<PAGE>
As filed with the Securities and Exchange Commission on May 5, 2000
Registration No. 333-33668
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- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------
AMENDMENT NO. 1
TO
FORM S-1
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
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ENTEGRIS, INC.
(Exact name of registrant as specified in its charter)
--------------
Minnesota 3089 41-1941551
(State or other (Primary Standard (I.R.S. Employer
jurisdiction of Industrial Identification No.)
incorporation or Classification Code
organization) Number)
--------------
3500 Lyman Boulevard Stan Geyer
Chaska, Minnesota 55318 Chief Executive Officer
(952) 556-3131 Entegris, Inc.
(Address, including zip 3500 Lyman Boulevard
code, and telephone Chaska, Minnesota 55318
number, including area code, (952) 556-3131
of registrant's (Name, address, including zip
principal executive offices) code, and telephone
number, including area code, of
agent for service)
--------------
Copies to:
John T. Kramer, Esq. Christopher D. Lueking, Esq.
Dorsey & Whitney LLP Latham & Watkins
Pillsbury Center South 233 South Wacker Drive
220 South Sixth Street Suite 5800
Minneapolis, Minnesota 55402-1498 Chicago, Illinois 60606
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Approximate date of proposed sale to the public:
As soon as practicable after the Registration Statement becomes effective.
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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, as amended (the "Securities Act"), 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 this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the Prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
CALCULATION OF REGISTRATION FEE
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<TABLE>
<CAPTION>
Title of Each Class of Proposed Maximum Amount of
Securities to be Registered Aggregate Offering Price Registration Fee
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<S> <C> <C>
Common Stock, $.01 par value.............. $239,200,000 (1)
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</TABLE>
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(1) The registration fee, calculated in accordance with Rule 457(o) under the
Securities Act of 1933 based on the proposed maximum aggregate offering
price of $239,200,000, has been previously paid.
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 that specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933, as amended, or until the Registration Statement
shall become effective on such date as the Commission, acting pursuant to said
Section 8(a), may determine.
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<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+The information in this prospectus is not complete and may be changed. We may +
+not sell these securities until the registration statement filed with the +
+Securities and Exchange Commission is effective. This prospectus is not an +
+offer to sell these securities and we are not soliciting offers to buy these +
+securities in any state where the offer or sale is not permitted. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED MAY 5, 2000
13,000,000 Shares
[Entegris Logo]
Common Shares
--------------
Entegris, Inc. is offering 8,600,000 common shares, and the selling
shareholders are offering 4,400,000 common shares in a firmly underwritten
offering. Entegris will not receive any of the proceeds from the sale of shares
by the selling shareholders. This is Entegris' initial public offering, and no
public market currently exists for Entegris' common shares. Entegris
anticipates that the initial public offering price for its shares will be
between $15.00 and $17.00 per share. After the offering, the market price for
Entegris' shares may be outside of this range.
--------------
We have applied to list our common shares on the Nasdaq National Market under
the symbol "ENTG."
--------------
Investing in the common shares involves a high degree of risk. See "Risk
Factors" beginning on page 7.
--------------
<TABLE>
<CAPTION>
Per Share Total
--------- -----
<S> <C> <C>
Offering Price $ $
Discounts and Commissions to Underwriters $ $
Offering Proceeds to Entegris $ $
Offering Proceeds to the Selling Shareholders $ $
</TABLE>
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if
this prospectus is truthful or complete. Any representation to the contrary is
a criminal offense.
Entegris, Inc. has granted the underwriters the right to purchase up to an
additional 1,290,000 common shares from Entegris and a selling shareholder has
granted the underwriters the right to purchase up to 660,000 shares from that
selling shareholder to cover over-allotments. The underwriters can exercise
this right at any time within thirty days after the offering. Banc of America
Securities LLC expects to deliver the common shares to investors on ,
2000.
Banc of America Securities LLC
Donaldson, Lufkin & Jenrette
Salomon Smith Barney
U.S. Bancorp Piper Jaffray
--------------
The date of this Prospectus is , 2000.
<PAGE>
Photo of silicon wafer
Safely storing, handling, processing and transporting critical materials
throughout the microelectronics industry
Enabling THE WORLD'S TECHNOLOGIES THROUGH Materials Integrity
[Logo]
<PAGE>
Our products enable the microelectronics industry by assuring the integrity
of our customers' materials from production to consumption.
MICROELECTRONICS OTHER MARKETS
Bio-pharmaceutical
Custom Medical
Telecommunications
Industrial and Other
Our custom products enable new technologies and applications such as live
bacteria manufacturing techniques and miniaturization for telecommunications
SEMICONDUCTOR MANUFACTURING PROCESS DISK MANUFACTURING
FRONT END BACK END
Wafer Manufacturing Wafer Handling Chemical Delivery Test, Assembly
and Packaging
[Photo of 300mm Shipper] [Photo of 100 to 200mm Shippers with caption stating:
Our wafer manufacturing products preserve the integrity of raw wafers during
shipment from wafer manufacturers to semiconductor manufacturers]
[Photo of 100 to 200mm Carriers] [Photo of 300mm Carriers with caption stating:
Our wafer handling products hold and position wafers during semiconductor
processing, including precise interfaces with automation and manufacturing
equipment]
[Photo of Containers] [Photo of Valve, Tubing, Fitting, Pipe]
[Photo of Transducers] [Photo of Fluid Handling Systems with caption stating:
Our chemical delivery products provide consistent and safe delivery of
sophisticated chemicals from chemical manufacturers to semiconductor
manufacturers' point-of-use]
[Photo of JEDEC/Matrix Trays] [Photo of Bare Die Trays with caption stating:
Our test, assembly and packaging products preserve the integrity of wafers and
die during transportation to back-end operations by avoiding electrostatic
discharge and contamination]
[Photo of Disk Shipper with caption stating: Our disk products prevent
degradation and damage to critical data storage components]
[Logo]
[Photos of various products that utilize integrated circuits and of
microelectronics manufacturing processes]
<PAGE>
You should rely only on the information contained in this prospectus. We
have not authorized anyone to provide you with information that is different.
We are offering to sell, and seeking offers to buy, common shares only in
jurisdictions where offers and sales are permitted. This prospectus may only be
used where it is legal to sell these securities. In this prospectus, references
to "Entegris," "we," "us" and "our" refer to Entegris, Inc., together with our
consolidated subsidiaries.
Our fiscal year is a 52 or 53 week period ending on the last Saturday of
each August. Our last five fiscal years ended on the following dates: August
26, 1995; August 31, 1996; August 30, 1997; August 29, 1998; and August 28,
1999. Fiscal years are identified in this prospectus according to the calendar
year in which they end. For example, the fiscal year ended August 28, 1999 is
referred to as "fiscal 1999." For convenience, the financial information
included in this prospectus has been presented as ending on the last day of the
month.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Prospectus Summary....................................................... 3
Risk Factors............................................................. 7
Special Note Regarding Forward-Looking Statements........................ 15
Use of Proceeds.......................................................... 16
Dividend Policy.......................................................... 16
Capitalization........................................................... 17
Dilution................................................................. 18
Selected Consolidated Financial Data..................................... 19
Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................... 20
Business................................................................. 28
Management............................................................... 44
Certain Transactions..................................................... 52
Principal and Selling Shareholders....................................... 55
Description of Capital Shares............................................ 56
Shares Eligible for Future Sale.......................................... 58
Underwriting............................................................. 61
U.S. Federal Tax Considerations for Non-U.S. Holders..................... 62
Legal Matters............................................................ 65
Experts.................................................................. 65
Where You Can Find Additional Information................................ 65
Index to Consolidated Financial Statements............................... F-1
</TABLE>
"Entegris" is a trademark of Entegris, Inc. in the United States and other
jurisdictions. Registration of "Entegris" is pending in the United States and
in other jurisdictions and registration of the Entegris logo is pending in the
United States. This prospectus also contains registered trademarks of Entegris
and registered trademarks and service marks of other entities.
<PAGE>
PROSPECTUS SUMMARY
This summary highlights selected information contained elsewhere in this
prospectus. This summary does not contain all of the information that you
should consider before investing in our common shares. You should read the
entire prospectus carefully before making an investment decision. This
prospectus contains forward-looking statements which involve risks and
uncertainties. Our results could differ significantly from those anticipated in
these forward-looking statements as a result of various factors, including
those set forth in "Risk Factors" and the consolidated financial statements and
the related notes. Except as otherwise indicated, all information in this
prospectus assumes no exercise of the underwriters' over-allotment option and
gives effect to a 2-for-1 stock split of the Entegris common shares to be
effective prior to the completion of this offering.
Entegris
We are a leading provider of materials management solutions to the
microelectronics industry including, in particular, the semiconductor
manufacturing and disk manufacturing markets. Our materials management
solutions for the semiconductor industry assure the integrity of materials as
they are handled, stored, processed and transported throughout the
semiconductor manufacturing process. These solutions enable our customers to
protect their investment in work-in-process and finished devices by
facilitating the safe handling, purity and precision processing of the critical
materials used in their manufacturing process.
Semiconductors are the building blocks of today's electronics and the
backbone of the information age. An increasing variety of new markets and
applications, such as wireless communications devices, network infrastructure
and Internet appliances, has driven the demand for semiconductors with enhanced
performance characteristics. As a result, semiconductors have become
increasingly complex, with smaller feature sizes and shorter product life
cycles, resulting in a more costly and complex manufacturing process. To
improve manufacturing productivity and efficiency, semiconductor manufacturers
have historically implemented yield management and automation technologies.
Because significant productivity gains from implementing these technologies
have for the most part already been realized, semiconductor manufacturers are
now increasingly focused on improving materials management. Productivity gains
can be achieved by preventing the damage and degradation of materials used or
consumed throughout the manufacturing process and by improving the
predictability of that process. Wafer processing can involve as many as 500
steps and take up to six weeks. As a result, a batch of 25 fully processed
wafers can cost more than $1 million. Damage to a processed wafer can severely
impact integrated circuit performance or render an integrated circuit
inoperable. Thus, it is critical to ensure safe and reliable wafer processing
throughout the manufacturing process. The need for efficient and reliable
materials management is becoming increasingly important to semiconductor
manufacturers as new materials are introduced and as 300mm wafer technology
becomes more prevalent.
Throughout our 34-year history, we have been a leading provider of materials
management solutions for the semiconductor industry. We have extensive
expertise in the development of polymer materials and we believe that we have
the broadest product line of standard and customized products. We have eleven
worldwide manufacturing facilities which enable us to provide local delivery,
advanced manufacturing capabilities and the capacity to meet customer demand
requirements. Our materials management products, such as wafer shippers, wafer
transport and process carriers, pods and work-in-process boxes, preserve the
integrity of wafers as they are transported from wafer manufacturers to
semiconductor manufacturers, processed into finished wafers and integrated
circuits and subsequently tested, assembled and packaged. We also provide
chemical delivery products, such as valves, fittings, tubing, pipe and
containers, that assure the consistent and safe delivery of sophisticated
chemicals between chemical manufacturers and semiconductor manufacturers'
point-of-use.
3
<PAGE>
We believe we are a technology leader in providing materials handling
solutions for the microelectronics industry. We are a leading designer and
manufacturer of 300mm wafer materials management solutions with products such
as front opening unified pods and reduced-pitch front opening shipping boxes.
In addition, our innovative designs and our use of high purity, corrosion
resistant fluid handling materials have made us a recognized leader in high
purity fluid transfer products. Our chemical delivery product line represents a
number of industry firsts, including:
.the first perfluoroalkoxy, or PFA, fusion-bonded piping;
.the first valves with no metal parts in the fluid stream;
. the first nonmetallic capacitive sensors to successfully perform in harsh
environments at high temperatures; and
. the first PFA pinch valve.
More recently, our Galtek SG Series valve received the 1999 Editor's Choice
Best Product award from Semiconductor International magazine for its ability to
maintain industry flow capacity standards despite its small size.
Our objective is to build upon our leadership position in materials
management solutions for the semiconductor device, equipment and materials
industries, as well as apply our expertise to the growing materials management
needs of other industries. The key elements of our strategy to achieve this
objective are:
. expand technological leadership;
. broaden product offering;
. enhance relationships with customers and suppliers;
. expand in Japan;
. pursue selective acquisitions; and
. expand into new industries.
We sell our products worldwide to over 1,000 customers, who represent a
broad base of leading suppliers to the microelectronics industry. Our customers
in the semiconductor industry include wafer manufacturers, chemical suppliers,
equipment manufacturers, device manufacturers and assemblers. International
sales represented approximately 45.1% of our sales in fiscal 1998, 47.9% of our
sales in fiscal 1999, and 47.7% of our sales in the six months ended February
28, 2000. We provide our customers with a worldwide network of sales and
support personnel, which enable us to offer local service to our global
customer base and assure the timely and cost-effective delivery of our
products.
Entegris was incorporated under the laws of the State of Minnesota in 1999
as part of a consolidation of Fluoroware, Inc. and Empak, Inc., both of which
are now wholly-owned subsidiaries of Entegris. Fluoroware and Empak are
Minnesota corporations. Fluoroware has been in business since 1966 and Empak
has been in business since 1980. Our principal executive offices are located at
3500 Lyman Boulevard, Chaska, Minnesota 55318, and our telephone number is
(952) 556-3131. The address of our web site is www.entegris.com. Information
contained on our web site is not part of this prospectus.
4
<PAGE>
The Offering
Common shares offered by Entegris.......... 8,600,000 shares
Common shares offered by the selling 4,400,000 shares
shareholders..................................
Common shares to be outstanding after this 67,320,700 shares
offering......................................
Use of proceeds............................ Retirement of debt, working
capital and general corporate
purposes. We may also use a
portion of the proceeds to
acquire complementary
businesses. See "Use of
Proceeds."
Proposed Nasdaq National Market symbol..... ENTG
The number of common shares to be outstanding after this offering is based
on the number of shares outstanding as of February 28, 2000, and does not
reflect the following:
. 7,263,972 shares subject to stock options currently outstanding at a
weighted average exercise price of $3.62 per share;
. 351,898 shares redeemed since February 28, 2000 from former employees,
which had been previously distributed by our Employee Stock Ownership
Plan and which we were required to redeem pursuant to the terms of the
Plan;
. 30,808 shares issued since February 28, 2000;
. 6,881,078 common shares reserved for future grants of options under our
stock option plans and future issuances of stock under our Employee
Stock Purchase Plan; and
. 1,290,000 shares that the underwriters may purchase from us to cover
over-allotments, if any.
5
<PAGE>
Summary Consolidated Financial Data
(in thousands, except per share data)
<TABLE>
<CAPTION>
Six Months Ended
Fiscal Year Ended August 31, February 28,
------------------------------------------------ ------------------
1995 1996 1997 1998 1999 1999 2000
-------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Consolidated Statement
of Operations Data:
Net sales.............. $193,284 $271,037 $277,290 $266,591 $241,952 $111,590 $156,662
Cost of sales.......... 104,513 149,042 161,732 156,508 148,106 72,026 85,260
-------- -------- -------- -------- -------- -------- --------
Gross profit.......... 88,771 121,995 115,558 110,083 93,846 39,564 71,402
Selling, general and
administrative
expenses.............. 43,284 62,390 62,384 65,536 64,336 28,896 34,962
Engineering, research
and development
expenses.............. 9,776 12,447 17,986 19,912 14,565 7,571 6,234
-------- -------- -------- -------- -------- -------- --------
Operating profit...... 35,711 47,158 35,188 24,635 14,945 3,097 30,206
Interest expense, net.. 2,782 4,582 6,652 6,995 5,498 3,040 2,020
Other (income) expense,
net................... (1,010) (1,396) 2,201 (273) (1,850) (1,312) (6,282)
-------- -------- -------- -------- -------- -------- --------
Income before income
taxes and other items
below................ 33,939 43,972 26,335 17,913 11,297 1,369 34,468
Income tax expense..... 12,596 16,109 10,578 4,536 4,380 89 11,589
Equity in net (income)
loss of affiliates.... (3,347) (3,252) (1,750) 118 1,587 1,196 (582)
Minority interest in
subsidiaries' net
income (loss)......... 1,601 2,898 573 176 (399) (16) 348
-------- -------- -------- -------- -------- -------- --------
Net income (1)........ $ 23,089 $ 28,217 $ 16,934 $ 13,083 $ 5,729 $ 100 $ 23,113
======== ======== ======== ======== ======== ======== ========
Earnings per common
share (1):
Basic................. $ 0.36 $ 0.46 $ 0.28 $ 0.22 $ 0.10 $ 0.00 $ 0.39
Diluted............... $ 0.35 $ 0.44 $ 0.27 $ 0.21 $ 0.09 $ 0.00 $ 0.36
Weighted average common
shares:
Basic................. 64,034 61,676 59,967 60,747 60,270 60,541 59,824
Diluted............... 65,396 63,500 61,786 61,492 62,220 61,611 64,699
</TABLE>
<TABLE>
<CAPTION>
February 28, 2000
------------------------
Actual As Adjusted(2)
-------- --------------
<S> <C> <C>
Consolidated Balance Sheet Data:
Cash and cash equivalents............................ $ 25,029 $114,029
Working capital...................................... 69,504 163,504
Total assets......................................... 266,540 355,540
Long-term debt and capital lease obligations,
excluding current maturities........................ 50,770 17,770
Total liabilities and minority interest.............. 123,571 85,571
Redeemable Employee Stock Ownership Trust common
stock............................................... 202,980 --
Shareholders' equity (deficit)....................... (60,011) 269,969
</TABLE>
- --------
(1) Net income and per share figures exclude loss from discontinued operations
of $1,503,000, or $0.02 per share diluted, in fiscal 1995 and income from
discontinued operations of $455,000, or $0.01 per share diluted, in fiscal
1996.
(2) As adjusted to reflect (a) the sale of 8,600,000 common shares by us
offered in this prospectus at an assumed offering price of $16.00 per
share, assuming no exercise of the underwriters' over-allotment option,
and the application of a portion of the estimated net proceeds, after
deducting the underwriting discounts and commissions and our estimated
offering expenses, to repay approximately $38 million of debt (see
"Capitalization") and (b) the reclassification of redeemable Employee
Stock Ownership Trust common shares no longer redeemable upon the
consummation of the Company's initial public offering.
6
<PAGE>
RISK FACTORS
You should carefully consider the following risk factors and all other
information contained in this prospectus before purchasing our common shares.
Investing in our common shares involves a high degree of risk. The risks and
uncertainties described below are not the only ones that we face. Additional
risks and uncertainties not presently known to us or that we currently believe
are immaterial also may impair our business operations. If any of the events
described in the following risks occur, our business, operating results and
financial condition could be significantly harmed. In addition, the trading
price of our common shares could decline due to any of the events described in
these risks, and you may lose all or part of your investment.
Industry Risk
The semiconductor industry is highly cyclical, and an industry downturn would
reduce revenue and profits.
Our business depends on the purchasing patterns of semiconductor
manufacturers, which, in turn, depend on the current and anticipated demand for
semiconductors and products utilizing semiconductors. The semiconductor
industry is highly cyclical and historically has experienced periodic
downturns, which often have resulted in decreased expenditures by semiconductor
manufacturers. These downturns, which occurred most recently in 1996 and 1998,
have harmed our sales, gross profits and operating results. Furthermore, even
in periods of reduced demand, we must continue to maintain a satisfactory level
of research and development expenditures and continue to invest in our
infrastructure. We expect the semiconductor industry to continue to be
cyclical. Any future downturns will reduce revenue and possibly increase
pricing pressure.
Our revenue and operating results may fluctuate in future periods, which could
harm our share price.
Our sales and operating results can vary significantly from quarter to
quarter. Because our expense levels are relatively fixed in the short-term, an
unanticipated decline in revenue in a particular quarter could
disproportionately affect our net income in that quarter. In addition, because
we typically do not have significant backlog, changes in order patterns have a
more immediate impact on our revenues. The 1998 downturn in the semiconductor
industry resulted in a decline in our net income from $16.9 million in fiscal
1997 to $13.1 million in fiscal 1998 and a further decline to $5.7 million in
fiscal 1999. We anticipate that fluctuations in operating results will continue
in the future. Such fluctuations in our results could cause our share price to
decline substantially. We believe that period-to-period comparisons of our
results of operations may not be meaningful, and you should not rely upon them
as indicators of our future performance.
Our industry is subject to rapid technological change, and we may fail to
successfully anticipate customer needs and develop new products.
The microelectronics industry is subject to rapid technological change,
changing customer requirements and frequent new product introductions. Because
of this, the life cycle of our products is difficult to determine. Our future
success will depend, to a significant extent, on our ability to keep pace with
changes in the market and on our ability to enhance our current products and
introduce new products. For example, we must continue to identify new polymers,
improve our product design and qualify our products with our customers. We
might not successfully develop and introduce new products and materials in a
timely and cost-effective manner. Any product enhancements or new products
developed by us might not gain market acceptance. In addition, products or
technologies developed by competitors could make our products or technologies
obsolete or less competitive. If we do not anticipate or respond adequately to
technological developments or customer requirements, we could lose market share
or miss market opportunities.
International Risks
We are dependent upon sales outside the United States and a substantial portion
of our growth is expected to be in international markets.
International sales accounted for 45.1% of our revenues in fiscal 1998,
47.9% in fiscal 1999 and 47.7% in the six months ended February 28, 2000. We
anticipate that sales outside the United States will be an
7
<PAGE>
increasing percentage of our revenues as we pursue our international growth
strategy. A significant portion of our revenues will therefore be subject to
risks associated with sales in markets outside the United States, including:
. export controls;
. unexpected changes in legal and regulatory requirements and policy
changes affecting the markets for semiconductor technology;
. difficulties in accounts receivable collection;
. difficulties in managing sales representatives or distributors;
. difficulties in staffing and managing foreign operations;
. difficulties in protecting our intellectual property outside the United
States; and
. potentially adverse tax consequences.
These risks could increase the cost of doing business internationally and
could prohibit or hinder our ability to do business in certain countries.
Taiwan accounts for a growing portion of the world's semiconductor
manufacturing. There are currently strained relations between China and Taiwan.
Any adverse development in those relations could significantly impact the
worldwide production of semiconductors, which would lead to reduced sales of
our products.
The value of the U.S. dollar in relation to other currencies may also harm
our sales to customers outside the United States. For the six months ended
February 28, 2000, approximately 22% of our sales revenue was not denominated
in U.S. dollars, which exposes us to currency fluctuations. We intend to expand
internationally, and to the extent that we do so or change our pricing
practices to denominate prices in other currencies, we will be exposed to
increased risks of currency fluctuations as well as the increased risks of
doing business internationally.
An increased concentration of wafer manufacturing in Japan could result in
lower sales of our wafer management and shipping products.
A large percentage of the world's wafer manufacturing currently takes place
in Japan. Our market share in Japan is currently low, and we believe that we
must increase our manufacturing capabilities in Japan in order to improve our
market share. If we are not able to successfully expand our manufacturing
capability and market share in Japan, we might not be able to maintain our
global market share in wafer manufacturing and handling products, especially if
wafer manufacturing in Japan increases.
Regulatory compliance impacts delivery times and reduces our ability to be
competitive in certain countries.
We are subject to federal, state, local and foreign regulations. Compliance
with future regulations, including environmental regulations in the United
States and abroad, could require us to incur substantial costs. If we do not
comply with current or future regulations, directives and standards:
. we could be subject to fines;
. our production could be suspended or delivery could be delayed; and
. we could be prohibited from offering particular products in specified
markets.
Certain of our fluid handling products fall within the scope of U.S. export
licensing regulations pertaining to products that could be used in connection
with chemical weapons processes. These regulations require us to obtain
licenses to ship some of our products to customers in certain countries, and we
routinely apply for and
8
<PAGE>
obtain export licenses. The applicable export licensing regulations frequently
change. Moreover, the types and categories of products that are subject to
export licensing are often described in the regulations in general terms and
could be subject to differing interpretations. We are currently cooperating
with the United States Department of Commerce to clarify our licensing
practices and to review our practices with respect to sales of products to
certain countries in recent years. The review relates to sales of approximately
$100,000 in fiscal 1999. The review does not relate to any product sales in
fiscal 2000. While the Department of Commerce review is pending, we have been
applying for export licenses with respect to ongoing orders for those same
products from customers in the countries that are the subject of the review,
and the Department of Commerce has been granting licenses for these sales.
Nevertheless, the Department of Commerce may determine that some of our past
practices were not in compliance with export licensing regulations, which could
subject us to penalties. Any denial or delay in the issuance of future export
licenses could result in lost sales.
We are dependent on Metron Technology N.V. for a substantial portion of our
sales, and our ability to influence Metron has been diminished.
For the period ended August 31, 1999, we derived 14.3% of our revenues from
customers that purchase our products through Metron Technology N.V., which
distributes our products in parts of Europe, Asia and the United States. Any
negative material event relating to Metron may impact our business. For
example, Metron's sales could decline or Metron could choose to sell our
competitors' products instead of our products.
In November 1999, Metron completed an initial public offering and our
ownership of Metron decreased from 32.8% to 20.8%. Although we retain a
significant ownership stake in Metron, we now have less influence on Metron's
business and decision making, and Metron may make decisions regarding the
conduct of its business that could harm us and over which we have no control.
Relationships with joint venture partners affect our ability to do business
internationally.
We have entered into joint venture agreements intended to complement or
expand our manufacturing and distribution operations in Japan and Korea. The
success of our joint ventures depends in part on our ability to strengthen our
relationships with our joint venture partners. If we do not develop and
maintain good relationships with joint venture partners, we will be less able
to successfully penetrate international markets.
Economic difficulties in countries in which we sell our products could lead to
a decrease in demand for our products.
The volatility of general economic conditions as well as fluctuations in
currency exchange and interest rates can lead to decreased demand in countries
in which we sell products. For example, in 1997 and 1998, many Asian countries
experienced economic and financial difficulties. During this period, our sales
to customers in Asia declined. Moreover, any economic, banking or currency
difficulties experienced by countries in which we have sales may lead to
economic recession in those countries. This in turn could result in a reduction
in sales to customers in these countries.
Manufacturing Risks
Our dependence on single and limited source suppliers could affect our ability
to manufacture our products.
We rely on single and limited source suppliers for some of the advanced
polymers that are critical to the manufacturing of our products. At times, we
have experienced a limited supply of some of these polymers, which resulted in
delays and increased costs. An industry-wide increase in demand for these
polymers could affect the ability of our suppliers to provide sufficient
quantities to us. If we are unable to obtain an adequate quantity of such
supplies, our manufacturing operations may be interrupted. Obtaining
alternative sources could result in increased costs and shipping delays, which
could decrease profitability and damage our relationships with current and
potential customers.
9
<PAGE>
Prices for polymers have varied widely in recent years. We have a long-term
contract with a key supplier of polymers that fixes our price for purchases of
up to specified quantities. If our polymer requirements exceed the quantities
specified in the contract, we could be exposed to higher material costs. If the
cost of polymers increases and we are unable to correspondingly increase the
sales price of our products, our profit margins would decline.
We may experience manufacturing difficulties because of the increasing
complexity of our production processes.
Our manufacturing processes are complex and require the use of expensive and
technologically sophisticated equipment and materials. These processes are
frequently modified to improve manufacturing yields and product quality. We
have on occasion experienced manufacturing difficulties, such as temporary
shortages of raw materials and occasional critical equipment breakdowns, that
have delayed deliveries to customers. A number of our product lines are
manufactured at only one or two facilities, and any disruption could impact our
sales until another facility could commence or expand production of such
products.
Our manufacturing operations are subject to numerous risks, including:
. the introduction of impurities in the manufacturing process that could
lower manufacturing yields and make our products unmarketable;
. the costs and demands of managing and coordinating geographically
diverse manufacturing facilities; and
. the disruption of production in one or more facilities as a result of a
slowdown or shutdown in another facility.
We could experience these or other manufacturing difficulties, which might
result in a loss of customers and exposure to product liability claims.
We may be unable to procure and maintain capital equipment necessary for our
many products.
Internally designing and producing new complex tools or purchasing
additional capital equipment can take several months. If our existing equipment
fails, or we are unable to obtain new equipment quickly enough to satisfy any
increased demand for our products, we may lose sales to competitors. In
particular, we do not maintain duplicate tools for most of our important
products. Fixing or replacing complex tools is time consuming, and we may not
be able to replace a damaged tool in time to meet customer requirements.
We generally have no written contracts with our customers, which diminishes our
ability to plan for future manufacturing needs.
As is typical in our industry, our sales are primarily made on a purchase
order basis and we have few written purchase contracts with our customers.
Customers may choose to delay or cancel orders. As a result, we cannot predict
the level of future sales or commitments from our current customers, which
diminishes our ability to effectively allocate labor, materials and equipment
in the manufacturing process.
We may not be able to protect our intellectual property, which may limit our
ability to compete.
Our success depends in part on our proprietary technology. We attempt to
protect our intellectual property rights primarily through patents, trademarks
and non-disclosure agreements. However, we might not be able to protect some of
our technology, and competitors might be able to develop similar technology
independently. In addition, the laws of certain foreign countries might not
afford our intellectual property the same protection as do the laws of the
United States. The costs of applying for patents in foreign countries and
translating the applications into foreign languages require us to select
carefully the inventions for which we apply for patent protection and the
countries in which we seek such protection. Generally, we have concentrated our
efforts on obtaining international patents in Europe, Japan and Taiwan because
there are competing manufacturers in
10
<PAGE>
those countries, as well as current and potential customers. Our inability or
failure to obtain adequate patent protection in a particular country could harm
our ability to compete effectively in that country. Our patents also might not
be sufficiently broad to protect our technology, and any existing or future
patents might be challenged, invalidated or circumvented. Additionally, our
rights under our patents may not provide competitive advantages.
Litigation may be necessary to defend us against claims of intellectual
property infringement, which if successful could cause us to pay significant
damage awards or prevent us from manufacturing or selling our products.
Some of our current or future products could infringe patents or proprietary
rights of others. Litigation may be necessary to enforce patents issued to us,
to protect our trade secrets or know-how, to defend ourselves against claimed
infringement of the rights of others or to determine the scope and validity of
the proprietary rights of others. Litigation could result in substantial cost
and diversion of our efforts. Moreover, an adverse determination in any
litigation could cause us to lose proprietary rights, subject us to significant
liabilities to third parties, require us to seek licenses or alternative
technologies from third parties, or prevent us from manufacturing or selling
our products.
Operating Risks
We may not be able to attract and retain key personnel and provide liquidity to
our ESOP participants.
Our success depends upon the continued efforts of our senior management team
and our technical, manufacturing, marketing and sales personnel. These
employees may voluntarily terminate their employment with us at any time. Our
success also depends on our ability to attract and retain additional highly
qualified management, manufacturing, technical, marketing and sales personnel.
Competition for such personnel in the technology and semiconductor industries
is particularly intense. Recruiting and hiring employees with the combination
of skills and attributes required to conduct our business is extremely
competitive, time-consuming and expensive.
Approximately one-third of our work force are participants in our Employee
Stock Ownership Plan, which held 20,385,514 of our common shares as of April
30, 2000. Participants have no right, with limited exceptions, to receive their
ESOP shares until after termination of their employment. The significant value
of the ESOP shares and the limited ability to obtain and control these shares
while employed may be important factors that many employees might consider when
determining whether to continue their employment with us.
We may not be able to successfully retain existing manufacturing personnel
or identify, hire and train new manufacturing personnel. The U.S. economy's
long period of expansion and high rate of employment have increased the
difficulty of recruiting qualified manufacturing personnel, such as operators
of our manufacturing equipment. If a significant number of manufacturing
personnel were to voluntarily terminate their employment with us, our
production would be disrupted and shipments might be delayed.
We may not be able to identify, complete or successfully integrate future
acquisitions.
One of our strategies is to expand by acquiring other businesses,
technologies or product lines. However, we currently have no commitments or
agreements with respect to any acquisition. We might not be able to
successfully identify, negotiate or finance any acquisitions, or integrate such
acquisitions with our current business, which could diminish our ability to
expand our business and remain competitive. Moreover, expansion could require
significant management time and resources.
The semiconductor materials management industry is highly competitive and
competition could intensify as the industry further consolidates.
