securities dealers may be sold at a discount
of up to $ per share from the initial price to public. Any such securities
dealers may resell any shares purchased from the underwriters to certain other
brokers or dealers at a discount of up to $ per share from the initial price to
public. If all the shares are not sold at the initial price to public, the
representatives may change the offering price and the other selling terms.
ATMI, its directors and executive officers and two of the selling
stockholders have agreed with the underwriters not to dispose of or hedge any of
their common stock or securities convertible into or exchangeable for shares of
their common stock during the period from the date of this prospectus continuing
through the date 90 days after the date of this prospectus, except with the
prior written consent of Goldman, Sachs & Co. This agreement does not apply to
any sales by ATMI under its existing employee benefit plans. The remaining
selling stockholder has entered into a 45-day lock-up agreement with the
underwriters with respect to 1,100,922 shares of common stock.
In connection with the offering, the underwriters may purchase and sell
shares of common stock in the open market. These transactions may include short
sales, stabilizing transactions and purchases to cover positions created by
short sales. Short sales involve the sale by the underwriters of a greater
number of
46
<PAGE>
shares than they are required to purchase in the offering. Stabilizing
transactions consists of bids or purchases made for the purpose of preventing or
retarding a decline in the market price of the common stock while the offering
is in progress.
The underwriters also may impose a penalty bid. This occurs when a
particular underwriter repays to the underwriters a portion of the underwriting
discount received by it because the representatives have repurchased shares sold
by or for the account of such underwriter in stabilizing or short covering
transactions.
These activities by the underwriters may stabilize, maintain or otherwise
affect the market price of the common stock. As a result, the price of the
common stock may be higher than the price that otherwise might exist in the open
market. If these activities are commenced, they may be discontinued by the
underwriters at any time. These transactions may be effected on the Nasdaq
National Market, in the over-the counter market or otherwise.
ATMI is paying all expenses of the offering other than underwriting
discounts and commissions related to the sale of shares of common stock by the
selling stockholders. ATMI estimates that the total expenses of the offering,
excluding underwriting discounts and commissions, will be approximately
$600,000.
ATMI and the selling stockholders have agreed to indemnify the several
underwriters against some liabilities, including liabilities under the
Securities Act of 1933.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and current reports, proxy statements and other
documents with the Securities and Exchange Commission. You may read and copy any
document we file at the Commission's public reference rooms at Judiciary Plaza,
450 Fifth Street, N.W., Washington, D.C. 20549, Seven World Trade Center, Suite
1300, New York, New York 10048 and Citicorp Center, 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661. Please call the Commission at
1-800-SEC-0330 for further information on public reference rooms. Our reports,
proxy statements and other information filed with the Commission are also
available to the public from our web site at http://www.atmi.com or at the
Commission's web site at http://www.sec.gov.
This prospectus is part of a registration statement that we filed with the
Commission. The registration statement contains more information than this
prospectus regarding ATMI and its common stock, including certain exhibits and
schedules. You can get a copy of the registration statement from the sources
listed above.
47
<PAGE>
The Commission allows us to "incorporate by reference" the information we
file with them, which means that we can disclose important information to you by
referring you to those documents. The information incorporated by reference is
considered to be part of this prospectus, and later information that we file
with the Commission will automatically update and supersede this information. We
incorporate by reference the documents listed below and any future filings we
will make with the Commission after the date we first filed the registration
statement of which this prospectus is a part under Section 13(a), 13(c), 14 or
15(d) of the Securities Exchange Act of 1934:
(1) Annual Report on Form 10-K for the year ended December 31, 1999 (File
No. 0-30130); and
(2) The description of the common stock of ATMI's predecessor registrant,
Advanced Technology Materials, Inc., contained in its registration
statement on Form 8-A filed on October 23, 1993, which description was
amended on Form 8-A/A filed on November 11, 1993, and any amendment or
report filed to update this description.
You may request a copy of these documents, at no cost, by writing or telephoning
us at the following address:
ATMI, Inc.
7 Commerce Drive
Danbury, Connecticut 06810
Attn: Dean Hamilton
(203) 794-1100
LEGAL MATTERS
Shipman & Goodwin LLP, Hartford, Connecticut, is giving us its opinion on
the validity of the shares being offered. As of the date of this prospectus,
lawyers employed at Shipman & Goodwin owned 7,000 shares of our common stock.
Legal matters will be passed upon for the underwriters by Ropes & Gray, Boston,
Massachusetts.
EXPERTS
The consolidated financial statements and related schedule of ATMI, Inc. at
December 31, 1999 and 1998 and for each of the three years in the period ended
December 31, 1999, appearing in this Prospectus and Registration Statement have
been audited by Ernst & Young LLP, independent auditors, as set forth in their
report appearing elsewhere herein which, as to 1998 is based in part on the
report of Arthur Andersen LLP and the reports of Rath, Anders, Dr. Wanner and
Partner, and as to 1997 is based in part on the report of Deloitte & Touche LLP.
The financial statements referred to above are included in reliance upon such
reports given on the authority of such firms as experts in accounting and
auditing.
48
<PAGE>
ATMI, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULE
<TABLE>
<CAPTION>
Page
----
<S> <C>
Report of Ernst & Young LLP F-2
Report of Deloitte & Touche, LLP F-3
Report of Arthur Andersen LLP F-4
Reports of Rath, Anders, Dr. Wanner and Partner (GbR) F-5
Audited Financial Statements and Schedule
Consolidated Balance Sheets - December 31, 1998 and 1999 F-7
Consolidated Statements of Income for the years ended December 31, 1997, 1998, and 1999 F-8
Consolidated Statements of Stockholders' Equity for the years ended December 31, 1997, 1998, and 1999 F-9
Consolidated Statements of Cash Flows for the years ended December 31, 1997, 1998, and 1999 F-10
Notes to Consolidated Financial Statements F-11
Schedule II - Valuation and Qualifying Accounts F-28
</TABLE>
F-1
<PAGE>
Report of Independent Auditors
The Board of Directors and Stockholders of
ATMI, Inc.
We have audited the consolidated balance sheets of ATMI, Inc. as of December 31,
1998 and 1999, and the related consolidated statements of income, stockholders'
equity and cash flows for each of the three years in the period ended December
31, 1999. Our audits also included the financial statement schedule listed in
the Index. These consolidated financial statements are the responsibility of the
management of ATMI, Inc. Our responsibility is to express an opinion on these
consolidated financial statements and schedule based on our audits. We did not
audit the December 31, 1998 financial statements or Valuation and Qualifying
Accounts Schedule Data of MST Analytics, Inc. ("MST"), a wholly-owned
subsidiary, which statements reflect total assets and total revenues
constituting 6% and 12%, respectively, of the related consolidated totals at and
for the year ended December 31, 1998. Nor did we audit the March 31, 1998
financial statements of NOW Technologies, Inc. ("NOW"), a wholly owned
subsidiary, which statements reflect total revenues constituting 8% of the
related consolidated totals for the year ended March 31, 1998 (which was
combined with the accounts of ATMI, Inc. for the year ended December 31, 1997).
Those statements were audited by other auditors whose reports have been
furnished to us, and our opinion, insofar as it relates to data included for MST
and NOW, for the periods indicated, is based solely on the reports of such other
auditors.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. 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 reports of the other auditors
provide a reasonable basis for our opinion.
In our opinion, based on our audits and the reports of other auditors, the
consolidated financial statements referred to above present fairly, in all
material respects, the consolidated financial position of ATMI, Inc. at December
31, 1998 and 1999, and the consolidated results of its operations and its cash
flows for each of the three years in the period ended December 31, 1999 in
conformity with accounting principles generally accepted in the United States.
Also, in our opinion, the related consolidated financial statement schedule,
when considered in relation to the basic consolidated financial statements taken
as a whole, presents fairly in all material respects the information set forth
therein.
ERNST & YOUNG LLP
Stamford, Connecticut
February 7, 2000
F-2
<PAGE>
INDEPENDENT AUDITORS REPORT
Board of Directors
NOW Technologies, Inc. and Subsidiaries
Bloomington, Minnesota
We have audited the consolidated statements of income, stockholders' equity
and cash flows (not presented herein) of NOW Technologies, Inc. and Subsidiaries
(the Company) for the year ended March 31, 1998. These consolidated financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit 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 audit provides a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly,
in all material respects, the results of the Company's operations and its cash
flows for the year ended March 31, 1998, in conformity with generally accepted
accounting principles.
DELOITTE & TOUCHE, LLP
Minneapolis, Minnesota
May 1, 1998
F-3
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors of
MST Analytics, Inc.
We have audited the consolidated balance sheet of MST ANALYTICS, INC. (a
Delaware corporation) AND SUBSIDIARIES as of December 31, 1998, and the related
consolidated statements of operations, stockholders' equity and cash flows for
the year then ended. 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 audit. We did not audit the financial
statements of MST Micro-Sensor-Technologie GmbH, Hohenschaftlarn and Sensoric
Gesellschaft fur angewandte Elektrochemie mbh & Co. KG, Hohenschaftlarn, wholly
and majority-owned subsidiaries, respectively, which statements reflect total
assets and total revenues of 55% and 47%, respectively, of the related
consolidated totals. Those statements were audited by other auditors whose
report has been furnished to us, and our opinion, insofar as it relates to the
amounts included for those entities, is solely based on the report of the other
auditors.
We conducted our audit 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 audit and the report of the other auditors provide a
reasonable basis for our opinion.
In our opinion, based on our audit and the report of other auditors, the
consolidated financial statements referred to above present fairly, in all
material respects, the financial position of MST Analytics, Inc. and
Subsidiaries as of December 31, 1998, and the results of their operations and
their cash flows for the year then ended, in conformity with generally accepted
accounting principles.
Arthur Andersen LLP
Chicago, Illinois
May 28, 1999
F-4
<PAGE>
OPINION
MST Micro-Sensor-Technologie GmbH
Hohenschaftlarn, Germany
We have conducted a full audit of MST Micro-Sensor-Technologie GmbH,
Hohenschaftlarn, (in the following called "MST" or "Company"), expressed in
Deutsche Mark (DM), as of December 31, 1998.
(1) 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 audit.
(2) We have conducted our audit in accordance with generally accepted auditing
standards in the United States. These standards require that we plan and
perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatements. 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 audit provides a reasonable basis for
our opinion.
(3) The reporting package does not present all disclosures required under US-
GAAP, e.g. no cash flow statement and no tax rationalization form have
been prepared.
(4) On the basis of our audit we certify that the documents attached to this
clearance have been issued in compliance with the methods and principles
accepted by US-GAAP.
Munich, January 22, 1999
Rath, Anders, Dr. Wanner & Partner
Dipl.-Kfm. Kabisch Dipl.-Kfm. Metzler
Vereidigter Buchprufer Wirtschaftsprufer
F-5
<PAGE>
OPINION
Sensoric Gesellschaft fur angewandte
Elektrochemie mbh Co. KG
Hohenschaftlarn
We have conducted a full audit of Sensoric Gesellschaft fur angewandte
Elektrochemie mbh & Co. KG, Hohenschaftlarn, (in the following called "Sensoric"
or "Company"), expressed in Deutsche Mark (DM), as of December 31, 1998.
(1) 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 audit.
(2) We have conducted our audit in accordance with generally accepted auditing
standards in the United States. These standards require that we plan and
perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatements. 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 audit provides a reasonable basis for
our opinion.
(3) The reporting package does not present all disclosures required under US-
GAAP, e.g. no cash flow statement and no tax rationalization form have
been prepared.
(4) On the basis of our audit we certify that the documents attached to this
clearance have been issued in compliance with the methods and principles
accepted by US-GAAP.
Munich, January 22, 1999
Rath, Anders, Dr. Wanner & Partner
Dipl.-Kfm. Kabisch Dipl.-Kfm. Metzler
Vereidigter Buchprufer Wirtschaftsprufer
F-6
<PAGE>
ATMI, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except per share data)
<TABLE>
<CAPTION>
December 31,
--------------------------
1998 1999
---------- ---------
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents (Note 1)......................................... $ 21,618 $ 31,619
Marketable securities (Notes 1 and 2)...................................... 64,551 60,555
Accounts receivable, net of allowance for doubtful accounts
of $959 in 1998, and $1,366 in 1999 (Note 3)............................ 25,708 41,989
Inventories (Notes 1 and 4)................................................ 19,216 21,733
Deferred income taxes (Note 8)............................................. 2,756 5,277
Other...................................................................... 7,717 6,256
---------- ---------
Total current assets.................................................. 141,566 167,429
Property, plant and equipment, net (Notes 1 and 5).............................. 54,683 54,675
Deferred income taxes (Note 8).................................................. 48 2,090
Goodwill and other long-term assets, net (Notes 1 and 11)....................... 12,355 8,462
---------- ---------
$ 208,652 $ 232,656
========== =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable........................................................... $ 9,287 $ 10,971
Accrued liabilities........................................................ 9,976 10,146
Accrued salaries and related benefits...................................... 3,547 9,185
Loans, notes and bonds payable, current portion (Note 6)................... 9,396 4,964
Capital lease obligations, current portion (Note 7)........................ 2,493 1,936
Income taxes payable (Note 8).............................................. 1,972 4,592
Deferred income taxes (Note 8)............................................. 957 4,436
---------- ---------
Total current liabilities............................................. 37,628 46,230
Loans, notes and bonds payable, less current portion (Note 6)................... 8,813 4,448
Capital lease obligations, less current portion (Note 7)........................ 3,746 1,832
Deferred income taxes (Note 8).................................................. 4,611 3,754
Other long-term liabilities..................................................... 288 478
Minority interest............................................................... 846 1,109
Stockholders' equity (Note 10):
Preferred stock, par value $.01: 2,000 shares authorized;
none issued and outstanding............................................. - -
Common stock, par value $.01: 50,000 shares authorized;
issued, 27,484 in 1998 and 27,774 in 1999............................... 275 278
Additional paid-in capital................................................. 118,516 122,536
Retained earnings.......................................................... 35,082 45,465
Accumulated other comprehensive income (loss).............................. (1,153) 6,526
---------- ---------
Total stockholders' equity............................................ 152,720 174,805
---------- ---------
$ 208,652 $ 232,656
========== =========
</TABLE>
See accompanying notes.
F-7
<PAGE>
ATMI, INC.
CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share data)
<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------------------------------
1997 1998 1999
----------- ------------ -------------
<S> <C> <C> <C>
Revenues (Notes 1 and 15)......................................... $ 192,012 $ 165,106 $ 196,236
Cost of revenues.................................................. 92,561 83,419 92,970
---------- ----------- -----------
Gross profit...................................................... 99,451 81,687 103,266
Operating expenses:
Research and development (Note 1)............................ 14,336 16,630 18,359
Selling, general and administrative (Note 13)................ 60,593 56,925 60,305
Merger costs and related expenses (Note 11).................. 9,000 1,700 9,914
---------- ----------- -----------
83,929 75,255 88,578
---------- ----------- -----------
Operating income.................................................. 15,522 6,432 14,688
Interest income................................................... 1,732 4,210 4,384
Interest expense (Note 6)......................................... (2,609) (1,723) (1,267)
Other income, net................................................. 340 539 724
---------- ----------- -----------
Income before taxes and minority interest......................... 14,985 9,458 18,529
Income taxes (Note 8)............................................. 8,588 4,412 7,720
---------- ----------- -----------
Income before minority interest................................... 6,397 5,046 10,809
Minority interest................................................. (2) (111) (263)
---------- ----------- -----------
Net income (Note 15).............................................. $ 6,395 $ 4,935 $ 10,546
========== =========== ===========
Net income per share--basic (Notes 1 and 10)...................... $ 0.27 $ 0.19 $ 0.40
========== =========== ===========
Net income per share--assuming dilution (Notes 1 and 10) $ 0.25 $ 0.18 $ 0.37
========== =========== ===========
Weighted average shares outstanding--basic
(Notes 1 and 10) 23,617 25,645 26,440
========== =========== ===========
Weighted average shares outstanding--assuming dilution
(Notes 1 and 10).................................................. 25,660 27,423 28,319
========== =========== ===========
</TABLE>
See accompanying notes.