We face substantial competition from a number of companies, some of which
have greater financial, marketing, manufacturing and technical resources.
Because of an industry trend toward consolidation, larger
11
<PAGE>
providers of materials management solutions and products could emerge, with
potentially broader product lines. Larger competitors could spend more on
research and development, which could give those competitors an advantage in
meeting customer demand. We expect that existing and new competitors will
improve the design of their existing products and will introduce new products
with enhanced performance characteristics. The introduction of new products or
more efficient production of existing products by our competitors could
increase pricing pressure on our products. Further, customers continue to
demand lower prices, shorter delivery times and enhanced product capability. If
we do not respond adequately to such pressures, we could lose customers or
orders. If we are unable to compete successfully, we could experience pricing
pressures, reduced gross margins and order cancellations.
Lack of market acceptance of our 300mm products could harm our operating
results.
The growing trend toward the use of 300mm wafers has contributed to the
increasing complexity of the semiconductor manufacturing process. The greater
diameter of these wafers requires higher tooling costs and presents more
complex handling, storage and transportation challenges. We are making
substantial investments to complete a full line of 300mm wafer manufacturing
and handling products. Our customers may not adopt our 300mm wafer
manufacturing and handling product lines. If we are not a leader in the 300mm
market, the market share for our other products could decline. In addition, if
the trend toward 300mm wafer manufacturing does not evolve as we anticipate,
sales of our products for these applications would be minimal and we might not
recover our development costs.
Our management information and financial reporting systems are not fully
integrated and need to be upgraded, which will be costly. If these new systems
are not successfully implemented, our business may be harmed.
The management information and financial reporting systems that we use in
our day-to-day operations are not fully integrated. We will need to continue to
invest in these systems in order to maintain our current level of business and
accommodate any future growth. We anticipate that the total costs associated
with upgrading and integrating our systems will be approximately $8 to $10
million over the next two to four years. Our failure to successfully upgrade
and integrate our management information and financial reporting systems may
disrupt our business, create inefficiencies due to the lack of centralized
data, result in unnecessarily high levels of inventories, and increase expenses
associated with additional employees to compensate for the lack of fully
integrated systems.
We encounter difficulties in soliciting customers of our competitors because
customers tend to standardize materials handling procedures and are reluctant
to change their standardized manufacturing processes.
Once an original equipment manufacturer or a microelectronics manufacturer
has selected particular materials management products, that manufacturer
generally incorporates those products into customized manufacturing procedures,
assuring precise and consistent processing steps. After these procedures have
been established, manufacturers are very reluctant to switch to another
provider of materials management products. Accordingly, it may be difficult to
sell our products to a manufacturer that has already selected a competitor's
products.
We may face product liability claims which could harm our operating results.
Our products are used by our customers to handle sensitive, complex and
valuable wafers and semiconductor materials and devices. If our products fail,
these materials could be damaged or contaminated, which could expose us to
product liability claims. Business interruption and personal injury claims are
also possible in the event of a product failure or misapplication of our
product by a customer. In addition, the failure of our chemical delivery
products could subject us to environmental liability claims and a failure of
our custom medical device components could subject us to personal injury
claims. We cannot predict whether our existing insurance coverage limits are
adequate to protect us from any liabilities that we might incur in connection
with the manufacture, sale or use of our products. A successful product
liability claim or series of product liability claims brought against us could
damage our reputation, diminish customer confidence in our products, expose us
to increased competition and increase our insurance costs.
12
<PAGE>
Risks related to investing in our initial public offering
Substantial sales of shares, including shares owned by our employees, may
impact the market price of our common shares.
If our shareholders sell substantial amounts of our common shares, including
shares issued upon the exercise of outstanding options, the market price of our
common shares may fall. These sales also make it more difficult for us to sell
equity or equity-related securities in the future at a time and price that we
deem appropriate. Based on the number of shares outstanding as of April 30,
2000, we will have 66,999,610 outstanding common shares upon completion of this
offering. The following tables set forth the number of shares that will be
freely tradable immediately upon completion of the offering as well as the
number of shares that will be available for sale 90 days after the completion
of the offering and the number of shares that will be available for sale after
expiration of the 180-day lock-up agreement:
<TABLE>
<CAPTION>
Total
shares
----------
<S> <C> <C>
Shares freely tradable immediately after offering:
Sold in this offering 13,000,000
Held by current shareholders 1,250,922 14,250,922
----------
Eligible for sale 90 days after offering 69,892
Eligible for sale after 180-day lock-up:
Subject to volume limitations 46,066,496
Not subject to volume limitations 6,612,300 52,678,796
---------- ----------
Total shares outstanding after offering 66,999,610
Shares subject to exercisable options that would be
freely tradable upon issuance 4,723,402
</TABLE>
If our shareholders sell substantial amounts of common shares (including shares
issued upon the exercise of outstanding options) in the public market, the
market price of our common shares could fall.
After completion of this offering, our ESOP will hold 17,910,514 common
shares. All shares in the ESOP are fully allocated to individual accounts of
ESOP participants. All ESOP participants are fully vested in their accounts.
Participants in the ESOP whose employment with us terminates have the right, as
of the second August 31 following termination, to request distribution of the
shares allocated to their accounts. Currently, participants who are no longer
employed by us have the right, subject to lock-up arrangements, to request
distribution of an aggregate of 2,065,209 shares as of August 31, 2000. For a
fuller description of the ESOP, see "Management--Equity and Profit Sharing
Plans--Employee Stock Ownership Plan."
We may not be able to pursue our expansion strategy if we are unable to raise
required funds.
We may need to raise additional capital to acquire or invest in
complementary businesses. If we issue additional equity securities, the
ownership stakes of our existing shareholders would be reduced, and the new
equity securities may have rights, preferences or privileges senior to those of
our existing common shares. If we cannot raise funds, if needed, on acceptable
terms, we may not be able to develop our business, take advantage of future
opportunities, or respond to competitive pressures or unanticipated
requirements.
We will have broad discretion as to the use of the offering proceeds, which
increases the risk that the proceeds will not be applied effectively.
We have not allocated the majority of the net proceeds of this offering for
specific uses, and our shareholders may disagree with the way management uses
the proceeds from this offering. We may use a portion of the net proceeds to
acquire additional businesses that we believe will complement or enhance our
current or future business. We cannot, however, be certain that we will be able
to use the proceeds to earn a favorable return.
13
<PAGE>
There is currently no public market for our common shares and, following the
offering, our share price may be volatile.
There has not been a public market for our common shares prior to this
offering, and a liquid trading market for our shares may not develop following
this offering. The initial price of our common shares to be sold in the
offering has been determined by negotiations between us and the representatives
of the underwriters and may not be indicative of prices that will prevail in
the trading market. The trading price of our common shares could be subject to
wide fluctuations in response to various factors, some of which are beyond our
control.
New investors in our common shares will experience immediate and substantial
dilution.
The initial public offering price is substantially higher than the book
value per share of our common shares. Investors purchasing common shares in
this offering, therefore, will incur immediate dilution of $12.37 in net
tangible book value per common share at an assumed initial public offering
price of $16.00 per share. Investors will incur additional dilution upon the
exercise of outstanding share options. See "Dilution."
Significant shareholders and current management will beneficially own
approximately 72% of our shares after this offering, and their beneficial
ownership may limit your ability to influence the outcome of matters requiring
shareholder approval.
Based on common stock beneficial ownership information available as of April
30, 2000, WCB Holding LLC would own 29.3%, the ESOP would own 26.7%, and all
directors and executive officers as a group would own 16.7% of our shares after
completion of this offering. Accordingly, WCB Holding LLC, the ESOP and
management, if acting together, could control the outcome of any shareholder
vote, including any vote on the election or removal of directors and on any
merger, consolidation or sale of all or substantially all of our assets.
Consequently, your ability to influence the outcome of matters requiring
shareholder approval may be limited.
Antitakeover provisions limit the ability of a person or entity to acquire
control of us.
Our articles of incorporation and bylaws include provisions that:
. provide for a classified board of directors, with each class of
directors subject to re-election every three years, which limits the
shareholders' ability to quickly change a majority of the board of
directors;
. impose a 75% shareholder vote requirement to change the maximum number
of directors;
. limit the right of our shareholders to call a special meeting of
shareholders; and
. impose procedural and other requirements that could make it difficult
for shareholders to effect certain corporate actions.
In addition, we are subject to the anti-takeover provisions of the Minnesota
Business Corporation Act. Any of these provisions could delay or prevent a
person or entity from acquiring control of us. The effect of these provisions
may be to limit the price that investors are willing to pay in the future for
our securities. These provisions might also discourage potential acquisition
proposals or tender offers, even if the acquisition proposal or tender offer is
at a price above the then current market price for our common shares. For a
fuller description of anti-takeover measures, see "Description of Capital
Shares."
We do not intend to pay dividends.
We have never declared or paid any cash dividends on our capital shares. In
addition, our loan agreements restrict our ability to pay dividends without the
consent of our lenders. We currently intend to retain any future earnings to
fund the development and growth of our business and, therefore, do not
anticipate paying any cash dividends in the foreseeable future.
14
<PAGE>
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Some of the statements under the captions "Prospectus Summary," "Risk
Factors," "Use of Proceeds," "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and "Business" and elsewhere in this
prospectus are "forward-looking statements." These statements involve known and
unknown risks, uncertainties, and other factors that may cause our, or our
industry's, actual results, levels of activity, performance or achievements to
be significantly different from any future results, levels of activity,
performance or achievements expressed or implied by the forward-looking
statements. These factors are listed under "Risk Factors" and elsewhere in this
prospectus.
In some cases, you can identify forward-looking statements by terminology
such as "expect," "anticipate," "intend," "may," "should," "plan," "believe,"
"seek," "estimate," "could," "would" or the negative of such terms or other
comparable terminology.
Although we believe that the expectations reflected in the forward-looking
statements are reasonable, we cannot guarantee future results, levels of
activity, performance or achievements. We are under no duty to update any of
the forward-looking statements after the date of this prospectus to conform
these statements to actual results.
15
<PAGE>
USE OF PROCEEDS
We expect to receive net proceeds of approximately $127,000,000, after
deducting underwriting discounts and estimated offering expenses, from the sale
of 8,600,000 common shares, and an additional $19,246,800 from the sale of
1,290,000 common shares if the underwriters' over-allotment option is exercised
in full, at an assumed initial public offering price of $16.00 per share. We
will not receive any proceeds from the sale of common shares by the selling
shareholders.
We intend to use the proceeds of the offering for the retirement of debt,
working capital and general corporate purposes, including sales, marketing,
customer support and other activities related to our business. We will use
approximately $38 million of the proceeds to repay indebtedness owed to ten
lenders under various loan and note agreements and approximately $1.5 million
to pay charges related to such debt reduction. This indebtedness has maturity
dates ranging from 2000 to 2011. This indebteness has a weighted average
interest rate of 8.0%. The indebtedness that we incurred under the loan and
note agreements that we intend to satisfy with offering proceeds was used for
capital expenditures, share redemptions and working capital. We may also use a
portion of the net proceeds for additional capital expenditures, or to acquire
additional businesses that we believe would strengthen our position in our
targeted markets, enhance our technology base, increase our manufacturing
capability and our product offerings and expand our geographic presence.
However, we have no agreements or commitments to acquire any business and are
currently not in negotiations regarding any potential acquisition.
The amounts that we actually expend for working capital and other general
corporate purposes will vary significantly depending on a number of factors,
including future revenue growth, if any, and the amount of cash we generate
from operations. As a result, we will retain broad discretion in the allocation
of the net proceeds of this offering. Pending such uses, we intend to invest
the net proceeds of the initial public offering in investment grade interest-
bearing securities.
DIVIDEND POLICY
We have never declared or paid any cash dividends on our common shares. In
addition, our loan agreements restrict our ability to pay dividends without the
consent of our lenders. We currently intend to retain any future earnings to
fund the development and growth of our business. Therefore, we currently do not
anticipate paying any cash dividends in the foreseeable future.
16
<PAGE>
CAPITALIZATION
The following table sets forth our capitalization as of February 28, 2000:
(1) on an actual basis; and (2) as adjusted to give effect to (a) the sale of
8,600,000 common shares offered in this offering and to give effect to the
receipt of the estimated net proceeds from the sale of such shares at an
assumed initial public offering price of $16.00 per share and the application
of the net proceeds from such sale and (b) the reclassification of redeemable
Employee Stock Ownership Trust common shares no longer redeemable upon
consummation of our initial public offering.
The capitalization information set forth in the table below is qualified by,
and you should read it in conjunction with, our more detailed Consolidated
Financial Statements and related notes and "Management's Discussion and
Analysis of Financial Condition and Results of Operations" appearing elsewhere
in this prospectus.
<TABLE>
<CAPTION>
February 28, 2000
---------------------
Actual As Adjusted
-------- -----------
(unaudited)
(in thousands,
except share data)
<S> <C> <C>
Short-term debt (including current portion of long-term
debt)................................................... $ 16,787 $ 11,787
Long-term debt (excluding current portion)............... 50,770 17,770
Redeemable ESOT common stock............................. 202,980 --
Shareholders' equity:
Common stock, par value $.01 per share; 200,000,000
shares authorized,
36,776,962 and 67,320,700 issued and outstanding,
actual and as adjusted................................. 368 673
Additional paid-in capital............................... 14,962 141,767
Retained earnings (deficit).............................. (75,111) 127,759
Accumulated other comprehensive loss..................... (230) (230)
-------- --------
Total shareholders' equity (deficit)................... (60,011) 269,969
-------- --------
Total capitalization................................... $210,526 $299,526
======== ========
</TABLE>
This table excludes the following shares as of February 28, 2000:
. 7,263,972 shares subject to stock options currently outstanding at a
weighted average exercise price of $3.62 per share;
. 351,898 shares redeemed since February 28, 2000 from former employees,
which had been previously distributed by our ESOP and which we were
required to redeem pursuant to its terms;
. 30,808 shares issued since February 28, 2000;
. 6,916,024 common shares reserved for future grant of options under our
stock option plan and future issuances of stock under our stock purchase
plan; and
. 1,290,000 shares that the underwriters may purchase from us to cover
over-allotments, if any.
17
<PAGE>
DILUTION
Our tangible book value as of February 28, 2000 was $134,580,000, or
approximately $2.12 per share. Net tangible book value per share represents the
amount of our total assets less total liabilities excluding redeemable common
stock, divided by the sum of the number of common shares outstanding plus the
number of shares issuable upon exercise of currently exercisable options.
Dilution in net tangible book value per share represents the difference between
the amount per share paid by purchasers of common shares in this offering and
the net tangible book value per common share immediately after the completion
of this offering. After giving effect to the sale of the 8,600,000 common
shares in this offering at an assumed initial public offering price of $16.00
per share and after deducting the estimated underwriting discounts and
commissions and estimated offering expenses payable by us, our net tangible
book value at February 28, 2000 would have been $261,580,000, or approximately
$3.63 per share. This represents an immediate increase in net tangible book
value of $1.51 per share to existing shareholders and an immediate dilution in
net tangible book value of $12.37 per share to purchasers of common shares in
this offering. The following table illustrates this dilution on a per share
basis:
<TABLE>
<CAPTION>
Assumed initial public offering price per share............. $16.00
<S> <C> <C>
Net tangible book value per share as of February 28, 2000.. $2.12
Increase in net tangible book value per share attributable
to new investors.......................................... 1.51
-----
Net tangible book value per share after offering............ 3.63
------
Dilution in net tangible book value per share to new
investors.................................................. $12.37
======
</TABLE>
The following table sets forth, as of February 28, 2000, after giving effect
to the difference between the number of common shares purchased from us, the
total cash consideration paid and the average price per share paid by existing
holders of common shares and by the new investors, before deducting
underwriting discounts and commissions and estimated offering expenses payable
by us, at an assumed initial public offering price of $16.00 per share:
<TABLE>
<CAPTION>
Shares Purchased Total Consideration Average
------------------ -------------------- Price
Name Shares Percent Amount Percent Per Share
---- ---------- ------- ------------ ------- ---------
<S> <C> <C> <C> <C> <C>
Existing shareholders...... 63,444,102 88.06% $ 28,618,000 17.22% $ 0.45
New investors.............. 8,600,000 11.94 137,600,000 82.78 $16.00
---------- ------ ------------ ------
Total.................... 72,044,102 100.00% $166,218,000 100.00%
========== ====== ============ ======
</TABLE>
This table includes the following shares as of February 28, 2000:
. 4,723,402 shares subject to exercisable options outstanding at a
weighted average exercise price of $2.79 per share.
This table excludes the following shares as of February 28, 2000:
. 2,028,534 shares subject to unexercisable options outstanding at a
weighted average exercise price of $3.42 per share; and
. 6,875,290 additional shares that could be issued under our stock plans,
and options for the purchase of 544,000 shares granted to employees
since February 28, 2000.
The sale of common shares by the selling shareholders in this offering will
reduce the number of common shares held by existing shareholders to 59,044,102,
or approximately 82.0% of the total number of common shares outstanding upon
the closing of this offering, and will increase the number of shares held by
new public investors to 13,000,000, or approximately 18.0% of the total number
of common shares outstanding after this offering.
18
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
The consolidated statement of operations data for fiscal 1997, 1998, and
1999, and the consolidated balance sheet data as of August 31, 1998 and August
31, 1999, are derived from and are qualified in their entirety by our audited
consolidated financial statements. The consolidated statement of operations
data for fiscal 1995 and 1996, and the consolidated balance sheet data as of
August 31, 1995, 1996 and 1997, are derived from audited consolidated financial
statements which do not appear in this prospectus. The selected consolidated
statement of operations data for the six month periods ended February 28, 1999
and 2000 and the selected consolidated balance sheet data at February 28, 2000
have been derived from unaudited consolidated financial statements included in
this prospectus. The unaudited consolidated financial statements include, in
the opinion of management, all adjustments, consisting only of normal recurring
adjustments, that management considers necessary for a fair statement of the
results for those periods. The historical results presented below are not
necessarily indicative of the results to be expected for any future periods.
Within the consolidated statement of operations data, net income and per share
figures exclude loss from discontinued operations of $1,503,000, or $0.02 per
share diluted, in fiscal 1995 and income from discontinued operations of
$455,000, or $0.01 per share diluted, in fiscal 1996.
<TABLE>
<CAPTION>
Six Months Ended
Fiscal Year Ended August 31, February 28,
------------------------------------------------ ------------------
1995 1996 1997 1998 1999 1999 2000
-------- -------- -------- -------- -------- -------- --------
(in thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C> <C>
Consolidated Statement
of Operations Data:
Net sales.............. $193,284 $271,037 $277,290 $266,591 $241,952 $111,590 $156,662
Cost of sales.......... 104,513 149,042 161,732 156,508 148,106 72,026 85,260
-------- -------- -------- -------- -------- -------- --------
Gross profit.......... 88,771 121,995 115,558 110,083 93,846 39,564 71,402
Selling, general and
administrative
expenses.............. 43,284 62,390 62,384 65,536 64,336 28,896 34,962
Engineering, research
and development
expenses.............. 9,776 12,447 17,986 19,912 14,565 7,571 6,234
-------- -------- -------- -------- -------- -------- --------
Operating profit...... 35,711 47,158 35,188 24,635 14,945 3,097 30,206
Interest expense, net.. 2,782 4,582 6,652 6,995 5,498 3,040 2,020
Other (income) expense,
net................... (1,010) (1,396) 2,201 (273) (1,850) (1,312) (6,282)
-------- -------- -------- -------- -------- -------- --------
Income before income
taxes and other items
below................ 33,939 43,972 26,335 17,913 11,297 1,369 34,468
Income tax expense..... 12,596 16.109 10,578 4,536 4,380 89 11,589
Equity in net (income)
loss of affiliates.... (3,347) (3,252) (1,750) 118 1,587 1,196 (582)
Minority interest in
subsidiaries' net
income (loss)......... 1,601 2,898 573 176 (399) (16) 348
-------- -------- -------- -------- -------- -------- --------
Net income............ $ 23,089 $ 28,217 $ 16,934 $ 13,083 $ 5,729 $ 100 $ 23,113
======== ======== ======== ======== ======== ======== ========
Earnings per common
share:
Basic................. $ 0.36 $ 0.46 $ 0.28 $ 0.22 $ 0.10 $ 0.00 $ 0.39
Diluted............... $ 0.35 $ 0.44 $ 0.27 $ 0.21 $ 0.09 $ 0.00 $ 0.36
Weighted average common
shares:
Basic................. 64,034 61,676 59,967 60,747 60,270 60,541 59,824
Diluted............... 65,396 63,500 61,786 61,492 62,220 61,611 64,699
</TABLE>
<TABLE>
<CAPTION>
August 31,
-------------------------------------------- February 28,
1995 1996 1997 1998 1999 2000
-------- -------- -------- -------- -------- ------------
(in thousands)
<S> <C> <C> <C> <C> <C> <C>
Consolidated Balance
Sheet Data:
Cash and cash
equivalents........... $ 11,084 $ 11,251 $ 11,354 $ 8,235 $ 16,411 $ 25,029
Working capital........ 25,450 44,437 50,991 41,777 48,860 69,504
Total assets........... 160,010 212,865 260,885 252,941 242,064 266,540
Long-term debt and
capital lease
obligations, excluding
current maturities.... 32,735 61,916 75,971 73,242 53,830 50,770
Total liabilities and
minority interest..... 93,791 130,162 151,503 134,542 117,381 123,571
Redeemable ESOT common
stock................. 65,846 75,876 76,725 47,906 145,570 202,980
Shareholders' equity
(deficit)............. 373 6,827 32,657 70,493 (20,887) (60,011)
</TABLE>
19
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The information in this Management's Discussion and Analysis of Financial
Condition and Results of Operations, except for the historical information,
contains forward-looking statements. These statements are subject to risks and
uncertainties. You should not place undo reliance on these forward-looking
statements, as actual results could differ materially. We do not assume any
obligation to publicly release the results of any revision or updates to these
forward-looking statements to reflect future events or unanticipated
occurrences. This discussion and analysis should be read in conjunction with
our consolidated financial statements and the related notes, which are included
elsewhere in this prospectus.
Our fiscal year is a 52 or 53 week period ending on the last Saturday of
each August. Our last five fiscal years ended on the following dates: August
26, 1995; August 31, 1996; August 30, 1997; August 29, 1998; and August 28,
1999. Fiscal years are identified in this prospectus according to the calendar
year in which they end. For example, the fiscal year ended August 28, 1999 is
referred to as "fiscal 1999." For convenience, the financial information
included in this prospectus has been presented as ending on the last day of the
month.
Overview
We are a leading provider of critical materials management solutions for the
handling, storage, processing and transportation of material used in the
manufacture of semiconductors. Entegris is the result of the 1999 combination
of Fluoroware and Empak. Building on 34 years of expertise, we provide a
comprehensive portfolio of materials management products that enable our
customers to protect the critical materials used in the semiconductor
manufacturing process.
In 1966, we began to produce wafer-carrying baskets for the emerging
semiconductor industry. As the semiconductor industry grew, we expanded our
product lines. During the 1970s, we added wafer shipping containers, die trays
and other items to our product portfolio. In the early 1980s, we added disk
shippers and introduced a series of valve, fitting, pipe and tubing products to
manage chemical delivery for our customers. In the mid 1980s, we also
introduced our chemical transport and storage containers that help ensure the
safe delivery of sophisticated chemicals from chemical manufacturers to the
semiconductor manufacturers' point- of-use. In the early 1990s, we developed
and acquired the technology to manufacture JEDEC/Matrix trays used for testing
and packaging finished integrated circuits. In recent years, we have continued
to broaden our product offerings in response to the trend toward increased size
and complexity of wafers. In October 1999, we acquired a polymer machining
business that we utilize to produce machined products for chemical delivery
applications.
A significant portion of our net sales are to customers outside the United
States. International sales have always been important for us, and have been
increasingly so, as the semiconductor industry has grown over the past three
decades. We began to manufacture our products in overseas facilities starting
with Japan in 1985. Today, we operate manufacturing facilities in Germany,
Japan, Korea and Malaysia, while continuing to export from the United States.
We also maintain a network of over 117 sales and support offices to service
customers on a worldwide basis. International sales accounted for 43.6% of
sales in fiscal 1997, 45.1% of sales in fiscal 1998, 47.9% of sales in fiscal
1999 and 55.2% for the six month period ended February 28, 2000.
We derive our revenue from the sale of products to the microelectronics
industry and recognize revenue upon the shipment of such goods to customers.
Our costs of goods sold include polymers and purchased components,
manufacturing personnel, supplies and fixed costs related to depreciation and
operation of facilities and equipment. Our customers consist primarily of
semiconductor manufacturers and semiconductor equipment and materials
suppliers. We serve our customers through various subsidiaries and sales and
distribution relationships in the United States, Asia and Europe.
Our results in fiscal 1998 and 1999 were affected by downturns in the
semiconductor industry. During this time, we made significant investments in
capacity expansion. In 1998, in response to the downturn in the semiconductor
industry, we reduced personnel and variable expenses. We also consolidated
manufacturing operations by combining the activities of two of our facilities
into one, which allowed the Company to reduce
20
<PAGE>
infrastructure support costs and eliminate duplicate production equipment. In
the second half of calendar 1999, the semiconductor industry began to recover
from the downturn. This recovery has led to improved net sales and
profitability.
Entegris was incorporated in June 1999 to effect the business combination of
Fluoroware and Empak. We issued common stock in exchange for 100% of the
outstanding shares of both Fluoroware, which began operating in 1966, and
Empak, which began business in 1980. Accordingly, the historical financial
statements of Entegris are shown to include the historical accounts and results
of operations of Fluoroware and Empak and their respective subsidiaries, as if
the business combination had existed for all periods presented.
Results of Operations
The following table sets forth the relationship between various components
of operations, stated as a percentage of net sales, for each of the periods
indicated. Our historical financial data for fiscal 1997, 1998 and 1999 were
derived from, and should be read in conjunction with, our audited consolidated
financial statements and the related notes included elsewhere in this
prospectus. The historical financial data for the six month periods ended
February 28, 1999 and February 28, 2000 were derived from our unaudited
consolidated financial statements which, in the opinion of management, reflect
all adjustments necessary for the fair presentation of the financial condition
and results of operations for such periods.
<TABLE>
<CAPTION>
Six Months
Fiscal Year Ended Ended
August 31, February 28,
------------------- --------------
1997 1998 1999 1999 2000
----- ----- ----- ------ ------
(percentage of net sales)
<S> <C> <C> <C> <C> <C>
Net sales................................ 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of sales............................ 58.3 58.7 61.2 64.5 54.4
----- ----- ----- ------ ------
Gross profit............................. 41.7 41.3 38.8 35.5 45.6
Selling, general and administrative
expenses................................ 22.5 24.6 26.6 25.9 22.3
Engineering, research and development
expenses................................ 6.5 7.5 6.0 6.8 4.0
----- ----- ----- ------ ------
Operating profit......................... 12.7 9.2 6.2 2.8 19.3
Interest expense, net.................... 2.4 2.6 2.3 2.7 1.3
Other (income) expense, net.............. 0.8 (0.1) (0.8) (1.2) (4.0)
----- ----- ----- ------ ------
Income before income taxes and other
items................................... 9.5 6.7 4.7 1.2 22.0
Income tax expense....................... 3.8 1.7 1.8 0.1 7.4
Equity in net (income) loss of
affiliates.............................. (0.6) -- .7 1.1 (0.4)
Minority interest........................ 0.2 0.1 (0.2) -- 0.2
----- ----- ----- ------ ------
Net income............................... 6.1% 4.9% 2.4% 0.1% 14.8%
===== ===== ===== ====== ======
</TABLE>
Six Months Ended February 28, 2000 Compared to Six Months Ended February 28,
1999
Net sales. Net sales increased $45.1 million, or 40.4%, to $156.7 million in
the six months ended February 28, 2000, compared to $111.6 million in the
comparable period in fiscal 1999. The improvement reflected the increase in
product sales associated with the recovery in the semiconductor industry that
began in the second half of fiscal 1999. Revenue gains were recorded in all
geographic regions and across all product lines.
Gross profit. Gross profit in the six months ended February 28, 2000
increased by $31.8 million to $71.4 million, an increase of 80.5% over the
$39.6 million reported in the comparable period in fiscal 1999. Gross margin
for the first two quarters of fiscal 2000 improved to 45.6% compared to 35.5%
for the fiscal 1999 period. The improvements in the fiscal 2000 period
reflected the improved utilization of our production capacity associated with
the higher sales levels noted above, a more favorable product mix and the
benefits of integrating various elements of our manufacturing operations. Gross
margin and gross profit improvements were reported by both domestic and
international operations.
21
<PAGE>
Selling, general and administrative expenses. Selling, general and
administrative expenses increased $6.1 million, or 21.0%, to $35.0 million in
the first six months of fiscal 2000 from $28.9 million in fiscal 1999. The
increase was due to higher commissions and incentive compensation as well as
increased expenditures for personnel and information systems. Selling, general
and administrative costs also increased due to an accrued expense of $0.9
million in the first six months of fiscal 2000 for charitable contributions, as
more fully described in the next paragraph. No significant charitable
contributions were made in fiscal 1999. Selling, general and administrative
costs, as a percentage of net sales, decreased to 22.3% from 25.9% primarily
due to increased net sales.
Fluoroware had historically contributed 5% of its profits to charitable
organizations, primarily through the Wallestad Foundation, which was
established by Victor Wallestad, Fluoroware's founder. The Wallestad Foundation
is dedicated to the support of Christian ministries in Minnesota, the United
States and throughout the world. Dan Quernemoen, Stan Geyer and James
Dauwalter, executive officers and directors of Entegris, have also been
directors of the Wallestad Foundation for many years. Because of the industry
downturn in 1998, Fluoroware made no significant charitable contributions for
fiscal 1998 or fiscal 1999. Management currently intends to annually contribute
5% of Entegris' net income to charitable organizations, primarily through the
Wallestad Foundation. The amount of the annual cash contributions is subject to
review by our board of directors annually in light of our cash needs, operating
results, existing conditions in the industry and other factors deemed relevant
by the Board.
Engineering, research and development expenses. Engineering, research and
development expenses decreased $1.3 million, or 17.7%, to $6.2 million in the
six months ended February 28, 2000 from $7.6 million in the comparable period
in fiscal 1999. The decrease was due to lower personnel costs reflecting
headcount reductions in the six month period ended February 28, 1999, as well
as reduced product sampling and development expenditures. Engineering, research
and development costs, as a percentage of net sales, decreased to 4.0% from
6.8% due to both increased net sales and reduced costs.
Interest expense, net. Net interest expense decreased 33.6% to $2.0 million
in the first half of fiscal 2000 compared to $3.0 million in the comparable
period a year ago. The decrease reflected the elimination of domestic credit
line borrowings and the short-term investment of available cash balances.
Other (income) expense, net. Other income was $6.3 million in the first six
months of fiscal 2000 compared to other income of $1.3 million in the
comparable fiscal 1999 period. The change was primarily due to the $5.5 million
gain recognized on the sale of approximately 612,000 shares of stock of Metron
in its initial public offering in November 1999. Other income in the first half
of fiscal 2000 also included gains from foreign exchange translation and the
sale of property and equipment.
Income tax expense. Income tax expense of $11.6 million was significantly
higher in the first half of fiscal 2000 compared to $89,000 in income tax
expense reported for the first six months of fiscal 1999, primarily reflecting
significantly higher income. Our effective tax rate of 33.6% in the fiscal 2000
period compared to 6.5% for the same period in fiscal 1999.
Equity in net (income) loss of affiliates. Our equity in the net income of
affiliates was $0.6 million in the six months ended February 28, 2000. Our
equity in the net loss of affiliates was $1.2 million in the comparable period
a year earlier. This improvement primarily reflects the operating results of
Metron, which reflected many of the same improved industry conditions affecting
our results.
Net income. Net income increased to $23.1 million in the six months ended
February 28, 2000, compared to net income of $0.1 million in the first half of
fiscal 1999.