F-8
<PAGE>
ATMI, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(in thousands)
<TABLE>
<CAPTION>
Accumulated
-----------
Additional Other
---------- -----
Common Paid-in Retained Comprehensive
------ ------- -------- -------------
Stock Capital Earnings Income Total
----- ------- -------- ------ -----
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1996................. $ 239 $ 41,438 $ 24,450 $ (78) $ 66,049
Issuance of 83 common shares pursuant
to the exercise of employee stock
options................................... -- 454 -- -- 454
Issuance of 151 common shares pursuant
to the exercise of warrants............... 2 1,688 -- -- 1,690
Issuance of common shares to pooled entity... 10 4,284 -- -- 4,294
Issuance of common and preferred shares by
pooled entity............................. -- 5,046 -- -- 5,046
Distributions to stockholders................ -- -- (199) -- (199)
Compensation for the issuance of common
shares.................................... -- 272 -- -- 272
Tax benefit related to nonqualified stock
options................................... -- 678 -- -- 678
Net income................................... 6,395 6,395
Cumulative translation adjustment............ -- -- -- (1,376) (1,376)
----------
Comprehensive income......................... 5,019
------------------------------------------------------------------------------------
Balance at December 31, 1997................. 251 53,860 30,646 (1,454) 83,303
------------------------------------------------------------------------------------
Issuance of 159 common shares pursuant
to the exercise of employee stock
options................................... 1 782 -- -- 783
Sale of 2,257 common shares, net of issuance
costs of $4,161........................... 23 62,403 -- -- 62,426
Compensation for the issuance of common
shares.................................... -- 372 -- -- 372
Tax benefit related to nonqualified stock
options................................... -- 1,099 -- -- 1,099
Distributions to stockholders................ -- -- (397) -- (397)
Adjustment to reflect change in pooled --
entity fiscal year........................ -- (102) -- (102)
Net income................................... -- -- 4,935 -- 4,935
Unrealized loss on available-for-sale
securities (net of tax benefit of $281)...... -- -- -- (500) (500)
Cumulative translation adjustment............ -- -- -- 801 801
----------
Comprehensive income......................... 5,236
------------------------------------------------------------------------------------
Balance at December 31, 1998................. 275 118,516 35,082 (1,153) 152,720
------------------------------------------------------------------------------------
Issuance of 204 common shares pursuant
to the exercise of employee stock
options................................... 2 1,046 -- -- 1,048
Issuance of 20 common shares pursuant
to the exercise of warrants............... -- 222 -- -- 222
Issuance of 64 common shares pursuant
to the employee stock purchase plan....... 1 952 -- -- 953
Compensation for the issuance of common -- 426 -- 426
shares.................................... --
Tax benefit related to nonqualified stock
options................................... -- 1,374 -- -- 1,374
Adjustment to reflect change in pooled....... --
entity fiscal year........................ -- (163) -- (163)
Net income................................... -- -- 10,546 -- 10,546
Unrealized gain on available-for-sale
securities (net of tax provision of
$4,141)................................... -- -- -- 7,860 7,860
Cumulative translation adjustment............ -- -- -- (181) (181)
----------
Comprehensive income......................... 18,225
------------------------------------------------------------------------------------
Balance at December 31, 1999................. $ 278 $ 122,536 $ 45,465 $ 6,526 $ 174,805
------------------------------------------------------------------------------------
</TABLE>
See accompanying notes.
F-9
<PAGE>
ATMI, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands, except per share data)
<TABLE>
<CAPTION>
Year Ended December 31,
-------------------------------------------
1997 1998 1999
------------ ------------ ------------
<S> <C> <C> <C>
Operating activities
Net income.............................................................. $ 6,395 $ 4,935 $ 10,546
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization........................................ 7,957 9,900 10,868
Write-down of goodwill............................................... - - 3,386
Stock option compensation............................................ 272 372 426
Effect of change of fiscal year of pooled entity..................... - (102) (163)
Provision for bad debt............................................... 1,251 399 587
Deferred income taxes................................................ 2,369 (1,891) (6,677)
Tax benefit of nonqualified stock options............................ 678 1,099 1,374
Minority interest in net earnings of subsidiaries.................... 2 111 263
Changes in operating assets and liabilities
(Increase) decrease in accounts receivable....................... (11,624) 10,667 (16,868)
(Increase) in inventory.......................................... (4,085) (796) (2,517)
(Increase) decrease in other assets.............................. (2,990) (4,394) 1,330
Increase (decrease) in accounts payable.......................... (628) (1,187) 1,684
Increase (decrease) in accrued expenses.......................... 4,055 (5,156) 5,808
Increase (decrease) in other liabilities......................... 473 (672) 3,017
------------ ------------ ------------
Total adjustments........................................... (2,270) 8,350 2,518
------------ ------------ ------------
Net cash provided by operating activities................... 4,125 13,285 13,064
------------ ------------ ------------
Investing activities
Capital expenditures.................................................... (9,084) (15,023) (10,222)
Long-term investment.................................................... (250) - -
Sale (purchase) of marketable securities, net........................... 777 (47,871) 16,278
Payments for acquisitions............................................... (5,551) - -
Proceeds from sale of assets............................................ - 199 -
------------ ------------ ------------
Net cash provided (used) by investing activities............ (14,108) (62,695) 6,056
------------ ------------ ------------
Financing activities
Borrowings from loans, notes, and bonds payable......................... 4,630 2,232 303
Payments on loans, notes, and bonds payable............................. (4,411) (6,747) (9,100)
Distribution to stockholders............................................ (199) (397) -
Payments on capital lease obligations................................... (3,125) (2,831) (2,471)
Proceeds from sale of common stock, net................................. - 62,426 -
Proceeds from sale of common and preferred stock by pooled entities..... 8,549 - -
Investment by minority stockholder...................................... 251 - -
Proceeds from exercise of stock options and warrants.................... 2,144 783 2,223
------------ ------------ ------------
Net cash provided (used) by financing activities............ 7,839 55,466 (9,045)
------------ ------------ ------------
Effects of exchange rate changes on cash................................ (142) 120 (74)
------------ ------------ ------------
Net increase (decrease) in cash and cash equivalents.................... (2,286) 6,176 10,001
Cash and cash equivalents, beginning of year............................ 17,728 15,442 21,618
------------ ------------ ------------
Cash and cash equivalents, end of year.................................. $ 15,442 $ 21,618 $ 31,619
============ ============ ============
Disclosure of noncash financing activities
Conversion of note payable to preferred stock by pooled entity.......... $ 685 - -
============ ============ ============
</TABLE>
See accompanying notes.
F-10
<PAGE>
ATMI, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Summary of Significant Accounting Policies
Basis of Presentation
The consolidated financial statements include the accounts of ATMI, Inc.
and its majority-owned subsidiaries, after elimination of intercompany accounts
and transactions.
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 materials, equipment and related services used in the manufacture of
semiconductor devices. The Company targets specialty materials used in front-end
semiconductor manufacture. The Company provides:
. a broad range of ultrahigh-purity semiconductor materials;
. semiconductor materials packaging and delivery systems;
. sensors for the workplace and environment that detect materials as they move
through the workplace;
. point-of-use environmental equipment that abates materials; and
. specialty thin film deposition services that provide coated wafers directly
to customers.
Revenue Recognition
Revenues are recognized upon the shipment of goods.
Use of Estimates
The preparation of the financial statements in conformity with accounting
principles generally accepted in the United States 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.
Marketable Securities and Investments
Highly liquid investments with maturities of three months or less, when
purchased, are classified as cash and cash equivalents. Investments with
maturities greater than three months are classified as marketable securities.
In connection with the Company's strategic alliances and research and
development activities, it has acquired equity securities of certain of its
alliance partners.
F-11
<PAGE>
ATMI, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
1. Summary of Significant Accounting Policies (continued)
The Company accounts for investments in accordance with SFAS No. 115,
"Accounting for Certain Investments in Debt and Equity Securities." The
Company's policy, except for its equity investments in alliance partners, is to
protect the value of its investments portfolio and to minimize principal risk by
earning returns based on current interest rates. All of the Company's marketable
securities are classified as available-for-sale as of the balance sheet date and
are reported at fair value, based on quoted market prices, with unrealized gains
and losses recorded in accumulated other comprehensive income, net of tax. The
cost of securities sold is based on the specific identification method. Interest
on these securities is accrued and included in interest income.
Management determines the classification of marketable debt securities at
the time of purchase and reevaluates such designation as of each balance sheet
date.
Inventories
Inventories are stated at the lower of cost or market using the first-in,
first-out (FIFO) method.
Property, Plant and Equipment
Property and equipment is stated at cost. Depreciation and amortization of
property, plant 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 accumulated other comprehensive income.
Gains or losses resulting from foreign currency transactions are included in
other income (expense) and have been immaterial.
Taxes
The Company accounts for income taxes in accordance with the liability
method. Under this method, deferred tax assets and liabilities are determined
based upon differences between financial reporting and the tax basis of assets
and liabilities and are measured using the enacted tax rates and laws that are
expected to 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,
marketable securities, accounts receivable, 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.
F-12
<PAGE>
ATMI, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
1. Summary of Significant Accounting Policies (continued)
Long-Lived Assets
The Company reviews on a periodic basis the value of its long-lived assets
to determine whether an impairment exists. In connection with the acquisition of
Delatech, the Company recorded a charge of $3.4 million associated with the
impairment of goodwill related to an existing EcoSys product line (see Note 11).
This charge was based on the estimate of future cash flows on a discounted basis
compared with the carrying value of the goodwill. Goodwill of $7.8 million and
$3.7 million at December 31, 1998 and 1999 is amortized over periods of ten to
twenty years and is stated net of accumulated amortization of $1.5 million and
$2.2 million at December 31, 1998 and 1999, respectively.
Stock Based Compensation
The Company accounts for employee stock compensation 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 Company's common stock at the grant date over
the amount the employee must pay to acquire the common 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 10.
Per Share Data
Basic and diluted earnings per share are calculated in accordance with FASB
Statement No. 128, "Earnings Per Share".
Recent Accounting Pronouncements
In December 1999, the SEC issued Staff Accounting Bulletin ("SAB") 101,
"Revenue Recognition," which provides guidance on the recognition, presentation,
and disclosure of revenue in financial statements filed with the SEC. SAB 101
outlines the basic criteria that must be met to recognize revenue and provides
guidance for disclosure related to revenue recognition policies. At this time,
the Company is still assessing the impact of SAB 101 on its financial position
and results of operations.
2. Marketable Securities
Marketable securities are comprised of the following at December 31, 1998
(in thousands):
<TABLE>
<CAPTION>
Gross
Unrealized Fair
Cost Loss Value
---- ---- -----
<S> <C> <C> <C>
Corporate obligations.................. $ 49,563 $ -- $ 49,563
U.S. Government obligations............ 8,695 -- 8,695
Certificates of deposit................ 4,887 -- 4,887
-------------------------------------------------
Total debt securities 63,145 -- 63,145
Common stock .......................... 2,187 (781) 1,406
-------------------------------------------------
Total marketable securities.......... $ 65,332 $ (781) $ 64,551
=================================================
</TABLE>
F-13
<PAGE>
ATMI, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
2. Marketable Securities (continued)
Marketable securities are comprised of the following at December 31, 1999
(in thousands):
<TABLE>
<CAPTION>
Gross
-----
Unrealized Fair
---------- ----
Cost Gain Value
---- ----- -----
<S> <C> <C> <C>
Corporate obligations.................. $ 36,887 $ -- $ 36,887
U.S. Government obligations............ 3,969 -- 3,969
Certificates of deposit................ 6,011 -- 6,011
---------------------------------------------
Total debt securities 46,867 -- 46,867
Common stock .......................... 2,187 11,501 13,688
---------------------------------------------
Total marketable securities.......... $ 49,054 $ 11,501 $ 60,555
=============================================
</TABLE>
All of the Company's marketable debt securities have maturities of less than two
years.
3. Accounts Receivable
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.
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.
Amounts due from various agencies of the U.S. Government were approximately
$2.1 million and $2.7 million at December 31, 1998 and 1999, respectively.
4. Inventories
Inventories are comprised of the following (in thousands):
<TABLE>
<CAPTION>
December 31,
------------
1998 1999
------ ------
<S> <C> <C>
Raw materials............ $14,335 $16,088
Work in process.......... 2,392 3,059
Finished goods........... 4,350 4,115
-------------------------
21,077 23,262
Obsolescence reserve..... (1,861) (1,529)
-------------------------
$19,216 $21,733
=========================
</TABLE>
F-14
<PAGE>
ATMI, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
5. Property, Plant and Equipment
Property, plant and equipment is comprised of the following (in thousands):
<TABLE>
<CAPTION>
December 31,
------------
1998 1999
------ ------
<S> <C> <C>
Land................................... $ 1,944 $ 2,738
Buildings.............................. 10,522 9,875
Machinery and equipment................ 63,624 70,691
Furniture and fixtures................. 5,657 6,839
Leasehold improvements................. 8,094 9,287
------------------------
89,841 99,430
Accumulated depreciation and
amortization.......................... (35,158) (44,755)
------------------------
$ 54,683 $ 54,675
========================
</TABLE>
Depreciation expense for the years ended December 31, 1997, 1998, and 1999,
was $7.4 million, $9.1 million and $10.2 million, respectively.
6. Loans, Notes and Bonds Payable
Loans, notes and bonds payable consist of the following (in thousands):
<TABLE>
<CAPTION>
December 31,
-------------
1998 1999
------ ------
<S> <C> <C>
Note payable bearing interest at 8.25%, due in three annual installments
beginning January 1, 1999................................................... $ 2,000 $ 1,333
Term loans with Connecticut state agency, bearing interest ranging between
5%-5.75%, due between January 2000 and June 2002............................ 2,212 1,490
Credit lines with commercial banks, bearing interest ranging between
6.50%-8.75% available through February 2000................................. 2,376 940
Notes payable primarily with commercial banks and leasing companies, bearing
interest ranging between 2.5%-6.0%, due between April 1998 and September
2008........................................................................ 7,466 3,349
Mortgages payable, bearing interest at 8.63%, due November
2016........................................................................ 1,455 -
City of Bloomington, Minnesota Industrial Revenue Bond, interest rate is
variable (4.4% and 4.2% at December 31, 1998 and 1999), quarterly payments
of $0.1 million, due September 2005......................................... 2,700 2,300
--------- -------
18,209 9,412
Less current portion........................................................... (9,396) (4,964)
-------- -------
$ 8,813 $ 4,448
========= ========
</TABLE>
F-15
<PAGE>
ATMI, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
6. Loans, Notes and Bonds Payable (continued)
The approximate aggregate debt maturities are as follows as of December 31,
1999 (in thousands):
2000 $ 3,064
2001 2,735
2002 1,800
2003 672
2004 522
Thereafter 619
------------
$ 9,412
============
The balance of loans and notes payable at December 31, 1998 and 1999,
respectively include amounts due in foreign currencies as follows: Belgian
Francs 68,499,000 and 64,046,000 ($1,994,000 and $1,595,000) and Deutschmarks
7,498,000 and 4,486,000 ($4,502,000 and $2,305,000).
The term loans are collateralized by various equipment, leasehold
improvements and renovations in the Company's Connecticut facility. The
mortgages are collateralized by the building at the Company's Napa, California
facility. The majority of the Company's notes payable are secured by the related
real property or equipment. The Company's credit lines are secured by
substantially all the assets of certain of the Company's subsidiaries and have
available borrowing capacity approximating $1.8 million at December 31, 1999.
The Company is in compliance with the credit line and notes payable covenants.
The bondholders may tender the City of Bloomington, Minnesota bonds at any
time for the principal amount plus accrued interest. As a result, they have been
classified as a current liability. The Company has the option to convert the
bonds to a fixed rate provided all bonds can be remarketed at the fixed rate.
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.
Interest paid was $2.8 million, $2.3 million, and $1.3 million, for the
years ended December 31, 1997, 1998, and 1999, respectively.
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. 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.
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 (in thousands):
<TABLE>
<CAPTION>
December 31,
---------------------
1998 1999
------ ------
<S> <C> <C>
Machinery and equipment........... $12,269 $10,380
Accumulated depreciation.......... (3,109) (3,173)
------- -------
$ 9,160 $ 7,207
======= =======
</TABLE>
F-16
<PAGE>
ATMI, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
7. Leases (continued)
The following is a schedule of future minimum lease payments for capital leases
as of December 31, 1999 (in thousands):
<TABLE>
<S> <C>
2000...................................... $ 2,175
2001...................................... 1,560
2002...................................... 365
--------
Total lease payments........................... 4,100
Less amount representing interest.............. (332)
--------
Present value of net capital lease payments 3,768
Less current portion........................... (1,936)
--------
Long-term portion.............................. $ 1,832
========
</TABLE>
The Company leases office and manufacturing facilities, and certain
manufacturing equipment under several operating leases expiring between 2000 and
2005. Rental expense was $4.6 million, $5.0 million, and $4.7 million, for the
years ended December 31, 1997, 1998 and 1999, respectively.
The following is a schedule of future minimum lease payments for operating
leases as of December 31, 1999 (in thousands):
<TABLE>
<CAPTION>
Operating
---------
Leases
------
<S> <C>
2000.......................... $ 3,393
2001.......................... 2,495
2002.......................... 1,703
2003.......................... 994
2004.......................... 878
Thereafter.................... 594
---------
Total minimum lease payments....... $10,057
=========
</TABLE>
8. Income Taxes
Pretax income was taxed in the following jurisdictions (in thousands):
<TABLE>
<CAPTION>
Year Ended December 31,
------------------------------
1997 1998 1999
------ ------ ------
<S> <C> <C> <C>
Domestic.................... $13,677 $5,989 $15,672
Foreign..................... 1,306 3,358 2,594
------- ------ -------
Total pretax income......... $14,983 $9,347 $18,266
======= ====== =======
</TABLE>
F-17
<PAGE>
ATMI, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
8. Income Taxes (continued)
Significant components of the provision for income taxes for the periods
presented are as follows (in thousands):
<TABLE>
<CAPTION>
December 31,
-------------------------------
1997 1998 1999
------ ------ ------
<S> <C> <C> <C>
Current:
Federal...... $5,305 $ 4,539 $11,811
State........ 740 1,116 1,635
Foreign...... 174 648 951
------ ------- -------
Total current..... 6,219 6,303 14,397
------ ------- -------
Deferred:
Federal...... 1,896 (1,816) (5,901)
State........ 321 (536) (746)
Foreign...... 152 461 (30)
------ ------- -------
Total deferred.... 2,369 (1,891) (6,677)
------ ------ -------
$8,588 $ 4,412 $ 7,720
====== ======= =======
</TABLE>
Significant components of the Company's deferred tax assets and liabilities
are as follows (in thousands):
<TABLE>
<CAPTION>
December 31,
-----------------------
1998 1999
------ ------
<S> <C> <C>
Deferred tax assets:
Accrued liabilities..................................... $ 1,234 $ 3,565
Inventory reserves...................................... 1,183 1,713
Net operating loss and tax credit carryforwards......... 2,045 1,823
Other, net.............................................. 496 266
--------------------------
4,958 7,367
Valuation allowance.......................................... (2,154) -
--------------------------
2,804 7,367
Deferred tax liabilities:
Depreciation and amortization........................... (4,614) (3,736)
Unrealized gain on marketable securities................ - (4,141)
Other, net.............................................. (954) (313)
--------------------------
(5,568) (8,190)
--------------------------
Net deferred tax liabilities................................. $(2,764) $ (823)
==========================
</TABLE>
The valuation allowance was eliminated as a result of changes in estimates
regarding the realizability of net operating loss and tax credit carryforwards
of certain acquired companies.
As of December 31, 1999, the Company has federal net operating loss
carryforwards of $4.6 million attributable to certain acquired companies and
tax credit carryforwards of $0.2 million. The net operating loss and tax credit
carryforwards will expire at various dates beginning in 2007 through 2019, if
not utilized. Utilization of the net operating losses and credits may be subject
to a substantial annual limitation due to the "change in ownership" provisions
of the Internal Revenue Code of 1986 and similar state provisions.
Income taxes paid for the years ended December 31, 1997, 1998, and 1999
were $6.1 million, $9.4 million and $9.2 million, respectively.
F-18
<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
rate to the Company's tax expense is (in thousands):
<TABLE>
<CAPTION>
For the Year Ended December 31,
-------------------------------
1997 1998 1999
------ ------ ------
<S> <C> <C> <C>
U.S. statutory rate....................................... $5,094 $3,178 $ 6,393
State income taxes........................................ 662 266 657
Foreign income taxes...................................... (24) 228 (162)
Effect of nondeductible acquisition expenses.............. 3,548 599 1,851
Net operating loss carryforward utilization............... (296) -- --
Foreign sales corporation benefit......................... -- (324) (773)
Reversal of valuation allowance........................... (954) 855 (2,154)
Tax liabilities accrued................................... -- -- 1,511
Other, net................................................ 558 (390) 397
----------------------------------
$8,588 $4,412 $ 7,720
==================================
</TABLE>
South Korea has granted the Company a five year full income tax exemption,
which expires in 2003, and an additional three year 50% exemption, which expires
in 2006. The effect of the tax exemption was to reduce income tax expense by
$0.1 million and $0.2 million for the years ended December 31, 1998 and 1999,
respectively.
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 (see Note
11). While the possible exposures 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.
Although the former securityholders of the ADCS Group have agreed to indemnify
the Company against losses arising out of such tax matters, any assessments, if
ultimately determined against the Company, would result in a charge to the
Company's results of operations. During the second quarter 1999, the Company was
notified by the Internal Revenue Service of an assessment of $2.1 million for
certain tax matters. The Company believes that such assessment is without merit
and intends to vigorously defend its position in these tax matters.
9. Profit Sharing Plan
The Company maintains a 401(k) profit sharing plan (the "Plan") covering
substantially all of its employees and is subject to the provisions of the
Employee Retirement Income Security Act of 1974. The Company's matching
contributions are discretionary by plan year and were $0.1 million, $0.1 million
and $0.4 million for 1997, 1998 and 1999, respectively.
10. Stockholders' Equity
In March 1998, the Company completed a registered underwritten public
offering of 5,428,000 shares, including over-allotments, of common stock at
$29.50 per share. Net proceeds to the Company of $62.4 million were from
2,257,291 shares sold by the Company while 3,170,709 shares were sold by certain
stockholders. Costs of the offering, including underwriting commissions, were
$4.2 million.
F-19
<PAGE>
ATMI, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
10. Stockholders' Equity (continued)
Stock Plans
The Company has certain stock plans, which provide for the granting of up
to 4,515,833 nonqualified stock options, incentive stock options ("ISOs"), stock
appreciation rights and restricted stock awards to employees, directors and
consultants of the Company.
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. All grants have been made at fair market
value under the plans. 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 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, 1996....... 958,216 $ 0.28 - $17.63
Granted................................... 1,023,506 $ 2.10 - $40.13
Canceled.................................. (348,250) $ 0.53 - $40.13
Exercised................................. (82,520) $ 0.28 - $13.50
------------ ---------------
Options outstanding at December 31, 1997....... 1,550,952 $ 0.28 - $29.38
Granted................................... 752,440 $14.00 - $33.00
Canceled.................................. (110,130) $ 5.63 - $33.00
Exercised................................. (158,918) $ 0.28 - $17.63
------------ --------------
Options outstanding at December 31, 1998....... 2,034,344 $ 0.28 - $33.00
Granted................................... 1,148,954 $19.19 - $37.38
Canceled.................................. (134,658) $ 5.63 - $27.00
Exercised................................. (204,085) $ 0.28 - $29.38
------------ ---------------
Options outstanding at December 31, 1999....... 2,844,555 $ 0.44 - $37.38
============ ===============
</TABLE>
At December 31, 1999 options for 1,017,946 shares were exercisable and
options for 805,667 shares were available for grant. Exercise prices for 282,340
options outstanding ranged from $0.44-$4.04; for 376,638 options outstanding
ranged from $5.63-$10.00; for 449,808 options outstanding ranged from
$10.13-$20.00; and for 956,820 options outstanding ranged from $20.88- $24.25
and for 778,949 options ranged from $24.38-$37.38 as of December 31, 1999.
The weighted average exercise price and remaining contractual life of
options outstanding at December 31, 1999 was $18.94 and 7.8 years, respectively.
As a result of the NOW and MST mergers in 1998 and 1999, respectively (see
Note 11), stock options of NOW and MST were converted into 205,089 and 123,016
of ATMI stock options. NOW stock options were converted into ATMI stock options
at historical prices ranging from $4.04 to $8.90 and MST stock options were
converted into ATMI stock options at historical prices ranging from $2.10 to
$15.74.
F-20
<PAGE>
ATMI, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
10. Stockholders' Equity (continued)
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 (in
thousands, except per share data):
<TABLE>
<CAPTION>
Pro forma
---------
1997 1998 1999
-------- -------- --------
<S> <C> <C> <C>
Net income.................................... $ 5,556 $ 2,984 $ 6,948
Net income per share--basic................... $ 0.24 $ 0.12 $ 0.26
Net income per share--assuming dilution....... $ 0.22 $ 0.11 $ 0.25
</TABLE>
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:
<TABLE>
<CAPTION>
1997 1998 1999
--------- --------- ---------
<S> <C> <C> <C>
Expected dividend yield None None None
Risk free interest rate 6.00% 5.50% 5.80%
Expected volatility .560 .628 .615
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
1997, 1998 and 1999 was $17.04, $14.74 and $17.18, respectively.
Employee Stock Purchase Plan
The Employee Stock Purchase Plan ("ESPP Plan") was approved in May 1998 and
enables all employees to subscribe at six month intervals to purchase shares of
common stock at the lower of 85% of the fair market value of the shares on the
first day or last day of each six month period. A maximum of 500,000 shares is
authorized for subscription. At December 31, 1999, 64,000 shares have been
issued under the ESPP Plan, and no such shares were issued in 1998.
Earnings Per Share
The following table presents the computation of basic and diluted earnings
per share (in thousands, except per share data):
<TABLE>
<CAPTION>
1997 1998 1999
---------- ---------- -----------
<S> <C> <C> <C>
Numerator:
Net income $ 6,395 $ 4,935 $ 10,546
======================================
Denominator:
Denominator for basic earnings per share-
Weighted-average shares 23,617 25,645 26,440
Dilutive effect of contingent shares related to
acquisitions subject to escrow arrangements 1,289 1,289 1,149
Dilutive effect of employee stock options 754 489 730
--------------------------------------
Denominator for diluted earnings per share 25,660 27,423 28,319
======================================
Net income per share--basic $ 0.27 $ 0.19 $ 0.40
======================================
Net income per share--assuming dilution $ 0.25 $ 0.18 $ 0.37
======================================
</TABLE>
F-21
<PAGE>
ATMI, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
10. Stockholders' Equity (continued)
Options to purchase 16,000, 720,520 and 18,900 shares of common stock,
outstanding as of December 31, 1997, 1998 and 1999, 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.
11. Mergers and Acquisitions
The Company has consummated eight mergers since 1997 each of which has been
accounted for as a pooling of interests. The entities acquired and share
consideration exchanged were as follows:
<TABLE>
<CAPTION>
Shares Held in
Escrow December
Company Year Shares Issued 31, 1999
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
ADCS Group (Note 8) 1997 5,469,000 700,000
Lawrence Semiconductor Laboratories, Inc. 1997 3,671,000 -
NOW Technologies, Inc. 1998 1,594,000 -
TeloSense Corporation 1999 232,000 -
Advanced Chemical Systems International, Inc. 1999 1,202,000 61,000
Delatech Incorporated 1999 2,347,000 234,000
NewForm N.V. 1999 550,000 55,000
MST Analytics, Inc. 1999 993,000 99,000
</TABLE>
The former securityholders of the aforementioned entities have agreed to
indemnify the Company from and against certain losses arising out of breaches of
representations and warranties made by the respective securityholders. As
security for these obligations, the former securityholders agreed to escrow a
certain specified amount of the merger consideration. These shares will be
released from escrow in accordance with the terms of the respective merger
agreements.
The Company has reduced retained earnings by $102,000 and $163,000 in 1998
and 1999, respectively, to adjust retained earnings for the different fiscal
year ends of certain of the acquired entities.
In connection with the investigation, analysis and closings of the
aforementioned transactions, the Company recorded merger costs and related
expenses of $9.0 million, $1.7 million and $10.5 million in 1997, 1998, and
1999, respectively. During 1999, the Company reversed approximately $0.6 million
of merger costs accrued in prior years. Included within merger costs and related
expenses in 1999 is a charge of $4.4 million related to the Delatech acquisition
to recognize the impaired value of certain inventory ($1 million) and goodwill
($3.4 million) associated with an existing environmental equipment product line.
These charges were based on the estimate of future cash flows on a discounted
basis compared with the carrying value of these assets.
F-22
<PAGE>
ATMI, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
11. Mergers and Acquisitions (continued)
For the years ended December 31, 1997 and 1998, prior to the acquisitions,
revenues and net income of acquired companies included in the financial
statements are as follows (in thousands):
<TABLE>
<CAPTION>
Revenues: 1997 1998
--------- ------------------------------------
<S> <C> <C>
ATMI.................................... $101,877 $ 97,874
TeloSense, ACSI and Delatech............ $ 62,043 $ 42,994
NewForm and MST......................... $ 13,237 $ 24,238
NOW..................................... $ 14,855 -
Net Income (Loss): 1997 1998
------------------ ------------------------------------
ATMI.................................... $ 4,421 $ 6,465
TeloSense, ACSI and Delatech............ $ 1,228 $ (2,024)
NewForm and MST......................... $ (762) $ 494
NOW..................................... $ 1,508 -
</TABLE>
On July 15, 1997, MST acquired 100% of the outstanding capital stock of
four operating companies (i) Environmental Monitoring Technology S.A., a Swiss
holding company which owns 100% of the stock of MST Measurement Systems, Inc.;
(ii) Micro-Sensor Technologie GmbH; (iii) FPM Analytics, Inc. and (iv) Sensoric
GmbH ("four operating companies"). The aggregate purchase price for the four
operating companies was $18.8 million which was composed of cash of $5.6
million, the issuance of stock, and a two-year promissory note of $0.1 million.
The acquisition was accounted for as a purchase and, accordingly, the
operating results of the four operating companies have been included in the
Company's consolidated financial statements since the date of acquisition (July
15, 1997). The excess of the aggregate purchase price over the fair market value
of the net assets acquired of $4.4 million is being amortized over 10 years. The
following unaudited pro forma consolidated results of operations for the year
ended December 31, 1997 assume that the acquisition of the four operating
companies occurred as of January 1, 1997 (in thousands, except per share data):
1997
--------
Net revenues $200,256
Income before taxes and minority interest $ 15,485
Net income $ 6,893
Net income per share assuming dilution $ 0.27
12. Comprehensive Income
During 1998, the Company adopted FASB Statement No. 130, "Reporting
Comprehensive Income." Statement No. 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.
F-23
<PAGE>
ATMI, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
12. Comprehensive Income (continued)
The components of comprehensive income are as follows (in thousands):
<TABLE>
<CAPTION>
Currency Unrealized Gain
-------- ---------------
Translation (Loss) on Available-
----------- --------------------
Adjustments for-Sale Securities Total
----------- ------------------- --------
<S> <C> <C> <C>
Balance at December 31, 1996................ $ (78) $ -- $ (78)
Cumulative translation adjustment........... (1,376) -- (1,376)
----------------------------------------------------
Balance at December 31, 1997................ (1,454) -- (1,454)
----------------------------------------------------
Unrealized loss on available-for-sale
securities (net of tax benefit of $281) -- (500) (500)
Cumulative translation adjustment........... 801 -- 801
----------------------------------------------------
Balance at December 31, 1998................ (653) (500) (1,153)
----------------------------------------------------
Unrealized gain on available-for-sale
securities (net of tax provision of $4,141) -- 7,860 7,860
Cumulative translation adjustment........... (181) -- (181)
----------------------------------------------------
Balance at December 31, 1999................ $ (834) $ 7,360 $ 6,526
----------------------------------------------------
</TABLE>
13. Severance Charge
During the fourth quarter of 1999, the Company terminated the employment of
four executive officers within its Materials division and one executive officer
within its Technologies division and recorded a charge of $2.3 million,
reflected in selling, general, and administrative expenses in the Company's 1999
results of operations. As of December 31, 1999, there were no payments charged
against this liability. Payments for this liability will be made in 2000.
14. 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
paid the manufacturer $2.0 million during 1997 and agreed to purchase reactors
from the manufacturer assuming LSL's business conditions justify such purchases.
LSL had purchased a reactor at an approximate fair market value of $2.5 million
during the year ended December 31, 1997.
In December 1998, a former office employee initiated a legal proceeding
against the Company alleging personal injuries to her minor child (then unborn)
allegedly resulting from her exposure to various chemicals while employed by the
Company. The plaintiffs have claimed damages of $25.0 million and unspecified
exemplary damages. The Company has denied the plaintiffs' legal allegations and
is vigorously defending this action. While the Company cannot predict the
outcome of this proceeding at this time, the Company believes it is without
merit.
In the normal course of business, the Company is involved in various
lawsuits and claims. Although the ultimate outcome of any of these legal
proceedings cannot be determined at this time, management, including internal
counsel, does not believe that the outcome of these proceedings, individually or
in the aggregate, will have a material adverse effect on the Company's financial
position or results of operations.
F-24
<PAGE>
ATMI, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
15. Segment and Geographic Data
During 1998, the Company adopted FASB Statement No. 131 "Disclosure
About Segments of an Enterprise and Related Information". The Company has two
segments: ATMI Materials and ATMI Technologies. The reportable segments are each
managed separately because they manufacture and distribute distinct products
with different production processes. The Company evaluates performance and
allocate resources based on operating profit or loss, not including interest and
other income or expense and income taxes. Intercompany sales are not material
among segments or operating divisions. The general corporate assets primarily
include cash and marketable securities, goodwill and other long-lived assets.
The following tables provide reported results for each of these segments:
<TABLE>
<CAPTION>
For the year ended December 31,
-------------------------------
1997 1998 1999
-----------------------------------------------
<S> <C> <C> <C>
Revenues
- --------
ATMI Materials................................................ $ 83,060 $ 71,279 $ 96,711
ATMI Technologies............................................. 108,952 93,827 99,525
-----------------------------------------------
Consolidated revenues......................................... $192,012 $165,106 $196,236
===============================================
1997 1998 1999
-----------------------------------------------
Operating Income (Loss)
- -----------------------
ATMI Materials................................................ $ 17,757 $ 11,373 $ 19,335
ATMI Technologies............................................. 6,765 (3,241) 5,267
Merger costs and related expenses............................. (9,000) (1,700) (9,914)
-----------------------------------------------
Consolidated operating income................................. $ 15,522 $ 6,432 $ 14,688
===============================================
1997 1998 1999
-----------------------------------------------
Consolidated Net Income
- -----------------------
Operating income from reportable segments..................... $ 15,522 $ 6,432 $ 14,688
Other profit or (loss)........................................ (539) 2,915 3,578
Income tax provision.......................................... (8,588) (4,412) (7,720)
-----------------------------------------------
Consolidated net income....................................... $ 6,395 $ 4,935 $ 10,546
===============================================
<CAPTION>
At December 31,
---------------
1998 1999
----------------------------
<S> <C> <C>
Identifiable Assets
- -------------------
ATMI Materials................................................ $ 45,166 $ 60,717
ATMI Technologies............................................. 73,321 78,747
General corporate assets...................................... 90,165 93,192
----------------------------
Total consolidated assets..................................... $208,652 $232,656
============================
</TABLE>
F-25
<PAGE>
ATMI, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
15. Segment and Geographic Data (continued)
The Company's geographic data for the years ended December 31, 1997, 1998
and 1999 are as follows:
<TABLE>
<CAPTION>
United Europe and
In Thousands States Pacific Rim Other Eliminations Total
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
December 31, 1997
Total revenues $136,453 $42,829 $14,572 $(1,842) $192,012
Long-lived assets $ 54,473 $ 1,734 $ 498 $ - $ 56,705
December 31, 1998
Total revenues $112,445 $34,451 $20,779 $(2,569) $165,106
Long-lived assets $ 60,457 $ 1,373 $ 653 $ - $ 62,483
December 31, 1999
Total revenues $119,716 $54,563 $23,586 $(1,629) $196,236
Long-lived assets $ 56,224 $ 1,589 $ 638 $ - $ 58,451
</TABLE>
Revenues are attributed to countries based on the location of the customer.