Fiscal Year Ended August 31, 1999 Compared to Fiscal Year Ended August 31, 1998
Net sales. Net sales decreased $24.6 million, or 9.2%, to $242.0 million in
fiscal 1999 from $266.6 million in fiscal 1998. The revenue decline was
primarily associated with the slowdown experienced in
22
<PAGE>
the semiconductor industry and reflected lower sales in all major product lines
and geographic areas, primarily in the United States.
Gross profit. Gross profit in fiscal 1999 declined by $16.2 million to $93.8
million, a decrease of 14.7% from $110.1 million in fiscal 1998. Gross margin
for fiscal 1999 decreased to 38.8% compared to 41.3% in fiscal 1998. The
primary factor underlying the gross margin decline was the reduced utilization
of our production capacity resulting from lower sales levels in fiscal 1999, as
well as a less favorable product mix. A moderate expansion in production
capacity also contributed to the drop in gross margin.
Selling, general and administrative expenses. Selling, general and
administrative expenses decreased $1.2 million, or 1.8%, to $64.3 million in
fiscal 1999 from $65.5 million in fiscal 1998. Fiscal 1999 costs included
expenses of $5.4 million associated with the business combination of Flouroware
and Empak and higher information systems costs. These increases were offset by
improvements related to headcount reductions and lower incentive compensation.
Selling, general and administrative costs, as a percentage of net sales,
increased to 26.6% from 24.6% primarily due to the decline in net sales and
one-time business combination expenses.
Engineering, research and development expenses. Engineering, research and
development expenses decreased $5.3 million, or 26.9%, to $14.6 million in
fiscal 1999 from $19.9 million in fiscal 1998. The decrease was due to lower
personnel costs associated with personnel reductions related to the
semiconductor downturn, as well as reduced product sampling and development
expenditures. Engineering, research and development costs, as a percentage of
net sales, decreased to 6.0% from 7.5% due to both increased net sales and
reduced costs.
Interest expense, net. Net interest expense decreased 21.4% to $5.5 million
in fiscal 1999 compared to $7.0 million in fiscal 1998. The decrease reflected
reduced borrowings.
Other (income) expense, net. Other income was $1.9 million in fiscal 1999
compared to $0.3 million in fiscal 1998. The increase primarily reflected a
$2.0 million difference in foreign currency translation gains.
Income tax expense. Income tax expense decreased slightly in fiscal 1999
compared to fiscal 1998. Our effective tax rate was 38.8% in fiscal 1999
compared to 25.3% in fiscal 1998, which reflected the benefit of tax deductions
related to international operations not recognized in prior years.
Equity in net (income) loss of affiliates. Our equity in the net loss of
affiliates was $1.6 million in fiscal 1999 compared to $0.1 million in fiscal
1998. This decline reflects the operating results of Metron, which reflected
many of the same declining industry conditions affecting our results.
Net income. Net income decreased $7.4 million, or 56.2%, to $5.7 million in
fiscal 1999 from $13.1 million in fiscal 1998.
Fiscal Year Ended August 31, 1998 Compared to Fiscal Year Ended August 31, 1997
Net sales. Net sales decreased $10.7 million, or 3.9%, to $266.6 million in
fiscal 1998 from $277.3 million in fiscal 1997. The revenue decline reflected
the slowdown experienced in the semiconductor industry in 1998, particularly
affecting product sales in the second half of the year. We experienced lower
sales in the United States and Asia, which was partly offset by increased sales
in Europe. All major product lines were affected.
Gross profit. Gross profit in fiscal 1998 decreased by $5.5 million to
$110.1 million, a decrease of 4.7% from $115.6 million in fiscal 1997. Gross
margin for fiscal 1998 was 41.3% of net sales compared to 41.7% in fiscal 1997.
The primary factor underlying the slight gross margin decline was the reduced
utilization of our production capacity occurring in the second half of fiscal
1998 due to the reduced level of sales and severance
23
<PAGE>
costs associated with the reduction in manufacturing personnel which took place
in fiscal 1998. An expansion in production capacity in Asia and Europe also
contributed to the decrease in gross margin.
Selling, general and administrative expenses. Selling, general and
administrative expenses increased $3.2 million, or 5.1%, to $65.5 million in
fiscal 1998 from $62.4 million in fiscal 1997. Higher information systems
expenses and severance costs accounted for the increase. Selling, general and
administrative costs, as a percentage of net sales, increased to 24.6% from
22.5%, reflecting both the increased costs and lower net sales.
Engineering, research and development expenses. Engineering, research and
development expenses increased $1.9 million, or 10.7%, to $19.9 million in
fiscal 1998 from $18.0 million in fiscal 1997. The increase reflected higher
personnel, product sampling and development costs. Engineering, research and
development costs, as a percentage of net sales, increased to 7.5% from 6.5%,
reflecting both the increased costs and lower net sales.
Interest expense, net. Our net interest expense rose slightly to $7.0
million in fiscal 1998 compared to $6.7 million in fiscal 1997. The increase
reflected an increased level of average outstanding borrowings.
Other (income) expense, net. Other income was $0.3 million in fiscal 1998
compared to other expense of $2.2 million in fiscal 1997. The increase
reflected lower foreign currency translation losses in fiscal 1998 and $1.2
million in gains on property and equipment sales in fiscal 1998.
Income tax expense. Our effective income tax rate was 25.3% in fiscal 1998
compared to 40.2% in fiscal 1997. The lower rate in fiscal 1998 primarily
reflected the benefit of tax deductions related to international operations not
recognized in prior years.
Equity in net (income) loss of affiliates. Our equity in the net loss of
affiliates was $0.1 million in fiscal 1998, compared to equity in net income of
affiliates of $1.8 million in fiscal 1997. This decrease reflected the
operating results of Metron, which reflected many of the same declining
industry conditions affecting our operating results.
Net income. Net income decreased $3.9 million, or 22.7%, to $13.1 million in
fiscal 1998 from $16.9 million in fiscal 1997.
24
<PAGE>
Quarterly Results of Operations
The following tables present consolidated statements of operations data in
dollars and as a percentage of net sales for the six quarters ended February
28, 2000. In management's opinion, this unaudited information has been prepared
on the same basis as our audited consolidated financial statements appearing
elsewhere in this prospectus. All adjustments which management considers
necessary for the fair presentation of the unaudited information have been
included in the quarters presented. The results for any quarter are not
necessarily indicative of the results to be expected for the entire year or any
future period. For example, our results were positively affected in the first
quarter of fiscal 2000 by the $5.4 million gain recognized on the sale of
approximately 612,000 of Metron stock in its initial public offering in
November 1999.
<TABLE>
<CAPTION>
Fiscal Year 1999 Fiscal Year 2000
----------------------------------- -----------------
Statement of Operations Q1 Q2 Q3 Q4 Q1 Q2
Data: ------- ------- ------- ------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
Net sales............... $51,467 $60,124 $60,585 $69,777 $71,816 $ 84,846
------- ------- ------- ------- ------- --------
Gross profit............ 17,091 22,473 24,737 29,545 31,784 39,618
Selling, general and
administrative
expenses............... 14,110 14,786 13,897 21,543 15,366 19,596
Engineering, research
and development
expenses............... 4,379 3,192 3,345 3,649 3,288 2,946
------- ------- ------- ------- ------- --------
Operating profit
(loss)................. (1,398) 4,495 7,496 4,353 13,130 17,076
------- ------- ------- ------- ------- --------
Net income (loss)....... $(1,650) $ 1,750 $ 2,433 $ 3,197 $12,045 $ 11,068
======= ======= ======= ======= ======= ========
<CAPTION>
Percentage of Net Sales Q1 Q2 Q3 Q4 Q1 Q2
Data: ------- ------- ------- ------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
Net sales............... 100.0 % 100.0% 100.0% 100.0% 100.0% 100.0%
------- ------- ------- ------- ------- --------
Gross profit............ 33.2 37.4 40.8 42.3 44.3 46.7
Selling, general and
administrative
expenses............... 27.4 24.6 22.9 30.9 21.4 23.1
Engineering, research
and development
expenses............... 8.5 5.3 5.5 5.2 4.6 3.5
------- ------- ------- ------- ------- --------
Operating profit
(loss)................. (2.7)% 7.5% 12.4% 6.2% 18.3% 20.1%
------- ------- ------- ------- ------- --------
Net income (loss)....... (3.2)% 2.9% 4.0% 4.6% 16.8% 13.0%
======= ======= ======= ======= ======= ========
</TABLE>
Over the past six quarters, we have generally reported improved net sales
and net income. These results reflect improved conditions in the semiconductor
industry and increased sales of all product lines. Gross profits have increased
throughout fiscal 1999 and into fiscal 2000 due to higher sales, improved
utilization of our product capacity and a more favorable product sales mix.
Selling, general and administrative expenses were impacted in the quarter ended
August 1999 by $5.4 million associated with the business combination. Many of
our customers have upgraded their facilities in the second quarter of fiscal
2000, which resulted in a significant increase in the sale of wafer management
products. We expect a charge of approximately $1.5 million in the fourth
quarter of fiscal 2000 due to the early extinguishments of a portion of our
long-term debt, which will be possible due to the proceeds of our initial
public offering.
Our quarterly results of operations have been, and will likely continue to
be, subject to significant fluctuations due to a variety of factors, including,
among others:
. economic conditions in the semiconductor industry;
. size, timing and shipment of customer orders;
. timing of announcements or introductions by us or our competitors of
product upgrades or enhancements;
. exchange rate fluctuations;
. price competition;
. our ability to design, introduce and manufacture new products on a cost
effective and timely basis; and
. other factors, a number of which are beyond our control.
25
<PAGE>
Liquidity and Capital Resources
We have historically financed our operations and capital requirements
through cash flow from operating activities, long-term loans, and lease
financing (some of which are secured by property and equipment) and borrowings
under domestic and international short-term lines of credit.
Operating activities. Cash flow provided by operations for the six-month
period ended February 28, 1999 was $13.3 million and for the six-month period
ended February 28, 2000 was $24.2 million. The increase was primarily due to
increased net income partly offset by higher working capital required to fund
increased accounts receivable levels.
Cash flow provided by operating activities totaled $43.4 million in fiscal
1999, $45.9 million in fiscal 1998 and $28.5 million in fiscal 1997. Net income
and noncash charges primarily accounted for the cash flow generated by
operations. Fiscal 1998 and 1999 operating cash flows also benefited from
reductions in working capital, while increases in working capital reduced the
cash flow from operations in fiscal 1997.
Investing activities. Cash flow used in investing activities was $4.7
million for the six-month period ended February 28, 1999 and $3.5 million for
the six-month period ended February 28, 2000. Acquisitions of property and
equipment totalled $5.2 million for the six-month period ended February 28,
1999 and $7.3 million for the six-month period ended February 28, 2000.
Significant capital expenditures in fiscal 2000 include additions of
manufacturing equipment and the upgrading of information systems throughout the
organization.
Cash flow used in investing activities totaled $46.3 million in fiscal 1997,
$34.0 million in fiscal 1998 and $9.3 million in fiscal 1999. Acquisitions of
property and equipment totaled $44.9 million in fiscal 1997, $33.5 million in
fiscal 1998 and $10.1 million in fiscal 1999. Most of our capital expenditures
are for new facilities, manufacturing equipment and computer and communications
equipment. We continue to upgrade and integrate our management information and
financial reporting systems. We plan capital expenditures of approximately $20
million during 2000.
Financing activities. Financing activities in the six months ended February
28, 1999 used cash of $12.9 million and in the six months ended February 28,
2000 used $12.0 million, as we eliminated our use of domestic short-term
borrowings and made scheduled payments on our long-term borrowing and capital
lease obligations. In the six months ended February 28, 2000 we also used $8.3
million to redeem shares of common stock.
Cash provided by financing activities totaled $17.9 million in fiscal 1997,
while cash used by financing activities was $14.9 million in fiscal 1998 and
$27.1 million in fiscal 1999. In fiscal 1997, new borrowings exceeded payments
on existing debt by $19.7 million. This increase in debt was required because
cash flow from operating activities was not adequate to cover the high level of
investing activities taking place that year. In fiscal 1998 and fiscal 1999, we
were able to pay down outstanding debt with cash flow from operations not used
for investing purposes. We also repurchased common shares for $2.2 million in
fiscal 1997, $2.6 million in fiscal 1998, $1.1 million in fiscal 1999 and $8.3
million in the six months ended February 2000, primarily in connection with the
redemption of common stock from our Employee Stock Ownership Plan.
Our sources of available funds as of February 28, 2000 were comprised of
$25.0 million in cash and cash equivalents and credit facilities. We have
unsecured revolving commitments with two commercial banks with aggregate
borrowing capacity of $30.0 million, with no borrowings outstanding at February
28, 2000. We also have lines of credit, equivalent to an aggregate $12.0
million with six international banks, which provide for borrowings of Deutsche
marks, Malaysia ringgits and Japanese yen for our overseas subsidiaries.
Borrowings outstanding on these lines of credit were $8.0 million at February
28, 2000.
26
<PAGE>
We believe that our cash and cash equivalents, cash flow from operations and
available credit facilities, together with the proceeds of the public offering,
will be sufficient to meet our working capital and investing requirements for
the next twelve months. However, our future growth, including potential
acquisitions, may require additional funding, and from time to time we may need
to raise capital through additional equity or debt financing. If we were unable
to obtain this additional funding, we might have to curtail our expansion or
acquisition plans. There can be no assurance that any such financing would be
available to us on commercially acceptable terms.
Recently Issued Accounting Pronouncements
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards (SFAS) No. 133, "Accounting for Derivative
Instruments and Hedging Activities." This statement, as amended, requires
companies to record derivatives on the balance sheet as assets or liabilities,
measured at fair value. Gains or losses resulting from changes in the values of
those derivatives would be accounted for depending on the use of the derivative
and whether it qualifies for hedge accounting. SFAS No. 133 will be effective
for us beginning in the first quarter of fiscal 2001. We are currently
assessing the impact of SFAS No. 133 on our consolidated financial position,
results of operations and cash flows.
Quantitative and Qualitative Disclosure About Market Risks
Our principal market risks are sensitivities to interest rates and foreign
currency exchange rates. Our exposure to interest rate fluctuations is not
significant. Most of our outstanding debt at February 28, 2000 carried fixed
rates of interest. All of our short-term investments are debt instruments that
mature in three months or less.
We use derivative financial instruments to manage foreign currency exchange
rate risk associated with the sale of products from the United States when such
sales are denominated in currencies other than the U.S. dollar. The cash flows
and earnings of our foreign-based operations are subject to fluctuations in
foreign exchange rates. A hypothetical 10% change in the foreign currency
exchange rates would increase or decrease our net income by approximately $2
million.
Our cash flows and earnings are also subject to fluctuations in foreign
exchange rates due to investments in foreign-based affiliates. Investments in
affiliates include our 20.8% interest in Metron and our 30.0% interest in FJV
(Korea) Ltd. Metron attempts to limit its exposure to changing foreign currency
exchange rates through operational and financial market actions. Products are
sold in a number of countries throughout the world resulting in a diverse
portfolio of transactions denominated in foreign currencies. Metron manages
certain short-term foreign currency exposures by the purchase of forward
contracts to offset the earnings and cash flow impact of foreign currency
denominated receivables and payables.
Our investment in Metron is accounted for by the equity method of accounting
and has a carrying value on the balance sheet of approximately $13.3 million.
The fair value of Metron is subject to stock market fluctuations. Based on the
closing stock price of Metron on February 28, 2000, the fair value of our
investment in Metron was approximately $65.2 million.
Impact of Inflation
Our financial statements are prepared on a historical cost basis, which does
not completely account for the effects of inflation. However, since the cost of
about three-quarters of our inventories is determined using the last-in, first-
out (LIFO) method of accounting, cost of sales, except for depreciation expense
included therein, generally reflects current costs. The cost of polymers, our
primary raw material, was essentially unchanged from a year ago. We expect the
cost of resins to remain stable in the foreseeable future. Labor costs,
including taxes and fringe benefits, rose modestly in fiscal 1999, and a
moderate increase also can be reasonably anticipated for fiscal 2000.
27
<PAGE>
BUSINESS
Overview
We are a leading provider of materials management solutions to the
microelectronics industry including, in particular, the semiconductor
manufacturing and disk manufacturing markets. Our materials management
solutions for the semiconductor industry assure the integrity of materials as
they are handled, stored, processed and transported throughout the
semiconductor manufacturing process, from raw silicon wafer manufacturing to
packaging of completed integrated circuits. These solutions enable our
customers to protect their investment in work-in-process and finished devices
by facilitating the safe handling, purity and precision processing of the
critical materials used in their manufacturing process.
With over 10,000 standard and customized products, we believe we provide the
most comprehensive portfolio of materials management products to the
microelectronics industry. Our materials management products, such as wafer
shippers, wafer transport and process carriers, pods and work-in-process boxes,
preserve the integrity of wafers as they are transported from wafer
manufacturers to semiconductor manufacturers, processed into finished wafers
and integrated circuits and subsequently tested, assembled and packaged. We
also provide chemical delivery products, such as valves, fittings, tubing, pipe
and containers, that assure the consistent and safe delivery and storage of
sophisticated chemicals between chemical manufacturers and semiconductor
manufacturers' point-of-use.
We sell our products worldwide to over 1,000 customers, who represent a
broad base of leading suppliers to the microelectronics industry. Our customers
in the semiconductor industry include wafer manufacturers, chemical suppliers,
equipment manufacturers, device manufacturers and assemblers. Our semiconductor
customers include Amkor/Anam, Applied Materials, Arch Chemicals, IBM, Infineon,
Intel, Texas Instruments and TSMC. Our customers in data storage manufacturing
include HMT, IBM, Komag and Seagate Technology. International sales represented
approximately 45.1% of our sales in fiscal 1998, 47.9% of our sales in fiscal
1999 and 47.7% of our sales in the six months ended February 28, 2000. We
provide our customers with a worldwide network of sales and support personnel,
which enable us to offer local service to our global customer base and assure
the timely and cost-effective delivery of our products.
Industry Background
Semiconductors, or integrated circuits, are the building blocks of today's
electronics and the backbone of the information age. The market for
semiconductors has grown significantly over the past several years. This trend
is expected to continue due to rapid growth in Internet usage and the
continuing demand for applications in data processing, wireless communications,
broadband infrastructure, personal computers, handheld electronic devices and
other consumer electronics. As integrated circuit performance has increased and
the size and cost have decreased, the use of semiconductors in these
applications has grown significantly. According to the Semiconductor Industry
Association, or SIA, worldwide semiconductor revenues grew by 14.7% in 1999 to
$144.1 billion, and is expected to grow at a compound annual growth rate of
17.5% over the next three years to $233.6 billion in 2002.
The semiconductor materials industry is comprised of a wide variety of
materials and consumables that are used throughout the semiconductor production
process. The extensive and complex process of turning bare silicon wafers into
finished integrated circuits is dependent upon a variety of materials used
repeatedly throughout the manufacturing process, such as silicon, chemicals,
gases and metals. The handling of these materials during the integrated circuit
manufacturing process requires the use of a variety of products, such as wafer
shippers, wafer transport and process carriers, fluid and gas handling
components and integrated circuit trays. Semiconductor unit volume is the
primary driver of the demand for these materials and products because they are
used or consumed throughout the production process and many are replenished or
replaced on a regular basis. While influenced by capacity expansion, the
semiconductor materials and materials management industries are less cyclical
than the semiconductor capital equipment industries.
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<PAGE>
Semiconductor Manufacturing Process
Semiconductor manufacturing is highly complex and consists of two principal
segments: front-end and back-end processes. The front-end process begins with
the delivery of raw wafers from wafer manufacturers to semiconductor
manufacturers. After the wafers are shipped to semiconductor manufacturers,
they are processed into finished wafers. During the front-end process, raw
wafers undergo a series of highly complex and sensitive manufacturing steps,
during which a variety of materials, including chemicals and gases, are
introduced. Once the front-end manufacturing process is completed, finished
wafers are transferred to back-end manufacturers or assemblers. The back-end
semiconductor manufacturing process consists of test, assembly and packaging of
finished wafers into integrated circuits. Materials management products, such
as wafer shippers, wafer transport and process carriers, fluid and gas handling
components and integrated circuit trays, facilitate the storage, transport,
processing and protection of wafers through these front-end and back-end
manufacturing steps. Semiconductor manufacturing has become more complex in
recent years as new technologies have been introduced to enhance device
performance and as larger wafer sizes have been introduced to increase
production efficiencies. Increased processing complexity adds significantly to
the cost of constructing and equipping a wafer manufacturing facility, or fab,
which can now exceed $2 billion.
As a result of the growing cost and complexity of manufacturing integrated
circuits, semiconductor manufacturers have increasingly focused on improving
productivity in their manufacturing facilities. In the 1970s, yield management
techniques such as process monitoring and in-line testing were introduced to
the semiconductor manufacturing process. These techniques were widely adopted
in the 1980s and 1990s. Automation was introduced to semiconductor
manufacturing facilities in the 1980s in an effort to improve efficiency.
Because of the widespread use of these technologies, significant productivity
gains have already been realized.
Materials Management Focus
In an effort to realize continued productivity gains, semiconductor
manufacturers have become increasingly focused on materials management
solutions that enable them to safely store, handle, process and transport
materials throughout the manufacturing process to minimize the potential for
damage or degradation to their materials and to protect their investment in
processed wafers. Wafer processing can involve as many as 500 steps and take up
to six weeks. As a result, a batch of 25 fully processed wafers can cost more
than $1 million. Since significant value is added to the wafer during each
successive manufacturing step, it is essential that the wafer be handled
carefully and precisely to minimize damage. In addition, materials handling
products must meet exact specifications each and every time or valuable wafers
can be damaged. For example, in the case of wafer carriers, precise wafer
positioning, highly reliable and predictable cassette interface dimensions and
advanced materials are crucial. The failure to prevent damage to wafers can
severely impact integrated circuit performance, render an integrated circuit
inoperable or disrupt manufacturing operations. Thus, semiconductor
manufacturers are seeking to:
. minimize contamination--semiconductor processing is now so sensitive
that ionic contamination in certain processing chemicals is measured in
parts per trillion;
. protect semiconductor devices from electrostatic discharge and shock;
. avoid process interruptions;
. prevent damage or abrasion to wafers and materials during automated
processing caused by contact with other materials or equipment;
. prevent damage due to abrasion or vibration of work-in-process and
finished goods during transportation to and from customer and supplier
facilities; and
. eliminate the dangers associated with handling toxic chemicals--
according to Rose Associates, the semiconductor industry will use over
100 million gallons of extremely corrosive chemicals in 2000 alone.
29
<PAGE>
The importance of efficiently managing materials throughout the
manufacturing process and the need to protect wafers have been officially
recognized by the Semiconductor Equipment and Materials International (SEMI)
organization, a leading industry trade organization. SEMI has included the need
to eliminate these risks in SEMI's official standards publication.
The need for efficient and reliable materials management is particularly
important as new materials are introduced and as 300mm semiconductor wafer
manufacturing becomes a more prevalent manufacturing technology. These 300mm
wafers are increasingly larger, more costly and more complex, and thus are more
vulnerable to damage or contamination. In addition, new materials as well as
increased wafer size and circuit shrinkage create new contamination and
material compatability risks. These trends will present new and increasingly
difficult shipping, transport, process and storage challenges.
The semiconductor materials industry and the materials management industry
are highly fragmented and are served by a variety of providers, consisting of
divisions within large corporations and smaller companies that target niche
markets or specific geographic regions. Semiconductor manufacturers require
materials management providers that demonstrate a deep knowledge of materials
management and semiconductor manufacturing, have a track record of reliability,
offer a broad product line and have the ability to support and service customer
needs worldwide.
The Entegris Solution
We are a leading provider of materials management solutions that assure the
integrity of materials as they are handled, stored, processed and transported
throughout the semiconductor manufacturing process, from raw silicon wafers to
completed integrated circuits. Among other things, our comprehensive portfolio
of products enable:
. secure transport of materials, including chemicals and raw silicon
wafers, from suppliers to the fab;
. storage, handling and transport of wafers throughout fab processing;
. storage, mixing and distribution of chemicals throughout fab processing;
. delivery of finished wafers to test, assembly and packaging facilities;
and
. safe handling of integrated circuit packages and bare die at the test,
assembly and packaging facilities.
We also apply our materials integrity expertise within other markets in the
microelectronics industry, such as the data storage market.
Our customers benefit from our comprehensive product line, advanced
manufacturing capabilities, extensive polymer expertise, industry and
applications knowledge and worldwide infrastructure.
Comprehensive Product Line
With over 10,000 products, we believe that we offer the broadest product
offering of materials management solutions for the microelectronics
manufacturing industry. In the last eighteen months, we have released more than
100 new products, including front opening unified pods, or FOUPs, and 500
derivative products. In the semiconductor industry, we offer products to ship,
process, test and store wafers before, during and after the integrated circuit
manufacturing process. We also offer a complete product line to transport,
process, store and ship chemicals used in the semiconductor manufacturing
process. In the data storage market, we offer a broad range of products to
transport and handle magnetic hard disk drives, read/write heads and optical
and compact disks.
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<PAGE>
Advanced Manufacturing Capabilities
We have a wide range of advanced polymer manufacturing capabilities that use
a variety of mold designs to produce high precision products, often in
cleanroom facilities. Our polymer capabilities include:
. injection molding
. rotational molding
. blow molding
. extrusion
. machining
. welding and flaring
. sheet lining
. over-molding
. insert molding and
. prototyping
These capabilities, coupled with our strengths in advanced tool design and
mold-making, high volume manufacturing, quality assurance and polymer
reclaiming, enable us to be a leader in our markets.
Extensive Polymer Expertise
We have extensive research experience with the advanced polymer materials
used in our products. We have expertise in:
. material evaluation
. analytical chemistry
. polymer blending and
. quality assurance techniques
We understand the properties of advanced polymers, how they interact with
other materials used in the semiconductor manufacturing process and how they
address the varying conditions of the manufacturing process.
Industry and Applications Knowledge
Throughout our 34-year history, we have worked closely with semiconductor
and hard disk drive manufacturers and materials suppliers to accumulate
considerable insight into the increasingly complex manufacturing requirements
of the semiconductor and data storage markets. This insight allows us to more
effectively target our research and development toward products that satisfy
our customers' manufacturing requirements. Our industry knowledge encompasses:
. contamination control
. electrostatic discharge protection and
. cleanroom manufacturing
This industry knowledge has enabled us to serve as a leader in developing
industry standards. Our ability to characterize and test products allows us to
understand the interaction of our products with wafers in our customers'
manufacturing process in order to ensure superior performance while reducing
the risk of damage.
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<PAGE>
Worldwide Infrastructure
Our worldwide infrastructure positions us in every major region of the world
where semiconductor manufacturing takes place. Our manufacturing operations and
support offices in the United States, Europe and Asia enable us to offer local
service, the timely and cost-effective delivery of our products and the
capacity to meet customer requirements. We offer customer service 24 hours a
day, 7 days a week.
Entegris' Strategy
Our objective is to build upon our leadership in materials management
solutions for semiconductor device, equipment and materials suppliers, as well
as apply our expertise to the growing materials management needs of other
markets. The key elements of our strategy to achieve this objective are:
Expand Technological Leadership
Since our inception, we have been an innovator in materials management
solutions for the semiconductor industry. For example, our chemical delivery
product line represents a number of industry firsts, including:
. the first perfluoroalkoxy, or PFA, fusion-bonded piping
. the first valves with no metal parts in the fluid stream
. the first nonmetallic capacitive sensors to successfully perform in
harsh environments at high temperatures and
. the first pinch valve.
Additionally, we are a leading designer and manufacturer of 300mm materials
management solutions with products such as FOUPs, and reduced-pitch front
opening shipping boxes, or FOSBs. We will continue to expand the scope of our
technology leadership by:
. identifying viable new polymers for materials management applications
. developing innovative product designs and advanced processes for molding
difficult materials and
. aiding the industry in establishing manufacturing standards for
materials management products.
Broaden Product Offering
Although we offer a comprehensive line of more than 10,000 products, we
believe that there is significant potential for sales of new products and
solutions in the semiconductor and data storage markets and within the broader
microelectronics industry including, among others:
. new products and solutions for the emerging 300mm wafer market;
. upgrading 200mm fabs with new and improved products;
. new products and solutions to store, mix, handle and transport ultra-
pure and corrosive chemicals used in the semiconductor manufacturing
process; and
. new products and solutions in the area of testing, storing and shipping
finished integrated circuits.
We are committed to developing new products through both internal research and
development and strategic acquisitions.
Enhance Relationships with Customers and Suppliers
For over three decades, we have cultivated our relationships with our key
customers and suppliers. We work closely with our customers during the
engineering and design phase to identify and respond to their
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<PAGE>
requests for future generation products. For example, our application engineers
work closely with key original equipment manufacturers, or OEMs, to assure that
our products are designed to interface smoothly with their equipment. In
addition, we enjoy long-standing collaborative relationships with key
suppliers, which provide us with technical information and access to new or
improved materials. We will continue to emphasize these collaborative
relationships with customers and suppliers in order to develop new and enhanced
products.
Expand in Japan
We believe that further penetration of the Japanese market is critical to
our growth. Five of the world's seven largest wafer manufacturers are
headquartered in Japan. We have maintained a manufacturing and sales presence
in Japan since the 1970s through licensing arrangements, joint venture
injection molding operations and a joint venture sales company, which has
allowed us to develop strategic relationships and an understanding of the
Japanese market. To increase our presence in Japan, we intend to expand our
local manufacturing operations, introduce new products, expand our marketing
initiatives and pursue strategic acquisitions.
Pursue Selective Acquisitions
Although we currently have no agreements or commitments to acquire any
business, we intend to pursue selective acquisitions to complement our growth.
Our goal is to acquire businesses that will strengthen our position in our
targeted markets, enhance our technology base, increase our manufacturing
capability and our product offerings and expand our geographic presence.
Expanding our business in key market segments could strengthen our presence
with existing customers and provide access to new customers who seek a global
service provider for their materials management needs.
Expand into New Industries
We believe that our materials management expertise can be applied outside
the microelectronics industry to a variety of industries that use sophisticated
manufacturing processes and have critical materials management needs. For
example, in the biopharmaceutical industry, we are seeking to apply our
expertise to live bacteria drug manufacturing, which is a metal-sensitive
process enabled by our polymer expertise and products. We are also pursuing
other growth opportunities in the chemical processing and medical device
markets.
Markets and Products
With over 10,000 standard and customized products, we believe that we
provide the most comprehensive portfolio of materials management solutions to
the microelectronics industry. Our product lines address both the semiconductor
and the data storage manufacturing markets. During the front-end semiconductor
manufacturing process, we provide materials management products and services
that preserve the integrity of wafers as they travel from wafer manufacturers
to semiconductor manufacturers. As the wafers are subsequently processed, we
provide wafer transport products that reliably interface with automated
processing equipment. We also provide products that safely deliver processing
chemicals from chemical manufacturers to containers at the fab and then from
containers to process equipment within the fab. During the back-end
semiconductor manufacturing process, we provide products that transport and
handle completed integrated circuits during testing, assembly and packaging.
Furthermore, we provide products that prevent degradation and damage to
magnetic hard disk drives and read/write heads as they are processed and
shipped.
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<PAGE>
The following table summarizes the breadth of our materials management
product offerings.
Representative Product Enabling
Process Products Description Function
- ------- -------------- ----------- --------
MICROELECTRONICS
Semiconductor
Front-End:
Wafer Manu- o Ultrapak(R) Transport and storage Preserves the
facturing o Crystalpak(R) products and systems integrity of raw
o FabFit300(TM) for 100, 125, 150, wafers during
200 and 300mm shipment from
raw wafers wafer manufacturers
to semiconductor
manufacturers
Wafer Handling o KA250(R) Pods, carriers and Holds and positions
o F300 FOUP work-in-process wafers during
boxes for 100, 125, processing
150, 200, and 300mm including precise
process wafers interfaces with
automation and
manufacturing
equipment
Chemical Delivery o Valves: High purity Provides consistent
Integra(R), corrosion resistant and safe delivery
Dymak(R), fluid handling of sophisticated
Accuflo(TM) components for chemicals from
o Fittings: chemical transport chemical manu-
Flaretek(R), and bulk storage facturers to semi-
Galtek(R), conductor manufac-
Quikgrip(R) turers' point-of-
o Tubing: use
FluoroLine(R)
o Pipes:
PUREBOND(R)
o Containers:
FluoroPure(R)
Back-End:
Test, Assembly
and Packaging o 1120/1144 Bare Transport, handling Preserves the
Die Trays and storage systems integrity of wafers
o JEDEC/Matrix for wafer, bare die, and die during
Trays single die, in transportation to
process die, and back-end opera-
packaged die tions by avoiding
electrostatic
discharge and
contamination
Microelectronics
Disk Manu- o Disk Shipper Trays and carriers Prevents degrada-
facturing o Read/Write for read/write and tion and damage to
Head Trays disk processing and critical data
shipping in all storage components
sizes and
substrates
OTHER
Biopharmaceutical,
Tele-
communications,
Medical and Other o Cynergy(R) Wide variety of Enables new
o Filter Housing custom designed technologies and
and Components and molded products applications such
o Micro-molded for use in high as live bacteria
Parts technology manufacturing tech-
applications niques and minia-
including fluid turization for
transfer and telecommunications
sophisticated
medical devices
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<PAGE>
Semiconductor Manufacturing: Front-End
Wafer Manufacturing Products. We are a leading provider of critical shipping
products that preserve the integrity of raw silicon wafers as they are
transported from wafer manufacturers to semiconductor manufacturers. We lead
the market with our extensive, high volume line of UltraPak(R) and
CrystalPak(R) products which are supplied to wafer manufacturers in a full
range of sizes covering 100, 125, 150 and 200mm wafers. The UltraPak(R) was
first introduced in the mid 1980s. It is made of a proprietary blend of
polypropylene and is the market leader in wafer shipping boxes. The
CrystalPak(R) was introduced in the early 1990s as a reusable wafer shipping
box and is made of a proprietary blend of polycarbonate. Continuing our
technological leadership in the market, we offer the FabFit300(TM) for the
transportation and automated interface of 300mm wafers. We offer a complete
shipping system, including both wafer shipping containers as well as secondary
packaging that provide another level of protection for wafers. This 300mm wafer
system reduces the cleaning, shipping and storage costs for semiconductor
manufacturers and allows them to optimize the use of their premium cleanroom
space.
Wafer Handling Products. We believe that we are a market leader in wafer
handling products. We offer a wide variety of products that hold and position
wafers as they travel to and from each piece of equipment used in the automated
manufacturing process. These specialized carriers provide precise wafer
positioning, wafer protection and highly reliable and predictable cassette
interfaces in automated fabs. Semiconductor manufacturers rely on our products
to improve yields by protecting wafers from abrasion, degradation and
contamination during the manufacturing process. We provide standard and
customized products that meet the full spectrum of industry standards and
customers' wafer handling needs including FOUPs, wafer transport and process
carriers, pods and work-in-process boxes. To meet our customers' varying wafer
processing and transport needs, we offer wafer carriers in a variety of
materials and in sizes ranging from 100mm through 300mm.
Chemical Delivery Products. Chemicals spend most of their time in contact
with fluid storage and management distribution systems, so it is critical for
fluid storage and handling components to resist these chemicals and avoid
contributing contaminants to the fluid stream. We offer chemical delivery
products that allow the consistent and safe delivery of sophisticated chemicals
from the chemical manufacturer to the point-of-use in the semiconductor fab.
Most of these products are made from perfluoroalkoxy or PFA, a fluoropolymer
resin widely used in the industry because of its high purity and inertness to
chemicals. The innovative design and reliable performance of our products and
systems under the most stringent of process conditions has made us a recognized
leader in high purity fluid transfer products and systems.
Both semiconductor manufacturers and semiconductor OEMs use our chemical
delivery products and systems. Our comprehensive product line provides our
customers with a single source provider for their chemical storage and
management needs throughout the manufacturing process.
Our chemical delivery products include:
. Valves. We offer the Integra(R), Dymak(R) and Accuflo(TM) valves, each
of which were first in their respective applications. Our Integra(R)
valve was the first to feature no external metal parts, which can
corrode and pose a safety hazard when managing aggressive chemicals. Our
Dymak(R) valve is the first PFA pinch valve designed for chemical
mechanical polishing, or CMP, slurries, bulk chemical distribution and
other high flow applications. The all-PFA pinch element allows greater
resistance to chemical corrosion and offers lower particle generation
than competing valves. Our Accuflo(TM) metering valve is the first to be
molded entirely from PFA, which provides enhanced control for a broad
range of applications.
. Fittings. We provide fittings that have become the industry standard for
high purity chemical resistance. We offer three styles of fittings:
Flaretek(R), Quikgrip(R) and Galtek(R) fittings. Our Flaretek(R)
fittings feature a flare design that combines leak-free performance with
minimum dead volume. All of the wetted surfaces of our fittings products
are Teflon(R) PFA, chosen for its resistance to corrosion and wear in
the semiconductor processing environment. Our Quikgrip(R) fitting has a
gripper design that
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<PAGE>
features easy, user-friendly assembly. Additionally, our Galtek(R)
fittings represent the industry's first all PFA fitting featuring an
integral ferrule design for strength along with chemical resistance
features.
. Tubing. We offer three grades of FluoroLine(R) PFA tubing, which address
our customers' needs ranging from industrial to ultra high purity
applications.
. Pipe. Our PUREBOND(R) fusable piping components provide leak-free piping
systems by fusion bonding over rigid pipe and components. Our patented
method for joining PFA components allows flexibility of design and
assembly of fluid delivery systems. We offer many component
configuration sizes ranging from 1/4 inch to 2 inch inner diameters,
meeting a wide range of customer design requirements.
. Chemical Containers. We offer a broad spectrum of chemical transport and
storage containers that help ensure the safe delivery of sophisticated
chemicals from chemical manufacturers to the semiconductor
manufacturers' point-of-use. Our containers are well suited for the
microelectronics industry because they help minimize contamination of
chemicals to concentrations of parts per billion and parts per trillion.
Our sheet lining process allows us to provide containers for bulk
chemical storage and shipment of up to 19,000 liters. We offer a wide
variety of container types including drums, pressure vessels,
intermediate bulk containers, custom containers and bottles. In
addition, we provide our patented quick connect system, which enables
safe, risk-free connections for chemical container change-outs.
. Custom Fabricated Products. We offer a wide variety of custom-molded,
welded or fabricated fluid products, including custom valves, fittings,
filter housings, caps, closures, flanges and tanks. We manufacture these
custom products to meet stringent standards of consistency and safety by
offering a variety of high performance, chemically resistant materials.
Semiconductor Manufacturing: Back-End
Test, Assembly and Packaging Products. Rapidly changing packaging
strategies for semiconductor applications are creating new materials
management challenges for back-end manufacturers. We offer chip and matrix
trays as well as shippers and carriers for thinned wafers, bare die handling
and integrated circuits. Our materials management products are compatible with
industry standards and available in a wide range of sizes with various feature
sets. Our standard trays offer dimensional stability and permanent
electrostatic discharge protection. Our trays also offer a number of features
including:
. custom designs to minimize die movement and contact;
. shelves and pedestals to minimize direct die contact, special pocket
features to handle various surface finishes to eliminate die sticking;
and
. other features for automated or manual die placement and removal.
In addition, we support our product line with a full range of accessories
to address specific needs such as static control, cleaning, chip washing and
other related materials management requirements. To better address this
market, we have established ictray.com, a website which allows new and
existing customers to select from our full range of standard and custom
integrated circuit trays.
Hard Disk Drive Manufacturing
Disk Manufacturing Products. Like the semiconductor industry, the data
storage market continues to face new challenges and deploy new technologies at
an accelerating rate. We provide materials management products and solutions
to manage two critical sectors of this industry: magnetic disks and the
read/write heads used to read and write today's higher density disks. Because
both of these hard disk drive components are instrumental in the transition to
more powerful storage solutions, we offer products that carefully protect and
36
<PAGE>
maintain the integrity of these components during their processing, storage and
shipment. Our product offerings for magnetic hard disk drives include:
. process carriers
. boxes
. packages
. tools and
. shippers for aluminum and other disk substrates.
Our optical hard disk drive products include:
. stamper cases
. process carriers
. boxes and
. glass master carriers.
Our read/write head products include:
. transport trays
. carriers
. handles
. boxes
. individual disk substrate packages and
. accessories.
Other Industries
We offer our extensive polymer molding expertise to customers outside the
microelectronics industry, such as the biopharmaceutical, medical and
telecommunications industries. We work with our customers in these industries
to develop specialized components and assemblies that meet their stringent
specifications for close tolerances and cleanliness. We offer a wide variety of
services and capabilities to these customers, including:
.materials research
.parts design
.mold design
.manufacturing
.molding
.assembly and
.final testing
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<PAGE>
Customers
We have over 1,000 customers in North America, Europe and Asia, including
every major semiconductor manufacturer in the world. No single end-customer
accounts for over 5% of our sales. We provide products and solutions primarily
to semiconductor manufacturers and semiconductor equipment manufacturers,
chemical materials suppliers and data storage manufacturers. The following
table sets forth a list of major customers in each of the markets in which we
operate.
<TABLE>
<S> <C>
Semiconductor Wafer
Manufacturing
</TABLE>
<TABLE>
<S> <C>
Microelectronics
and
Semiconductor
Materials
</TABLE>
<TABLE>
<S> <C>
Mitsubishi Silicon Sumitomo Metals
MEMC Wacker Siltronic
Shin Etsu Handotai
(SEH)
Arch Chemicals Millipore
Ashland Pall
BOC Edwards
</TABLE>
<TABLE>
<S> <C> <C>
Semiconductor Device Manufacturing and Assembly
Semiconductor Device Manufacturing and Assembly
</TABLE>
<TABLE>
<S> <C> <C> <C>
AMD Hitachi LG International Samsung
Amkor/Anam Intel Micron Technology STMicroelectronics
ASE Test IBM Motorola Texas Instruments
Carsem Infineon NEC TSMC
Fujitsu Lucent Philips UMC
</TABLE>
<TABLE>
<S> <C>
Semiconductor Equipment Manufacturing
</TABLE>
<TABLE>
<S> <C>
Data Storage Manufacturing
</TABLE>
<TABLE>
<S> <C>
Applied Materials SCP Global Technologies
FSI International
Fujitsu Komag
Hoya MMC
HMT Seagate Technology
IBM
</TABLE>
<TABLE>
<S> <C>
Custom Products for Other Industries
</TABLE>
<TABLE>
<S> <C>
ADC Telecom Guidant
Boston Scientific Medtronic
Ericsson
</TABLE>
Sales and Marketing
We market and sell our products on a worldwide basis through a network of
direct sales personnel, commissioned sales representatives and stocking
distributors. Our sales and marketing initiatives in Japan are coordinated
through the sales office of Fluoroware Valqua Japan, our majority owned
subsidiary. Metron, a global distributor of semiconductor products and services
partially owned by Entegris, has broad distribution rights in Europe, and in
portions of the United States and Asia.
International sales accounted for 45.1% of our revenues in fiscal 1998,
47.9% in fiscal 1999 and 47.7% in the six months ended February 28, 2000. The
following table summarizes total net sales, based upon the
38
<PAGE>
country from which sales were made, and long-lived assets attributed to
significant countries for fiscal 1997, fiscal 1998 and fiscal 1999 (in
thousands):
<TABLE>
<CAPTION>
1997 1998 1999
-------- -------- --------
<S> <C> <C> <C>
Net sales:
United States................................ $252,230 $217,171 $176,345
Japan........................................ 13,232 19,129 20,337
Germany...................................... 10,103 18,853 26,278
Malaysia..................................... 818 5,828 12,100
Korea........................................ -- 1,249 2,443
Singapore.................................... 907 4,361 4,449
-------- -------- --------
$277,290 $266,591 $241,952
======== ======== ========
Long-lived assets:
United States................................ $ 95,847 $102,190 $ 84,271
Japan........................................ 7,404 6,044 7,100
Germany...................................... 5,034 7,143 6,484
Malaysia..................................... 9,807 13,094 12,955
Korea........................................ 25 2,742 5,131
Singapore.................................... 2,037 2,110 1,683
-------- -------- --------
$120,154 $133,323 $117,624
======== ======== ========
</TABLE>
We support our worldwide sales activities by stocking select products in
regional warehouses, which facilitates rapid response to customers' needs. For
example, Entegris Europe GmbH is a stocking location for distribution
throughout Europe. The worldwide offices of Metron also carry inventories to
meet regional demand.
Direct customer support comes from our five regional service and customer
support offices located in the United States, Germany, Japan, Korea and
Malaysia. We work with each of our regional service and customer support
offices to provide:
. regional marketing support
. including public relations
. collateral development and publication
. corporate positioning
. advertising
. trade show participation and communications.
Our marketing groups based in the United States support our global marketing
strategy, e-business and other initiatives.
Manufacturing
Our customers rely on our products to assure their materials integrity by
providing dimensional precision and stability, cleanliness and consistent
performance. Our ability to meet our customers' expectations, combined with our
substantial investments in worldwide manufacturing capacity, position us to
respond to the increasing materials management demands of the microelectronics
industry and other industries that require similar levels of materials
integrity.
To meet our customer needs worldwide, we have established an extensive
global manufacturing network with facilities in the United States, Germany,
Japan, Malaysia and South Korea. Because we work in an
39
<PAGE>
industry where contamination control is paramount, we maintain Class 100 to
Class 10,000 cleanrooms for manufacturing and assembly.
We believe that our worldwide manufacturing operations and our advanced
manufacturing capabilities are important competitive advantages. Our advanced
manufacturing capabilities include:
. Injection Molding. Our manufacturing expertise is based on our long
experience with injection molding. Using molds produced from computer-
aided processes, our manufacturing technicians utilize specialized
injection molding equipment and operate within specific protocols and
procedures established to consistently produce precision products.
. Extrusion. Extrusion is the use of heat and force from a screw to melt
solid polymer pellets in a cylinder and then forcing the resulting melt
through a die to produce tubing and pipe. We have established
contamination free on-line laser marking and measurement techniques to
properly identify products during the extrusion process and ensure
consistency in overall dimension and wall thicknesses.
. Blow Molding. Blow molding consists of the use of heat and force from a
screw to melt solid polymer pellets in a cylinder and then forcing the
melt through a die to create a hollow tube. The molten tube is clamped
in a mold and expanded with pressurized gas until it takes the shape of
the mold. We utilize advanced three-layer processing to manufacture 55
gallon drums, leading to cost savings while simultaneously assuring
durability, strength and purity.
. Rotational Molding. Rotational molding is the placing of a solid polymer
powder in a mold, placing the mold in an oven and rotating the mold on
two axes so that the melting polymer coats the entire surface of the
mold. This forms a part in the shape of the mold upon cooling. We use
rotational molding in manufacturing containers up to 5,000 liters. Our
rotational molding expertise has provided rapid market access for our
current fluoropolymer sheet lining manufacturing business.
. Sheet Lining. Sheet lining consists of welding thin sheets of polymer
into a solid lining that conforms to the shape of a large vessel, such
as a tanker truck. We sheet line stainless steel tanks up to 19,000
liters in size through a complex adhesive and welding process that
provides customers with purity and strength for the high volume storage
and transportation of corrosive chemicals.
. Machining. Machining consists of the use of computer controlled
equipment to create shapes, such as valve bodies, out of solid polymer
blocks or rods. Our computerized machining capabilities enable speed and
repeatability in volume manufacturing of our machined products,
particularly products utilized in chemical delivery applications.
. Assembly. We have established protocols, flow charts, work instructions
and quality assurance procedures to assure proper assembly of component
parts. The extensive use of robotics throughout our facilities reduces
labor costs, diminishes the possibility of contamination and assures
process consistency.
. Tool Making. We employ more than 100 toolmakers at three separate
locations in the United States. Our toolmakers produce the majority of
the tools we use throughout the world.
We have made significant investments in systems and equipment to create
innovative products and tool designs. Our pro-engineer CAD equipment allows us
to develop three-dimensional electronic models of desired customer products to
guide design and tool-making activities. Our pro-engineer CAD equipment also
aids in the rapid prototyping of products.
We also use computer-automated engineering in the context of mold flow
analysis. Beginning with a pro-engineer 3D model, mold flow analysis is used to
visualize and simulate how our molds will fill. The mold flow analysis
techniques cut the time needed to bring a new product to market because of the
reduced need for
40
<PAGE>
sampling and development. Also, our pro-engineer CAD equipment can create a
virtual part with specific geometries, which drives subsequent tool design,
tool manufacturing, mold flow analysis and performance simulation.
In conjunction with our three-dimensional product designs, we use finite
element software to simulate the application of a variety of forces or
pressures to observe what will happen during product use. This analysis helps
us anticipate forces that affect our products under various conditions. The
program also assists our product designers by measuring anticipated stresses
against known material strengths and establishing proper margins of safety.
Engineering, Research and Development
We devote a significant portion of our financial and human resources to
research and development programs. As of February 28, 2000, we employed
approximately 140 people in our worldwide engineering, research and development
department. Of these, more than 20 work in our materials and product testing
research laboratories, where we conduct general materials research to enhance
current products and strengthen our advanced materials knowledge. The other
engineering, research and development personnel perform product design and
development in response to general market needs as well as specific industry
and customer requests. Increasingly, customers ask us to conduct research and
development to find materials, products and systems that meet their specific
materials handling needs.
We utilize sophisticated methodologies to develop and characterize our
materials and products. Our materials technology lab is equipped to analyze the
physical, rheological, thermal, chemical and compositional nature of the
polymers we use. Our materials lab includes standard and advanced polymer
analysis equipment such as inductively coupled plasma mass spectrometry
(ICP/MS), inductively coupled plasma atomic emission spectrometry (ICP/AES),
Fourier transform infrared spectroscopy (FTIR) and automated thermal desorption
gas chromatography/mass spectrometry (ATD-GC/MS). This advanced analysis
equipment allows us to detect contaminants in materials that could harm the
semiconductor manufacturing process to levels as low as parts per billion, and
in some cases parts per trillion.
Our capabilities to test and characterize our materials and products are
focused on continuously reducing risk to our customers. The majority of our
research laboratories are located at our Chaska, Minnesota and Colorado
Springs, Colorado facilities. We expect that technology and product research
and development will continue to represent an important element in our ability
to develop and characterize our materials and products.
41
<PAGE>
Facilities
We conduct manufacturing operations in facilities strategically positioned
throughout the world. Our factory and warehouse facilities adequately meet our
production capacity and work flow requirements. Due to significant capital
spending over the past several years, we currently have significant unused
production and warehouse capacity. The table below presents certain information
relating to these manufacturing and related warehouse facilities.
<TABLE>
<CAPTION>
Facility Square
Location Footage Type of Ownership Manufacturing Use
<C> <C> <C> <S>
United States
Minnesota 712,000 6 facilities owned, Injection Molding, Extrusion, Blow
2 facilities leased Molding,
Rotational Molding, Tool Making,
Micro-molding,
Sheet Lining
Colorado 148,000 1 facility owned, Injection Molding, Tool Making
1 facility leased
California 30,000 1 facility leased Custom Manufacturing
Texas 20,000 1 facility leased Polymer Reclaiming
Malaysia 105,000 1 facility owned Injection Molding
Korea 78,000 1 facility owned, Injection Molding, Extrusion, Sheet
1 facility leased Lining
Germany 44,000 1 facility owned Injection Molding, Extrusion
Japan 42,000 1 facility owned Injection Molding
</TABLE>
Of the facilities leased, the table below presents certain relevant
information.
<TABLE>
<CAPTION>
State Square Footage Lease Termination
<C> <C> <S>
Minnesota--Chaska 124,000 March 31, 2011
Minnesota--Chanhassen 60,000 August 31, 2001 (1)
Minnesota--Gaylord 30,000 July 1, 2023
Colorado--Castle Rock 70,000 September 30, 2005
California--Upland 30,000 July 31, 2005
Texas--Pearland 20,000 December 31, 2000
Korea 23,000 Indefinite (2)
</TABLE>
- --------
(1)This property purchased May 1, 2000 for $2,530,000
(2)Lease agreement terminates at end of Joint Venture Agreement
Patents and Proprietary Rights
We rely on patent, copyright, trademark and trade secret laws,
confidentiality agreements and other contractual arrangements with our
employees, strategic partners and others to protect our technology. Our goal is
to obtain intellectual property protection to maintain our position as a leader
in materials management and to give us a competitive advantage in the industry.
We actively pursue a program of patent applications to seek protection of
technologically sensitive features of our materials management products and
processes. We conduct extensive research on the patentability of our
42
<PAGE>
innovations, the potential infringement on existing patents and the business
value of retaining the information as proprietary knowledge. With this
information, we determine whether to seek a patent, disclose the information
through an industry white paper or maintain the information as a trade secret.
Our patent portfolio consists of 95 current U.S. patents, which expire from
2000 to 2018, and 31 pending U.S. patent applications. We regularly seek patent
protection outside the United States by filing counterpart applications,
principally in Europe, Southeast Asia and Japan. We also pursue trademark
registration of our key trademarks in the principal countries where we do
business.
The patent position of any manufacturer, including us, is subject to
uncertainties and may involve complex legal and factual issues. Litigation may
be necessary in the future to enforce our patents and other intellectual
property rights or to defend ourselves against claims of infringement or
invalidity. The steps that we have taken in seeking patents and other
intellectual property protections may prove inadequate to deter
misappropriation of our technology and information. In addition, our
competitors may independently develop technologies that are substantially
equivalent or superior to our technology.
Competition
We face substantial competition from a number of companies, some of which
have greater financial, marketing, manufacturing and technical resources. We
are not aware of any single competitor who offers a comparable breadth of
materials management products and services in the microelectronics industry. We
compete on the basis of our technical expertise, product performance, advanced
manufacturing capabilities, global locations, quality, reliability, established
reputation and customer relationships. We believe that we compete favorably on
the basis of these factors in each of our served markets.
Our wafer management product line faces competition largely on a product-by-
product basis. We have historically faced significant competition from
companies such as Kakizaki, Sanga Flantek, Dainichi and Asyst Technologies.
These companies compete with us primarily in 200mm and 300mm applications. Our
chemical delivery products also face worldwide competition from companies such
as Furon, Parker, Pillar and Gemu. In assembly, packaging and testing of
semiconductor and data storage applications, we compete with companies such as
Advantek, GEL-Pak, ITW/Camtex, Peak International and 3M. Primary competition
for our wafer shipping containers comes from Japanese companies such as SEP and
Kakizaki. In the disk shipping and bare and packaged die tray markets, we face
competition from regional suppliers.
Employees
As of February 28, 2000, we had approximately 1,570 full-time employees
throughout the world, including 1,030 in manufacturing, 140 in engineering,
research and development, including custom product development, and 400 in
selling, marketing and general and administrative activities, including
customer service, finance and accounting, information technology, human
resources and corporate management. Of our full-time employees, 1,280 are
located in the United States, 70 are located in Europe and about 220 are
located in Asia. None of our employees are covered by a collective bargaining
arrangement. We consider our relationship with our employees to be good.
Legal Proceedings
We are not a party to any material pending legal proceedings.
43
<PAGE>
MANAGEMENT
Executive Officers, Directors and Key Personnel
The following table sets forth certain information with respect to each of
the executive officers and directors of Entegris, as of the date of this
prospectus.
<TABLE>
<CAPTION>
Name Age Position
- ---- --- --------
<S> <C> <C>
Daniel R.
Quernemoen(1).......... 69 Chairman of the Board
Stan Geyer(1)........... 51 President, Chief Executive Officer and Director
James E. Dauwalter...... 48 Executive Vice President, Chief Operating Officer and Director
John D. Villas.......... 42 Chief Financial Officer
James A. Bernards(2).... 53 Vice Chairman and Director
Robert J. Boehlke(2).... 58 Director
Mark A. Bongard......... 35 Director
Delmer M. Jensen(1)..... 62 Director
Roger D.
McDaniel(1)(2)......... 61 Director
</TABLE>
- --------
(1) Member of the compensation and stock option committee
(2) Member of the audit committee
Daniel R. Quernemoen has been Chairman of the board of directors of Entegris
since June 1999. Prior to that time, Mr. Quernemoen had been the Chairman of
the board of directors of Fluoroware since August 1987 and a member of its
board since 1970. Mr. Quernemoen was also Chief Executive Officer of Fluoroware
from 1982 to 1996 and President from 1980 to 1982. Mr. Quernemoen is a member
of the board of directors of SEMI and the Wallestad Foundation, a private non-
profit charity.
Stan Geyer has been President, Chief Executive Officer and a member of the
board of directors of Entegris since June 1999. Prior to that time, Mr. Geyer
had been the President and Chief Executive Officer of Fluoroware since
September 1996 and a member of its board of directors since 1982. Mr. Geyer
also served as Vice President of Marketing and Executive Vice President of
Fluoroware. Mr. Geyer serves on the board of directors of the Wallestad
Foundation.
James E. Dauwalter has been a director of Entegris since June 1999 and
Executive Vice President and Chief Operating Officer since March 2000. Prior to
that time, Mr. Dauwalter had been a director of Fluoroware since 1982 and also
served as Executive Vice President and Chief Operating Officer of Fluoroware
since September 1996. Mr. Dauwalter serves on the board of the Community Bank
of Chaska, the supervisory board of Metron, an affiliate of Entegris, and the
Wallestad Foundation.
John D. Villas has been Chief Financial Officer of Entegris since March
2000. Prior to that time, Mr. Villas had been Chief Financial Officer of
Fluroware since November 1997 and Vice President Finance since April 1994. Mr.
Villas joined Fluroware in 1984 as controller and then served as corporate
controller between 1991 and 1994.
James A. Bernards has been Vice Chairman of the board of Entegris since
March 2000 and a director since June 1999. Mr. Bernards has also been President
of Facilitation, Inc., a provider of business and financial consulting
services, since June 1993. Mr. Bernards was President of the accounting firm of
Stirtz, Bernards & Company from May 1981 to June 1993. Mr. Bernards has been
President of Brightstone Capital, Ltd., a venture capital fund, since 1986. He
is a director of FSI International, Inc., Fieldworks, Inc., Health Fitness
Corporation, August Technology, Inc. and several private companies.
44
<PAGE>
Robert J. Boehlke has been a director of Entegris since August 1999. Prior
to that time, Mr. Boehlke had been a director of Fluoroware since January 1998.
Mr. Boehlke is Executive Vice President and Chief Financial Officer of KLA-
Tencor Corporation. Mr. Boehlke joined KLA-Tencor in April 1983 as Vice
President. Since 1983, he has served in a number of positions for KLA-Tencor,
including division General Manager, Chief Operating Officer and Chief Financial
Officer. Prior to his employment by KLA-Tencor, Mr. Boehlke was a partner at
the investment banking firm of Kidder, Peabody & Company from 1971 to 1983. He
currently serves on the board of directors of LTX Corporation.
Mark A. Bongard has been a director of Entegris since June 1999. Mr. Bongard
has been the Chief Executive Officer of Emplast, Inc. since 1996, and Chairman
of its board of directors since 1999. Emplast was formerly a part of Empak, and
all of Emplast's stock is owned by the Estate of WCB Bongard, our largest
shareholder. Prior to being Chief Executive Officer of Emplast, Mr. Bongard
held a number of positions with Empak from 1987 to 1996. Before joining Empak
in 1987, Mr. Bongard was employed by MTE Associates, Inc.
Delmer M. Jensen has been a director of Entegris since June 1999. Mr. Jensen
was Executive Vice President of Operations of Entegris from June 1999 to March
2000. Prior to that time, he had been Chief Executive Officer of Empak since
1998 and Chief Operating Officer from 1988 to 1997. Mr. Jensen joined Empak in
1988. Prior to 1988, he was employed by Thermotech.
Roger D. McDaniel has been a director of Entegris since August 1999. Prior
to that time, Mr. McDaniel was a director of Fluoroware since August 1997. From
1989 to August 1996, Mr. McDaniel was the Chief Executive Officer of MEMC, a
silicon wafer producer, and was also a director of MEMC from April 1989 to
March 1997. Mr. McDaniel is a director of Veeco Instruments, Inc., Speedfam-
IPEC, Inc. and Anatel Inc. He is also a director and past Chairman of SEMI.
Our bylaws provide that the board of directors must consist of no more than
nine directors, and that any increase in the number of directors must be
approved by the affirmative vote of 75% of the votes entitled to be cast at a
shareholders' meeting, unless the increase was approved by a majority of the
board. The board of directors has established the number of directors to serve
on the board at eight. The directors are divided into three classes, designated
as Class I, Class II and Class III, with staggered three-year terms of office.
At each annual meeting of shareholders, directors who are elected to succeed
the class of directors whose terms expired at that meeting will be elected for
three-year terms. Messrs. McDaniel and Boehlke will be up for reelection at the
2001 annual meeting of shareholders, Messrs. Quernemoen, Jensen and Bongard at
the 2002 annual meeting of shareholders, and Messrs. Geyer, Dauwalter and
Bernards at the 2003 annual meeting of shareholders. Vacancies may be filled by
a majority of the directors then in office, and the directors so chosen hold
office until the next election of the class to which such directors belong. All
current directors were previously elected by Entegris' shareholders.
Pursuant to the Consolidation Agreement among Entegris, Fluoroware and
Empak, dated June 1, 1999, and the related Shareholder Agreements between
Entegris and the Empak and Fluoroware shareholders, the board of directors of
Entegris must consist of up to nine persons: three directors designated by
those persons who were members of Fluoroware's board of directors on June 1,
1999; three directors who are designated by those persons who were members of
Empak's board of directors on June 1, 1999; and up to three independent
directors, who must be appointed by the initial board members of Entegris upon
their mutual agreement. Messrs. Bernards, Bongard and Jensen were designated by
the Empak board and Messrs. Dauwalter, Geyer and Quernemoen were designated by
the Fluoroware board.
Committees Of The Board Of Directors
The board of directors maintains an audit committee composed of Messrs.
Bernards, Boehlke and McDaniel. The audit committee recommends to the board of
directors the appointment of independent auditors, reviews and approves the
scope of the annual audit and other non-audit services performed by the
independent auditors, reviews the findings and recommendations of the
independent auditors and periodically reviews and approves major accounting
policies and significant internal accounting control procedures.
45
<PAGE>
The board of directors also maintains a compensation and stock option
committee comprised of Messrs. Quernemoen, Geyer, Jensen and McDaniel. The
compensation and stock option committee reviews and makes recommendations
regarding compensation of officers and directors, administers Entegris' stock
option plans, and reviews major personnel matters.
Compensation Committee Interlocks And Insider Participation
Messrs. Quernemoen, Geyer, Jensen and McDaniel currently serve on our
compensation and stock option committee. Messrs. Quernemoen, Geyer and Jensen
are executive officers and employee directors of Entegris, Empak and
Fluoroware. Mr. Quernemoen received a promissory note from Fluoroware for
$4,138,379 as consideration for the redemption of 68,950 shares of Fluoroware
common stock. This promissory note bears interest at a rate of 8% per annum and
is payable in equal monthly installments over a 15 year period. Prior to the
formation of our compensation and stock option committee on August 9, 1999, all
decisions regarding executive compensation were made by the full board of
directors. No interlocking relationships exist between the board of directors
or the compensation and stock option committee and the board of directors or
compensation committee of any other company, nor has any interlocking
relationship existed in the past.
Director Compensation
Each non-employee director of Entegris receives a monthly retainer of $1,000
for their service to the board. Non-employee directors are also entitled to
$500 for every committee meeting that they attend. Entegris also maintains its
Directors' Stock Option Plan (Directors' Plan) which provides that all non-
employee directors receive an option to purchase 15,000 shares of common stock
when they are first elected or appointed to the board, and then options to
purchase 6,000 shares upon each reelection to the board at an annual meeting of
shareholders. At the time of the Directors' Plan adoption in 1999, each non-
employee director of Entegris also received an option to purchase 15,000
shares. Additionally, prior to the consolidation of Empak and Fluoroware,
Fluoroware maintained its 1997 Directors Stock Option Plan and had stock
options outstanding, all of which were converted at the time of the
consolidation into Directors' Plan stock options. As of February 28, 2000,
there were outstanding options to purchase an aggregate of 150,106 shares at a
weighted average exercise price of $4.00 per share.