No one specific country within the Pacific Rim or Europe accounted for greater
than 10% of consolidated revenues in 1997, 1998 and 1999. Revenues and net
income of the foreign subsidiaries is not material to the consolidated
operations of the Company for each of the three years in the period ended
December 31, 1999. The Company utilized one vendor to manufacture and distribute
product that accounted for approximately 7%, 10% and 14% of revenues in 1997,
1998 and 1999, respectively.
F-26
<PAGE>
Quarterly Results of Operations (unaudited)
(In Thousands, except per share amounts)
<TABLE>
<CAPTION>
Quarter Year
------------------------------------------------------- --------
1998 First Second Third Fourth 1998
- ---- ------- -------- ------- -------- --------
<S> <C> <C> <C> <C> <C>
Revenues................................... $52,047 $44,446 $35,161 $33,452 $165,106
Gross profit............................... $28,528 $21,294 $14,907 $16,958 $ 81,687
Net income (loss).......................... $ 5,747 $ 1,496 $(2,348) (a) $ 40 $ 4,935
Net income (loss) per share--basic......... $ 0.24 $ 0.07 $ (0.09) (a) $ 0.00 $ 0.19
Net income (loss) per share--assuming
dilution................................... $ 0.22 $ 0.05 $(0.09) (a) $ 0.00 $ 0.18
Quarter Year
------------------------------------------------------- --------
1999 First Second Third Fourth 1999
- ---- ------- -------- ------- -------- --------
Revenues................................... $37,240 $49,323 $52,055 $57,618 $196,236
Gross profit............................... $18,999 $26,563 $26,973 $30,731 $103,266
Net income (loss).......................... $ 1,479 $ (819) (b) $ 6,132 $ 3,754 (c) $ 10,546
Net income (loss) per share--basic......... $ 0.06 $ (0.03) $ 0.23 $ 0.14 $ 0.40
Net income (loss) per share--assuming
dilution................................... $ 0.05 $ (0.03) $ 0.22 $ 0.13 $ 0.37
</TABLE>
(a) Includes merger costs and related expenses of $1.7 million incurred in
completing the NOW acquisition, and a severance charge of $0.4 million for
severance for employees. The severance was completed by December 31, 1998.
(b) Includes merger costs and related expenses of $7.2 million incurred in
the ACSI, Delatech, and TeloSense acquisitions.
(c) Includes merger costs and related expenses of $3.3 million incurred in
completing the MST Analytics and NewForm N.V. acquisitions, and a charge of
$2.3 million of severance for five executive officers of the Material and
Technologies segments.
F-27
<PAGE>
Schedule II
ATMI, INC.
VALUATION AND QUALIFYING ACCOUNTS
(In Thousands)
<TABLE>
<CAPTION>
Balance at Balance at
---------- ----------
Beginning Charged to End
--------- ---------- ---
Year Ended of Period Cost/Expense Deductions of Period
- ---------- --------- ------------ ---------- ---------
<S> <C> <C> <C> <C>
December 31, 1997
Allowance for doubtful accounts....... $ 682 $1,251 $ 446(a) $1,487
Obsolescence reserve.................. 952 1,608 823(b) 1,737
December 31, 1998
Allowance for doubtful accounts....... $1,487 $ 399 $ 927(a) $ 959
Obsolescence reserve.................. 1,737 1,365 1,241(b) 1,861
Severance accrual..................... 0 402 402(c) 0
December 31, 1999
Allowance for doubtful accounts....... $ 959 $ 587 $ 180(a) $1,366
Obsolescence reserve.................. 1,861 1,143 1,475(b) 1,529
Severance accrual..................... 0 2,300 0 2,300
</TABLE>
a) reflects write-offs of bad debts
b) reflects disposals of obsolete inventory
c) reflects payments made during 1998
F-28
<PAGE>
================================================================================
- --------------------------------------------------------------------------------
No dealer, salesperson or other person is authorized to give any information
or to represent anything not contained in this prospectus. You must not rely on
any unauthorized information or representations. This prospectus is an offer to
sell only the shares offered hereby, but only under circumstances and in
jurisdictions where it is lawful to do so. The information contained in this
prospectus is current only as of its date.
---------------------------
TABLE OF CONTENTS
Page
Prospectus Summary............................. 3
Risk Factors................................... 6
Special Note Regarding
Forward-Looking Information.................. 11
Use of Proceeds................................ 12
Dividend Policy................................ 12
Price Range of Common Stock.................... 12
Capitalization................................. 13
Selected Consolidated Financial Data........... 14
Management's Discussion and Analysis of
Financial Condition and Results of
Operations................................... 16
Business....................................... 25
Management..................................... 40
Selling Stockholders........................... 42
Description of Capital Stock................... 43
Underwriting................................... 45
Where Can You Find More Information............ 47
Legal Matters.................................. 48
Experts........................................ 48
Index to Consolidated Financial
Statements................................... F-1
- --------------------------------------------------------------------------------
================================================================================
================================================================================
- --------------------------------------------------------------------------------
3,100,000 Shares
ATMI, Inc.
Common Stock
---------------
[LOGO]
---------------
Goldman, Sachs & Co.
Banc of America Securities LLC
Deutsche Banc Alex. Brown
Prudential Volpe Technology
a unit of Prudential Securities
Representatives of the Underwriters
- --------------------------------------------------------------------------------
================================================================================
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution
The following table sets forth the estimated expenses, other than
underwriting discounts and commissions, payable by the registrant in connection
with the sale and distribution of the shares of Common Stock registered hereby.
The registrant is paying all of the expenses incurred on behalf of the selling
stockholders (other than discounts and commissions).
SEC registration fee................................ $ 45,587
NASD filing fees.................................... 17,545
Nasdag National Market listing fee.................. 17,500
Printing expenses................................... 175,000
Legal fees and expenses............................. 150,000
Accounting fees and expenses........................ 175,000
Transfer agent and registrar fees and expenses...... 1,500
Miscellaneous....................................... 17,868
--------
Total expenses............................. $600,000
Item 15. 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 her or his 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 an
injunction or rescission, against a director for breach of her or his fiduciary
duty.
In addition, the registrant's Certificate of Incorporation and Bylaws
provide 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 reasonably believed to be in or not
opposed to the best interests of the company 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.
II-1
<PAGE>
Item 16. Exhibits
The following is a list of exhibits filed as a part of this registration
statement or incorporated by reference herein:
Exhibit No. Description
- ----------- -----------
1.1 Form Underwriting Agreement. (1)
4.1(a) Certificate of Incorporation of ATMI (Exhibit 3.01 to ATMI's
Registration Statement on Form S-4, filed September 10, 1997,
Registration No. 333-35323 (the "1997 Form S-4 Registration
Statement")). (2)
4.1(b) Certificate of Amendment to Certificate of Incorporation (Exhibit
4.1(b) to ATMI's Post-Effective Amendment No. 1 to Registration
Statement on Form S-8, filed October 10, 1997, Registration No.
33-77060). (2)
4.1(c) Certificate of Amendment to Certificate of Incorporation (Exhibit
3.01(c) to ATMI's Registration Statement on Form S-4, Registration
No. 333-51333). (2)
4.2 Bylaws of ATMI (Exhibit 3.02 to the 1997 Form S-4 Registration
Statement). (2)
5.1 Opinion and Consent of Shipman & Goodwin LLP as to the legality
of the shares to be registered. (1)
23.1 Consent of Shipman & Goodwin LLP (to be included in the opinion
filed as Exhibit 5.1). (1)
23.2 Consent of Ernst & Young LLP. (1)
23.3 Consent of Deloitte & Touche LLP. (1)
23.4 Consent of Arthur Andersen LLP. (1)
23.5 Consent of Rath, Anders, Dr. Wanner & Partner. (1)
24.1 Power of Attorney, included in signature page of this
Registration Statement. (1)
- ------------------
(1) Filed herewith.
(2) Incorporated by reference.
Item 17. Undertakings
The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
Registration Statement 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.
Insofar as indemnification for liabilities arising under the Securities Act
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 Commission such indemnification is
against public policy as expressed in the Securities 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
II-2
<PAGE>
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 Securities Act and will be governed by
the final adjudication of such issue.
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act,
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 prospects filed by the registrant pursuant to Rule 424(b)(1)
or (4) or 497(h) under the Securities Act shall be deemed to be part of
this registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act, 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-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and 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 March 8, 2000.
ATMI, INC.
By: /s/ Eugene G. Banucci
-------------------------------------------
Eugene G. Banucci, President,
Chief Executive Officer and Chairman of the Board
POWER OF ATTORNEY
Know All Persons by These Presents, that each person whose signature
appears below constitutes and appoints Eugene G. Banucci and Daniel P. Sharkey
and each of them, his true and lawful attorneys-in-fact and agents, with full
power of substitution and resubstitution for him and in his name, place and
stead, in any and all capacities to sign any and all amendments (including,
without limitation, post-effective amendments and any amendment or amendments or
registration statement increasing the amount of securities for which
registration is being sought) to this registration statement, and to file the
same, with all exhibits thereto, and other documents in connection therewith,
with full power and authority to do and perform each and every act and thing
requisite or necessary to be done in and about the premises, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents or any of them, of their
or his substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
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.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Eugene G. Banucci President, Chief Executive Officer and March 8, 2000
- ---------------------------------
Eugene G. Banucci Chairman of the Board
(principal executive officer)
/s/ Daniel P. Sharkey Vice President, Treasurer and Chief March 8, 2000
- ---------------------------------
Daniel P. Sharkey Financial Officer (principal
financial and accounting officer)
/s/ Mark A. Adley Director March 8, 2000
- ---------------------------------
Mark A. Adley
/s/ Robert S. Hillas Director March 8, 2000
- ---------------------------------
Robert S. Hillas
/s/ Kam Law Director March 8, 2000
- ---------------------------------
Kam Law
</TABLE>
II-4
<PAGE>
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Stephen H. Mahle Director March 8, 2000
- ---------------------------------
Stephen H. Mahle
/s/ Stephen H. Siegele Director March 8, 2000
- ---------------------------------
Stephen H. Siegele
</TABLE>
II-5
<PAGE>
EXHIBIT INDEX
Exhibit No. Description
- ----------- -----------
1.1 Form Underwriting Agreement. (1)
4.1(a) Certificate of Incorporation of Registrant (Exhibit 3.01 to ATMI's
Registration Statement on Form S-4, filed September 10, 1997,
Registration No. 333-35323 (the "1997 Form S-4 Registration
Statement")). (2)
4.1(b) Certificate of Amendment to Certificate of Incorporation (Exhibit
4.1(b) to ATMI's Post-Effective Amendment No. 1 to Registration
Statement on Form S-8, filed October 10, 1997, Registration No.
33-77060). (2)
4.1(c) Certificate of Amendment to Certificate of Incorporation (Exhibit
3.01(c) to ATMI's Registration Statement on Form S-4,
Registration No. 333-51333). (2)
4.2 Bylaws of ATMI (Exhibit 3.02 to the 1997 Form S-4 Registration
Statement). (2)
5.1 Opinion and Consent of Shipman & Goodwin LLP as to the legality
of the shares to be registered. (1)
23.1 Consent of Shipman & Goodwin LLP (to be included in the opinion
filed as Exhibit 5.1). (1)
23.2 Consent of Ernst & Young LLP. (1)
23.3 Consent of Deloitte & Touche LLP. (1)
23.4 Consent of Arthur Andersen LLP. (1)
23.5 Consent of Rath, Anders, Dr. Wanner & Partner. (1)
24.1 Power of Attorney, included in signature page of this
Registration Statement. (1)
- ------------------
(1) Filed herewith.
(2) Incorporated by reference.
E-1
<PAGE>
Exhibit 1.1
ATMI, INC.
Common Stock ($0.01 par value per share)
-----------
Underwriting Agreement
----------------------
_________ __, 2000
Goldman, Sachs & Co.,
Deutsche Banc Alex. Brown,
Banc of America Securities LLC,
Prudential Securities Incorporated
As representatives of the several Underwriters
named in Schedule I hereto,
c/o Goldman, Sachs & Co.
85 Broad Street
New York, New York 10004
Ladies and Gentlemen:
ATMI, Inc., a Delaware corporation (the "Company"), proposes, subject to
the terms and conditions stated herein, to issue and sell to the Underwriters
named in Schedule I hereto (the "Underwriters") an aggregate of 1,500,000 shares
and, at the election of the Underwriters, up to 225,000 additional shares of
Common Stock, par value $0.01 per share ("Stock") of the Company and the
stockholders of the Company named in Schedule II hereto (the "Selling
Stockholders") propose, subject to the terms and conditions stated herein, to
sell to the Underwriters an aggregate of 1,600,000 shares and, at the election
of the Underwriters, up to 240,000 additional shares of Stock. The aggregate of
3,100,000 shares to be sold by the Company and the Selling Stockholders is
herein called the "Firm Shares" and the aggregate of 465,000 additional shares
to be sold by the Company and the Selling Stockholders is herein called the
"Optional Shares". The Firm Shares and the Optional Shares that the
Underwriters elect to purchase pursuant to Section 2 hereof are herein
collectively called the "Shares".