46
<PAGE>
Executive Compensation
The following table provides certain summary information concerning the
compensation earned by Entegris' Chief Executive Officer and the four other
most highly compensated executive officers of Entegris for fiscal 1999 whom we
refer to as the Named Executive Officers.
Summary Compensation Table
<TABLE>
<CAPTION>
Annual
Compensation for
Fiscal 1999(1)
------------------
All Other
Name and Position Salary($) Bonus($) Compensation($)(2)
- ----------------- --------- -------- ------------------
<S> <C> <C> <C>
Daniel R. Quernemoen.................... 196,517 0 16,000
Chairman of the Board
Stan Geyer ............................. 250,000 64,000 16,000
Chief Executive Officer
Delmer M. Jensen........................ 250,016 179,500 9,600
Executive Vice President of Operations
James E. Dauwalter...................... 230,000 64,000 16,000
Executive Vice President and Chief
Operating Officer
John D. Villas.......................... 133,269 41,200 13,313
Chief Financial Officer
</TABLE>
- --------
(1) None of the perquisites and other benefits paid to any Named Executive
Officer exceeded the lesser of $50,000 or 10% of the total annual salary
and bonus amounts received by the Named Executive Officer.
(2) Represents payments made to defined contribution plans.
Options/SAR Grants in the Last Fiscal Year
There were no options or stock appreciation rights awarded to any of the
Named Executive Officers during fiscal 1999.
Bonus Programs
We maintain an executive management incentive program providing annual bonus
opportunities for certain qualified employees, including executive officers,
under which such employees may be awarded cash bonuses based upon the
achievement of individual performance criteria established at the beginning of
each year and upon our financial performance. Under this program, an incentive
pool is established at the end of each fiscal year based upon certain financial
criteria for the then ending fiscal year, including sales growth, operating
profit and return on assets. Our executive officers are eligible to receive a
bonus payment of up to 100% of their base salary, up to 65% of which is based
on the incentive pool, and up to 35% of which is based upon the accomplishment
of their individual performance goals established at the beginning of the year.
Other employees who qualify for this bonus program are eligible to receive
lesser percentages of their base salary based upon the same financial and
individual factors. Additionally, for our domestic employees who do not qualify
for this bonus program, we maintain a quarterly incentive plan. The quarterly
incentive plan provides bonuses based upon base salary, depending upon our
domestic operating income results.
Our bonus programs are administered at the discretion of our board of
directors. Bonuses paid under the executive management incentive program, if
any, are included in the cash compensation table above.
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<PAGE>
Fiscal Year-End Option/SAR Values
None of the Named Executive Officers exercised options in the twelve months
ended August 31, 1999. The following table sets forth the number and value of
securities underlying unexercised options held by the Named Executive Officers
at August 31, 1999:
<TABLE>
<CAPTION>
Number of Securities
Underlying Unexercised Value of Unexercised
Options/SARs at In-the-Money Options
August 31, 1999(1) at August 31, 1999(2)
------------------------- -------------------------
Name and Position Exercisable Unexercisable Exercisable Unexercisable
- ----------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Daniel R. Quernemoen........ 173,688 0 $185,846 $ 0
Chairman of the Board
Stan Geyer.................. 358,260 191,058 383,338 204,432
Chief Executive Officer
Delmer M. Jensen............ 274,780 0 747,402 0
Vice President of
Operations
James E. Dauwalter.......... 349,576 165,004 374,046 176,554
Executive Vice Pesident and
Chief Operating Officer
John Villas................. 149,672 95,528 160,149 102,215
Chief Financial Officer
Totals...................... 1,305,976 451,590 $1,850,781 $483,201
</TABLE>
- --------
(1) The weighted average exercise price for all options is $2.89 per share.
(2) The value of unexercised "in-the-money" options is based on the fair
market value of $4.22 as of August 31, 1999, as determined by the board,
minus the exercise price, multiplied by the number of shares underlying
the option.
Equity and Profit Sharing Plans
Employee Stock Option Plan. The Entegris, Inc. 1999 Long-Term Incentive and
Stock Option Plan (Option Plan) was adopted by the board in August 1999 and
approved by our shareholders in February 2000.
There are 9,000,000 common shares reserved for issuance under the Option
Plan. Shares subject to awards that have lapsed or terminated without having
been exercised in full may again become available for the grant of awards under
the Option Plan.
The Option Plan provides for grants of incentive stock options that qualify
under Section 422 of the Internal Revenue Code of 1986, as amended (Code), to
our employees, including officers and employee directors, or the employees of
any of our affiliates. Stock options that do not qualify under section 422 of
the Code, restricted share awards and performance awards may be granted to
employees, including officers, directors of and consultants to Entegris or any
of our affiliates. We will refer to options, restricted share awards and
performance awards under the Option Plan as awards. The Option Plan may be
administered by the board or a committee appointed by the board. After this
offering, the Option Plan will be administered by the compensation and stock
option committee, currently consisting of Messrs. Quernemoen, Geyer, Jensen and
McDaniel. The board or the compensation and stock option committee will have
the authority to determine to whom awards are granted, the terms of such
awards, including the type of awards to be granted, the exercise price, the
number of shares subject to the awards, and the vesting and exercisability of
the awards.
The term of options granted under the Option Plan generally may not exceed
ten years. The exercise price of incentive stock options granted under the
Option Plan is determined by the board or the compensation and stock option
committee, but cannot be less than 100% of the fair market value of the
underlying common shares on the date of grant. Other options granted under the
Option Plan can be granted at exercise prices
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<PAGE>
below the fair market value of our common shares. Options granted under the
Option Plan vest at the rate specified in the option agreement. No option may
be transferred by the optionee other than by will or the laws of descent or
distribution.
No incentive stock options may be granted to any person who, at the time of
the grant, owns, or is deemed to own, shares possessing more than 10% of the
total combined voting power of Entegris or any of our affiliates, unless the
option exercise price is at least 110% of the fair market value of the shares
subject to the option on the date of grant and the term of the option does not
exceed five years from the date of grant. In addition, the aggregate fair
market value, determined at the time of grant, of the common shares underlying
incentive stock options which become exercisable by an optionee during any
calendar year may not exceed $100,000. Any options, or portions thereof, which
exceed this limit are treated as nonqualified stock options.
As of April 30, 2000, there were 6,354,924 options outstanding under the
Option Plan, held by 166 employees, to purchase shares of Entegris at a
weighted average exercise price of $2.64 per share. The Option Plan will
terminate in August 2009, unless terminated sooner by the board. In addition,
effective March 3, 2000, the board of directors approved additional grants to
54 employees to purchase a total of 544,000 shares of Entegris common stock, at
a price equal to the finally determined price for this offering. On March 13,
2000, the board also approved a "broad-based' option grant covering nearly all
of our U.S. employees. Employees who are eligible as of the date of this
offering will each receive options to purchase 300 shares of common stock at a
price equal to the finally determined price for this offering. The estimated
total shares to be subject to these grants are 390,000.
Directors' Stock Option Plan. In August 1999, our Board adopted, and in
February 2000, our shareholders approved, the Entegris, Inc. Outside Directors'
Option Plan (Directors' Plan) to provide for the automatic grant of options to
purchase Entegris common shares to directors of Entegris. The Directors' Plan
is administered by our board.
The aggregate number of common shares that may be issued pursuant to options
granted under the Directors' Plan is 1,000,000. Pursuant to the terms of the
Directors' Plan, each of our directors who was not an employee of Entegris or
one of our affiliates was automatically granted an option to purchase 30,000
common shares on the effective date of the Directors' Plan. The Director's Plan
was amended so that each new director who is not an employee of Entegris will
be granted an option to purchase 15,000 common shares upon their appointment or
election to the board. On the effective date of the Director's Plan, options
under this plan will be issued to replace the then current outstanding options
issued under the Fluoroware, Inc. 1997 Directors Stock Option Plan with
substantially the same terms. In addition, each non-employee director who is
still a director after each annual meeting or regular stockholders' meeting
will be automatically granted an option to purchase 6,000 common shares
immediately after that annual meeting. The exercise price of options under the
Directors' Plan will at least equal the fair market value of our common shares
on the date of grant. No option granted under the Directors' Plan may be
exercised after the expiration of ten years from the date on which it was
granted.
As of April 30, 2000, there were 145,474 options outstanding to purchase
common shares of Entegris under the Directors' Plan, at a weighted average
exercise price of $4.00 per share. Those shares are held by 4 non-employee
directors of Entegris and 2 former non-employee directors of Fluoroware.
Employee Stock Purchase Plan. In March 2000, our board adopted, subject to
shareholder approval, the Entegris, Inc. Employee Stock Purchase Plan (Purchase
Plan). A total of 4,000,000 common shares of Entegris have been reserved for
issuance under the Purchase Plan. The Purchase Plan is intended to qualify as
an employee stock purchase plan within the meaning of Section 423 of the Code.
The Purchase Plan provides a means by which employees may purchase common
shares of Entegris through payroll deductions. The Purchase Plan is implemented
by offerings of rights to eligible employees. Under the Purchase Plan, the
purchase period is six months, beginning on January 1 and July 1 of each
49
<PAGE>
calendar year, but the first purchase period will commence on the effective
date of this offering. Purchase dates under this Purchase Plan will occur on
the last business day of each purchase period.
Employees who participate in this Purchase Plan may contribute up to 10% of
their earnings, by having Entegris withhold part of their salary or otherwise.
The amount withheld is then used to purchase common shares of Entegris on
specified purchase dates. The price of common shares of Entegris purchased
under the Purchase Plan will be equal to 85% of the lower of the fair market
value of the common shares on the first business day of the corresponding
purchase period or the fair market value of the common shares on that purchase
date. Employees who become eligible to participate in the Purchase Plan for the
first time during an ongoing offering may be permitted to begin participating
in the Purchase Plan during such offering. The price of common shares of
Entegris purchased under the Purchase Plan for employees who begin
participating in the Purchase Plan during an ongoing offering will be equal to
85% of the lower of the fair market value of the common shares on the day they
begin participating in the Purchase Plan or the fair market value of the common
shares on the relevant purchase date. Participants in this Purchase plan may
reduce the amount withheld from their pay or stop the withholding altogether at
anytime. Participants can also increase the rate of withholding from their
salary, but only on the first day of any purchase period. Employees'
participation in all offerings under this Purchase Plan will end automatically
on termination of their employment.
Unless otherwise determined by our board, employees are eligible to
participate in the Purchase Plan in any given purchase period only if they are
customarily employed by us or one of our U.S. subsidiaries for at least 20
hours per week and five months per calendar year immediately prior to the first
day of a purchase period. No employee shall be eligible for the grant of any
rights under the Purchase Plan if immediately after such rights are granted,
such employee will have voting power over 5% or more of our outstanding capital
shares. Eligible employees may be granted rights only if the rights, together
with any other rights granted under employee stock purchase plans, do not
permit such employees' rights to purchase shares of Entegris to accrue at a
rate which exceeds $25,000 of fair market value of those shares for each
calendar year in which those rights are outstanding.
Employee Stock Ownership Plan. The Entegris, Inc. Employee Stock Ownership
Plan (ESOP) is a tax-qualified employee stock ownership plan under Sections
401(a) and 4975(e)(7) of the Code and under Section 407(d)(6) of the Employee
Retirement Income Security Act of 1974, as amended (ERISA). The ESOP was
originally established by Fluoroware in 1984 to purchase common stock of
Fluoroware held by Fluoroware's founder, Victor Wallestad. The ESOP purchased
shares from Wallestad in August 1984, and in August 1989 utilizing proceeds
from debt financing secured by the shares purchased. The ESOP serviced the
indebtedness with funds received as discretionary contributions from Fluoroware
and shares were allocated to participant accounts as they were released from
security upon payment of the loan.
All ESOP loans have been completely paid off since August 1994, and all
shares have been released from the security interest and fully allocated to
participant accounts as of that date. On April 25, 1997, all company
contributions were discontinued and all active participants were vested at
100%. As of June 7, 1999, the ESOP exchanged its shares of Fluoroware for
shares of Entegris in connection with the consolidation of Fluoroware and
Empak. The ESOP invests almost exclusively in Entegris common stock.
Participants in the ESOP who terminate employment with us have the right to
request distribution of the Entegris shares allocated to their accounts as of
the second August 31 following termination. Participants who terminate
employment on account of death or disability, or upon retirement after age 65
also have the right to request distribution of the Entegris shares allocated to
their accounts as of the first August 31 following termination. A terminated
participant whose accounts are worth less than $5,000 on the second August 31
after termination of employment, however, will automatically receive
distribution of the shares even if the participant does not request
distribution. Participants who are eligible to receive shares can elect to have
the shares transferred directly to their Individual Retirement Accounts (IRAs).
The ESOP will be selling shares in this offering. In addition, contingent
upon the successful completion of this offering, the ESOP will be amended to
permit each ESOP participant to receive an annual distribution of
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<PAGE>
up to 10% of the shares in such participant's account. The first opportunity to
elect such "in-service" distribution will be in or about May of 2001. ESOP
participants who are eligible to receive shares from in-service distributions
can elect to have the shares transferred directly to their IRAs.
As of February 28, 2000, the ESOP held an aggregate of 20,385,514 common
shares. Approximately 530 of our current employees are participants in the
ESOP.
Pension Plan. We maintain a defined contribution retirement plan, the
Entegris, Inc. Pension Plan (Pension Plan), that covers eligible employees who
have completed a year of service. The Pension Plan, and the accompanying trust,
are intended to qualify as tax exempt under Sections 401(a) and 501(a) of the
Code. All contributions to the Pension Plan are company contributions, and are
subject to a vesting schedule. The trustee of the Pension Plan, at the
direction of each participant, invests the assets of the Pension Plan in a
number of investment options.
401(k) Savings and Profit Sharing Plan. In addition to the Pension Plan, we
maintain the Entegris, Inc. 401(k) Savings and Profit Sharing Plan (401(k)
Plan), a defined contribution plan that covers eligible employees. The 401(k)
Plan, and the accompanying trust, are intended to qualify as tax exempt under
Sections 401(a) and 501(a) of the Code. Eligible employees may elect to defer a
percentage of their pre-tax gross compensation in the 401(k) Plan, subject to
the statutory annual limit. The 401(k) Plan provides that we will make matching
contributions on employee deferrals at prescribed levels. Employees are
eligible to defer a portion of their compensation to the 401(k) Plan
immediately upon their hire, but we will not match those contributions until
the employee has completed a year of service with Entegris. Participants are
fully vested in their deferrals and the matching contributions. We may also
make profit sharing contributions to the 401(k) Plan, as determined at the
discretion of our board of directors. Profit sharing contributions, if made,
are subject to a vesting schedule in the accounts of the participants. The
trustee of the 401(k) Plan, at the direction of each participant, invests the
assets of the 401(k) Plan in a number of investment options.
Employment Agreements
None of the Named Executive Officers are employed pursuant to employment
contracts with Entegris.
Limitation of Liability and Indemnification
Minnesota law and our articles of incorporation and bylaws provide that we
will, subject to limitations, indemnify any person made or threatened to be
made a party to a proceeding by reason of that person's former or present
official capacity with us. We will indemnify this person against judgments,
penalties, fines, settlements and reasonable expenses, and, subject to
limitations, we will pay or reimburse reasonable expenses before the final
disposition of the proceeding.
As permitted by Minnesota law, our articles of incorporation provide that
our directors will not be personally liable to us or our shareholders for
monetary damages for a breach of fiduciary duty as a director, subject to the
following exceptions:
. any breach of the director's duty of loyalty to us or our shareholders;
. acts or omissions not in good faith or that involve intentional
misconduct or a knowing violation of law;
. liability for illegal distributions under section 302A.559 of the
Minnesota Business Corporation Act or for civil liabilities for state
securities law violations under section 80A.23 of the Minnesota
statutes; and
. any transaction from which the director derived an improper personal
benefit.
Presently, there is no pending litigation or proceeding involving any of our
directors, officers, employees or agents where indemnification will be required
or permitted. We are not aware of any threatened litigation or proceeding that
might result in a claim for indemnification.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933, as amended, may be permitted to directors, officers or persons
controlling Entegris pursuant to the foregoing provisions, We have been
informed that in the opinion of the SEC, such indemnification is against public
policy as expressed in the Securities Act and therefore is unenforceable.
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CERTAIN TRANSACTIONS
The following is a description of transactions since September 1, 1996, to
which we or our subsidiaries have been a party, in which the amount involved in
the transaction exceeds $60,000, and in which any of our directors, executive
officers or holders of more than 5% of our capital stock had or will have a
direct or indirect material interest, other than compensation arrangements that
are otherwise required to be described under "Management." We believe that all
of the transactions set forth below were made on terms no less favorable to us
than could have been obtained from unaffiliated third parties.
Leases. The estate of Wayne C. Bongard is the general partner of County 17,
Chanhassen Partnership; the Waconia Partnership; and the Fleninge Partnership.
The estate of Wayne C. Bongard also controls WCB Holding LLC, a family limited
liability company formed by Wayne C. Bongard, which owns approximately 37% of
the Entegris common shares. Empak, one of our wholly owned subsidiaries, leases
its office and three production facilities from these partnerships or from
Wayne C. Bongard directly on the terms described in the following paragraphs.
Empak entered into a lease agreement with Fleninge Partnership on June 15,
1993, to lease 4.37 acres of improved commercial real estate, located at 1501
Park Road, in Chanhassen, Minnesota, with an original term from September 1,
1993 to August 31, 2001. This lease is expected to be terminated on or before
May 1, 2000, pursuant to the Real Estate Purchase and Sale Agreement described
in the next subheading. The base rent for such lease is $19,000 per month, to
be adjusted every three years based on the consumer price index.
Empak also entered into a lease agreement with County 17, Chanhassen
Partnership to lease a 95,000 sq. foot property located at 950 Lake Drive,
Chanhassen, Minnesota with a term of 15 years commencing on December 1, 1989.
The base rent is $37,600 per month and is to be adjusted periodically with
increases tied to the Twin Cities All Urban Wage Earners Cost-Of-Living Index.
This lease gives Empak the option to purchase the leased premises at the end of
the 10th year (1999) and at the end of the 15th year (2004) of the lease at the
fair market value, as determined by an appraisal of a mutually agreed upon
appraiser.
Empak entered into a lease agreement with Waconia Partnership on March 16,
1987, to lease a property in Waconia, Minnesota, until June 30, 2002. The base
rent was set at $21,791 per month, to be adjusted periodically with increases
tied to the Twin Cities All Urban Wage Earners Cost-Of-Living Index. This lease
also gives Empak the option to purchase the leased premise at the end of the
10th year (1997) and at the end of the 15th year (2002) of the lease at the
fair market value, as determined by an appraisal of a mutually agreed upon
appraiser.
Finally, Empak entered into a lease agreement with Wayne C. Bongard, now
deceased, on September 22, 1998 to lease a property in Castle Rock, Colorado,
until September 30, 2005. The base rent was set at $25,000 per month or 150% of
the amount of the monthly debt service due and payable by Mr. Bongard on
financing secured by a first lien against that property or any other financing
secured to improve the property, whichever is more. The rent could also be
increased to reflect the then current market rental rates at Mr. Bongard's
option. If Mr. Bongard and Empak disagree on the rental amount, the rental
amount will be determined by a qualified appraiser.
Under the foregoing agreements, Empak is required to pay, as additional
rent, all real estate taxes, utilities, and other related property expenses.
Purchase of Property. Entegris entered into a Real Estate Purchase and Sale
Agreement with Fleninge Partnership on March 15, 2000, to purchase the 4.37
acres of improved commercial real estate and related personal property located
at 1501 Park Road, Chanhassen, Minnesota, which Empak currently leases from the
Fleninge Partnership. The purchase price of the property, which was purchased
on May 1, 2000, was $2,530,000. The purchase price was determined in an arms-
length negotiation with representatives of the Fleninge Partnership who are not
affiliated with or related to us.
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Sublease Agreement. On April 28, 1997, Empak entered into a sublease
agreement with Emplast, Inc. to sublease property located in Chanhassen,
Minnesota to Emplast. Emplast is majority owned by WCB Holding LLC, our largest
shareholder, and Mark A. Bongard, one of our board members, is the Chief
Executive Officer of Emplast. Empak leases this property from County 17,
Chanhassen Partnership, which lease is described above under the subheading
"Leases." The term of the sublease ends on November 30, 2004. The base rent was
set at $550,000 per year from June 1, 1999 to May 31, 2000, and thereafter
increases $50,000 per year until the rental payment reaches the rental payment
paid by Empak for the premises. As of February 28, 2000, Emplast owed Empak
$229,170 under the sublease. This amount is included in prepaid expenses and
other current assets in the accompanying consolidated balance sheets.
Notes Payable. On April 6, 1992, Empak issued a promissory note for
$6,000,000 in favor of Marubeni America Corporation pursuant to a loan
agreement between the parties, dated the same day, for the purpose of
constructing our Colorado facility. Interest accrues on the promissory note at
a rate of 9.07% per annum. Empak will repay the principal amount of this loan
in 96 equal consecutive monthly installments and a final balloon payment of
$3,913,044, payable March 15, 2002. However, Empak has the option of extending
this final balloon payment for an additional period of 15 years. Interest
expense related to this note totaled $204,738 for the six months ended February
28, 2000.
Fluoroware issued a promissory note on January 5, 1996 in the amount of
$4,138,379 to Daniel R. Quernemoen, Chairman of the Board of Entegris, as
consideration for the redemption of 2,758,000 shares of Fluoroware common
stock. The price of the redeemed shares was based on the book value of
Fluoroware pursuant to a buy-sell agreement between us and Mr. Quernemoen. The
note bears interest rate at the rate of 8.0% and is payable in equal monthly
installments of approximately $39,300 until January 5, 2011.
Notes Receivable. On April 15, 1999, the estate of Wayne C. Bongard executed
a promissory note in the amount of $801,347 payable to Empak, to be repaid in
equal installments over a 36 month period beginning October 15, 2001, at a rate
of interest of 8.0% per annum. At February 28, 2000, the total debt was
$801,347.
Debt Guarantees. Empak entered into a guaranty agreement with U.S. Bank
National Association (formerly known as First Bank National Association) on
March 1, 1994, to guarantee the obligations of Wayne C. Bongard, now deceased,
under the Loan Agreement by and between Mr. Bongard and U.S. Bank, dated March
1, 1994, related to the facility in Castle Rock, Colorado that is leased by
Empak. This guarantee totals $1,558,500 at February 28, 2000.
Sales to Minority Stockholder. Prior to this offering, Marubeni Corporation
held 4.15% of our outstanding shares as of February 28, 2000. In the fiscal
year 1999, sales to Marubeni Corporation accounted for 4.9% of our sales. On
December 1, 1999, Entegris and Marubeni Corporation amended their distribution
agreement to reflect the consolidation of Empak and Fluoroware into Entegris.
Pursuant to the terms of the amended agreement, we appointed Marubeni
Corporation as our exclusive distributor to sell certain of our products in
Japan. Marubeni Corporation, as distributor, agreed to use its best efforts to
sell the agreed upon products and spare parts in Japan. Unless the contract is
terminated under specific conditions, the distribution agreement expires on
February 27, 2003. Sales to Marubeni Corporation were $11,960,387 in fiscal
1999. At February 28, 2000 Entegris had receivables from Marubeni Corporation
totaling $2,765,881, which are due under normal trade terms.
Sales to Affiliated Entities. Entegris currently holds 20.8% of Metron's
outstanding shares, and in fiscal 1999, products distributed by Metron
accounted for 14.3% of our sales. In addition, Mr. Dauwalter, a supervisory
director of Metron, is Executive Vice President, Chief Operation Officer and
Director of Entegris. As a supervisory director of Metron, Mr. Dauwalter
receives yearly option grants. In connection with Mr. Dauwalter's employment
with Entegris, he entered into an agreement pursuant to which he agreed to
exercise his options to purchase common shares of Metron at our request, to
vote the shares received upon exercise of the options as directed by us and to
hold title to these shares only as a nominee on our behalf, without any
beneficial right, ownership, or interest in the shares. In addition, Mr.
Dauwalter agreed to convey
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title to the option (if this is permitted by its terms) and any shares received
upon exercise of the option to us or to sell the shares and remit the proceeds
to us upon our request.
In July 1995, Metron and Fluoroware entered into a distribution agreement.
Subsequent to the consolidation of Empak and Fluoroware to form Entegris and
pursuant to the terms of the agreement, Entegris and Metron agreed that, with
some exceptions, Metron would be the exclusive, independent distributor of some
of Entegris' products in specific countries, primarily in Europe and Asia.
Metron, as distributor, agreed to use its best efforts to sell the agreed upon
products in the designated countries. Unless the contract is terminated under
specific conditions, the contract will remain in place until July 1, 2000, and
is automatically renewed thereafter for additional terms of two years. The
contract can be terminated upon written notification given more than twelve
months prior to the expiration of the applicable term.
In September of 1997, Fluoroware entered into a distribution agreement with
T.A. Kyser Co., a wholly owned subsidiary of Metron. Pursuant to the terms of
that agreement, Fluoroware and Kyser agreed that Kyser would be stocking
distributor for specific Fluoroware gas and liquid management products in
certain U.S. states. Kyser, as distributor, agreed to use its best efforts to
stock, market and sell products within the states which comprise its territory.
The agreement is for a term of five years, expiring on August 31, 2002, and,
unless either party terminates, the agreement is renewed automatically for
successive five-year terms. Notice of termination must be given one year prior
to the expiration of the term of the agreement for termination without cause.
Termination for cause may occur at any time if specific conditions are met.
Stock Options. On February 28, 1997, Marubeni America Corporation and
Marubeni Corporation were granted Empak stock options. The grants were
immediately vested and exercisable for ten years. In connection with the
consolidation of Empak and Fluoroware to form Entegris, Marubeni America
Corporation exchanged the Empak option for an option to purchase up to 85,978
shares of Entegris common stock at an exercise price of $5.19. These options
may be exercised at any time before February 27, 2007. Similarly, Marubeni
Corporation exchanged the Empak option for an option to purchase up to 128,964
shares of Entegris common stock at an exercise price of $5.19. These options
may be exercised at any time before February 27, 2007.
Consulting Agreement. James A. Bernards, a director of Entegris, renders
consulting services to Entegris for a fee of $6,000 per month under an oral
agreement.
Contributions to Charity. Fluoroware had historically made charitable
contributions to the Wallestad Foundation, a private foundation qualified under
Section 170 of the Code, established by Victor Wallestad, the founding
shareholder of Fluoroware, Inc. The Wallestad Foundation is dedicated to the
support of Christian ministries in Minnesota, the United States and throughout
the world. Dan Quernemoen, Stan Geyer and James Dauwalter, executive officers
and directors of Entegris, are also directors of the Wallestad Foundation.
Fluoroware contributed approximately $270,000 to the Wallestad Foundation for
fiscal 1997. Entegris currently intends to annually contribute 5% of its net
income to charitable organizations, primarily through the Wallestad Foundation.
Entegris has accrued a charitable deduction of $0.9 million for the first six
months of fiscal 2000.
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PRINCIPAL AND SELLING SHAREHOLDERS
The following table sets forth certain information regarding the beneficial
ownership of our common shares as of April 30, 2000, and as adjusted to reflect
the sale of our common shares offered in this offering: (1) each shareholder
who is known by us to own beneficially more than 5% of our common shares; (2)
each member of our board of directors; (3) each of our Named Executive
Officers; (4) all of our directors and executive officers as a group; and (5)
all selling shareholders as a group. Unless otherwise indicated, to our
knowledge, all persons listed below have sole voting and investment power with
respect to their common shares, except to the extent authority is shared by
spouses under applicable law. Unless otherwise noted, the address of each
shareholder is c/o Entegris, Inc., 3500 Lyman Boulevard, Chaska, Minnesota,
55318.
<TABLE>
<CAPTION>
Beneficial
Beneficial Ownership
Ownership Number of After
Before Offering(1) Shares Offering(1)(2)
------------------------ Being ------------------
Name Shares Percent Offered Shares Percent
- ---- ---------- ------- --------- ---------- -------
<S> <C> <C> <C> <C> <C>
WCB Holding LLC.......... 21,580,608 37.0% 1,925,000 19,655,608 29.3%
950 Lake Drive, Chaska,
Minnesota 55317
Entegris, Inc. Employee
Stock Ownership Plan.... 20,385,514 34.9% 2,475,000 17,910,514 26.7%
James A. Bernards........ 59,310(2) * -- 59,310 *
Mark A. Bongard.......... 66,638(2)(3) * -- 66,638 *
James E. Dauwalter....... 5,556,127(4) 9.5% -- 5,556,127 8.2%
Stan Geyer............... 2,937,562(5) 5.0% -- 2,937,562 4.4%
Daniel R. Quernemoen..... 1,982,442(6) 3.4% -- 1,982,442 3.0%
Delmer M. Jensen......... 274,780(2) * -- 274,780 *
John D. Villas........... 485,163(7) * -- 485,163 *
Robert J. Boehlke........ 46,210(2) * -- 46,210 *
Roger D. McDaniel........ 48,248(8) * -- 48,248 *
All directors and
executive officers
as a group (9
persons)(9)............. 11,456,480 19.1% -- 11,456,480 16.7%
All selling shareholders
as a group.............. 41,966,122 71.9% 4,400,000 37,566,122 56.1%
</TABLE>
- --------
*Represents beneficial ownership of less than one percent of the common shares.
(1) Beneficial ownership is determined in accordance with the rules of the SEC.
Applicable percentage ownership is based on 58,399,610 common shares
outstanding as of February 28, 2000 and 66,999,610 shares outstanding
immediately following the completion of this offering.
(2) The shares indicated are subject to stock options exercisable within 60
days.
(3) Mr. Bongard is Chief Manager of WBC Holding LLC and disclaims beneficial
ownership of the shares held by WCB Holding LLC.
(4) Includes 4,113,542 shares held directly, 692,152 held by family members,
345,856 shares allocated to Mr. Dauwalter's individual account under the
ESOP, and an aggregate of 404,577 shares subject to stock options
exercisable within 60 days.
(5) Includes 1,724,828 shares held directly; 430,466 shares held by family
members, 360,322 shares allocated to Mr. Geyer's account under the ESOP,
and 421,946 shares subject to stock options exercisable within 60 days.
(6) Includes 968,970 shares held directly, 393,696 held by family members,
446,088 shares allocated to Mr. Quernemoen's account under the ESOP, and
173,688 shares subject to options exercisable within 60 days.
(7) Includes 157,104 shares held directly, 146,544 shares allocated to Mr.
Villas' account under the ESOP and 181,515 shares subject to options
exercisable within 60 days.
(8) Includes 13,616 shares held directly and 34,632 shares subject to options
exercisable within 60 days.
(9) Includes an aggregate of 8,494,374 shares held directly, 1,298,810 shares
allocated to all of the officers and directors' accounts under the ESOP,
and 1,663,296 shares subject to options exercisable within 60 days.
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DESCRIPTION OF CAPITAL SHARES
Common Stock
As of April 30, 2000, we had 58,399,610 common shares outstanding held by 86
shareholders of record. Based upon the number of shares outstanding as of April
30, 2000, and giving effect to the issuance of the common shares being offered
by us, we will have 66,999,610 common shares outstanding upon the closing of
the offering.
Holders of our common shares are entitled to one vote for each share held of
record on all matters on which shareholders are entitled or permitted to vote.
Our board of directors is divided into three classes, serving staggered three
year terms. However, there is no cumulative voting for the election of
directors. Holders of our common shares are entitled to receive dividends when
and as declared by the board of directors out of funds legally available for
dividends. Our loan agreements restrict our ability to pay dividends without
the consent of our lenders. Holders of our common shares have no preemptive or
subscription rights. There are no conversion rights, redemption rights, sinking
fund provisions or fixed dividend rights with respect to our common shares. All
of our outstanding common shares are fully paid and nonassessable, and the
common shares to be issued upon completion of this offering will be fully paid
and nonassessable. As of April 30, 2000, there were 2,936,754 common shares of
Entegris held in holdback escrow in accordance with the Consolidation Agreement
dated June 1, 1999. The escrow was established to secure certain
representations and warranties made by the former shareholders of Fluoroware
and Empak upon the combination of the companies. There have been no claims of
breach through the date of this filing. The escrow will be liquidated under the
terms of the Consolidation Agreement as of June 7, 2000.
Our directors and executive officers as a group beneficially own
approximately 19.1% of our outstanding common shares. Upon the completion of
the offering, such persons will beneficially own approximately 16.7% of our
outstanding common shares. Accordingly, such persons may be able to control our
affairs, including, without limitation, the sale of our equity or debt
securities, the appointment of officers, the determination of officers'
compensation and the determination as to whether to register outstanding
securities.
Options And Warrants
Besides options granted under employee options plans, as of April 30, 2000,
Marubeni America Corporation and Marubeni Corporation hold options to purchase
an aggregate of 214,942 of our common shares at an exercise price of $5.19.
Marubeni America Corporation and Marubeni Corporation received the grant,
originally for stock of Empak as consideration for their equity interest in
EMPAK International, which was merged into Empak in February 1997. The grant
was immediately vested and exercisable for ten years. With the consolidation of
Empak and Fluoroware to form Entegris, Entegris offered to exchange warrants
and options to purchase Fluoroware and Empak stock outstanding at the time of
the consolidation for options to purchase Entegris common shares, with terms
comparable to the prior options.
Provisions of Our Articles and Bylaws and State Law with Potential Anti-
Takeover Effect
The existence of a staggered board, the requirement of a 75% shareholder
vote to change the maximum number of directors and the provisions of Minnesota
law, described below, could have an anti-takeover effect. These provisions are
intended to provide management with flexibility, to enhance the likelihood of
continuity and stability in the composition and policies of our board of
directors and to discourage an unsolicited takeover of Entegris, if our board
of directors determines that the takeover is not in the best interests of
Entegris and our shareholders. However, these provisions could have the effect
of discouraging attempts to acquire Entegris, which could deprive our
shareholders of opportunities to sell their common shares at prices higher than
prevailing market prices.
Our board of directors is divided into three classes, serving staggered
three-year terms. As a result of this division, generally at least two
shareholders' meetings will be required for shareholders to effect a change in
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control of the board of directors. Also, our bylaws require the approval of 75%
of the shareholders present at a shareholders meeting to increase the maximum
number of directors to more than nine members. In addition, our bylaws contain
provisions that establish specific procedures and requirements for calling
meetings of shareholders, appointing and removing members of the board of
directors or changing the number of directors on the board.
We are governed by the provisions of Sections 302A.671 and 302A.673 of the
Minnesota Business Corporation Act, which are anti-takeover laws. In general,
Section 302A.671 provides that the shares of a corporation acquired in a
"control share acquisition" have no voting rights unless voting rights are
approved in a prescribed manner. A "control share acquisition" is an
acquisition, directly or indirectly, of beneficial ownership of shares that
would, when added to all other shares beneficially owned by the acquiring
person, entitle the acquiring person to have voting power of 20% or more in the
election of directors. In general, Section 302A.673 prohibits a publicly-held
Minnesota corporation from engaging in a "business combination" with an
"interested shareholder" for a period of four years after the date of the
transaction in which the person became an interested shareholder, unless the
business combination is approved in a prescribed manner. "Business combination"
includes mergers, asset sales and other transactions resulting in a financial
benefit to the interested shareholder. An "interested shareholder" is a person
who is the beneficial owner, directly or indirectly, of 10% or more of the
corporation's voting stock, or an affiliate or associate of the corporation
and, at any time within four years prior to the date in question, was the
beneficial owner, directly or indirectly, of 10% or more of the corporation's
voting shares.
Transfer Agent And Registrar
Norwest Bank Minnesota, N.A., is the transfer agent and registrar for our
common shares.
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SHARES ELIGIBLE FOR FUTURE SALE
Prior to this offering, there has been no public market for our common
shares. A significant public market for the Entegris common shares may not
develop or be sustained after this offering. Future sales of substantial
amounts of Entegris common shares in the public market, or the possibility of
such sales occurring, could harm prevailing market prices for the Entegris
common shares or our future ability to raise capital through an offering of
equity securities.
Based on the numbers of shares outstanding as of April 30, 2000, we will
have 66,999,610 outstanding common shares upon completion of this offering. Of
these shares, the 13,000,000 shares to be sold in this offering (14,950,000
shares if the underwriters' over-allotment option is exercised in full) will be
freely tradable in the public market without restriction under the Securities
Act, unless such shares are held by "affiliates" of Entegris, as that term is
defined in Rule 144 under the Securities Act.
The remaining 58,399,610 shares outstanding upon completion of this offering
will be "restricted securities" as that term is defined under Rule 144. We
issued and sold the restricted shares in private transactions in reliance on
exemptions from registration under the Securities Act. Restricted shares may be
sold in the public market only if they are registered or if they qualify for an
exemption from registration under Rule 144 or Rule 701 under the Securities
Act, as summarized below.
A total of 1,250,922 of the restricted shares are available for immediate
sale, and an additional 69,892 of the restricted shares will be available for
sale 90 days from the date of this offering. We expect that a total of
52,678,796 shares will be subject to lock-up arrangements between the
shareholders and us or the underwriters. Pursuant to these lock-up agreements,
the holders of these shares would not offer, sell, pledge or otherwise dispose
of, directly or indirectly, or announce their intention to do the same, any
common shares or security convertible into, or exchangeable or exercisable for
any security of Entegris for a period of 180 days from the date of this
offering. However, if the holder of the restricted shares is an individual, he
or she may transfer any such securities either during his or her lifetime or on
death by will or intestacy to his or her immediate family or to a trust the
beneficiaries of which are exclusively the holder of the securities and/or a
member of his or her immediate family. We also have entered into an agreement
with the underwriters pursuant to which we will not offer, sell or otherwise
dispose of common shares for a period of 180 days from the date of this
offering. The agreement further provides that we will not file a registration
statement on Form S-8 to register our stock option and purchase plans for a
period of 180 days after the effective date of this offering. On the date of
the expiration of the 180 day lock-up agreements, 6,612,300 shares will be
eligible for immediate sale without restriction, and 46,066,496 of the
restricted shares will be eligible for immediate sale, although these shares
will be subject to certain volume, manner of sale and other limitations under
Rule 144. In addition, approximately 4,723,402 of our common shares are subject
to immediately exercisable options, and we expect that none of these shares
will be eligible for sale in the public market until 180 days following the
date of this prospectus.
Following the expiration of such lock-up periods, certain shares issued upon
exercise of options we granted prior to the date of this offering will also be
available for sale in the public market pursuant to Rule 701 under the
Securities Act. Rule 701 permits resales of such shares in reliance upon Rule
144 under the Securities Act but without compliance with certain restrictions,
including the holding-period requirement, imposed under Rule 144. In general,
under Rule 144 as in effect at the closing of this offering, a person, or
persons whose shares are aggregated, may sell shares within any three-month
period beginning 90 days after the date of this prospectus, if
(i) the person has beneficially owned restricted shares for at least one
year, including the holding period of any prior owner who is not an
affiliate; and
(ii) the number of shares sold within any three-month period does not
exceed the greater of (a) 1% of the then outstanding common shares or
(b) the average weekly trading volume of the common shares during the
four calendar weeks preceding the filing of a Form 144 with respect to
such sale.
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<PAGE>
Sales under Rule 144 are also subject to certain manner of sale and notice
requirements and to the availability of current public information about us.
Under Rule 144(k), a person who is not deemed to have been an affiliate at any
time during the 90 days preceding a sale and who has beneficially owned the
shares proposed to be sold for at least two years, including the holding period
of any prior owner who is not an affiliate, is entitled to sell such shares
without complying with the manner of sale, public information, volume
limitation or notice provisions of Rule 144.
We intend to file, 180 days after the effective date of this offering, a
registration statement on Form S-8 to register approximately 14,000,000 common
shares reserved for issuance under the Option Plan, the Directors' Plan and the
Purchase Plan. The registration statement will become effective automatically
upon filing. Shares issued under the foregoing plans, after the filing of a
registration statement on Form S-8, may be sold in the open market, subject, in
the case of certain holders, to the Rule 144 limitations applicable to
affiliates and vesting restrictions imposed by us.
59
<PAGE>
UNDERWRITING
Entegris and the selling shareholders are offering the common shares
described in this prospectus through a number of underwriters. Banc of America
Securities LLC, Donaldson, Lufkin & Jenrette, Salomon Smith Barney Inc. and
U.S. Bancorp Piper Jaffray Inc. are the representatives of the underwriters.
Entegris and certain of the selling shareholders have entered into an
underwriting agreement with the representatives. Subject to the terms and
conditions of the underwriting agreement, Entegris and the selling shareholders
have agreed to sell to the underwriters, and each underwriter has severally
agreed to purchase, the number of common shares listed next to its name in the
following table:
<TABLE>
<CAPTION>
Number of
Underwriter Shares
----------- ----------
<S> <C>
Banc of America Securities LLC...................................
Donaldson, Lufkin & Jenrette.....................................
Salomon Smith Barney Inc.........................................
U.S. Bancorp Piper Jaffray Inc...................................
----------
Total.......................................................... 13,000,000
==========
</TABLE>
Shares sold by the underwriters to the public will initially be offered on
the terms set forth on the cover page of this prospectus. The underwriters may
allow to selected dealers a concession of not more than $ per share, and the
underwriters may also allow, and any other dealers may reallow, a concession of
not more than $ per share to other dealers. If all the shares are not sold at
the assumed initial public offering price, the underwriters may change the
offering price and the other selling terms. The common shares are offered
subject to receipt and acceptance by the underwriters and other conditions,
including the right to reject orders in whole or in part.
If the underwriters sell more shares than the total number of shares set
forth in the table above, they have an option to buy up to a maximum of
1,290,000 additional shares from Entegris and a maximum of 660,000 additional
shares from a selling shareholder to cover such sales. The underwriters have 30
days to exercise this option. 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. If purchased, the underwriters
will offer such additional shares on the same terms as those on which the
shares set forth in the table above are being offered. The following table
shows the underwriters' discounts to be paid to the underwriters by Entegris
and the selling shareholders. Such amounts are shown assuming both no exercise
and full exercise of the underwriters' option to purchase additional shares.
<TABLE>
<CAPTION>
Per Share Total
------------------- -------------------
Without With Without With
Over- Over- Over- Over-
Allotment Allotment Allotment Allotment
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Underwriting discounts and
commissions payable by Entegris... $ $ $ $
Underwriting discounts and
commissions payable by the selling
shareholders...................... $ $ $ $
</TABLE>
We estimate that the total expenses of the offering, excluding underwriting
discounts and commissions, will be approximately $1,312,000 and will be paid by
Entegris. The offering of the shares is made for delivery, when, as and if
accepted by the underwriters and subject to prior sale and to withdrawal,
cancellation or modification of the offering without notice.
Entegris and holders of substantially all of our outstanding common shares,
including all of our executive officers and directors, as well as holders of
options to purchase common shares who are senior officers, have
60
<PAGE>
agreed with the underwriters not to dispose of or hedge any of their common
shares or securities convertible into or exchangeable for common shares during
the period from the date of this prospectus continuing through 180 days after
the date of this prospectus without the prior written consent of Banc of
America Securities LLC. At any time and without notice, Banc of America
Securities LLC may, in its sole discretion, release all or any portion of the
securities from these lock-up agreements.
The underwriting agreement provides that Entegris and the selling
shareholders will indemnify the underwriters against liabilities set forth in
that agreement, including civil liabilities under the Securities Act, or will
contribute to payments the underwriters may be required to make under that
agreement.
At our request, the underwriters have reserved up to 650,000 shares or 5% of
the common shares offered by this prospectus for sale at the initial public
offering price to persons having business and other relationships with us. The
number of shares of common stock available to the general public will be
reduced to the extent that these persons purchase the reserved shares. Any
reserved common shares that are not purchased by such persons at the closing of
the initial public offering will be offered by the underwriters to the general
public on the same terms as the other shares in the initial public offering.
In connection with this offering, the underwriters may purchase and sell
common shares 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
shares than they are required to purchase in this offering. Stabilizing
transactions consist of bids or purchases made for the purpose of preventing or
retarding a decline in the market price of the common shares while this
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.
The underwriters may engage in activities that stabilize, maintain or
otherwise affect the price of the common shares, including:
. over-allotments;
. stabilization;
. syndicate covering transactions; and
. imposition of penalty bids.
As a result of these activities, the price of the common shares may be
higher than the price that otherwise might exist in the open market. If the
underwriters commence these activities, they may discontinue them at any time.
The underwriters may carry out these transactions on the Nasdaq National
Market, in the over-the-counter market or otherwise.
The underwriters do not expect sales to discretionary accounts to exceed
% of the total number of common shares offered by this prospectus.
Prior to this offering, there has been no public market for the common
shares of Entegris. The initial public offering price was negotiated among
Entegris and the underwriters. Among the factors considered in such
negotiations were:
. the history of, and the prospects for, Entegris and the industry in
which it competes;
61
<PAGE>
. the past and present financial performance of Entegris;
. an assessment of Entegris' management;
. the present state of Entegris' development;
. the prospects for Entegris' future earnings;
. the prevailing market conditions of the applicable U.S. securities
market at the time of this offering;
. market valuations of publicly traded companies that Entegris and the
representatives believe to be comparable to Entegris; and
. other factors deemed relevant.
U.S. FEDERAL TAX CONSIDERATIONS FOR NON-U.S. HOLDERS
The following is a general discussion of the material United States federal
income and estate tax consequences of the ownership and disposition of our
common shares by a non-U.S. holder. As used herein, the term non-U.S. holder
generally means a holder that for United States federal income tax purposes is
an individual or entity other than:
. a citizen or individual resident of the United States;
. a corporation or partnership, including an entity treated as a
corporation or partnership for federal income tax purposes, created or
organized in or under the laws of the United States or of any state
thereof or in the District of Columbia unless, in the case of a
partnership, U.S. Treasury regulations promulgated in the future provide
otherwise;
. an estate the income of which is subject to U.S. federal income taxation
regardless of its source; or
. a trust if a court within the U.S. is able to exercise primary
supervision over the administration of the trust and one or more U.S.
persons have the authority to control all substantial decisions of the
trust.
This discussion does not address all aspects of United States federal income
and estate taxes that may be relevant to non-U.S. holders in light of their
personal circumstances, including the fact that in the case of a non-U.S.
holder that is a partnership, the U.S. tax consequences of holding and
disposing of shares of common stock may be affected by determinations made at
the partner level, or that may be relevant to various types of non-U.S. holders
which may be subject to special treatment under United States federal income
tax laws, including, for example, insurance companies, tax-exempt
organizations, financial institutions, dealers in securities and holders of
securities held as part of a straddle, hedge, or conversion transaction, and
does not address U.S. state or local or foreign tax consequences. Furthermore,
this discussion is based on provisions of the Internal Revenue Code of 1986, as
amended, existing and proposed regulations promulgated thereunder and
administrative and judicial interpretations thereof, all as of the date of this
prospectus, and all of which are subject to change, possibly with retroactive
effect. The following summary is included herein for general information.
Accordingly, prospective investors should consult their own tax advisers
regarding the United States federal, state, local and foreign income and other
tax consequences of acquiring, holding and disposing of shares of common stock.
Dividends
We do not anticipate declaring or paying cash dividends on our common shares
in the foreseeable future. However, if dividends are paid on our common shares,
dividends paid to a non-U.S. holder of common shares generally will be subject
to withholding of United States federal income tax at a 30% rate, or the lower
rate provided by the income tax treaty between the United States and a foreign
country if the non-U.S. holder is treated as a resident of that foreign country
within the meaning of the applicable treaty. Non-U.S. holders should consult
their own tax advisors regarding their entitlement to benefits under a relevant
income tax treaty.
62
<PAGE>
Dividends that are effectively connected with a non-U.S. holder's conduct of
a trade or business in the United States or, if an income tax treaty applies,
attributable to a permanent establishment in the United States, are generally
subject to U.S. federal income tax on a net income basis at regular graduated
rates, but are not generally subject to the 30% withholding tax if the non-U.S.
holder files a properly executed appropriate U.S. Internal Revenue Service form
with the payor. Any U.S. trade or business income received by a non-U.S. holder
that is a corporation may also be subject to an additional branch profits tax
at a 30% rate or a lower rate specified by an applicable income tax treaty.
Under currently applicable U.S. Treasury regulations, dividends paid to an
address in a foreign country are presumed, absent actual knowledge to the
contrary, to be paid to a resident of that country for purposes of the
withholding discussed above and for purposes of determining the applicability
of a tax treaty rate. Under U.S. Treasury regulations generally effective for
payments made after December 31, 2000, however, a non-U.S. holder of our common
shares who wishes to claim the benefit of an applicable treaty rate generally
will be required to satisfy applicable certification and other requirements.
A non-U.S. holder of our common shares that is eligible for a reduced rate
of U.S. withholding tax under an income tax treaty may obtain a refund of any
excess amounts withheld by filing an appropriate claim for a refund with the
Internal Revenue Service.
Gain on disposition of common shares
A non-U.S. holder generally will not be subject to U.S. federal income tax
in respect of gain recognized on a disposition of our common shares unless:
. the gain is effectively connected with a trade or business of the non-
U.S. holder in the United States, or where a tax treaty applies, is
attributable to a United States permanent establishment of the non-U.S.
holder;
. the non-U.S. holder is an individual who holds our common shares as a
capital asset within the meaning of Section 1221 of the Internal Revenue
Code, is present in the United States for 183 or more days in the
taxable year of the disposition and meets other requirements;
. we are or have been a U.S. real property holding corporation for federal
income tax purposes at any time during the shorter of the five-year
period preceding the disposition or the period that the non-U.S. holder
held our common shares; or
. the non-U.S. holder is subject to tax under provisions applicable to
certain former citizens or residents of the United States.
Generally, a corporation is a U.S. real property holding corporation if the
fair market value of its U.S. real property interests equals or exceeds 50% of
the sum of the fair market value of its worldwide real property interests plus
its other assets used or held for use in a trade or business. We believe that
we have not been, are not currently, and do not anticipate becoming, a U.S.
real property holding corporation for U.S. federal income tax purposes. The tax
with respect to stock in a U.S. real property holding corporation does not
apply to a non-
U.S. holder whose holdings, direct and indirect, at all times during the
applicable period, constituted 5% or less of our common shares, provided that
our common shares were regularly traded on an established securities market.
If a non-U.S. holder who is an individual is subject to tax under the first
bullet point above, the individual generally will be taxed on the net gain
derived from a sale of common shares under regular graduated United States
federal income tax rates. If an individual non-U.S. holder is subject to tax
under the second bullet point above, the individual generally will be subject
to a flat 30% tax on the gain derived from a sale, which may be offset by
particular United States capital losses.
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<PAGE>
If a non-U.S. holder that is a foreign corporation is subject to tax under
the first bullet point above, such foreign corporation generally will be taxed
on its net gain under regular graduated United States federal income tax rates
and, in addition, will be subject to the branch profits tax equal to 30% of its
effectively connected earnings and profits, within the meaning of the Internal
Revenue Code for the taxable year, as adjusted for certain items, unless it
qualifies for a lower rate under an applicable tax treaty.
Federal estate tax
Common shares that are owned or treated as owned by an individual non-U.S.
holder at the time of death will be included in the individual's gross estate
for United States federal estate tax purposes, unless an applicable estate tax
or other treaty provides otherwise and, therefore, may be subject to United
States federal estate tax.
Information reporting and backup withholding tax
Under United States Treasury regulations, we must report annually to the
Internal Revenue Service and to each non-U.S. holder the amount of dividends
paid to that holder and the tax withheld with respect to those dividends.
Copies of the information returns reporting dividends and withholding may also
be made available to the tax authorities in the country in which the non-U.S.
holder is a resident under the provisions of an applicable income tax treaty or
agreement.
United States backup withholding, which generally is a withholding tax
imposed at the rate of 31% on payments to persons that fail to furnish certain
required information generally will not apply:
. to dividends paid to non-U.S. holders that are subject to the 30%
withholding discussed above or that are not so subject because a tax
treaty applies that reduces or eliminates such 30% withholding; or
. before January 1, 2001, to dividends paid to a non-U.S. holder at an
address outside of the United States unless the payor has actual
knowledge that the payee is a U.S. holder.
Backup withholding and information reporting generally will apply to
dividends paid to addresses inside the United States on our common shares to
beneficial owners that are not exempt recipients and that fail to provide
identifying information in the manner required.
The payment of the proceeds of the disposition of our common shares by a
holder to or through the U.S. office of a broker or through a non-U.S. branch
of a U.S. broker generally will be subject to information reporting and backup
withholding at a rate of 31% unless the holder either certifies its status as a
non-U.S. holder under penalties of perjury or otherwise establishes an
exemption. The payment of the proceeds of the disposition by a non-U.S. holder
of common shares to or through a non-U.S. office of a non-U.S. broker will
not be subject to backup withholding or information reporting unless the non-
U.S. broker has particular types of U.S. relationships. In the case of the
payment of proceeds from the disposition of our common shares effected by a
foreign office of a broker that is a U.S. person or a U.S. related person,
existing regulations require information reporting on the payment unless the
broker receives a statement from the owner, signed under penalty of perjury,
certifying its non-U.S. status or the broker has documentary evidence in its
files as to the non-U.S. holder's foreign status and the broker has no actual
knowledge to the contrary. For this purpose, a U.S. related person includes:
. a controlled foreign corporation for U.S. federal income tax purposes;
or
. a foreign person 50% or more of whose gross income for a certain period
is derived from activities that are effectively connected with the
conduct of a U.S. trade or business.
New U.S. Treasury regulations, which are generally effective for payment
made after December 31, 2000, alter the foregoing rules in certain respects.
Among other things, these regulations provide presumptions under
64
<PAGE>
which a non-U.S. holder is subject to backup withholding at the rate of 31% and
information reporting unless we receive certification from the holder of non-
U.S. status. Depending on the circumstances, this certification will need to be
provided:
. directly by the non-U.S. holder;
. in the case of a non-U.S. holder that is treated as a partnership or
certain other types of entities for U.S. income tax purposes, by the
partners, stockholders or other beneficiaries of that entity; or
. by particular qualified financial institutions or other qualified
entities on behalf of the non-U.S. holder.
Any amounts withheld under the backup withholding rules from a payment to a
non-U.S. holder will be refunded or credited against the holder's U.S. federal
income tax liability, if any, provided that the required information is
furnished to the Internal Revenue Service.
LEGAL MATTERS
The validity of the issuance of the common shares offered by this prospectus
will be passed upon for Entegris by Dorsey & Whitney, LLP, Minneapolis,
Minnesota. Certain legal matters in connection with the offering will be passed
upon for the underwriters by Latham & Watkins, Chicago, Illinois.
EXPERTS
The consolidated balance sheets of Entegris, Inc. and subsidiaries as of
August 31, 1999, August 31, 1998 and August 31, 1997, and the related
consolidated statements of income, shareholders' equity (deficit) and cash
flows for each of the fiscal years in the three year period ended August 31,
1999, have been included in this prospectus and elsewhere in the registration
statement in reliance upon the reports of KPMG LLP and Arthur Andersen LLP,
independent public accountants, and upon the authority of said firms as experts
in accounting and auditing.
WHERE YOU CAN FIND ADDITIONAL INFORMATION
A registration statement on Form S-1, including amendments to the
registration statement, relating to the common shares offered by this
prospectus has been filed by us with the SEC. This prospectus, which
constitutes a part of the registration statement, does not contain all of the
information set forth in the registration statement and the exhibits and
schedules to the registration statement. Statements contained in this
prospectus as to the contents of any contract or other document referred to are
not necessarily complete, and in each instance reference is made to the copy of
such contract or other document filed as an exhibit to the registration
statement, each such statement being qualified in all respects by such
reference. For further information with respect to us and the common shares
offered by this prospectus, reference is made to such registration statement,
exhibits and schedules. A copy of the registration statement may be inspected
by anyone without charge at the public reference facilities maintained by the
SEC at 450 Fifth Street, NW, Judiciary Plaza, Washington, D.C. 20549, and
copies of all or any part thereof maybe obtained from the SEC upon payment of
certain fees prescribed by the Commission. The telephone number for the public
reference facilities maintained by the SEC is (800) SEC-0330. The SEC maintains
a World Wide Web site that contains reports, proxy and information statements
and other information filed electronically with the SEC. The address of the
site is http://www.sec.gov.
65
<PAGE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Financial Statements
<S> <C>
Report of Independent Auditors.......................................... F-2
Report of Independent Public Accountants................................ F-3
Consolidated Balance Sheets as of August 31, 1998 and 1999 and as of
February 28, 2000...................................................... F-4
Consolidated Statements of Operations for the years ended August 31,
1997, 1998 and 1999 and for the six months ended February 28, 1999 and
2000................................................................... F-5
Consolidated Statements of Shareholders' Equity (Deficit) for the years
ended August 31, 1997, 1998 and 1999 and for the six months ended
February 28, 2000...................................................... F-6
Consolidated Statements of Cash Flows for the years ended August 31,
1997, 1998 and 1999 and for the six months ended February 28, 1999 and
2000................................................................... F-7
Notes to Consolidated Financial Statements.............................. F-8
<CAPTION>
Financial Schedules
<S> <C>
Schedule II--Valuation and Qualifying Accounts.......................... F-23
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Board of Directors
Entegris, Inc.:
We have audited the accompanying consolidated balance sheets of Entegris,
Inc. and subsidiaries as of August 31, 1999 and 1998, and the related
consolidated statements of operations, shareholders' equity (deficit) and cash
flows for each of the years in the three-year period ended August 31, 1999.
These consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits. We did not audit the 1998 and 1997
financial statements of Empak, Inc., a wholly-owned subsidiary, which
statements reflect total assets constituting 33% of the 1998 total consolidated
assets and total revenues constituting 40% and 43% of total consolidated
revenues in 1998 and 1997. 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 Empak, Inc., is based solely on the report of the
other auditors.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits and the report of the other
auditors provide a reasonable basis for our opinion.
In our opinion, based on our audits and the report of the other auditors,
the consolidated financial statements referred to above present fairly, in all
material respects, the financial position of Entegris, Inc. and subsidiaries as
of August 31, 1999 and 1998, and the results of their operations and their cash
flows for each of the years in the three-year period ended August 31, 1999 in
conformity with generally accepted accounting principles.
/s/ KPMG LLP
Minneapolis, Minnesota
October 27, 1999, except as to notes 7 and 21,
which are as of December 22, 1999 and March 31, 2000
F-2
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Empak, Inc. and Subsidiaries:
We have audited the consolidated balance sheet of Empak, Inc. (a Minnesota
corporation) and Subsidiaries as of August 31, 1998, and the related
consolidated statements of operations, shareholders' equity and cash flows for
each of the years ended August 31, 1998 and 1997, not presented separately
herein. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted accounting
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above, not separately
presented herein, present fairly, in all material respects, the financial
position of Empak, Inc. and Subsidiaries as of August 31, 1998, and the results
of their operations and their cash flows for each of the years ended August 31,
1998 and 1997, in conformity with generally accepted accounting principles.
/s/ Arthur Andersen LLP
Denver, Colorado
October 8, 1998
F-3
<PAGE>
ENTEGRIS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
<TABLE>
<CAPTION>
August 31
------------------ February 28,
1998 1999 2000
-------- -------- ------------
(Unaudited)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................... $ 8,235 $ 16,411 $ 25,029
Trade accounts receivable, net of allowance
for doubtful accounts of $1,322, $1,205 and
$1,311, respectively....................... 30,076 32,932 38,083
Trade accounts receivable due from
affiliates................................. 7,402 9,962 19,278
Inventories................................. 36,935 35,047 35,132
Refundable income taxes..................... 2,395 -- --
Deferred tax assets......................... 6,688 6,276 6,241
Other current assets........................ 4,890 4,737 5,805
-------- -------- --------
Total current assets....................... 96,621 105,365 129,568
-------- -------- --------
Property, plant and equipment, net............ 133,323 117,624 112,200
Other assets:
Investments in affiliates................... 13,013 10,421 13,576
Intangible assets, less accumulated
amortization of $2,236, $3,217 and $3,811,
respectively............................... 7,368 6,318 8,389
Investments in marketable securities........ 387 860 1,067
Other....................................... 2,229 1,476 1,740
-------- -------- --------
Total assets............................... $252,941 $242,064 $266,540
======== ======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Current maturities of long-term debt........ $ 8,685 $ 6,566 $ 6,336
Current maturities of capital lease
obligations................................ 2,333 2,642 2,430
Short-term borrowings....................... 10,019 8,439 8,021
Accounts payable............................ 12,568 10,548 14,162
Accrued liabilities......................... 21,239 26,780 28,723
Income tax payable.......................... -- 1,530 392
-------- -------- --------
Total current liabilities.................. 54,844 56,505 60,064
-------- -------- --------
Long-term debt, less current maturities....... 67,547 48,023 46,274
Capital lease obligations, less current
maturities................................... 5,695 5,807 4,496
Deferred tax liabilities...................... 5,255 6,139 8,982
Minority interest in subsidiaries............. 1,201 907 3,755
Redeemable ESOT common stock.................. 47,906 145,570 202,980
Shareholders' equity (deficit):
Common stock, par value $.01; 200,000,000
shares authorized.
Issued and outstanding shares; 18,359,755,
18,354,344 and 36,776,962, respectively.... 184 184 368
Additional paid-in capital.................. 15,066 15,066 14,962
Retained earnings (deficit)................. 57,564 (36,069) (75,111)
Accumulated other comprehensive loss........ (2,321) (68) (230)
-------- -------- --------
Total shareholders' equity (deficit)....... 70,493 (20,887) (60,011)
-------- -------- --------
Commitments and contingent liabilities
-------- -------- --------
Total liabilities and shareholders'
equity.................................... $252,941 $242,064 $266,540
======== ======== ========
</TABLE>
See the accompanying notes to consolidated financial statements.
F-4
<PAGE>
ENTEGRIS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except per share data)
<TABLE>
<CAPTION>
Six Months Ended
Year Ended August 31, February 28,
---------------------------- ------------------
1997 1998 1999 1999 2000
-------- -------- -------- -------- --------
(Unaudited)
<S> <C> <C> <C> <C> <C>
Sales to non-affiliates..... $223,300 $216,852 $195,421 $ 91,862 $110,113
Sales to affiliates......... 53,990 49,739 46,531 19,728 46,549
-------- -------- -------- -------- --------
Net sales................... 277,290 266,591 241,952 111,590 156,662
Cost of sales............... 161,732 156,508 148,106 72,026 85,260
-------- -------- -------- -------- --------
Gross profit.............. 115,558 110,083 93,846 39,564 71,402
Selling, general and
administrative expenses.... 62,384 65,536 64,336 28,896 34,962
Engineering, research and
development expenses....... 17,986 19,912 14,565 7,571 6,234
-------- -------- -------- -------- --------
Operating profit.......... 35,188 24,635 14,945 3,097 30,206
Interest expense, net....... 6,652 6,995 5,498 3,040 2,020
Other (income) expense,
net........................ 2,201 (273) (1,850) (1,312) (6,282)
-------- -------- -------- -------- --------
Income before income taxes
and other items below.... 26,335 17,913 11,297 1,369 34,468
Income tax expense.......... 10,578 4,536 4,380 89 11,589
Equity in net (income) loss
of affiliates.............. (1,750) 118 1,587 1,196 (582)
Minority interest in
subsidiaries' net income
(loss)..................... 573 176 (399) (16) 348
-------- -------- -------- -------- --------
Net income................ $ 16,934 $ 13,083 $ 5,729 $ 100 $ 23,113
======== ======== ======== ======== ========
Earnings per common share:
Basic..................... $ 0.28 $ 0.22 $ 0.10 $ 0.00 $ 0.39
Diluted................... $ 0.27 $ 0.21 $ 0.09 $ 0.00 $ 0.36
</TABLE>
See the accompanying notes to consolidated financial statements.