1. (a) The Company represents and warrants to, and agrees with, each
of the Underwriters that:
(i) A registration statement on Form S-3 (File No. 333-____)
(the "Initial Registration Statement") in respect of the Shares has been
filed with the Securities and Exchange Commission (the "Commission"); the
Initial Registration Statement and any post-effective amendment thereto,
each in the form heretofore delivered to you, and, excluding exhibits
thereto but including all documents incorporated by reference in the
prospectus contained therein, to you for each of the other Underwriters,
have been declared effective by the Commission in such form; other than a
registration statement, if any, increasing the size of the offering (a
"Rule 462(b) Registration Statement"), filed pursuant to Rule 462(b) under
the Securities Act of 1933, as amended (the "Act"), which became effective
upon filing, no other document with respect to the Initial Registration
Statement or document incorporated by reference therein has heretofore
<PAGE>
been filed with the Commission; and no stop order suspending the
effectiveness of the Initial Registration Statement, any post-effective
amendment thereto or the Rule 462(b) Registration Statement, if any, has
been issued and no proceeding for that purpose has been initiated or
threatened by the Commission (any preliminary prospectus included in the
Initial Registration Statement or filed with the Commission pursuant to
Rule 424(a) of the rules and regulations of the Commission under the Act is
hereinafter called a "Preliminary Prospectus"; the various parts of the
Initial Registration Statement and the Rule 462(b) Registration Statement,
if any, including all exhibits thereto and including (i) the information
contained in the form of final prospectus filed with the Commission
pursuant to Rule 424(b) under the Act in accordance with Section 5(a)
hereof and deemed by virtue of Rule 430A under the Act to be part of the
Initial Registration Statement at the time it was declared effective and
(ii) the documents incorporated by reference in the prospectus contained in
the Initial Registration Statement at the time such part of the Initial
Registration Statement became effective, each as amended at the time such
part of the Initial Registration Statement became effective or such part of
the Rule 462(b) Registration Statement, if any, became or hereafter becomes
effective, are hereinafter collectively called the "Registration
Statement"; and such final prospectus, in the form first filed pursuant to
Rule 424(b) under the Act, is hereinafter called the "Prospectus"; and any
reference herein to any Preliminary Prospectus or the Prospectus shall be
deemed to refer to and include the documents incorporated by reference
therein pursuant to Item 12 of Form S-3 under the Act, as of the date of
such Preliminary Prospectus or Prospectus, as the case may be; any
reference to any amendment or supplement to any Preliminary Prospectus or
the Prospectus shall be deemed to refer to and include any documents filed
after the date of such Preliminary Prospectus or Prospectus, as the case
may be, under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), and incorporated by reference in such Preliminary
Prospectus or Prospectus, as the case may be; and any reference to any
amendment to the Registration Statement shall be deemed to refer to and
include any annual report of the Company filed pursuant to Section 13(a) or
15(d) of the Exchange Act after the effective date of the Initial
Registration Statement that is incorporated by reference in the
Registration Statement);
(ii) No order preventing or suspending the use of any
Preliminary Prospectus has been issued by the Commission, and each
Preliminary Prospectus, at the time of filing thereof, conformed in all
material respects to the requirements of the Act and the rules and
regulations of the Commission thereunder, and did not contain an untrue
statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein, in the light
of the circumstances under which they were made, not misleading; provided,
however, that this representation and warranty shall not apply to any
statements or omissions made in reliance upon and in conformity with
information furnished in writing to the Company by an Underwriter through
Goldman, Sachs & Co. expressly for use therein or by a Selling Stockholder
expressly for use in the preparation of the answers therein to Item 7 of
Form S-3;
(iii) The documents incorporated by reference in the
Prospectus, when they became effective or were filed with the Commission,
as the case may be, conformed in all material respects to the requirements
of the Act or the Exchange Act, as applicable, and the rules and
regulations of the Commission thereunder, and none of such documents
contained an untrue statement of a material fact or omitted to state a
material fact required to be stated therein or
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<PAGE>
necessary to make the statements therein not misleading; and any further
documents so filed and incorporated by reference in the Prospectus or any
further amendment or supplement thereto, when such documents become
effective or are filed with the Commission, as the case may be, will
conform in all material respects to the requirements of the Act or the
Exchange Act, as applicable, and the rules and regulations of the
Commission thereunder and will not contain an untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading;
provided, however, that this representation and warranty shall not apply to
any statements or omissions made in reliance upon and in conformity with
information furnished in writing to the Company by an Underwriter through
Goldman, Sachs & Co. expressly for use therein;
(iv) The Registration Statement conforms, and the Prospectus and
any further amendments or supplements to the Registration Statement or the
Prospectus will conform, in all material respects to the requirements of
the Act and the rules and regulations of the Commission thereunder and do
not and will not, as of the applicable effective date as to the
Registration Statement and any amendment thereto and as of the applicable
filing date as to the Prospectus and any amendment or supplement thereto,
contain an untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements
therein not misleading; provided, however, that this representation and
warranty shall not apply to any statements or omissions made in reliance
upon and in conformity with information furnished in writing to the Company
by an Underwriter through Goldman, Sachs & Co. expressly for use therein or
by a Selling Stockholder expressly for use in the preparation of the
answers therein to Item 7 of Form S-3;
(v) Neither the Company nor any of its subsidiaries has
sustained since the date of the latest audited financial statements
included or incorporated by reference in the Prospectus any material loss
or interference with its business from fire, explosion, flood or other
calamity, whether or not covered by insurance, or from any labor dispute or
court or governmental action, order or decree, otherwise than as set forth
or contemplated in the Prospectus; and, since the respective dates as of
which information is given in the Registration Statement and the
Prospectus, there has not been any change in the capital stock other than
as a result of the grant or exercise of stock options pursuant to the
Company's stock option plans and purchases of stock pursuant to the
Company's stock purchase plan, in each case as in effect on December 31,
1999, or increase in long-term debt of the Company or any of its
subsidiaries or any material adverse change, or any development involving a
prospective material adverse change, in or affecting the general affairs,
management, financial position, stockholders' equity or results of
operations of the Company and its subsidiaries, otherwise than as set forth
or contemplated in the Prospectus;
(vi) The Company and its subsidiaries have good and marketable
title in fee simple to all real property and good and marketable title to
all personal property owned by them, in each case free and clear of all
liens, encumbrances and defects except such as are described in the
Prospectus or such as do not materially affect the value of such property
and do not interfere with the use made and proposed to be made of such
property by the Company and its subsidiaries; and any real property and
buildings held under lease by the Company and its subsidiaries are held by
them under valid, subsisting and enforceable leases with such exceptions
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<PAGE>
as are not material and do not interfere with the use made and proposed to
be made of such property and buildings by the Company and its subsidiaries;
(vii) The Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the State of
Delaware, with power and authority (corporate and other) to own its
properties and conduct its business as described in the Prospectus, and has
been duly qualified as a foreign corporation for the transaction of
business and is in good standing under the laws of each other jurisdiction
in which it owns or leases properties or conducts any business so as to
require such qualification, except where the failure to be so qualified
would not, individually or in the aggregate, have a material adverse effect
on the general affairs, management, the current or future consolidated
financial position, business prospects, stockholder's equity or results of
operations of the Company and its subsidiaries, taken as a whole (a
"Material Adverse Effect"); and each subsidiary of the Company has been
duly organized and is validly existing and in good standing under the laws
of its jurisdiction of organization;
(viii) The Company has an authorized capitalization as set
forth in the Prospectus, and all of the issued shares of capital stock of
the Company have been duly and validly authorized and issued, are fully
paid and non-assessable and conform to the description of the Stock
contained in the Prospectus; and all of the issued shares of capital stock
of each subsidiary of the Company have been duly and validly authorized and
issued, are fully paid and non-assessable and (except for directors'
qualifying shares and except as set forth in the Prospectus) are owned
directly or indirectly by the Company, free and clear of all liens,
encumbrances, equities or claims;
(ix) The unissued Shares to be issued and sold by the Company
to the Underwriters hereunder have been duly and validly authorized and,
when issued and delivered against payment therefor as provided herein, will
be duly and validly issued and fully paid and non-assessable and will
conform to the description of the Stock contained in the Prospectus;
(x) The issue and sale of the Shares to be sold by the Company
and the compliance by the Company with all of the provisions of this
Agreement and the consummation of the transactions herein contemplated will
not conflict with or result in a breach or violation of any of the terms or
provisions of, or constitute a default under, any indenture, mortgage, deed
of trust, loan agreement or other agreement or instrument to which the
Company or any of its subsidiaries is a party or by which the Company or
any of its subsidiaries is bound or to which any of the property or assets
of the Company or any of its subsidiaries is subject, nor will such action
result in any violation of the provisions of the Certificate of
Incorporation or By-laws of the Company or any statute or any order, rule
or regulation of any court or governmental agency or body having
jurisdiction over the Company or any of its subsidiaries or any of their
properties; and no consent, approval, authorization, order, registration or
qualification of or with any such court or governmental agency or body is
required for the issue and sale of the Shares or the consummation by the
Company of the transactions contemplated by this Agreement, except the
registration under the Act of the Shares and such consents, approvals,
authorizations,
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<PAGE>
registrations or qualifications as may be required under state securities
or Blue Sky laws and under the rules of the Nasdaq Stock Market and the
National Association of Securities Dealers, Inc. ("NASD") in connection
with the purchase and distribution of the Shares by the Underwriters;
(xi) Neither the Company nor any of its subsidiaries is in
violation of its Certificate of Incorporation or By-laws or other governing
documents or in default in the performance or observance of any material
obligation, agreement, covenant or condition contained in any indenture,
mortgage, deed of trust, loan agreement, lease or other agreement or
instrument to which it is a party or by which it or any of its properties
may be bound;
(xii) The statements set forth in the Prospectus under the
caption "Description of Capital Stock", insofar as they purport to
constitute a summary of the terms of the Stock are accurate, complete and
fair;
(xiii) Other than as set forth in the Prospectus, there are no
legal or governmental proceedings pending to which the Company or any of
its subsidiaries is a party or of which any property of the Company or any
of its subsidiaries is the subject which, if determined adversely to the
Company or any of its subsidiaries, would individually or in the aggregate
have a material adverse effect on the general affairs, management, the
current or future consolidated financial position, business prospects,
stockholders' equity or results of operations of the Company and its
subsidiaries (a "Material Adverse Effect"); and, to the best of the
Company's knowledge, no such proceedings are threatened or contemplated by
governmental authorities or threatened by others;
(xiv) The Company is not and, after giving effect to the
offering and sale of the Shares, will not be an "investment company"or an
entity "controlled" by an "investment company" as such terms are defined in
the Investment Company Act of 1940, as amended (the "Investment Company
Act");
(xv) Neither the Company nor any of its affiliates does
business with the government of Cuba or with any person or affiliate
located in Cuba within the meaning of Section 517.075, Florida Statutes;
(xvi) Ernst & Young LLP, who have certified certain financial
statements of the Company and its subsidiaries, and Deloitte & Touche LLP,
Arthur Andersen LLP and Rath, Anders, Dr. Wanner & Partner, who have
certified certain financial statements of certain of the subsidiaries of
the Company, are each independent public accountants as required by the Act
and the rules and regulations of the Commission thereunder;
(xvii) The Company has reviewed its operations and that of its
subsidiaries and any third parties with which the Company or any of its
subsidiaries has a material relationship to evaluate the extent to which
the business or operations of the Company or any of its subsidiaries will
be affected by the Year 2000 Problem. As a result of such review, the
Company has no reason to believe, and does not believe, that the Year 2000
Problem will have a Material Adverse Effect or result in any material loss
or interference with the Company's business or operations.
-5-
<PAGE>
The "Year 2000 Problem" as used herein means any significant risk that
computer hardware or software used in the receipt, transmission,
processing, manipulation, storage, retrieval, retransmission or other
utilization of data or in the operation of mechanical or electrical systems
of any kind will not, in the case of dates or time periods occurring after
December 31, 1999, function at least as effectively as in the case of dates
or time periods occurring prior to January 1, 2000.
(xviii) Other than as set forth in the Prospectus, the Company
and its subsidiaries own or have the right to use pursuant to license,
sublicense, agreement or permission all patents, patent applications,
trademarks, service marks, trade names, copyrights, trade secrets, domain
names, information, proprietary rights and processes ("Intellectual
Property") necessary for their business as described in the Prospectus and,
to the Company's knowledge, necessary in connection with the products and
services under development, without any conflict with or infringement of
the interests of others, except for such conflicts or infringements which,
individually or in the aggregate, have not had and are not reasonably
likely to result in, a Material Adverse Effect, and have taken all
reasonable steps necessary to secure interests in such Intellectual
Property and have taken all reasonable steps necessary to secure assignment
of such Intellectual Property from its employees and contractors; except as
set forth in the Prospectus, the Company is not aware of outstanding
options, licenses or agreements of any kind relating to the Intellectual
Property of the Company which are required to be set forth in the
Prospectus, and, except as set forth in the Prospectus, neither the Company
nor any of its subsidiaries is a party to or bound by any options, licenses
or agreements with respect to the Intellectual Property of any other person
or entity which are required to be set forth in the Prospectus; none of the
technology employed by the Company has been obtained or is being used by
the Company or its subsidiaries in violation of any contractual fiduciary
obligation binding on the Company or any of its subsidiaries or any of its
directors or executive officers or, to the Company's knowledge, any of its
employees or otherwise in violation of the rights of any persons; except as
disclosed in the Prospectus, neither the Company nor any of its
subsidiaries has received any written or, to the Company's knowledge, oral
communications alleging that the Company or any of its subsidiaries has
violated, infringed or conflicted with, or, by conducting its business as
set forth in the Prospectus, would violate, infringe or conflict with any
of the Intellectual Property of any other person or entity other than any
such violations, infringements or conflicts which, individually or in the
aggregate, have not had, and are not reasonably likely to result in a
Material Adverse Effect; and the Company and its subsidiaries have taken
and will maintain reasonable measures to prevent the unauthorized
dissemination or publication of their confidential information and, to the
extent contractually required to do so, the confidential information of
third parties in their possession;
(xix) The Company maintains insurance of the types and in the
amounts generally deemed adequate for its business, including, but not
limited to, business interruption insurance, insurance covering real and
personal property owned or leased by the Company against theft, damage,
destruction, acts of vandalism and all other risks customarily insured
against, all of which insurance is in full force and effect;
(xx) There are no contracts, other documents or other
agreements required to be
-6-
<PAGE>
described in the Registration Statement or to be filed as exhibits to the
Registration Statement by the Act or by the rules and regulations
thereunder which have not been described or filed as required; the
contracts so described in the Prospectus are in full force and effect on
the date hereof; and neither the Company nor, to the Company's knowledge,
any other party is in breach of or default under any of such contracts
other than such breaches or defaults which, individually or in the
aggregate, have not had, and are not reasonably likely to result in, a
Material Adverse Effect;
(xxi) Except as described in or contemplated by the Prospectus,
the Company and its subsidiaries possess all certificates, authorizations
and permits issued by the appropriate federal, state or foreign regulatory
authorities necessary to conduct their respective businesses, and neither
the Company nor any such subsidiary has received any notice of proceedings
relating to the revocation or modification of, or failure to obtain, any
such certificate, authorization or permit which, individually or in the
aggregate, if the subject of an unfavorable decision, ruling or finding,
would result in a Material Adverse Effect;
(xxii) To the Company's knowledge, there are no legal or
governmental proceedings pending relating to trademarks, trade names,
patent rights, mask works, copyrights, licenses, trade secrets or other
Intellectual Property rights of the Company or any of its subsidiaries
(other than the prosecution by the Company and its subsidiaries of their
patent applications before the United States Patent Office and appropriate
foreign government agencies) which, individually or in the aggregate, would
result in a Material Adverse Effect, and no proceedings are threatened or
contemplated by government authorities or others relating to trademarks,
trade names, patent rights, mask works, copyrights, licenses or other
Intellectual Property rights of the Company or its subsidiaries; and
(xxiii) The Company has filed all reports it has been required
to file under the Exchange Act; such reports when filed conformed in all
material respects to the requirements of the Exchange Act; and none of such
reports contained an untrue statement of material fact or omitted to state
a material fact required to be stated therein, in light of the
circumstances under which they were made, to make the statements therein
not misleading.
(b) Each of the Selling Stockholders severally represents and warrants
to, and agrees with, each of the Underwriters and the Company that:
(i) All consents, approvals, authorizations and orders
necessary for the execution and delivery by such Selling Stockholder of
this Agreement, the Power of Attorney and the Custody Agreement hereinafter
referred to, and for the sale and delivery of the Shares to be sold by such
Selling Stockholder hereunder, have been obtained; and such Selling
Stockholder has full right, power and authority to enter into this
Agreement, the Power-of-Attorney and the Custody Agreement and to sell,
assign, transfer and deliver the Shares to be sold by such Selling
Stockholder hereunder;
(ii) The sale of the Shares to be sold by such Selling
Stockholder hereunder and the compliance by such Selling Stockholder with
all of the provisions of this Agreement, the Power
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<PAGE>
of Attorney and the Custody Agreement and the consummation of the
transactions herein and therein contemplated will not conflict with or
result in a breach or violation of any of the terms or provisions of, or
constitute a default under, any statute, indenture, mortgage, deed of
trust, loan agreement or other agreement or instrument to which such
Selling Stockholder is a party or by which such Selling Stockholder is
bound or to which any of the property or assets of such Selling Stockholder
is subject, nor will such action result in any violation of the provisions
of the Certificate of Incorporation or By-laws of such Selling Stockholder
if such Selling Stockholder is a corporation, the Partnership Agreement of
such Selling Stockholder if such Selling Stockholder is a partnership, the
trust documentation of such Selling Stockholder if such Selling Stockholder
is a trust or any statute or any order, rule or regulation of any court or
governmental agency or body having jurisdiction over such Selling
Stockholder or the property of such Selling Stockholder;
(iii) Such Selling Stockholder has, and immediately prior to
each Time of Delivery (as defined in Section 4 hereof) such Selling
Stockholder will have, good and valid title to the Shares to be sold by
such Selling Stockholder hereunder, free and clear of all liens,
encumbrances, equities or claims; and, upon delivery of such Shares and
payment therefor pursuant hereto, good and valid title to such Shares,
free and clear of all liens, encumbrances, equities or claims, will pass
to the several Underwriters;
(iv) Such Selling Stockholder has entered into a 90 day lock-up
agreement in the form attached as Annex IA;
(v) Such Selling Stockholder has not taken and will not take,
directly or indirectly, any action which is designed to or which has
constituted or which might reasonably be expected to cause or result in
stabilization or manipulation of the price of any security of the Company
to facilitate the sale or resale of the Shares;
(vi) To the extent that any statements or omissions made in the
Registration Statement, any Preliminary Prospectus, the Prospectus or any
amendment or supplement thereto are made in reliance upon and in conformity
with written information furnished to the Company by such Selling
Stockholder expressly for use therein, such Preliminary Prospectus and the
Registration Statement did, and the Prospectus and any further amendments
or supplements to the Registration Statement and the Prospectus, when they
become effective or are filed with the Commission, as the case may be, will
conform in all material respects to the requirements of the Act and the
rules and regulations of the Commission thereunder and will not 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
not misleading;
(vii) In order to document the Underwriters' compliance with
the reporting and withholding provisions of the Tax Equity and Fiscal
Responsibility Act of 1982 with respect to the transactions herein
contemplated, such Selling Stockholder will deliver to you prior to or at
the First Time of Delivery (as hereinafter defined) a properly completed
and executed United States Treasury Department Form W-9 (or other
applicable form or statement specified by Treasury Department regulations
in lieu thereof);
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<PAGE>
(viii) Certificates in negotiable form representing all of the
Shares to be sold by such Selling Stockholder hereunder have been placed in
custody under a Custody Agreement, in the form heretofore furnished to you
(the "Custody Agreement"), duly executed and delivered by such Selling
Stockholder to the Company, as custodian (the "Custodian"), and such
Selling Stockholder has duly executed and delivered an Irrevocable Power of
Attorney, in the form heretofore furnished to you (the "Power of
Attorney"), appointing the persons indicated in Schedule II hereto, and
each of them, as such Selling Stockholder's attorneys-in-fact (the
"Attorneys-in-Fact") with authority to execute and deliver this Agreement
on behalf of such Selling Stockholder, to determine the purchase price to
be paid by the Underwriters to the Selling Stockholders as provided in
Section 2 hereof, to authorize the delivery of the Shares to be sold by
such Selling Stockholder hereunder and otherwise to act on behalf of such
Selling Stockholder in connection with the transactions contemplated by
this Agreement and the Custody Agreement; and
(ix) The Shares represented by the certificates held in custody
for such Selling Stockholder under the Custody Agreement are subject to the
interests of the Underwriters hereunder; the arrangements made by such
Selling Stockholder for such custody, and the appointment by such Selling
Stockholder of the Attorneys-in-Fact by the Power of Attorney, are to that
extent irrevocable; the obligations of the Selling Stockholders hereunder
shall not be terminated by operation of law, whether by the death or
incapacity of any individual Selling Stockholder or, in the case of an
estate or trust, by the death or incapacity of any executor or trustee or
the termination of such estate or trust, or in the case of a partnership or
corporation, by the dissolution of such partnership or corporation, or by
the occurrence of any other event; if any individual Selling Stockholder or
any such executor or trustee should die or become incapacitated, or if any
such estate or trust should be terminated, or if any such partnership or
corporation should be dissolved, or if any other such event should occur,
before the delivery of the Shares hereunder, certificates representing the
Shares shall be delivered by or on behalf of the Selling Stockholders in
accordance with the terms and conditions of this Agreement and of the
Custody Agreements; and actions taken by the Attorneys-in-Fact pursuant to
the Powers of Attorney shall be as valid as if such death, incapacity,
termination, dissolution or other event had not occurred, regardless of
whether or not the Custodian, the Attorneys-in-Fact, or any of them, shall
have received notice of such death, incapacity, termination, dissolution or
other event.