F-5
<PAGE>
ENTEGRIS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIT)
(in thousands)
<TABLE>
<CAPTION>
Common Stock Accumulated
---------------- Additional Other
Number Paid-in Retained Comprehensive Comprehensive
of Shares Amount Capital Earnings Income (Loss) Total income
--------- ------ ---------- -------- ------------- -------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at August 31,
1996................... 16,727 $167 $ 2,743 $ 4,379 $ (462) $ 6,827
Repurchase and
retirement of
shares............... (22) -- -- (29) -- (29)
Issuance of stock for
merger............... 1,210 12 10,719 -- -- 10,731
Shares issues pursuant
to stock options
exercised............ 293 3 337 -- -- 340
Options granted below
fair value........... -- -- 968 -- -- 968
Market value
adjustment to
redeemable ESOT
common stock......... -- -- -- (3,045) -- (3,045)
Foreign currency
translation
adjustment........... -- -- -- -- (278) (278) $ (278)
Increase in unrealized
holding gain on
marketable
securities........... -- -- -- -- 209 209 209
Net income............ -- -- -- 16,934 -- 16,934 16,934
-------
Total comprehensive
income............... $16,865
------ ---- ------- -------- ------- -------- =======
Balance at August 31,
1997................... 18,208 182 14,767 18,239 (531) 32,657
Repurchase and
retirement of
shares............... (143) (1) -- (928) -- (929)
Shares issues pursuant
to stock options
exercised............ 295 3 299 -- -- 302
Market value
adjustment to
redeemable ESOT
common stock......... -- -- -- 27,170 -- 27,170
Foreign currency
translation
adjustment........... -- -- -- (1,622) (1,622) $(1,622)
Decrease in unrealized
holding gain on
marketable
securities........... -- -- -- -- (168) (168) (168)
Net income............ -- -- -- 13,083 -- 13,083 13,083
-------
Total comprehensive
income............... $11,293
------ ---- ------- -------- ------- -------- =======
Balance at August 31,
1998................... 18,360 184 15,066 57,564 (2,321) 70,493
Repurchase and
retirement of
shares............... (6) -- -- (20) -- (20)
Dilution of ownership
on equity
investment........... -- -- -- (588) -- (588)
Market value
adjustment to
redeemable ESOT
common stock......... -- -- -- (98,754) -- (98,754)
Foreign currency
translation
adjustment........... -- -- -- -- 1,792 1,792 $ 1,792
Increase in unrealized
holding gain on
marketable
securities........... -- -- -- -- 461 461 461
Net income............ -- -- -- 5,729 -- 5,729 5,729
-------
Total comprehensive
income............... $ 7,982
------ ---- ------- -------- ------- -------- =======
Balance at August 31,
1999................... 18,354 184 15,066 (36,069) (68) (20,887)
Repurchase and
retirement of shares
(unaudited).......... (8) -- -- (89) -- (89)
Shares issues pursuant
to stock options
exercised
(unaudited).......... 22 -- 80 -- -- 80
Dilution of ownership
on investments
(unaudited).......... -- -- -- 3,523 -- 3,523
Market value
adjustment to
redeemable ESOT
common stock......... 20 -- -- (65,589) -- (65,589)
Foreign currency
translation
adjustment
(unaudited).......... -- -- -- -- (138) (138) $ (138)
Decrease in unrealized
holding gain on
marketable securities
(unaudited).......... -- -- -- -- (24) (24) (24)
Net income
(unaudited).......... -- -- -- 23,113 -- 23,113 23,113
Stock split adjustment
(unaudited).......... 18,389 184 (184) -- -- --
-------
Total comprehensive
income (unaudited)... $22,951
------ ---- ------- -------- ------- -------- =======
Balance at February 28,
2000 (unaudited)....... 36,777 $368 $14,962 $(75,111) $ (230) $(60,011)
====== ==== ======= ======== ======= ========
</TABLE>
See the accompanying notes to consolidated financial statements.
F-6
<PAGE>
ENTEGRIS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
<TABLE>
<CAPTION>
Six Months
Ended February
Year Ended August 31, 28,
------------------------- ----------------
1997 1998 1999 1999 2000
------- ------- ------- ------- -------
(Unaudited)
<S> <C> <C> <C> <C> <C>
Operating Activities:
Net income....................... $16,934 $13,083 $ 5,729 $ 100 $23,113
Adjustments to reconcile net
income to net cash provided by
operating activities:
Depreciation and amortization.. 23,395 26,591 28,810 13,670 13,369
Asset impairment............... -- 425 1,996 -- 1,287
Provision for doubtful
accounts...................... 404 57 213 245 106
Provision for deferred income
taxes......................... 261 667 1,296 -- 2,879
Stock option compensation
expense....................... 968 -- -- -- --
Equity in net (income) loss of
affiliates.................... (1,750) 118 1,587 1,196 (582)
Loss (gain) on sale of property
and equipment................. 112 (360) 543 (16) 611
Gain on sale of investment in
affiliate..................... -- -- -- -- (5,468)
Minority interest in
subsidiaries' net income
(loss)........................ 573 176 (399) (16) 348
Changes in operating assets and
liabilities:
Trade accounts receivable..... (4,151) 7,983 (3,069) (136) (4,992)
Trade accounts receivable due
from affiliates.............. 448 113 (2,560) (1,380) (9,316)
Inventories................... (4,402) 7,122 1,888 2,624 (85)
Accounts payable and accrued
liabilities.................. 4,771 (11,685) 3,520 1,611 5,217
Other current assets.......... (8,807) 5,457 152 (3,887) (1,067)
Accrued income taxes.......... 798 (4,094) 3,925 (353) (1,119)
Other......................... (1,063) 256 (222) (399) (139)
------- ------- ------- ------- -------
Net cash provided by
operating activities....... 28,491 45,909 43,409 13,259 24,162
------- ------- ------- ------- -------
Investing Activities:
Acquisition of property and
equipment....................... (44,928) (33,512) (10,079) (5,178) (7,323)
Purchase of intangible assets.... (695) (618) (621) (21) (2,013)
Proceeds from sales of property
and equipment................... 315 343 1,285 493 290
Proceeds from sale of investment
in affiliate.................... -- -- -- -- 7,399
(Decrease) increase in investment
in affiliates................... (1,012) (213) 159 -- (1,840)
------- ------- ------- ------- -------
Net cash used in investing
activities................. (46,321) (34,000) (9,256) (4,706) (3,487)
------- ------- ------- ------- -------
Financing Activities:
Principal payments on short-term
borrowings and long-term debt... (9,507) (28,567) (32,339) (14,165) (6,155)
Proceeds from short-term
borrowings and long-term debt... 29,193 15,895 6,382 2,373 2,312
Issuance of common stock......... 389 302 -- -- 80
Repurchase of redeemable and non-
redeemable common stock......... (2,225) (2,578) (1,110) (1,110) (8,268)
------- ------- ------- ------- -------
Net cash provided by (used
in) financing activities... 17,851 (14,948) (27,067) (12,902) (12,031)
------- ------- ------- ------- -------
Effect of exchange rate changes
on cash and cash equivalents.... 82 (80) 1,090 940 (26)
------- ------- ------- ------- -------
(Decrease) increase in cash
and cash equivalents....... 103 (3,119) 8,176 (3,409) 8,618
Cash and cash equivalents at
beginning of period............. 11,251 11,354 8,235 8,235 16,411
------- ------- ------- ------- -------
Cash and cash equivalents at end
of period....................... $11,354 $ 8,235 $16,411 $ 4,825 $25,029
======= ======= ======= ======= =======
</TABLE>
See accompanying notes to consolidated financial statements.
F-7
<PAGE>
ENTEGRIS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) Summary of Significant Accounting Policies
(a) Principles of Consolidation and Basis of Presentation
Entegris, Inc. (the Company) is a worldwide leader in providing advanced
materials management products using polymers developed for applications in the
microelectronics industry and other targeted markets. The accompanying
consolidated financial statements include the accounts of the Company, its
wholly owned subsidiaries, Fluoroware, Inc., Empak, Inc., Fluoroware Jamaica,
Ltd. and Empak Bermuda, both foreign sales corporations (FSC), Fluoroware PEI,
Inc., Empak GmbH, Fluoroware Europa GmbH, Empak Hanbal Korea, Empak Korea Yuhan
Hoesa, Empak UK, and Empak Malaysia. The results of operations of Nippon
Fluoroware K.K., a 90% owned subsidiary, Fluoroware GmbH, a 90% owned
subsidiary, Fluoroware Southeast Asia Pte Ltd., a 70% owned subsidiary;
Fluoroware Valqua Japan K.K., a 51% owned subsidiary, and Unified Container
Solutions, Inc., an 80% owned subsidiary of the Company, have also been
consolidated with the Company's results. See Notes 21 and 22 regarding
transactions subsequent to August 31, 1999 which affect certain of the
preceding information. The Company accounts for its investments in its 30.0%
and 20.8% owned affiliates, FJV (Korea) Ltd. and Metron Technology N.V.
(Metron), respectively, using the equity method (See Note 21). The Company's
investment in Metron is accounted for using a three-month lag due to Metron's
May year end. Intercompany profits, transactions and balances have been
eliminated.
The Company's fiscal year is a 52 or 53 week period ending on the last
Saturday in August. Fiscal years 1997, 1998 and 1999 ended on August 30, 1997,
August 29, 1998 and August 28, 1999, respectively. For convenience, the
accompanying financial statements have been presented as ending on the last day
of the month.
The unaudited interim consolidated financial statements for the six months
ended February 28, 1999 and 2000, have been prepared on the same basis as the
audited financial statements and, in the opinion of management, reflect all
normal recurring adjustments necessary to present fairly the financial
information set forth therein, in accordance with generally accepted accounting
principles. The results of operations for the six months ended February 28,
2000 are not necessarily indicative of the operating results to be expected for
the year ended August 31, 2000.
(b) Business Combination
On June 7, 1999, Fluoroware, Inc. and Empak, Inc. completed a business
combination which resulted in the formation of Entegris, Inc., a new
corporation formed for the purpose of effecting the business combination.
Entegris, Inc. issued 36 million shares of its common stock in exchange for
100% of the outstanding shares of Fluoroware, Inc. and 24 million shares in
exchange for 100% of the outstanding shares of Empak, Inc.
For financial reporting purposes, the business combination has been recorded
using the pooling-of-interests method of accounting under generally accepted
accounting principles. Accordingly, the historical financial statements of
Entegris, Inc. include the historical accounts and results of operations of
Empak, Inc. and subsidiaries and Fluoroware, Inc. and subsidiaries as if the
business combination had been in effect for all periods presented.
F-8
<PAGE>
The results of operations for the separate companies and combined amounts
presented in the consolidated financial statements are as follows:
<TABLE>
<CAPTION>
1997 1998 1999
-------- ------- -------
<S> <C> <C> <C>
Net sales:
Fluoroware, Inc............................. $165,772 152,805 141,758
Empak, Inc.................................. 111,518 113,786 100,194
-------- ------- -------
Combined.................................. $277,290 266,591 241,952
======== ======= =======
Net income before merger-related expenses,
impairment of asset charges and adjustments
recorded to conform accounting methods:
Fluoroware, Inc............................. $ 6,056 1,940 149
Empak, Inc.................................. 10,741 11,414 9,843
-------- ------- -------
Combined.................................. $ 16,797 13,354 9,992
======== ======= =======
Net income (loss):
Fluoroware, Inc............................. $ 6,202 1,724 (3,630)
Empak, Inc.................................. 10,732 11,359 9,359
-------- ------- -------
Combined.................................. $ 16,934 13,083 5,729
======== ======= =======
</TABLE>
Adjustments to conform the companies' methods of depreciation reduced
combined net income for the years ended August 31, 1998 and 1999 by
approximately $0.5 million and $1.9 million, respectively.
Expenses related to the business combination were approximately $3.6 million
for 1999, of which approximately $2.6 million is in accrued liabilities at
August 31, 1999. In addition, the Company recorded asset impairment charges
related to the business combination of approximately $1.3 million during 1999.
(c) Cash and Cash Equivalents
Cash and cash equivalents include cash on hand, demand deposits, and short-
term investments with original maturities of three months or less.
(d) Inventories
Inventories are stated at the lower of cost or market. Cost is determined by
the last-in, first-out (LIFO) method for approximately 78% and 73% of total
inventories at August 31, 1998 and 1999, respectively. Inventories not valued
at LIFO are recorded using the first-in, first-out method.
(e) Property, Plant, and Equipment
Property, plant, and equipment are carried at cost and are depreciated
principally on the straight-line method. When assets are retired or disposed
of, the cost and related accumulated depreciation are removed from the
accounts, and gains or losses are recognized in the same period. Maintenance
and repairs are expensed as incurred; significant renewals and betterments are
capitalized.
(f) Capitalized Software
The Company capitalizes certain costs associated with significant software
obtained and developed for internal use. Certain costs are capitalized when
both the preliminary project stage is completed and management deems the
project will be completed and used to perform the intended function.
Capitalization of such costs ceases no later than the point at which the
project is substantially complete and ready for its intended purpose.
Capitalized software costs are amortized over the estimated useful life of
the project which is generally 4 to 5 years. Capitalized software of
approximately $4.6 million was included in office furniture and equipment as of
August 31, 1998 and 1999.
F-9
<PAGE>
(g) Intangible Assets
Patents, trademarks and goodwill are carried at cost, less accumulated
amortization, and are being amortized over 5 to 17 year periods, using the
straight-line method. Costs associated with bond and debt issuance are carried
at cost, less accumulated amortization, and are being amortized on a straight-
line basis over the life of the applicable bond or debt instrument, which is 10
to 15 years.
The carrying value of intangible assets is reviewed when circumstances
suggest that there has been possible impairment. If this review indicates that
intangible assets will not be recoverable based on the estimated undiscounted
cash flows over the remaining amortization period, the carrying value of
intangible assets is reduced to estimated fair value.
(h) Investments in Marketable Securities
Certain of the Company's investments are classified as available-for-sale,
and accordingly, any unrealized holding gains and losses, net of taxes, are
excluded from income, and recognized as a separate component of shareholders'
equity until realized. Fair market value of the securities is determined based
on published market prices. At August 31, 1999, the gross unrealized gains on
marketable securities were $0.5 million.
(i) Foreign Currency Translation/Foreign Currency Contracts
Except for certain foreign subsidiaries whose functional currency is the
United States dollar, assets and liabilities of foreign subsidiaries are
translated from foreign currencies into U.S. dollars at current exchange rates.
Income statement amounts are translated at the weighted average exchange rates
for the year. Gains and losses resulting from foreign currency transactions are
included in net income. For certain foreign subsidiaries whose functional
currency is the U.S. dollar, currency gains and losses resulting from
translation are determined using a combination of current and historical rates
and are reported as a component of net income.
The Company periodically enters into forward foreign currency contracts to
reduce certain exposures relating to rate changes in foreign currency. These
contracts are subject to gain or loss from changes in foreign currency rates,
however, any realized gain or loss will be offset by gains or losses on the
underlying hedged foreign currency transactions. Certain exposures to credit
losses related to counterparty nonperformance exist, however, the Company does
not anticipate nonperformance by the counterparties as they are large, well-
established financial institutions. The fair values of the Company's forward
hedging instruments discussed below are estimated based on prices quoted by
financial institutions for these instruments.
The Company was a party to forward foreign currency contracts with notional
amounts of $1.6 million at August 31, 1999.
(j) Revenue Recognition/Concentration of Risk
Revenue and the related cost of sales are recognized upon shipment of the
products. The Company provides for estimated returns and warranty obligations
when the revenue is recorded. The Company sells its products to semiconductor
manufacturing companies throughout the world. The Company performs continuing
credit evaluations of its customers and, generally, does not require
collateral. Letters of credit may be required from its customers in certain
circumstances. The Company maintains an allowance for doubtful accounts which
management believes is adequate to cover any losses on trade receivables.
Certain of the materials included in the Company's products are obtained
from a single source or a limited group of suppliers. Although the Company
seeks to reduce dependence on those sole and limited source suppliers, the
partial or complete loss of certain of these sources could have at least a
temporary adverse effect on the Company's results of operations. Furthermore, a
significant increase in the price of one or more of these components could
adversely affect the Company's results of operations.
(k) Income Taxes
Deferred income taxes are provided in amounts sufficient to give effect to
temporary differences between financial and tax reporting. The Company accounts
for tax credits as reductions of income tax expense in the year in which such
credits are allowable for tax purposes.
F-10
<PAGE>
The Company utilizes the asset and liability method for computing its
deferred income taxes. Under the asset and liability method, deferred tax
assets and liabilities are based on the temporary difference between the
financial statement and tax basis of assets and liabilities and the enacted tax
rates expected to apply to taxable income in the years in which these temporary
differences are expected to be recovered or settled. The effect on deferred tax
assets and liabilities of a change in tax rates is recognized in income in the
period that includes the enactment date.
(l) Long-lived Assets
Long-lived assets and certain identifiable intangibles are reviewed for
impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable based on estimated future
undiscounted cash flows. The Company recorded asset write-offs on molds and
equipment which were determined to have no future use of approximately $0.4
million and $2.0 million for 1998 and 1999, respectively. All impairment losses
are included in the Company's selling, general and administrative expenses.
(m) Earnings per Share
Basic EPS is computed by dividing net income by the weighted average number
of common shares outstanding. Diluted EPS is computed by dividing net income by
the weighted average number of common shares outstanding and all potential
dilutive securities outstanding. The dilutive effect of options is determined
under the treasury stock method and is included only where the effect would be
dilutive.
(n) Accounting Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
(o) Stock-based Compensation
The Company accounts for stock-based compensation under Accounting
Principles Board (APB) Opinion No. 25, Accounting for Stock Issued to
Employees. APB No. 25 requires compensation cost to be recorded on the date of
the grant only if the current market price of the underlying stock exceeds the
exercise price. The Company has adopted the disclosure-only provisions of SFAS
No. 123, Accounting for Stock-based Compensation.
(p) Comprehensive Income
Comprehensive income (loss) represents the change in shareholders' equity
resulting from other than shareholder investments and distributions. The
Company's foreign currency translation adjustments and unrealized gains and
losses on marketable securities are included in accumulated comprehensive
income (loss). The effect of deferred taxes on other comprehensive income
(loss) is not material.
(q) Recent Accounting Pronouncements
In June 1998, FASB issued SFAS No. 133, Accounting for Derivative
Instruments and Hedging Activities, which, as amended, becomes effective for
fiscal years beginning after June 15, 2000. The pronouncement requires
companies to record derivatives on the balance sheet as assets or liabilities,
measured at fair value. Gains or losses resulting from changes in the value of
those derivatives would be accounted for depending on the use of derivatives
and whether it qualifies for hedge accounting. The Company is presently
analyzing this statement and the impact, if any, on the Company's financial
statements.
F-11
<PAGE>
(2) Acquisitions
On April 30, 1998, the Company acquired all the common stock of Hanbal
Korea, a Korean corporation, for a nominal amount. Subsequent to the
acquisition, the Company contributed additional capital of $2.3 million. The
acquisition has been accounted for under the purchase method of accounting. The
excess of the purchase price over the net book value of the common stock
acquired was $0.8 million and was allocated to goodwill. Results of operations
of Hanbal Korea are included in the consolidated financial statements
subsequent to April 30, 1998.
On January 26, 1998, the Company acquired an additional 37.5% interest in
Nippon Fluoroware K.K. for $0.9 million.
(3) Inventories
Inventories consist of the following (in thousands):
<TABLE>
<CAPTION>
1998 1999
-------- -------
<S> <C> <C>
Raw materials.......................................... $ 7,564 $ 7,194
Work-in-process........................................ 876 4,377
Finished goods......................................... 28,161 22,703
Supplies............................................... 334 773
-------- -------
$ 36,935 $35,047
======== =======
</TABLE>
If the first-in, first-out (FIFO) cost method had been used by the company,
inventories would have been $4.5 million and $4.9 million higher at August 29,
1998 and August 28, 1999, respectively.
During fiscal 1998 and 1999, inventory quantities were reduced, which
resulted in a liquidation of LIFO inventory layers carried at lower costs than
those prevailing in prior years. The effect of this liquidation was to increase
income before income taxes in fiscal 1998 and 1999 by approximately $1.0
million and $1.6 million, respectively.
(4) Property, Plant, and Equipment
Property, plant, and equipment, together with annual depreciation lives,
consist of the following (in thousands):
<TABLE>
<CAPTION>
Estimated
1998 1999 Useful Lives
--------- -------- ------------
<S> <C> <C> <C>
Land...................................... $ 6,268 $ 7,307
Buildings and improvements................ 53,117 55,349 5-35
Manufacturing equipment................... 80,127 77,625 5-10
Molds..................................... 65,174 68,352 3-5
Office furniture and equipment............ 32,213 34,291 3-8
--------- --------
236,900 242,924
Less accumulated depreciation............. 103,577 125,300
--------- --------
$ 133,323 $117,624
========= ========
</TABLE>
Depreciation expense was $22.9 million, $25.6 million and $27.8 million in
1997, 1998 and 1999, respectively.
F-12
<PAGE>
(5) Investments in Affiliates
The investment in Metron was reduced from 37.5% to 32.8% in 1999 due to the
dilution of ownership resulting from an acquisition by Metron. The Company
recorded this $0.6 million reduction in its investment through retained
earnings in fiscal 1999. This ownership percentage was further reduced in
November 1999 as explained in Note 22. A summary of assets, liabilities, and
results of operations for Metron, a 32.8% owned affiliate accounted for using
the equity method, is as follows (in thousands):
<TABLE>
<CAPTION>
May 31,
-----------------
1998 1999
-------- --------
<S> <C> <C>
Current assets........................................ $ 97,859 $ 86,713
Noncurrent assets, net................................ 16,302 12,912
Current liabilities................................... 73,390 64,930
Noncurrent liabilities................................ 2,722 2,743
-------- --------
Total shareholders' equity........................ $ 38,049 $ 31,952
======== ========
<CAPTION>
Fiscal Years
Ended May 31,
-----------------
1998 1999
-------- --------
<S> <C> <C>
Net sales............................................. $275,024 $228,121
-------- --------
Net income (loss)..................................... $ 1,102 $ (4,534)
======== ========
</TABLE>
Metron operates mainly in Europe, Asia Pacific, and the United States. Sales
to Metron, which are recorded in accordance with the Company's revenue
recognition policy, were $34.6 million, $31.8 million and $34.6 million in
1997, 1998 and 1999, respectively. Trade accounts receivable relating to these
sales as of August 31, 1998 and 1999 were $6.6 million and $8.1 million,
respectively.
The Company also has a 30% investment in FJV (Korea) Ltd. Neither this
investment nor FJV (Korea) Ltd.'s financial statements are material.
(6) Accrued Liabilities
Accrued liabilities consist of the following (in thousands):
<TABLE>
<CAPTION>
1998 1999
-------- -------
<S> <C> <C>
Payroll and related benefits............................ $ 8,061 $ 6,896
Insurance............................................... 1,440 2,248
Taxes, other than income taxes.......................... 1,384 1,472
Pension................................................. 2,377 3,218
Interest................................................ 829 570
Other................................................... 7,148 12,376
-------- -------
$ 21,239 $26,780
======== =======
</TABLE>
F-13
<PAGE>
(7) Long-term Debt
Long-term debt consists of the following (in thousands):
<TABLE>
<CAPTION>
1998 1999
------- -------
<S> <C> <C>
Unsecured senior notes payable in various semiannual
principal installments, including semiannual interest
installments at 7.42% through February 2011.............. $20,000 $19,200
Unsecured reducing revolving commitments with two
commercial banks for aggregate borrowing of $35,833 with
interest only payable monthly at 6.43% to 8.50% during
1999, based on a factor of the banks' reference rates.... 13,400 --
Stock redemption notes payable in various installments
along with monthly interest of 6%, 8%, and 9% through
December 2010............................................ 9,112 8,490
Unsecured senior notes payable in various quarterly
principal installments, including monthly interest
installments at 9.46% through February 2005.............. 8,900 8,400
Mortgage loans payable in monthly installments of $55
including principal and interest at 8.75% and 9.95%
through July 2000 and July 2008; secured by land and
buildings................................................ 2,758 2,331
Commercial loans payable on a monthly basis in principal
installments of $271, with interest ranging from 1.925%
to 9.0% and various maturities through September 2015.... 7,929 5,391
Commercial loan payable on a semiannual basis in principal
installments of $252 and interest ranging from 4.9% to 6%
and various maturities through December 2007............. 4,446 3,416
Industrial Revenue Bonds payable on a semiannual basis
with principal installments of $50 through October 2012,
and variable interest ranging from 3.10% to 4.35%........ 1,550 1,450
Note payable to Marubeni Corporation, interest at 9.07%,
due monthly; balloon payment of $3,913 due March 2002;
secured by building...................................... 4,804 4,543
Other..................................................... 3,333 1,368
------- -------
Total..................................................... 76,232 54,589
Less current maturities................................... 8,685 6,566
------- -------
$67,547 $48,023
======= =======
</TABLE>
Annual maturities of long-term debt as of August 31, 1999, are as follows
(in thousands):
<TABLE>
<CAPTION>
Year Ending August 31,
<S> <C>
2000............................................................ $ 6,566
2001............................................................ 6,791
2002............................................................ 9,167
2003............................................................ 4,927
2004............................................................ 5,434
Thereafter...................................................... 21,703
-------
$54,589
=======
</TABLE>
Subsequent to year end through December 22, 1999, the Company signed new
debt agreements which replaced the unsecured senior notes payable and the
unsecured reducing revolving commitments. These new agreements contain
substantially identical terms as the former agreements. The new agreements
require the
F-14
<PAGE>
Company to maintain certain quarterly financial covenants beginning with the
quarter ending February 28, 2000.
(8) Short-term Bank Borrowings
The Company has a revolving commitment with three commercial banks for
aggregate borrowings of $25 million with interest at the LIBOR rate (5.4% at
August 31, 1999), plus 2.0%, or at prime (8.25% at August 31, 1999). During
1999 interest ranged between 7.75% and 8.5%. The balance outstanding under this
commitment was $5.0 million and $0 at August 31, 1998 and 1999, respectively.
The Company has entered into line of credit agreements with six
international commercial banks, which provide for aggregate borrowings of 5.1
million Deutsche marks, 5.0 million Malaysia ringgits, 0.5 million Singapore
dollars and 850 million yen for its foreign subsidiaries, which is equivalent
to $12.0 million as of August 31, 1999. Interest rates for these facilities are
based on a factor of the banks' reference rates and ranged from 1.625% to 9.5%
during 1999. Borrowings outstanding under these line of credit agreements at
August 31, 1998 and 1999, were $5.0 million and $8.4 million, respectively.
(9) Lease Commitments
The Company is obligated under noncancellable lease agreements for certain
equipment and buildings. Future minimum lease payments for all capital and
operating leases with initial or remaining terms in excess of one year at
August 31, 1999 are as follows (in thousands):
<TABLE>
<CAPTION>
Operating Capital Total
Year Ending August 31, --------- ------- -------
<S> <C> <C> <C>
2000.............................................. $ 4,359 $ 3,150 $ 7,508
2001.............................................. 3,491 2,836 6,328
2002.............................................. 2,387 1,433 3,820
2003.............................................. 1,205 707 1,911
2004.............................................. 1,212 489 1,701
Thereafter........................................ 1,247 1,120 2,368
------- ------- -------
Total minimum lease payments.................... $13,900 $ 9,735 $23,636
======= ======= =======
Less amount representing interest imputed at rates
ranging
from 5% to 9%.................................... 1,286
-------
Capital lease obligations, including current
maturities
of $2,641...................................... $ 8,449
=======
</TABLE>
The minimum lease payments for operating leases have not been reduced by
minimum sublease rentals of $3.5 million due through November 2004.
Equipment under capital lease is summarized as follows (in thousands):
<TABLE>
<CAPTION>
1998 1999
------- -------
<S> <C> <C>
Cost.................................................... $14,163 $16,367
Less accumulated depreciation........................... 4,632 6,145
------- -------
$ 9,530 $10,222
======= =======
</TABLE>
Total rental expense for all equipment and building operating leases was
$3.4 million, $4.3 million and $6.1 million in 1997, 1998 and 1999,
respectively. See note 20(a) for related party leases included above.
F-15
<PAGE>
(10) Interest Expense, net
Interest expense, net consists of the following (in thousands):
<TABLE>
<CAPTION>
1997 1998 1999
------- ------- -------
<S> <C> <C> <C>
Interest expense................................. $ 6,747 $ 7,111 $ 6,441
Less interest income............................. 95 116 943
------- ------- -------
Interest expense, net.......................... $ 6,652 $ 6,995 $ 5,498
======= ======= =======
(11) Other Income (Expense), net
Other income (expense), net consists the following (in thousands):
<CAPTION>
1997 1998 1999
------- ------- -------
<S> <C> <C> <C>
Gain (loss) on sale of property and equipment.... $ (112) $ 1,225 $ (543)
Gain (loss) on foreign currency exchange......... -- (904) 1,121
Other, net....................................... (2,089) (48) 1,272
------- ------- -------
$(2,201) $ 273 $ 1,850
======= ======= =======
(12) Income Taxes
Income (loss) before income taxes was derived from the following sources (in
thousands):
<CAPTION>
1997 1998 1999
------- ------- -------
<S> <C> <C> <C>
Domestic......................................... $26,974 $16,634 $ 7,592
Foreign.......................................... (639) 1,279 3,705
------- ------- -------
$26,335 $17,913 $11,297
======= ======= =======
Income tax expense (benefit) is summarized as follows (in thousands):
<CAPTION>
1997 1998 1999
------- ------- -------
<S> <C> <C> <C>
Current:
Federal........................................ $ 8,541 $ 2,919 $ 2,790
State.......................................... 1,018 876 495
Foreign........................................ 842 280 1,343
------- ------- -------
10,401 4,075 4,628
------- ------- -------
Deferred:
Federal........................................ 150 546 (264)
State.......................................... 27 (85) 16
------- ------- -------
177 461 (248)
------- ------- -------
$10,578 $ 4,536 $ 4,380
======= ======= =======
</TABLE>
F-16
<PAGE>
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities at August 31,
1998 and 1999 are as follows (in thousands):
<TABLE>
<CAPTION>
1998 1999
------- -------
<S> <C> <C>
Net current deferred tax assets:
Allowance for doubtful accounts....................... $ 1,056 $ 749
Inventory reserve..................................... 2,284 2,449
Accruals not currently deductible for tax purposes.... 3,008 2,549
Other, net............................................ 340 529
------- -------
Total current deferred tax assets................... 6,688 6,276
------- -------
Non-current deferred tax liabilities:
Accelerated depreciation.............................. (5,841) (7,098)
Capital leases........................................ (502) (519)
DISC earnings......................................... (967) (860)
Accruals not currently deductible for tax purposes.... 914 453
Other, net............................................ 1,141 1,886
------- -------
Total gross deferred tax liabilities................ (5,255) (6,139)
------- -------
Net deferred tax assets............................. $ 1,433 $ 137
======= =======
</TABLE>
In assessing the realizability of deferred tax assets, management considers
whether it is more likely than not that some portion or all of the deferred tax
assets will not be realized. Based upon the level of historical taxable income
and projections for future taxable income over the periods during which
deferred tax assets are deductible, the Company believes it is more likely than
not that the benefit of these deductible differences will be realized.
Actual income tax expense differs from the expected amounts based upon the
statutory federal tax rates as follows:
<TABLE>
<CAPTION>
1997 1998 1999
---- ---- ----
<S> <C> <C> <C>
Expected federal income tax at statutory rate............ 35.0% 35.0% 35.0%
State income taxes, net of federal tax effect............ 2.8 2.5 2.9
Effect of foreign source income.......................... 2.7 2.1 6.3
Foreign sales corporation income not subject to tax...... (4.1) (5.5) (6.2)
Research tax credit...................................... (2.6) (5.2) (3.1)
Foreign losses not previously benefited.................. -- (5.1) --
Discontinued use of domestic sales corporation........... 2.4 -- --
Other items, net......................................... 4.0 1.5 3.9
---- ---- ----
40.2% 25.3% 38.8%
==== ==== ====
</TABLE>
(13) Employee Stock Ownership Plan and Trust
Entegris maintains an Employee Stock Ownership Plan and Trust (ESOT).
In August 1985, the ESOT purchased 23,158,464 shares of common stock of the
Company from a shareholder. The ESOT borrowed funds, guaranteed by the Company,
for $3.6 million and obtained additional contributions to fund this purchase in
October 1985. In August 1989, the ESOT borrowed additional funds of $1.2
million guaranteed by the Company, to purchase an additional 4,631,692 shares
of common stock from a stockholder.
Employer contributions to the ESOT are determined from time to time by the
Board of Directors at its discretion, and are made without regard to the
profits of the Company. Contributions shall not exceed the
F-17
<PAGE>
amount allowable by the Internal Revenue Code. No contributions were made to
the ESOT for 1997, 1998 or 1999.
Employer contributions are allocated to separate accounts maintained for
each participant in the proportion that the total qualified compensation of
each participant bears to the total qualified compensation for all
participants. Each participant's account is adjusted, at least annually, to
reflect investment gains or losses.
The ESOT shares were 23,833,718 and 23,252,398 as of August 31, 1998 and
1999, respectively. The ESOT plan contains a put option, whereby the Company
agrees to purchase the vested shares distributed to terminated participants or
their estates, at the appraised value of the shares as of the second August 31
following termination, or after the first August 31 upon death, disability, or
attainment of age 65. The fair value of shares was estimated by an independent
appraiser to be $3.15, $2.01 and $6.25 as of August 31, 1997, 1998 and 1999,
respectively. As a result of this redemption feature, these shares are
classified separately from shareholders' equity. Pursuant to the terms of the
ESOT plan, upon the consummation of an initial public offering these shares
would no longer be redeemable and would be reclassified into shareholders'
equity.
On August 20, 1998, the Board of Directors approved a change to the
distribution procedures, whereby a corporate bylaw restriction was eliminated.
The impact of this restriction elimination allows participants (beneficiaries
and alternate payees) to receive their distribution in Company stock. This
change was effective for distributions based on the August 31, 1998 valuation.
(14) Pension and 401(k) Savings Plans
Entegris, Inc. has a defined contribution pension plan covering eligible
employees. Contributions under this plan are determined by a formula set forth
in the plan agreement. Total pension costs for 1997, 1998 and 1999 related to
this plan were $2.2 million, $1.7 million and $2.0 million, respectively.
The Company maintains 401(k) employee savings plans (the Plans) that qualify
as deferred salary arrangements under Section 401(k) of the Internal Revenue
Code. Under the Plans, eligible employees may defer a portion of their pretax
wages, up to the Internal Revenue Service annual contribution limit. The
Company matches 50% of the employee's contribution, up to a maximum of 6% of
the employee's eligible wages. The Board of Directors may, at its discretion,
declare a profit sharing contribution in addition to the matching contribution,
but all contributions are limited to the maximum amount deductible for federal
income tax purposes. The employer profit sharing and matching contribution
expense under the Plans was $1.5 million, $1.6 million and $1.8 million in
1997, 1998 and 1999, respectively.
(15)Stock Option Plans
In August 1999, Entegris, Inc. established the Entegris, Inc. 1999 Long-Term
Incentive and Stock Option Plan (the 1999 Plan) and the Entegris, Inc. Outside
Directors' Stock Option Plan (the Directors' Plan). These plans replaced
similar plans in effect prior to the business combination described in Note
1(b). The maximum aggregate number of shares that may be granted under the
plans is 9,000,000 and 1,000,000, respectively. The Plans state that the
exercise price for these shares shall not be less than 100% of the fair market
value of the common stock on the date of grant of such option.
On February 12, 1998, 10-year stock options were granted at a price equal to
the most recent fair market appraised value. Some of the options became
immediately exercisable while others are exercisable on a cumulative basis at a
rate of 25% per year.
Prior to the effective date of this offering, the Company intends to amend
the Directors' Plan so that each outside director shall automatically be
granted an option to purchase 15,000 shares upon the date the individual
F-18
<PAGE>
becomes a director. Annually, each outside director will automatically be
given an option to purchase 6,000 shares. Options will be exercisable six
months subsequent to the date of grant. The term of the option shall be ten
years. The Plan states that the exercise price for these shares shall not be
less than 100% of the fair market value of the common stock on the date of
grant of such option.
Option activity for the 1999 Plan and the Directors' Plan is summarized as
follows (shares in thousands):
<TABLE>
<CAPTION>
1997 1998 1999
---------------- ---------------- ----------------
Number of Option Number of Option Number of Option
shares price shares price shares price
--------- ------ --------- ------ --------- ------
<S> <C> <C> <C> <C> <C> <C>
Options outstanding,
beginning
of year................ 1,952 $1.46 1,810 $1.43 6,010 $2.72
Granted............... 92 1.37 4,610 3.15 -- --
Canceled.............. (234) 1.50 (410) 2.01 (111) 2.57
----- ----- ----- ----- ----- -----
Options outstanding, end
of year................ 1,810 $1.43 6,010 $2.72 5,899 $2.72
===== ===== ===== ===== ===== =====
Options exercisable, end
of year................ 452 $1.38 2,769 $2.45 3,855 $2.54
===== ===== ===== ===== ===== =====
Options available for
grant, end
of year................ 8,190 3,990 4,101
===== ===== =====
</TABLE>
At August 31, 1999, the exercise price for 4,454,000 options outstanding,
with a weighted average remaining contractual life of 8.5 years, was $3.15 and
the exercise prices for 1,445,000 options outstanding, with a weighted average
remaining life of 6.5 years, ranged from $0.96 to $1.50. At August 31, 1999,
2,527,000 options were exercisable at $3.15 and 1,328,000 options were
excercisable at prices ranging from $0.96 to $1.50. No options were exercised
in 1997, 1998 or 1999.
The Company determined pro forma compensation expense under the provisions
of SFAS No. 123 using the Black-Scholes pricing model and the following
assumptions:
<TABLE>
<CAPTION>
5 Year 8 Year 10 Year
--------- --------- ---------
<S> <C> <C> <C>
Expected dividend yield................... 0% 0% 0%
Expected stock price volatility........... 0% 0% 0%
Risk-free interest rate................... 5.32-5.47% 6.33-6.86% 5.39-5.96%
Expected life............................. 5 years 8 years 10 years
</TABLE>
Had compensation cost for option grants been determined consistent with
SFAS No. 123, the Company's net income, on a pro forma basis, would have been
as follows (in thousands, except per share data):
<TABLE>
<CAPTION>
1997 1998 1999
------- ------- ------
<S> <C> <C> <C>
Net income, as reported............................. $16,934 $13,083 $5,729
Pro forma net income................................ 16,610 10,018 4,603
Basic net earnings per share, as reported........... 0.28 0.22 0.10
Pro forma basic net earnings per share.............. 0.27 0.17 0.08
Diluted net earnings per share, as reported......... 0.27 0.21 0.09
Pro forma diluted net earnings per share............ 0.27 0.16 0.07
</TABLE>
The weighted average fair value of options granted during the years ended
August 31, 1997 and 1998 with exercise prices equal to the market price at the
date of grant was $0.84 and $1.33 per share, respectively.
(16) Earnings per Share
Basic earnings per share is based upon the weighted average common shares
outstanding during each year. Diluted earnings per share is based upon the
weighted average common shares outstanding and dilutive
F-19
<PAGE>
common stock equivalent shares outstanding during each year. The following
table presents a reconciliation of the denominators used in the computation of
basic and diluted earnings per share (in thousands):
<TABLE>
<CAPTION>
1997 1998 1999
------ ------ ------
<S> <C> <C> <C>
Basic earnings per share--Weighted common shares
outstanding.......................................... 59,967 60,747 60,270
Weighted common shares assumed upon exercise of stock
options.............................................. 1,819 745 1,950
------ ------ ------
Diluted earnings per share--Weighted common shares and
potential common shares outstanding.................. 61,786 61,492 62,220
====== ====== ======
</TABLE>
(17)Segment Information
The Company operates in one segment as it designs, develops, manufactures,
markets and sells material management and handling products predominantly
within the semiconductor industry. All products are sold on a worldwide basis.
The following table summarizes total net sales, based upon the country from
which sales were made, and long-lived assets attributed to significant
countries for 1997, 1998 and 1999, respectively (in thousands):
<TABLE>
<CAPTION>
1997 1998 1999
-------- -------- --------
<S> <C> <C> <C>
Net sales:
United States.............................. $252,230 $217,171 $176,345
Japan...................................... 13,232 19,129 20,337
Germany.................................... 10,103 18,853 26,278
Malaysia................................... 818 5,828 12,100
Korea...................................... -- 1,249 2,443
Singapore.................................. 907 4,361 4,449
-------- -------- --------
$277,290 $266,591 $241,952
======== ======== ========
Long-lived assets:
United States.............................. $ 95,847 $102,190 $ 84,271
Japan...................................... 7,404 6,044 7,100
Germany.................................... 5,034 7,143 6,484
Malaysia................................... 9,807 13,094 12,955
Korea...................................... 25 2,742 5,131
Singapore.................................. 2,037 2,110 1,683
-------- -------- --------
$120,154 $133,323 $117,624
======== ======== ========
Export sales, principally from the United States, amounted to $95.8 million,
$70.7 million and $50.3 million in 1997, 1998 and 1999, respectively. In 1997,
1998 and 1999, no single customer accounted for 10% or more of net sales.
(18) Supplementary Cash Flow Information
<CAPTION>
1997 1998 1999
-------- -------- --------
<S> <C> <C> <C>
Schedule of interest and income taxes paid
(in thousands):
Interest................................... $6,945 $6,881 $ 6,633
Income taxes, net of refunds received...... 8,427 7,777 (3,052)
</TABLE>
F-20
<PAGE>
(19) Fair Value of Financial Instruments
The carrying amount of cash equivalents and short-term debt approximates
fair value due to the short maturity of those instruments.
The fair value of long-term debt was estimated using discounted cash flows
based on market interest rates for similar instruments and approximated $54.7
million compared to a carrying value of $54.6 million at August 31, 1999.
(20) Related-Party Transactions
(a) Leases
The Company leases office space and production facilities under operating
leases from a major stockholder's trust or from entities related to this
stockholder. These leases, which expire through the year 2004, may be adjusted
periodically based on a percentage of the increase in the consumer price index.
The Company is required to pay for all real estate taxes, utilities and other
operating expenses. Rent expense for continuing operations relating to these
agreements totaled $0.6 million, $0.9 million and $1.2 million for 1997, 1998
and 1999, respectively.
(b) Service Agreement
The Company allocated rental payments to Emplast, a previously owned
company, totaling $0.5 million, $0.4 million and $0.3 million in 1997, 1998 and
1999, respectively. As of August 31, 1998 and 1999, Emplast owed the Company
$0.7 million and $0.8 million and respectively, which are included in prepaid
expenses and other current assets in the accompanying consolidated balance
sheets.
(c) Note Payable
The Company has a note payable to Marubeni, a minority stockholder. Interest
expense related to this note totaled $0.5 million, $0.5 million and $0.4
million for 1997, 1998 and 1999, respectively.
(d) Notes Receivable
At August 31, 1999, the Company has a $0.8 million note receivable from a
major stockholder trust which bears interest at 8.0% per year.
(e) Debt Guarantees
The Company guarantees a loan of a former officer and a major stockholder
related to the Company's leased facility in Castle Rock, Colorado. This
guarantee totaled $1.2 million and $1.6 million and at August 31, 1998 and
1999, respectively.
(f) Sales to Minority Shareholder
The Company sells products to Marubeni under normal business terms. Sales to
Marubeni were $19.4 million, $18.0 million and $12.0 million in 1997, 1998 and
1999, respectively. At August 31, 1998 and 1999, the Company had a receivable
from Marubeni totaling $0.8 million and $1.9 million, respectively, due under
normal trade terms. In addition, in February 1997, Marubeni was granted an
option to buy 214,942 shares of the Company's common stock with an exercise
price of $5.19 per share. The grant was immediately vested and exercisable for
ten years.
F-21
<PAGE>
(21) Subsequent Events
The accompanying consolidated financial statements reflect a 2-for-1 stock
split of the Company's common stock to be effective prior to its initial public
offering. The Company filed a registration statement with the Securities and
Exchange Commission on March 31, 2000.
In August 1999, the Company acquired the 10% minority interest in
Fluoroware, GmbH resulting in 100% ownership of the entity for $0.4 million.
In October 1999, the Company acquired the assets of a polymer machining
business located in Upland, California for $2.7 million.
(22) Subsequent Events (Unaudited)
In October 1999, the Company's Nippon Fluoroware K.K. subsidiary (NFKK)
agreed to issue equity of $2.2 million and debt of $2.2 million in exchange for
property and equipment. As a result, the Company's ownership percentage in NFKK
decreased from 90.0% to 51.0%.
In November 1999, the Company sold approximately 612,000 shares of its
investment in Metron Technology N.V. (Metron) stock as part of Metron's initial
public offering. As a result of the sale, the company received proceeds of $7.4
million and recognized a gain of $5.5 million. The Company's ownership
percentage decreased from 32.8% to 20.8% as a result of the sale in the public
offering. As a result of the initial public offering the value of the Company's
investment increased and was reflected as an increase to retained earnings of
$3.5 million. At February 28, 2000, the Company owned approximately 2.7 million
shares of Metron with a market value of approximately $65.2 million.
In February 2000, the Company acquired the 30% minority interest in
Fluoroware Southeast Asia Pte Ltd. resulting in 100% of the entity for $0.7
million.
In March 2000, the Company entered into an agreement with a related party to
purchase certain real estate and personal property, which the Company currently
leases from the related party (see Note 20(a)). The purchase price of the
property, which was purchased on May 1, 2000, was $2.5 million.
In March 2000, the Company's Board of Directors approved an increase in the
Company's number of authorized common shares from 100,000,000 shares to
200,000,000 shares in conjunction with our 2-for-1 stock split.
In March 2000, the Company's Board of Directors adopted, subject to
shareholder approval, the Entegris, Inc. Employee Stock Purchase Plan (the
Plan). A total of 4,000,000 common shares were reserved for issuance under the
Plan.
At various dates subsequent to August 31, 1999, the Company granted options
to purchase 1,396,000 common shares under the Entegris, Inc. 1999 Long-Term
Incentive and Stock Option Plan. The exercise price of grants for 1,196,000
common shares was equal to either the finally determined offering price or the
deemed fair value based on an independent appraisal. The exercise price for
grants for 200,000 common shares was equal to $6.25 per share. The Company
intends to record compensation expense for these grants based on the difference
between the exercise price and the offering price over the four-year vesting
term of the options.
F-22
<PAGE>
SCHEDULE II
ENTEGRIS, INC.
Valuation and Qualifying Accounts
(In thousands)
<TABLE>
<CAPTION>
Deductions
Balance at Charged from
beginning to costs reserves Balance at
of period and expenses (1) end of period
---------- ------------ ---------- -------------
<S> <C> <C> <C> <C>
For the year ended August 31,
1997:
Allowance for doubtful
receivables................ $1,524 404 439 $1,489
====== ===== ===== ======
Inventory reserves.......... $2,001 4,225 3,371 $2,855
====== ===== ===== ======
For the year ended August 31,
1998:
Allowance for doubtful
receivables................ $1,489 57 224 $1,322
====== ===== ===== ======
Inventory reserves.......... $2,855 2,475 2,818 $2,512
====== ===== ===== ======
For the year ended August 31,
1999:
Allowance for doubtful
receivables................ $1,322 213 330 $1,205
====== ===== ===== ======
Inventory reserves.......... $2,512 2,701 2,043 $3,170
====== ===== ===== ======
</TABLE>
- --------
(1) Net of recoveries
F-23
<PAGE>
Advanced Manufacturing Capabilities
Graphic of Globe depicting locations of sales offices and manufacturing
[Photo of blow molding equipment with caption stating: Blow Molding]
[Photo of injection molding equipment with caption stating: Injection
Molding]
[Photo of roto molding equipment with caption stating: Roto Molding]
[Photo of sheet lining equipment with caption stating: Sheet Lining]
[Photo of assembly equipment with caption stating: Assembly Operations]
[Photo of laboratory with caption stating: Materials Laboratory]
Germany Japan Korea Malaysia
California Colorado Minnesota Oregon Texas
Worldwide Infrastructure
[Logo]
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
13,000,000 Shares
[LOGO OF ENTEGRIS]
---------------------
Prospectus
, 2000
---------------------
Banc of America Securities LLC
Donaldson, Lufkin & Jenrette
Salomon Smith Barney
U.S. Bancorp Piper Jaffray
Until , 2000 (25 days after the date of this prospectus),
all dealers effecting transactions in the common shares, whether or not
participating in this distribution, may be required to deliver a prospectus.
This is in addition to the obligation of dealers to deliver a prospectus when
acting as underwriters and with respect to their unsold allotments or
subscriptions.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the costs and expenses, other than
underwriting discounts and commissions, payable by the registrant in connection
with the distribution of the common shares being registered. All amounts are
estimated, except the SEC Registration Fee, the NASD Filing Fee and the Nasdaq
National Market Filing Fee:
<TABLE>
<S> <C>
SEC Registration Fee........................................... $ 63,150
NASD Filing Fee................................................ 27,410
Nasdaq National Market Filing Fee.............................. 95,000
Blue Sky Fees and Expenses..................................... 10,000
Accounting Fees................................................ 200,000
Legal Fees and Expenses........................................ 600,000
Transfer Agent and Registrar Fees.............................. 5,000
Printing and Engraving......................................... 100,000
ESOP Related Fees.............................................. 160,000
Miscellaneous.................................................. 51,440
----------
Total.......................................................... $1,312,000
==========
</TABLE>
- --------
* To be supplied by amendment.
None of the expenses will be borne by selling shareholders.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 302A.521 of the Minnesota Statutes requires Entegris to indemnify a
person made or threatened to be made a party to a proceeding, by a reason of
the former or present official capacity of the person with respect to Entegris,
against judgment, penalties, fines, including without limitation, excise taxes
assessed against the person with respect to an employee benefit plan,
settlements, and reasonable expenses, including attorneys' fees and
disbursements, if, with respect to the acts or omissions of the person
complained of in the proceeding, such person (1) has not been indemnified by
another organization or employee benefit plan for the same judgments,
penalties, fines, including without limitation, excise taxes assessed against
the person with respect to an employee benefit plan, settlements, and
reasonable expenses, including attorneys' fees and disbursements, incurred by
the person in connection with the proceeding with respect to the same acts or
omissions; (2) acted in good faith; (3) received no improper personal benefit,
and statutory procedure has been followed in the case of any conflict of
interest by a director; (4) in the case of a criminal proceeding, had no
reasonable cause to believe the conduct was unlawful; and (5) in the case of
acts or omissions occurring in the person's performance in the official
capacity of director or, for a person not a director, in the official capacity
of officer, committee member, employee or agent, reasonably believed that the
conduct was in the best interests of Entegris, or in the case of performance by
a director, officer, employee or agent of Entegris as a director, officer,
partner, trustee, employee or agent of another organization or employee benefit
plan, reasonably believed that the conduct was not opposed to the best
interests of Entegris. In addition, Section 302A.521, subd. 3 requires payment
by Entegris, upon written request, of reasonable expenses in advance of final
disposition in certain instances. A decision as to required indemnification is
made by a majority of the disinterested board of directors present at a meeting
at which a disinterested quorum is present, or a designated committee of
disinterested directors, by special legal counsel, by the disinterested
shareholders, or by a court.
Provisions regarding the indemnification of officers and directors of
Entegris, to the extent permitted by Section 302A.521, are contained in
Entegris' articles of incorporation and bylaws.
II-1
<PAGE>
Entegris maintains a policy of directors' and officers' liability insurance
that insures Entegris' directors and officers against the cost of defense,
settlement or payment of a judgment under certain circumstances. In conjunction
with the effectiveness of the registration statement, Entegris plans to expand
its coverage to include securities law claims.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers or persons controlling Entegris
pursuant to the foregoing provisions, Entegris has been informed that in the
opinion of the SEC, such indemnification is against public policy as expressed
in the Securities Act, and is therefore unenforceable.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
Since September 1, 1996, we have sold and issued the following unregistered
securities (references to common shares reflect a 2-for-1 stock split to be
effected prior to our initial public offering):
(1) On June 7, 1999, we issued 59,999,958 common shares to former
shareholders of Fluoroware and Empak as part of a consolidation in
which Fluoroware and Empak became our wholly owned subsidiaries;
(2) Between June 1999 and March 2000, we issued an aggregate of 1,554,350
shares as distributions to current or former participants of the ESOP;
and
(3) As of March 30, 2000, we had granted options to purchase an aggregate
of 7,556,400 common shares to our employees, directors and consultants
pursuant to our 1999 Long-Term Incentive and Stock Option Plan and our
Outside Directors' Option Plan. Of these options, 244,748 shares have
been cancelled without being exercised and 43,716 shares have been
issued pursuant to stock option exercises.
(4) The total options outstanding as of April 30, 2000 includes the
following.
. Grants made in April 2000 for the purchase of an aggregate of 28,000
common shares, at an exercise price to be equal to the finally
determined offering price. The options vest over a four-year period.
The deemed fair value of the underlying common stock at the date of
grant is equal to the finally determined offering price.
. Grants made in March 2000 for the purchase of an aggregate of
316,000 common shares, at an exercise price to be equal to the
finally determined offering price. The options vest over a four-year
period. The deemed fair value of the underlying common stock at the
date of grant is equal to the finally determined offering price.
. Grants made in March 2000 for the purchase of an aggregate of
200,000 common shares, at an exercise price equal to $6.25 per
share. The options vest over a four-year period. The deemed fair
value of the underlying common stock at the date of grant is equal
to the finally determined offering price. The Company intends to
record compensation expense based on the difference between the
exercise price and the offering price over the four-year vesting
term of the options.
. Grants made in September 1999 for the purchase of an aggregate of
852,000 common shares, at an exercise price equal to $4.21 per
share. The options vest over a four-year period. The deemed fair
value of the underlying common stock at the date of grant is equal
to $4.21, as determined by the Company's Board of Directors based on
an independent appraisal.
The sale and issuance of securities in the transaction described in
paragraph 1 above was deemed to be exempt from registration under the
Securities Act by virtue of Section 4(2) as a transaction not involving a
public offering.
The sales and issuances of securities in the transactions described in
paragraph 2 and 3 above were deemed to be exempt from registration under the
Securities Act by virtue of Section 4(2) and Rule 701.
None of the transactions set forth in Item 15(a) involved underwritten
offerings.
II-2
<PAGE>
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits
<TABLE>
<CAPTION>
Numbers Description
------- -----------
<C> <S>
1.1 Form of Underwriting Agreement
3.1** Articles of Incorporation of Entegris, Inc.
3.2** Bylaws of Entegris, Inc.
3.3** Audit Committee Charter of Entegris, Inc.
4.1** Specimen of Common Stock Certificate
5.1 Opinion of Dorsey & Whitney LLP
9.1** Form Shareholder Agreement for Fluoroware, Inc. Shareholders in
relation to the consolidation of Fluoroware, Inc. and Empak, Inc. to
form Entegris, Inc.
9.2** Form Shareholder Agreement for Empak, Inc. Shareholders in relation to
the consolidation of Fluoroware, Inc. and Empak, Inc. to form
Entegris, Inc.
10.1** Entegris, Inc. 1999 Long-Term Incentive and Stock Option Plan
10.2** Entegris, Inc. Outside Directors' Option Plan
10.3 Entegris, Inc. 2000 Employee Stock Purchase Plan
10.4** Entegris, Inc. Employee Stock Ownership Plan
10.5** Entegris, Inc. Pension Plan
10.6** Entegris, Inc. 401(k) Savings and Profit Sharing Plan
10.7** Employment Agreement between Delmer Jensen and Empak, Inc., dated as
of January 1, 1999
10.8** Lease Agreement between Empak, Inc. and Fleninge Partnership, dated
June 15, 1993
10.9** Lease Agreement between Empak, Inc. and Wayne C. Bongard, dated
September 22, 1998
10.10** Amended and Restated Sublease Agreement between Empak, Inc. and
Emplast, Inc., dated April 28, 1997
10.11** Real Estate Purchase and Sale Agreement between Fleninge Partnership
and Entegris, Inc., dated March 15, 2000
10.12** Promissory Note between Wayne C. Bongard estate and Empak, Inc., dated
April 15, 1999
10.13** Promissory Note between Fluoroware, Inc. and Dan Quernemoen, dated
January 5, 1996
10.14** Guaranty between Empak, Inc. and First Bank National Association,
dated March 1, 1994
10.15** Consolidation Agreement by and among Entegris, Inc., Fluoroware, Inc.
and Empak, Inc., dated June 1, 1999
10.16** Distribution Agreement between Fluoroware, Inc. and Metron
Semiconductors Europa B.V., dated July 6, 1995, as amended by
Entegris, Inc., ISS Amendements to Metron/Fluoroware Distribution
Contract, between Entegris, Inc. Integrated Shipping Systems and
Metron Technology, Inc., dated October 22, 1999
10.17** Metron Semiconductors Europa B.V. Investor Rights Agreement dated July
6, 1995
10.18** U.S. Stocking Distributor Five-Year Agreement as of September 1, 1997
between Fluoroware, Inc. and Kyser Company
10.19+ STAT-PRO(R) 3000 and STAT-PRO(R) 3000E Purchase and Supply Agreement
between Fluoroware, Inc. and Miller Waste Mills, d/b/a RTP Company,
dated April 6, 1998
10.20** Amended and Restated Distributorship Agreement by and among Entegris,
Inc., Empak, Inc., Marubeni America Corporation and Marubeni
Corporation, dated as of December 1, 1999
10.21+ PFA Purchase and Supply Agreement by and between E.I. Du Pont De
Nemours and Company and Fluoroware, Inc., dated January 7, 1999, which
was made effective retroactively to November 1, 1998, and supplemented
by the Assignment and Limited Amendment by and between the same
parties and Entegris, Inc., dated as of September 24, 1999
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
Numbers Description
------- -----------
<C> <S>
21.1** Subsidiaries of the Company
23.1 Consent of Dorsey & Whitney LLP (Included in Exhibit 5.1)
23.2** Consent of KPMG LLP
23.3** Consent of Arthur Andersen LLP
24.1** Powers of Attorney (Included on signature page)
27.1 Financial Data Schedule
27.2 Financial Data Schedule
27.3 Financial Data Schedule
27.4 Financial Data Schedule
</TABLE>
- --------
**Previously Filed.
+ Confidential information has been omitted from these exhibits and filed
separately with the SEC accompanied by a confidential treatment request
pursuant to Rule 406 under the Securities Act of 1933, as amended.
Pursuant to Item 601(b)(4)(iii) of Regulation S-K, copies of instruments
defining the rights of holders of certain long-term debt of Entegris are not
filed, and in lieu thereof, Entegris agrees to furnish copies thereof to the
SEC upon request.
(b) Financial Statement Schedules
ITEM 17. UNDERTAKINGS
The undersigned Registrant hereby undertakes to provide to the Underwriters
at the closing specified in the Underwriting Agreement, certificates in such
denominations and registered in such names as required by the Underwriters to
permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 (the "Act") may be permitted to directors, officers, and controlling
persons of the Registrant pursuant to the foregoing provisions, or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question of
whether such indemnification by it is against public policy as expressed in the
Act and will be governed by the final adjudication of such issue.
The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the 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 prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Act shall be deemed to be a part of this Registration
Statement as of the time it was declared effective.
(2) For purposes of determining any liability under the 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-4
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Act of 1933, Registrant has
duly caused this Amendment No. 1 to the Registration Statement to be signed on
its behalf, by the undersigned, thereunto duly authorized, in the City of
Minneapolis, County of Hennepin, State of Minnesota, on May 5, 2000.
ENTEGRIS, INC.
/s/ Stan Geyer
By: _________________________________
Stan Geyer Chief Executive Officer
In accordance with the requirements of the Securities Act of 1933, this
Amendment No. 1 to the Registration Statement was signed by the following
persons in the capacities indicated on May 5, 2000.
Signature Title Date
/s/ Stan Geyer President, Chief
- ------------------------------------- Executive Officer May 5, 2000
Stan Geyer and Director
(principal
executive officer)
/s/ John D. Villas Chief Financial
- ------------------------------------- Officer (principal May 5, 2000
John D. Villas accounting and
financial officer)
Chairman of the
* Board May 5, 2000
- -------------------------------------
Daniel R. Quernemoen
Executive Vice
* President, Chief May 5, 2000
- ------------------------------------- Operating Officer
James E. Dauwalter and Director
Vice Chairman,
* Director May 5, 2000
- -------------------------------------
James A. Bernards
Director
* May 5, 2000
- -------------------------------------
Robert J. Boehlke
Director
* May 5, 2000
- -------------------------------------
Roger D. McDaniel
Director
* May 5, 2000
- -------------------------------------
Mark A. Bongard
Director
* May 5, 2000
- -------------------------------------
Delmer H. Jensen
/s/ Stan Geyer
*By: ___________________________
Stan Geyer
Attorney-in-Fact
II-5
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Numbers Description
------- -----------
<C> <S>
1.1 Form of Underwriting Agreement
3.1** Articles of Incorporation of Entegris, Inc.
3.2** Bylaws of Entegris, Inc.
3.3** Audit Committee Charter of Entegris, Inc.
4.1** Specimen of Common Stock Certificate
5.1 Opinion of Dorsey & Whitney LLP
9.1** Form Shareholder Agreement for Fluoroware, Inc. Shareholders in
relation to the consolidation of Fluoroware, Inc. and Empak, Inc. to
form Entegris, Inc.
9.2** Form Shareholder Agreement for Empak, Inc. Shareholders in relation to
the consolidation of Fluoroware, Inc. and Empak, Inc. to form
Entegris, Inc.
10.1** Entegris, Inc. 1999 Long-Term Incentive and Stock Option Plan
10.2** Entegris, Inc. Outside Directors' Option Plan
10.3 Entegris, Inc. 2000 Employee Stock Purchase Plan
10.4** Entegris, Inc. Employee Stock Ownership Plan Trust Agreement
10.5** Entegris, Inc. Pension Plan Trust Agreement
10.6** Entegris, Inc. 401(k) Savings and Profit Sharing Plan
10.7** Employment Agreement between Delmer Jensen and Empak, Inc., dated as
of January 1, 1999
10.8** Lease Agreement between Empak, Inc. and Fleninge Partnership, dated
June 15, 1993
10.9** Lease Agreement between Empak, Inc. and Wayne C. Bongard, dated
September 22, 1998
10.10** Amended and Restated Sublease Agreement between Empak, Inc. and
Emplast, Inc., dated April 28, 1997
10.11** Real Estate Purchase and Sale Agreement between Fleninge Partnership
and Entegris, Inc., dated March 15, 2000
10.12** Promissory Note between Wayne C. Bongard estate and Empak, Inc., dated
April 15, 1999
10.13** Promissory Note between Fluoroware, Inc. and Dan Quernemoen, dated
January 5, 1996
10.14** Guaranty between Empak, Inc. and First Bank National Association,
dated March 1, 1994
10.15** Consolidation Agreement by and among Entegris, Inc., Fluoroware, Inc.
and Empak, Inc., dated June 1, 1999
10.16** Distribution Agreement between Fluoroware, Inc. and Metron
Semiconductors Europa B.V., dated July 6, 1995, as amended by
Entegris, Inc., ISS Amendments to Metron/Fluoroware Distribution
Contract, between Entegris, Inc. Integrated Shipping Systems and
Metron Technology, Inc., dated October 22, 1999
10.17** Metron Semiconductors Europa B.V. Investor Rights Agreement dated July
6, 1995, as supplemented by the Indemnification Agreement, dated as of
November 18, 1999
10.18** U.S. Stocking Distributor Five-Year Agreement as of September 1, 1997
between Fluoroware, Inc. and Kyser Company
10.19+ STAT-PRO(R) 3000 and STAT-PRO(R) 3000E Purchase and Supply Agreement
between Fluoroware, Inc. and Miller Waste Mills, d/b/a RTP Company,
dated April 6, 1998
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Numbers Description
------- -----------
<C> <S>
10.20** Amended and Restated Distributorship Agreement by and among Entegris,
Inc., Empak, Inc., Marubeni America Corporation and Marubeni
Corporation, dated as of December 1, 1999
10.21+ PFA