2. Subject to the terms and conditions herein set forth, (a) the Company
and each of the Selling Stockholders agree, severally and not jointly, to sell
to each of the Underwriters, and each of the Underwriters agrees, severally and
not jointly, to purchase from the Company and each of the Selling Stockholders,
at a purchase price per share of $_________, the number of Firm Shares (to be
adjusted by you so as to eliminate fractional shares) determined by multiplying
the aggregate number of Shares to be sold by the Company and each of the Selling
Stockholders as set forth opposite their respective names in Schedule II hereto
by a fraction, the numerator of which is the aggregate number of Firm Shares to
be purchased by such Underwriter as set forth opposite the name of such
Underwriter in Schedule I hereto and the denominator of which is the aggregate
number of Firm Shares to be purchased by all of the Underwriters from the
Company and all of the Selling Stockholders hereunder and (b) in the event and
to the extent that the Underwriters shall exercise the election to purchase
Optional Shares as provided
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<PAGE>
below, the Company and each of the Selling Stockholders agree, severally and not
jointly, to sell to each of the Underwriters, and each of the Underwriters
agrees, severally and not jointly, to purchase from the Company and each of the
Selling Stockholders, at the purchase price per share set forth in clause (a) of
this Section 2, that portion of the number of Optional Shares as to which such
election shall have been exercised (to be adjusted by you so as to eliminate
fractional shares) determined by multiplying such number of Optional Shares by a
fraction the numerator of which is the maximum number of Optional Shares which
such Underwriter is entitled to purchase as set forth opposite the name of such
Underwriter in Schedule I hereto and the denominator of which is the maximum
number of Optional Shares that all of the Underwriters are entitled to purchase
hereunder.
The Company and the Selling Stockholders, as and to the extent indicated in
Schedule II hereto, hereby grant, severally and not jointly, to the Underwriters
the right to purchase at their election up to 465,000 Optional Shares, at the
purchase price per share set forth in the paragraph above, for the sole purpose
of covering sales of shares in excess of the number of Firm Shares. Any such
election to purchase Optional Shares shall be made in proportion to the maximum
number of Optional Shares to be sold by the Company and each Selling Stockholder
as set forth in Schedule II hereto initially with respect to the Optional Shares
to be sold by the Company and then among the Selling Stockholders in proportion
to the maximum number of Optional Shares to be sold by each Selling Stockholder
as set forth in Schedule II hereto. Any such election to purchase Optional
Shares may be exercised only by written notice from you to the Company and the
Attorneys-in-Fact, given within a period of 30 calendar days after the date of
this Agreement and setting forth the aggregate number of Optional Shares to be
purchased and the date on which such Optional Shares are to be delivered, as
determined by you but in no event earlier than the First Time of Delivery (as
defined in Section 4 hereof) or, unless you and the Company and the Attorneys-
in-Fact otherwise agree in writing, earlier than two or later than ten business
days after the date of such notice.
3. Upon the authorization by you of the release of the Firm Shares, the
several Underwriters propose to offer the Firm Shares for sale upon the terms
and conditions set forth in the Prospectus.
4. (a) The Shares to be purchased by each Underwriter hereunder, in
definitive form, and in such authorized denominations and registered in such
names as Goldman, Sachs & Co. may request upon at least forty-eight hours' prior
notice to the Company and the Selling Stockholders shall be delivered by or on
behalf of the Company and the Selling Stockholders to Goldman, Sachs & Co.,
through the facilities of the Depository Trust Company ("DTC"), for the account
of such Underwriter, against payment by or on behalf of such Underwriter of the
purchase price therefor by wire transfer of Federal (same-day) funds to the
account specified by the Company and the Custodian to Goldman, Sachs & Co. at
least forty-eight hours in advance. The Company will cause the certificates
representing the Shares to be made available for checking and packaging at least
twenty-four hours prior to the Time of Delivery (as defined below) with respect
thereto at the office of DTC or its designated custodian (the "Designated
Office"). The time and date of such delivery and payment shall be, with respect
to the Firm Shares, 9:30 a.m., New York time, on ______ __, 2000 or such other
time and date as Goldman, Sachs & Co. , the Company and the Selling Stockholders
may agree upon in writing, and, with respect to the Optional Shares, 9:30 a.m.,
New York time, on the date specified by Goldman, Sachs & Co. in the written
notice given by Goldman, Sachs & Co. of the Underwriters' election to purchase
such Optional Shares, or such other time and date as Goldman, Sachs & Co. and
the Company and the Selling Stockholders may agree
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upon in writing. Such time and date for delivery of the Firm Shares is herein
called the "First Time of Delivery", such time and date for delivery of the
Optional Shares, if not the First Time of Delivery, is herein called the "Second
Time of Delivery", and each such time and date for delivery is herein called a
"Time of Delivery".
(b) The documents to be delivered at each Time of Delivery by or on
behalf of the parties hereto pursuant to Section 7 hereof, including the
cross receipt for the Shares and any additional documents requested by the
Underwriters pursuant to Section 7(m) hereof, will be delivered at the
offices of Shipman & Goodwin LLP , One American Row, Hartford, Connecticut
06103 (the "Closing Location"), and the Shares will be delivered at the
Designated Office, all at such Time of Delivery. A meeting will be held at
the Closing Location at _____ p.m., New York City time, on the New York
Business Day next preceding such Time of Delivery, at which meeting the
final drafts of the documents to be delivered pursuant to the preceding
sentence will be available for review by the parties hereto. For the
purposes of this Section 4, "New York Business Day" shall mean each Monday,
Tuesday, Wednesday, Thursday and Friday which is not a day on which banking
institutions in New York are generally authorized or obligated by law or
executive order to close.
5. The Company agrees with each of the Underwriters:
(a) To prepare the Prospectus in a form approved by you and to file
such Prospectus pursuant to Rule 424(b) under the Act not later than the
Commission's close of business on the second business day following the
execution and delivery of this Agreement, or, if applicable, such earlier
time as may be required by Rule 430A(a)(3) under the Act; to make no
further amendment or any supplement to the Registration Statement or
Prospectus prior to the last Time of Delivery which shall be disapproved by
you promptly after reasonable notice thereof; to advise you, promptly after
it receives notice thereof, of the time when any amendment to the
Registration Statement has been filed or becomes effective or any
supplement to the Prospectus or any amended Prospectus has been filed and
to furnish you with copies thereof; to file promptly all reports and any
definitive proxy or information statements required to be filed by the
Company with the Commission pursuant to Section 13(a), 13(c), 14 or 15(d)
of the Exchange Act subsequent to the date of the Prospectus and for so
long as the delivery of a prospectus is required in connection with the
offering or sale of the Shares; to advise you, promptly after it receives
notice thereof, of the issuance by the Commission of any stop order or of
any order preventing or suspending the use of any Preliminary Prospectus or
prospectus, of the suspension of the qualification of the Shares for
offering or sale in any jurisdiction, of the initiation or threatening of
any proceeding for any such purpose, or of any request by the Commission
for the amending or supplementing of the Registration Statement or
Prospectus or for additional information; and, in the event of the issuance
of any stop order or of any order preventing or suspending the use of any
Preliminary Prospectus or prospectus or suspending any such qualification,
promptly to use its best efforts to obtain the withdrawal of such order;
(b) Promptly from time to time to take such action as you may
reasonably request to qualify the Shares for offering and sale under the
securities laws of such jurisdictions as you may request and to comply with
such laws so as to permit the continuance of sales and dealings therein in
such jurisdictions for as long as may be necessary to complete the
distribution of the Shares, provided that in connection therewith the
Company shall not be required to qualify as a foreign corporation or to
file a general
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consent to service of process in any jurisdiction;
(c) Prior to 10:00 a.m., New York City time, on the New York
Business Day next succeeding the date of this Agreement and from time to
time, to furnish the Underwriters with copies of the Prospectus in New York
City in such quantities as you may reasonably request, and, if the delivery
of a prospectus is required at any time prior to the expiration of nine
months after the time of issue of the Prospectus in connection with the
offering or sale of the Shares and if at such time any events shall have
occurred as a result of which the Prospectus as then amended or
supplemented would include an untrue statement of a material fact or omit
to state any material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made when
such Prospectus is delivered, not misleading, or, if for any other reason
it shall be necessary during such period to amend or supplement the
Prospectus or to file under the Exchange Act any document incorporated by
reference in the Prospectus in order to comply with the Act or the Exchange
Act, to notify you and upon your request to file such document and to
prepare and furnish without charge to each Underwriter and to any dealer in
securities as many copies as you may from time to time reasonably request
of an amended Prospectus or a supplement to the Prospectus which will
correct such statement or omission or effect such compliance, and in case
any Underwriter is required to deliver a prospectus in connection with
sales of any of the Shares at any time nine months or more after the time
of issue of the Prospectus, upon your request but at the expense of such
Underwriter, to prepare and deliver to such Underwriter as many copies as
you may request of an amended or supplemented Prospectus complying with
Section 10(a)(3) of the Act;
(d) To make generally available to its securityholders as soon as
practicable, but in any event not later than eighteen months after the
effective date of the Registration Statement (as defined in Rule 158(c)
under the Act), an earnings statement of the Company and its subsidiaries
(which need not be audited) complying with Section 11(a) of the Act and the
rules and regulations of the Commission thereunder (including, at the
option of the Company, Rule 158);
(e) During the period beginning from the date hereof and continuing
to and including the date 90 days after the date of the Prospectus, not to
offer, sell, contract to sell or otherwise dispose of, except as provided
hereunder, any securities of the Company that are substantially similar to
the Shares, including but not limited to any securities that are
convertible into or exchangeable for, or that represent the right to
receive, Stock or any such substantially similar securities (other than
pursuant to employee stock option plans existing on, or upon the conversion
or exchange of convertible or exchangeable securities outstanding as of,
the date of this Agreement), without your prior written consent;
(f) To furnish to its stockholders as soon as practicable after the
end of each fiscal year an annual report (including a balance sheet and
statements of income, stockholders' equity and cash flows of the Company
and its consolidated subsidiaries certified by independent public
accountants) and, as soon as practicable after the end of each of the first
three quarters of each fiscal year (beginning with the fiscal quarter
ending after the effective date of the Registration Statement), to make
available to its stockholders consolidated summary financial information of
the Company and its subsidiaries for such quarter in reasonable detail;
(g) During a period of five years from the effective date of the
Registration Statement, to furnish to you copies of all reports or other
communications (financial or other) furnished to stockholders, and to
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deliver to you (i) as soon as they are available, copies of any reports and
financial statements furnished to or filed with the Commission or any
national securities exchange on which any class of securities of the
Company is listed; and (ii) such additional nonconfidential information
concerning the business and financial condition of the Company as you may
from time to time reasonably request (such financial statements to be on a
consolidated basis to the extent the accounts of the Company and its
subsidiaries are consolidated in reports furnished to its stockholders
generally or to the Commission);
(h) To use the net proceeds received by it from the sale of the
Shares pursuant to this Agreement in the manner specified in the Prospectus
under the caption "Use of Proceeds";
(i) To use its best efforts to list for quotation the Shares on the
Nasdaq National Market ("Nasdaq"); and
(j) If the Company elects to rely upon Rule 462(b), the Company
shall file a Rule 462(b) Registration Statement with the Commission in
compliance with Rule 462(b) by 10:00 p.m., Washington, D.C. time, on the
date of this Agreement, and the Company shall at the time of filing either
pay to the Commission the filing fee for the Rule 462(b) Registration
Statement or give irrevocable instructions for the payment of such fee
pursuant to Rule 111(b) under the Act.
6. The Company covenants and agrees with the several Underwriters that
(a) the Company will pay or cause to be paid the following: (i) the fees,
disbursements and expenses of the Company's counsel and accountants, and the
fees, disbursements and expenses of counsel for the Selling Stockholders, in
connection with the registration of the Shares under the Act, the fees and
expenses of the Attorneys-in-Fact and the Custodian for each of the Selling
Stockholders, and all other expenses in connection with the preparation,
printing and filing of the Registration Statement, any Preliminary Prospectus
and the Prospectus and amendments and supplements thereto and the mailing and
delivering of copies thereof to the Underwriters and dealers; (ii) the cost of
printing or producing any Agreement among Underwriters, this Agreement, the Blue
Sky Memorandum, closing documents (including any compilations thereof) and any
other documents in connection with the offering, purchase, sale and delivery of
the Shares; (iii) all expenses in connection with the qualification of the
Shares for offering and sale under state securities laws as provided in Section
5(b) hereof, including the fees and disbursements of counsel for the
Underwriters in connection with such qualification and in connection with the
Blue Sky survey (iv) all fees and expenses in connection with listing the Shares
on Nasdaq; and (iv) the filing fees incident to, and the fees and disbursements
of counsel for the Underwriters in connection with, securing any required review
by the National Association of Securities Dealers, Inc. of the terms of the sale
of the Shares; and (b) the Company will pay or cause to be paid: (i) the cost of
preparing stock certificates; (ii) the cost and charges of any transfer agent or
registrar and (iii) all other costs and expenses incident to the performance of
its obligations hereunder which are not otherwise specifically provided for in
this Section. Each Selling Stockholder covenants and agrees with the Company,
one another and the Underwriters that such Selling Stockholder will pay or cause
to be paid all costs and expenses incident to the performance of such Selling
Stockholder's obligations hereunder which are not otherwise specifically
provided for in this Section, including all taxes incident to the sale and
delivery of the Shares to be sold by such Selling Stockholder to the
Underwriters hereunder. In connection with clause (c) of the preceding
sentence, Goldman, Sachs & Co. agrees to pay New York State stock transfer tax,
and the Selling Stockholder agrees to reimburse Goldman, Sachs & Co. for
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associated carrying costs if such tax payment is not rebated on the day of
payment and for any portion of such tax payment not rebated. It is understood,
however, that the Company shall bear, and the Selling Stockholders shall not be
required to pay or to reimburse the Company for, the cost of any other matters
not directly relating to the sale and purchase of the Shares pursuant to this
Agreement, and that, except as provided in this Section, and Sections 8 and 11
hereof, the Underwriters will pay all of their own costs and expenses, including
the fees of their counsel, stock transfer taxes on resale of any of the Shares
by them, and any advertising expenses connected with any offers they may make.
7. The obligations of the Underwriters hereunder, as to the Shares to be
delivered at each Time of Delivery, shall be subject, in their discretion, to
the condition that all representations and warranties and other statements of
the Company and of the Selling Stockholders herein are, at and as of such Time
of Delivery, true and correct, the condition that the Company and the Selling
Stockholders shall have performed all of its and their obligations hereunder
theretofore to be performed, and the following additional conditions:
(a) The Prospectus shall have been filed with the Commission
pursuant to Rule 424(b) within the applicable time period prescribed for
such filing by the rules and regulations under the Act and in accordance
with Section 5(a) hereof; if the Company has elected to rely upon Rule
462(b), the Rule 462(b) Registration Statement shall have become effective
by 10:00 p.m., Washington, D.C. time, on the date of this Agreement; no
stop order suspending the effectiveness of the Registration Statement or
any part thereof shall have been issued and no proceeding for that purpose
shall have been initiated or threatened by the Commission; and all requests
for additional information on the part of the Commission shall have been
complied with to your reasonable satisfaction;
(b) Ropes & Gray, counsel for the Underwriters, shall have
furnished to you such written opinion or opinions, dated as of such Time of
Delivery, with respect to the matters covered in paragraphs (i), (ii),
(vii), (xi), (xiii) and (xiv) of subsection (c) below as well as such other
related matters as you may reasonably request, and such counsel shall have
received such papers and information as they may reasonably request to
enable them to pass upon such matters;
(c) Shipman & Goodwin LLP, counsel for the Company, shall have
furnished to you their written opinion, dated such Time of Delivery, in
form and substance satisfactory to you, to the effect that:
(i) The Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the
Delaware, with the corporate power and authority to own its properties
and conduct its business as described in the Prospectus;
(ii) The Company has an authorized capitalization as set forth
in the Prospectus, and all of the issued shares of capital stock of
the Company (including the Shares being delivered at such Time of
Delivery) have been duly and validly authorized and issued and are
fully paid and non-assessable; and the Shares conform to the
description of the Stock contained in the Prospectus;
(iii) The Company has been duly qualified as a foreign
corporation for the
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transaction of business and is in good standing under the laws of each
other jurisdiction in which it owns or leases properties or conducts
any business so as to require such qualification except where the
failure to be so qualified would not have a Material Adverse Effect
(such counsel being entitled to rely in respect of the opinion in this
clause upon opinions of local counsel and in respect of matters of
fact upon certificates of officers of the Company, provided that such
counsel shall state that they believe that both you and they are
justified in relying upon such opinions and certificates, and if
requested, shall provide you with copies of such opinions and
certificates);
(iv) Each subsidiary of the Company has been duly formed and is
validly existing and in good standing under the laws of its
jurisdiction of organization; and all of the issued shares of capital
stock of each such subsidiary, in the case of corporate subsidiaries,
have been duly and validly authorized and issued, are fully paid and
non-assessable, and all of the issued shares of capital stock in the
case of corporate subsidiaries or other equity interests in the case
of other subsidiaries (except for directors' qualifying shares and
except as otherwise set forth in the Prospectus) are owned directly or
indirectly by the Company, free and clear of all liens, encumbrances,
equities or claims (such counsel being entitled to rely in respect of
the opinion in this clause upon opinions of local counsel and in
respect of matters of fact upon certificates of officers of the
Company or its subsidiaries, provided that such counsel shall state
that they believe that both you and they are justified in relying upon
such opinions and certificates, and if requested, shall provide you
with copies of such opinions and certificates);
(v) The Company and its subsidiaries have good and marketable
title in fee simple to all real property owned by them, in each case
free and clear of all liens, encumbrances and defects except such as
are described in the Prospectus or such as do not materially affect
the value of such property and do not interfere with the use made and
proposed to be made of such property by the Company and its
subsidiaries; and any real property and buildings held under lease by
the Company and its subsidiaries are held by them under valid,
subsisting and enforceable leases with such exceptions as are not
material and do not interfere with the use made and proposed to be
made of such property and buildings by the Company and its
subsidiaries (in giving the opinion in this clause, such counsel may
state that no examination of record titles for the purpose of such
opinion has been made, and that they are relying upon a general review
of the titles of the Company and its subsidiaries, upon opinions of
local counsel and abstracts, reports and policies of title companies
rendered or issued at or subsequent to the time of acquisition of such
property by the Company or its subsidiaries, upon opinions of counsel
to the lessors of such property and, in respect of matters of fact,
upon certificates of officers of the Company or its subsidiaries,
provided that such counsel shall state that they believe that both you
and they are justified in relying upon such opinions, abstracts,
reports, policies and certificates, and if requested, shall provide
you with copies of such opinions and certificates);
(vi) To the best of such counsel's knowledge and other than as
set forth in the Prospectus, there are no legal or governmental
proceedings pending to which the Company or any of its subsidiaries is
a party or of which any property of the Company or any of its
subsidiaries is the subject which, if determined adversely to the
Company or any of its
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subsidiaries, would have a Material Adverse Effect; and, to the best
of such counsel's knowledge, no such proceedings are threatened or
contemplated by governmental authorities or threatened by others;
(vii) This Agreement has been duly authorized, executed and
delivered by the Company;
(viii) The issue and sale of the Shares being delivered at
such Time of Delivery to be sold by the Company and the compliance by
the Company with all of the provisions of this Agreement and the
consummation of the transactions herein contemplated will not conflict
with or result in a breach or violation of any of the terms or
provisions of, or constitute a default under, any indenture, mortgage,
deed of trust, loan agreement or other agreement or instrument known
to such counsel to which the Company or any of its subsidiaries is a
party or by which the Company or any of its subsidiaries is bound or
to which any of the property or assets of the Company or any of its
subsidiaries is subject, nor will such action result in any violation
of the provisions of the Certificate of Incorporation or By-laws of
the Company or any statute or any order, rule or regulation known to
such counsel of any court or governmental agency or body having
jurisdiction over the Company or any of its subsidiaries or any of
their properties;
(ix) No consent, approval, authorization, order, registration
or qualification of or with any such court or governmental agency or
body is required for the issue and sale of the Shares or the
consummation by the Company of the transactions contemplated by this
Agreement, except the registration under the Act of the Shares, and
such consents, approvals, authorizations, registrations or
qualifications as may be required under state securities or Blue Sky
laws and under the rules of the Nasdaq Stock Market and the NASD in
connection with the purchase and distribution of the Shares by the
Underwriters;
(x) All holders of shares of Stock or other securities of the
Company and all holders of options, warrants or other rights to
acquire shares of Stock or other securities of the Company having
rights to the registration of shares of Stock or other securities of
the company because of the filing of the Registration Statement have
waived such rights.
(xi) The statements set forth in the Prospectus under the
caption "Description of Capital Stock", insofar as they purport to
constitute a summary of the terms of the Stock are accurate, complete
and fair;
(xii) The Company is not an "investment company"or an entity
"controlled" by an "investment company" as such terms are defined in
the Investment Company Act;
(xiii) The documents incorporated by reference in the
Prospectus or any further amendment or supplement thereto made by the
Company prior to such Time of Delivery (other than the financial
statements and related schedules therein, as to which such counsel
need express no opinion), when they became effective or were filed
with the Commission, as the case may be, complied as to form in all
material respects with the requirements of the Act or the
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Exchange Act, as applicable and the rules and regulations of the
Commission thereunder; and they have no reason to believe that any of
such documents, when such documents became effective or were so filed,
as the case may be, contained, in the case of a registration statement
which became effective under the Act, an untrue statement of a
material fact, or omitted to state a material fact required to be
stated therein or necessary to make the statements therein not
misleading, or, in the case of other documents which were filed under
the Exchange Act with the Commission, an untrue statement of a
material fact or omitted to state a material fact necessary in order
to make the statements therein, in the light of the circumstances
under which they were made when such documents were so filed, not
misleading; and
(xiv) The Registration Statement and the Prospectus and any
further amendments and supplements thereto made by the Company prior
to such Time of Delivery (other than the financial statements and
related schedules therein, as to which such counsel need express no
opinion) comply as to form in all material respects with the
requirements of the Act and the rules and regulations thereunder;
although they do not assume any responsibility for the accuracy,
completeness or fairness of the statements contained in the
Registration Statement or the Prospectus, except for those referred to
in the opinion in subsection (xi) of this Section 7(c), they have no
reason to believe that, as of its effective date, the Registration
Statement or any further amendment thereto made by the Company prior
to such Time of Delivery (other than the financial statements and
related schedules therein, as to which such counsel need express no
opinion) contained an untrue statement of a material fact or omitted
to state a material fact required to be stated therein or necessary to
make the statements therein not misleading or that, as of its date,
the Prospectus or any further amendment or supplement thereto made by
the Company prior to such Time of Delivery (other than the financial
statements and related schedules therein, as to which such counsel
need express no opinion) contained an untrue statement of a material
fact or omitted to state a material fact necessary to make the
statements therein, in the light of the circumstances under which they
were made, not misleading or that, as of such Time of Delivery, either
the Registration Statement or the Prospectus or any further amendment
or supplement thereto made by the Company prior to such Time of
Delivery (other than the financial statements and related schedules
therein, as to which such counsel need express no opinion) contains an
untrue statement of a material fact or omits to state a material fact
necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading; and they do
not know of any amendment to the Registration Statement required to be
filed or of any contracts or other documents of a character required
to be filed as an exhibit to the Registration Statement or required to
be incorporated by reference into the Prospectus or required to be
described in the Registration Statement or the Prospectus which are
not filed or incorporated by reference or described as required.[
(d) _____________________, intellectual property counsel for the
Company, shall have furnished to you their written opinion, dated as of such
Time of Delivery, in form and substance reasonably satisfactory to you, with
respect to such matters as you may reasonably request;
(e) The respective counsel for each of the Selling Stockholders, as
indicated in Schedule II hereto, each shall have furnished to you their written
opinion with respect to each of the Selling Stockholders for whom they are
acting as counsel, dated such Time of Delivery, in form and substance
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satisfactory to you, to the effect that:
(i) A Power-of-Attorney and a Custody Agreement have been duly
executed and delivered by such Selling Stockholder and constitute valid and
binding agreements of such Selling Stockholder in accordance with their
terms;
(ii) This Agreement has been duly executed and delivered by or on
behalf of such Selling Stockholder; and the sale of the Shares to be sold
by such Selling Stockholder hereunder and the compliance by such Selling
Stockholder with all of the provisions of this Agreement, the Power-of-
Attorney and the Custody Agreement and the consummation of the transactions
herein and therein contemplated will not conflict with or result in a
breach or violation of any terms or provisions of, or constitute a default
under, any statute, indenture, mortgage, deed of trust, loan agreement or
other agreement or instrument known to such counsel to which such Selling
Stockholder is a party or by which such Selling Stockholder is bound or to
which any of the property or assets of such Selling Stockholder is subject,
nor will such action result in any violation of the provisions of the
Certificate of Incorporation or By-laws of such Selling Stockholder if such
Selling Stockholder is a corporation, the Partnership Agreement of such
Selling Stockholder if such Selling Stockholder is a partnership, the trust
documentation of such Selling Stockholder if such Selling Stockholder is a
trust or any order, rule or regulation known to such counsel of any court
or governmental agency or body having jurisdiction over such Selling
Stockholder or the property of such Selling Stockholder;
(iii) No consent, approval, authorization or order of any court or
governmental agency or body is required for the consummation of the
transactions contemplated by this Agreement in connection with the Shares
to be sold by such Selling Stockholder hereunder, except [name any such
consent, approval, authorization or order] which have been duly obtained
and are in full force and effect, such as have been obtained under the
Act and such as may be required under state securities or Blue Sky laws or
under the rules of the Nasdaq Stock Market and the NASD in connection with
the purchase and distribution of such Shares by the Underwriters;
(iv) Immediately prior to such Time of Delivery, such Selling
Stockholder had good and valid title to the Shares to be sold at such Time
of Delivery by such Selling Stockholder under this Agreement, free and
clear of all liens, encumbrances, equities or claims, and full right, power
and authority to sell, assign, transfer and deliver the Shares to be sold
by such Selling Stockholder hereunder; and
(v) Good and valid title to such Shares, free and clear of all liens,
encumbrances, equities or claims, has been transferred to each of the
several Underwriters who have purchased such Shares in good faith and
without notice of any such lien, encumbrance, equity or claim or any other
adverse claim within the meaning of the Uniform Commercial Code.
In rendering the opinion in paragraph (iv), such counsel may rely upon a
certificate of such Selling Stockholder in respect of matters of fact as to
ownership of, and liens, encumbrances, equities or claims on, the Shares sold by
such Selling Stockholder, provided that such counsel shall state that they
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believe that both you and they are justified in relying upon such certificate
and if requested, shall provide you with copies of such certificate;
(f) On the date of the Prospectus at a time prior to the execution of this
Agreement, at 9:30 a.m., New York City time, on the effective date of any post-
effective amendment to the Registration Statement filed subsequent to the date
of this Agreement and also at each Time of Delivery, Ernst & Young LLP shall
have furnished to you a letter or letters, dated the respective dates of
delivery thereof, in form and substance satisfactory to you, to the effect set
forth in Annex I hereto (the executed copy of the letter delivered prior to the
execution of this Agreement is attached as Annex I(a) hereto and a draft of the
form of letter to be delivered on the effective date of any post-effective
amendment to the Registration Statement and as of each Time of Delivery is
attached as Annex I(b) hereto);
(g) (i) Neither the Company nor any of its subsidiaries shall have
sustained since the date of the latest audited financial statements included or
incorporated by reference in the Prospectus any loss or interference with its
business from fire, explosion, flood or other calamity, whether or not covered
by insurance, or from any labor dispute or court or governmental action, order
or decree, otherwise than as set forth or contemplated in the Prospectus, and
(ii) since the respective dates as of which information is given in the
Prospectus there shall not have been any change in the capital stock (other than
as a result of the grant or exercise of stock options pursuant to the Company's
stock option plans and purchases of stock pursuant to the Company's stock
purchase plan, in each case as in effect on December 31, 1999), or increase in
long-term debt of the Company or any of its subsidiaries or any change, or any
development involving a prospective change, in or affecting the general affairs,
management, financial position, stockholders' equity or results of operations of
the Company and its subsidiaries, otherwise than as set forth or contemplated in
the Prospectus, the effect of which, in any such case described in clause (i) or
(ii), is in the judgment of the Representatives so material and adverse as to
make it impracticable or inadvisable to proceed with the public offering or the
delivery of the Shares being delivered at such Time of Delivery on the terms and
in the manner contemplated in the Prospectus;
(h) On or after the date hereof (i) no downgrading shall have occurred
in the rating accorded the Company's debt securities by any "nationally
recognized statistical rating organization", as that term is defined by the
Commission for purposes of Rule 436(g)(2) under the Act, and (ii) no such
organization shall have publicly announced that it has under surveillance or
review, with possible negative implications, its rating of any of the Company's
debt securities;
(i) On or after the date hereof there shall not have occurred any of the
following: (i) a suspension or material limitation in trading in securities
generally on the New York Stock Exchange or on Nasdaq; (ii) a suspension or
material limitation in trading in the Company's securities on Nasdaq; (iii) a
general moratorium on commercial banking activities declared by either Federal
or New York or Connecticut State authorities; or (iv) the outbreak or
escalation of hostilities involving the United States or the declaration by the
United States of a national emergency or war, if the effect of any such event
specified in this clause (iv) in the judgment of the Representatives makes it
impracticable or inadvisable to proceed with the public offering or the delivery
of the Shares being delivered at such Time of Delivery on the terms and in the
manner contemplated in the Prospectus;
(j) The Shares at such Time of Delivery shall have been duly listed for
quotation on Nasdaq;
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(k) The Company has obtained and delivered to the Underwriters executed
copies of an agreement from each Selling Stockholder and each executive officer
listed on Schedule III and each director of the Company, substantially to the
effect set forth in Subsection 1(b)(iv) hereof in form and substance
satisfactory to you;
(l) The Company shall have complied with the provisions of Section 5(c)
hereof with respect to the furnishing of prospectuses on the New York Business
Day next succeeding the date of this Agreement; and
(m) The Company and the Selling Stockholders shall have furnished or
caused to be furnished to you at such Time of Delivery certificates of officers
of the Company and of the Selling Stockholders, respectively, satisfactory to
you as to the accuracy of the representations and warranties of the Company and
the Selling Stockholders, respectively, herein at and as of such Time of
Delivery, as to the performance by the Company and the Selling Stockholders of
all of their respective obligations hereunder to be performed at or prior to
such Time of Delivery, and as to such other matters as you may reasonably
request, and the Company shall have furnished or caused to be furnished
certificates as to the matters set forth in subsections (a) and (f) of this
Section.
8. (a) The Company and each of the Selling Stockholders, jointly and
severally, will indemnify and hold harmless each Underwriter against any losses,
claims, damages or liabilities, joint or several, to which such Underwriter may
become subject, under the Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are based
upon an untrue statement or alleged untrue statement of a material fact
contained in any Preliminary Prospectus, the Registration Statement or the
Prospectus, or any amendment or supplement thereto, or arise out of or are based
upon the omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not misleading,
and will reimburse each Underwriter for any legal or other expenses reasonably
incurred by such Underwriter in connection with investigating or defending any
such action or claim as such expenses are incurred; provided, however, that the
Company and the Selling Stockholders shall not be liable in any such case to the
extent that any such loss, claim, damage or liability arises out of or is based
upon an untrue statement or alleged untrue statement or omission or alleged
omission made in any Preliminary Prospectus, the Registration Statement or the
Prospectus or any such amendment or supplement in reliance upon and in
conformity with written information furnished to the Company by any Underwriter
through Goldman, Sachs & Co. expressly for use therein; provided, further, that
the liability of each Selling Stockholder pursuant to this subsection (a) shall
be limited to an aggregate amount equal to the lesser of (i) the gross proceeds
received by such Selling Stockholder for the Shares (including Optional Shares)
sold by such Selling Stockholder to the Underwriters or (B) that percentage of
the total amount of such losses, claims, damages or liabilities that equals the
percentage obtained by dividing the total number of Shares (including Optional
Shares) sold by such Selling Stockholder hereunder by the total number of Shares
(including Optional Shares) sold hereunder.
-20-
<PAGE>
(b) Each Underwriter will indemnify and hold harmless the Company and each
Selling Stockholder against any losses, claims, damages or liabilities to which
the Company or such Selling Stockholder may become subject, under the Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon an untrue statement or alleged
untrue statement of a material fact contained in any Preliminary Prospectus, the
Registration Statement or the Prospectus, or any amendment or supplement
thereto, or arise out of or are based upon the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, in each case to the extent, but only to
the extent, that such untrue statement or alleged untrue statement or omission
or alleged omission was made in any Preliminary Prospectus, the Registration
Statement or the Prospectus or any such amendment or supplement in reliance upon
and in conformity with written information furnished to the Company by such
Underwriter through Goldman, Sachs & Co. expressly for use therein; and will
reimburse the Company and each Selling Stockholder for any legal or other
expenses reasonably incurred by the Company or such Selling Stockholder in
connection with investigating or defending any such action or claim as such
expenses are incurred.
(c) Promptly after receipt by an indemnified party under subsection (a)
or (b) above of notice of the commencement of any action, such indemnified party
shall, if a claim in respect thereof is to be made against the indemnifying
party under such subsection, notify the indemnifying party in writing of the
commencement thereof; but the omission so to notify the indemnifying party shall
not relieve it from any liability which it may have to any indemnified party
otherwise than under such subsection. In case any such action shall be brought
against any indemnified party and it shall notify the indemnifying party of the
commencement thereof, the indemnifying party shall be entitled to participate
therein and, to the extent that it shall wish, jointly with any other
indemnifying party similarly notified, to assume the defense thereof, with
counsel satisfactory to such indemnified party (who shall not, except with the
consent of the indemnified party, be counsel to the indemnifying party), and,
after notice from the indemnifying party to such indemnified party of its
election so to assume the defense thereof, the indemnifying party shall not be
liable to such indemnified party under such subsection for any legal
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<PAGE>
expenses of other counsel or any other expenses, in each case subsequently
incurred by such indemnified party, in connection with the defense thereof
other than reasonable costs of investigation. No indemnifying party shall,
without the written consent of the indemnified party, effect the settlement
or compromise of, or consent to the entry of any judgment with respect to,
any pending or threatened action or claim in respect of which
indemnification or contribution may be sought hereunder (whether or not the
indemnified party is an actual or potential party to such action or claim)
unless such settlement, compromise or judgment (i) includes an
unconditional release of the indemnified party from all liability arising
out of such action or claim and (ii) does not include a statement as to or
an admission of fault, culpability or a failure to act, by or on behalf of
any indemnified party.
(d) If the indemnification provided for in this Section 8 is
unavailable to or insufficient to hold harmless an indemnified party under
subsection (a) or (b) above in respect of any losses, claims, damages
or liabilities (or actions in respect thereof) referred to therein, then
each indemnifying party shall contribute to the amount paid or payable by
such indemnified party as a result of such losses, claims, damages or
liabilities (or actions in respect thereof) in such proportion as is
appropriate to reflect the relative benefits received by the Company and
the Selling Stockholders on the one hand and the Underwriters on the other
from the offering of the Shares. If, however, the allocation provided by
the immediately preceding sentence is not permitted by applicable law or if
the indemnified party failed to give the notice required under subsection
(c) above, then each indemnifying party shall contribute to such amount
paid or payable by such indemnified party in such proportion as is
appropriate to reflect not only such relative benefits but also the
relative fault of the Company and the Selling Stockholders on the one hand
and the Underwriters on the other in connection with the statements or
omissions which resulted in such losses, claims, damages or liabilities (or
actions in respect thereof), as well as any other relevant equitable
considerations. The relative benefits received by the Company and the
Selling Stockholders on the one hand and the Underwriters on the other
shall be deemed to be in the same proportion as the total net proceeds from
the offering (before deducting expenses) received by the Company and the
Selling Stockholders bear to the total underwriting discounts and
commissions received by the Underwriters, in each case as set forth in the
table on the cover page of the Prospectus. The relative fault shall be
determined by reference to, among other things, whether the untrue or
alleged untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to information supplied by the
Company or the Selling Stockholders on the one hand or the Underwriters on
the other and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or
omission. The Company, each of the Selling Stockholders and the
Underwriters agree that it would not be just and equitable if contributions
pursuant to this subsection (d) were determined by pro rata allocation
(even if the Underwriters were treated as one entity for such purpose) or
by any other method of allocation which does not take account of the
equitable considerations referred to above in this subsection (d). The
amount paid or payable by an indemnified party as a result of the losses,
claims, damages or liabilities (or actions in respect thereof) referred to
above in this subsection (d) shall be deemed to include any legal or other
expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim. Notwithstanding the
provisions of this subsection (d), no Underwriter shall be required to
contribute any amount in excess of the amount by which the total price at
which the Shares underwritten by it and distributed to the public were
offered to the public exceeds the amount of any damages which such
Underwriter has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission. No person guilty
of fraudulent misrepresentation (within the meaning of
-22-
<PAGE>
Section 11(f) of the Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation. The Underwriters'
obligations in this subsection (d) to contribute are several in proportion
to their respective underwriting obligations and not joint.
(e) The obligations of the Company and the Selling Stockholders
under this Section 8 shall be in addition to any liability which the
Company and the respective Selling Stockholders may otherwise have and
shall extend, upon the same terms and conditions, to each person, if any,
who controls any Underwriter within the meaning of the Act; and the
obligations of the Underwriters under this Section 8 shall be in addition
to any liability which the respective Underwriters may otherwise have and
shall extend, upon the same terms and conditions, to each officer and
director of the Company and to each person, if any, who controls the
Company or any Selling Stockholder within the meaning of the Act.
9. (a) If any Underwriter shall default in its obligation to
purchase the Shares which it has agreed to purchase hereunder at a Time of
Delivery, you mayin your discretion arrange for you or another party or
other parties to purchase such Shares on the terms contained herein. If
within thirty-six hours after such default by any Underwriter you do not
arrange for the purchase of such Shares, then the Company and the Selling
Stockholders shall be entitled to a further period of thirty-six hours
within which to procure another party or other parties satisfactory to you
to purchase such Shares on such terms. In the event that, within the
respective prescribed periods, you notify the Company and the Selling
Stockholders that you have so arranged for the purchase of such Shares, or
the Company and the Selling Stockholders notify you that they have so
arranged for the purchase of such Shares, you or the Company and the
Selling Stockholders shall have the right to postpone such Time of Delivery
for a period of not more than seven days, in order to effect whatever
changes may thereby be made necessary in the Registration Statement or the
Prospectus, or in any other documents or arrangements, and the Company
agrees to file promptly any amendments to the Registration Statement or the
Prospectus which in your opinion may thereby be made necessary. The term
"Underwriter" as used in this Agreement shall include any person
substituted under this Section with like effect as if such person had
originally been a party to this Agreement with respect to such Shares.
(b) If, after giving effect to any arrangements for the
purchase of the Shares of a defaulting Underwriter or Underwriters by you
and the Company and the Selling Stockholders as provided in subsection (a)
above, the aggregate number of such Shares which remains unpurchased does
not exceed one-eleventh of the aggregate number of all the Shares to be
purchased at such Time of Delivery, then the Company and the Selling
Stockholders shall have the right to require each non-defaulting
Underwriter to purchase the number of Shares which such Underwriter agreed
to purchase hereunder at such Time of Delivery and, in addition, to require
each non-defaulting Underwriter to purchase its pro rata share (based on
the number of Shares which such Underwriter agreed to purchase hereunder)
of the Shares of such defaulting Underwriter or Underwriters for which such
arrangements have not been made; but nothing herein shall relieve a
defaulting Underwriter from liability for its default.
(c) If, after giving effect to any arrangements for the
purchase of the Shares of a defaulting Underwriter or Underwriters by you
and the Company and the Selling Stockholders as provided in subsection (a)
above, the aggregate number of such Shares which remains unpurchased
exceeds one-eleventh of the aggregate number of all of the Shares to be
purchased at such Time of Delivery, or if the Company and the Selling
Stockholders shall not exercise the right described in subsection (b) above
-23-
<PAGE>
to require non-defaulting Underwriters to purchase Shares of a defaulting
Underwriter or Underwriters, then this Agreement (or, with respect to the
Second Time of Delivery, the obligations of the Underwriters to purchase
and of the Company and the Selling Stockholders to sell the Optional
Shares) shall thereupon terminate, without liability on the part of any
non-defaulting Underwriter, the Company or the Selling Stockholders, except
for the expenses to be borne by the Company and the Selling Stockholders
and the Underwriters as provided in Section 6 hereof and the indemnity and
contribution agreements in Section 8 hereof; but nothing herein shall
relieve a defaulting Underwriter from liability for its default.
10. The respective indemnities, agreements, representations, warranties
and other statements of the Company, the Selling Stockholders and the several
Underwriters, as set forth in this Agreement or made by or on behalf of them,
respectively, pursuant to this Agreement, shall remain in full force and effect,
regardless of any investigation (or any statement as to the results thereof)
made by or on behalf of any Underwriter or any controlling person of any
Underwriter, or the Company, or any of the Selling Stockholders, or any officer
or director or controlling person of the Company, or any controlling person of
any Selling Stockholder, and shall survive delivery of and payment for the
Shares.
11. If this Agreement shall be terminated pursuant to Section 9 hereof,
neither the Company nor the Selling Stockholders shall then be under any
liability to any Underwriter except as provided in Sections 6 and 8 hereof; but,
if for any other reason any Shares are not delivered by or on behalf of the
Company and the Selling Stockholders as provided herein, the Company and each of
the Selling Stockholders pro rata (based on the number of Shares to be sold by
the Company and such Selling Stockholder hereunder) will reimburse the
Underwriters through you for all out-of-pocket expenses approved in writing by
you, including fees and disbursements of counsel, reasonably incurred by the
Underwriters in making preparations for the purchase, sale and delivery of the
Shares not so delivered, but the Company and the Selling Stockholders shall then
be under no further liability to any Underwriter in respect of the Shares not so
delivered except as provided in Sections 6 and 8 hereof.
12. In all dealings hereunder, you shall act on behalf of each of the
Underwriters, and the parties hereto shall be entitled to act and rely upon any
statement, request, notice or agreement on behalf of any Underwriter made or
given by you jointly or by Goldman, Sachs & Co. on behalf of you as the
representatives; and in all dealings with any Selling Stockholder hereunder, you
and the Company shall be entitled to act and rely upon any statement, request,
notice or agreement on behalf of such Selling Stockholder made or given by any
or all of the Attorneys-in-Fact for such Selling Stockholder.
All statements, requests, notices and agreements hereunder shall be in
writing, and if to the Underwriters shall be delivered or sent by mail, telex or
facsimile transmission to you as the representatives in care of Goldman, Sachs &
Co., 32 Old Slip, 21st Floor, New York, New York 10005, Attention: Registration
Department; if to any Selling Stockholder shall be delivered or sent by mail,
telex or facsimile transmission to counsel for such Selling Stockholder at its
address set forth in Schedule II hereto; and if to the Company shall be
delivered or sent by mail, telex or facsimile transmission to the address of the
Company set forth in the Registration Statement, Attention: Chief Financial
Officer; provided, however, that any notice to an Underwriter pursuant to
Section 8(c) hereof shall be delivered or sent by mail, telex or facsimile
transmission to such Underwriter at its address set forth in its Underwriters'
Questionnaire or telex constituting such Questionnaire, which address will be
supplied to
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<PAGE>
the Company or the Selling Stockholders by you on request. Any such
statements, requests, notices or agreements shall take effect upon receipt
thereof.
13. This Agreement shall be binding upon, and inure solely to the
benefit of, the Underwriters, the Company and the Selling Stockholders and, to
the extent provided in Sections 8 and 10 hereof, the officers and directors of
the Company and each person who controls the Company, any Selling Stockholder or
any Underwriter, and their respective heirs, executors, administrators,
successors and assigns, and no other person shall acquire or have any right
under or by virtue of this Agreement. No purchaser of any of the Shares from any
Underwriter shall be deemed a successor or assign by reason merely of such
purchase.
14. Time shall be of the essence of this Agreement. As used herein, the
term "business day" shall mean any day when the Commission's office in
Washington, D.C. is open for business.
15. This Agreement shall be governed by and construed in accordance with
the laws of the State of New York.
16. This Agreement may be executed by any one or more of the parties
hereto in any number of counterparts, each of which shall be deemed to be an
original, but all such counterparts shall together constitute one and the same
instrument.
If the foregoing is in accordance with your understanding, please sign and
return to us one for the Company and each of the Representatives plus one for
each counsel and the Custodian, if any, counterparts hereof, and upon the
acceptance hereof by you, on behalf of each of the Underwriters, this letter and
such acceptance hereof shall constitute a binding agreement among each of the
Underwriters, the Company and each of the Selling Stockholders. It is
understood that your acceptance of this letter on behalf of each of the
Underwriters is pursuant to the authority set forth in a form of Agreement among
Underwriters, the form of which shall be submitted to the Company and the
Selling Stockholders for examination, upon request, but without warranty on your
part as to the authority of the signers thereof.
-25-
<PAGE>
Any person executing and delivering this Agreement as Attorney-in-Fact for a
Selling Stockholder represents by so doing that he has been duly appointed as
Attorney-in-Fact by such Selling Stockholder pursuant to a validly existing and
binding Power-of-Attorney which authorizes such Attorney-in-Fact to take such
action.
Very truly yours,
ATMI, INC.
By:________________________
Name:
Title:
Stephen H. Siegele
The Lawrence Family Trust, 1995
RL Partners LLC
By:________________________
Name:
Title:
As Attorney-in-Fact acting on behalf of
each of the Selling Stockholders named
in Schedule II to this Agreement.
Accepted as of the date hereof
Goldman, Sachs & Co.
Deutsche Banc Alex. Brown
Bank of America Securities LLC
Prudential Securities Incorporated
By:
---------------------------------
(Goldman, Sachs & Co.)
On behalf of each of the Underwriters
-26-
<PAGE>
SCHEDULE I
<TABLE>
<CAPTION>
Number of Optional
Shares to be
Total Number of Purchased if
Firm Shares Maximum Option
Underwriter to be Purchased Exercised
- ----------- ----------------- --------------------
<S> <C> <C>
Goldman, Sachs & Co.
Deutsche Banc Alex. Brown
Banc of America Securities LLC
Prudential Securities Incorporated
Total ================== ====================
</TABLE>
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<PAGE>
SCHEDULE II
<TABLE>
<CAPTION>
Number of Optional
Shares to be
Total Number of Sold if
Firm Shares Maximum Option
to be Sold Exercised
--------------- ------------------
<S> <C> <C>
The Company.
The Selling Stockholder(s):
Stephen H. Siegele(a).
The Lawrence Family Trust, 1995(b)
RL Partners LLC (c)
--------------- ------------------
Total
=============== ==================
</TABLE>
(a) This Selling Stockholder is represented by [Name and Address of Counsel]
and has appointed Eugene G. Banucci and Daniel P. Sharkey, and each of
them, as the Attorneys-in-Fact for such Selling Stockholder.
(b) This Selling Stockholder is represented by [Name and Address of Counsel]
and has appointed Eugene G. Banucci and Daniel P. Sharkey, and each of
them, as the Attorneys-in-Fact for such Selling Stockholder.
(c) This Selling Stockholder is represented by [Name and Address of Counsel]
and has appointed Eugene G. Banucci and Daniel P. Sharkey, and each of
them, as the Attorneys-in-Fact for such Selling Stockholder.
-28-
<PAGE>
SCHEDULE III
Executive Officers
- ------------------
Eugene G. Banucci
Peter S. Kirlin
Douglas S. Neugold
Daniel P. Sharkey
-29-
<PAGE>
Exhibit 5.1
Shipman & Goodwin LLP One American Row
Counselors at Law Hartford, CT 06103
TEL: (860) 251-5000
March 8, 2000
ATMI, Inc.
7 Commerce Drive
Danbury, Connecticut 06810
Re: Registration Statement on Form S-3
----------------------------------
Ladies and Gentlemen:
In connection with registration of 3,565,000 shares of the Common
Stock, par value $.01 per share (the "Common Stock"), of ATMI, Inc., a Delaware
corporation (the "Company"), of which the Company proposes to issue up to
1,725,000 shares of its authorized but unissued Common Stock (the "Company
Shares") and certain stockholders propose to sell up to 1,840,000 outstanding
shares of Common Stock (the "Stockholder Shares"), pursuant to a public
offering, we have examined, as counsel to the Company, the Registration
Statement on Form S-3 (and the prospectus included therein) filed under the
Securities Act of 1993, as amended (the "Securities Act"), and such other
documents as we have deemed necessary or appropriate in order to express the
opinions set forth below.
In connection with our opinions hereinafter given, we have examined and
relied upon originals, or copies, certified or otherwise, identified to our
satisfaction, of such agreements, documents, certificates and other statements
of government officials, corporate officers and representatives and other
documents as we have deemed relevant and necessary as a basis for such opinions.
In such examination, we have assumed the genuineness of all signatures and the
authenticity of all documents submitted to us as originals and the conformity
with the original documents of documents submitted to us as copies.
Based upon the foregoing, we are of the opinion that (a) when (i) the
Registration Statement shall have become effective under the Securities Act, and
(ii) the Company Shares shall have been issued and delivered against payment
therefor as contemplated in the Registration Statement, the Company Shares will
be legally and validly issued, fully paid and non-assessable and (b) the
Stockholder Shares have been legally and validly issued and are fully paid and
non-assessable.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the use of our name under the heading "Legal
Matters" in the Prospectus included in the Registration Statement. In giving
this consent, we do not thereby admit that we come within the category of
persons whose consent is required under Section 7 of the Securities Act or the
rules and regulations of the Securities and Exchange Commission.
Very truly yours,
/s/ SHIPMAN & GOODWIN LLP
<PAGE>
Exhibit 23.2
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 7, 2000 in the Registration Statement (Form
S-3) and related Prospectus of ATMI, Inc. for the registration of 3,565,000
shares of its common stock.
We also consent to the incorporation by reference therein of our report dated
February 7, 2000, with respect to the consolidated financial statements and
schedule of ATMI included in its Annual Report (Form 10-K) for the year ended
December 31, 1999, filed with the Securities and Exchange Commission.
/s/ Ernst & Young LLP
Stamford, Connecticut
March 6, 2000
<PAGE>
Exhibit 23.3
INDEPENDENT AUDITORS' CONSENT
We consent to the use and incorporation by reference in this Registration
Statement of ATMI, Inc. on Form S-3 of our report dated May 1, 1998 relating to
the consolidated financial statements of NOW Technologies, Inc. and Subsidiaries
for the year ended March 31, 1998 appearing in ATMI, Inc.'s Annual Report on
Form 10-K for the year ended December 31, 1999. We also consent to the reference
to us under the heading "Experts" in such Registration Statement.
/s/ Deloitte & Touche LLP
Minneapolis, Minnesota
March 6, 2000
<PAGE>
Exhibit 23.4
Consent of Independent Accountants
As independent public accountants, we hereby consent to the use and
incorporation by reference in this registration statement of our report dated
May 28, 1999 included in ATMI, Inc.'s Form 10-K for the year ended December 31,
1999 and all references to our Firm included in this registration statement. We
also consent to the application of our reports to the schedule included in that
10-K labeled "Valuation and Qualifying Accounts" as of the date and period
covered by our report.
/s/ Arthur Andersen LLP
Chicago, Illinois
March 6, 2000
<PAGE>
Exhibit 23.5
CONSENT OF INDEPENDENT AUDITORS
As independent public accountants, we hereby consent to the use and
incorporation by reference in this registration statement of our reports dated
January 22, 1999 included in ATMI, Inc.'s Form 10-K for the year ended December
31, 1999 and all references to our Firm included in this registration statement.
We also consent to the application of our reports to the schedule labeled
"Valuation and Qualifying Accounts" as of the dates and period covered by our
reports.
Rath, Anders, Dr. Wanner & Partner
Munich, February 25, 2000
/s/ Kabisch
Dipl. -Kfm. Kabisch
Vereidigter Buchprufer
/s/ Metzler
Dipl. -Kfm. Metzler
Wirtschaftsprufer
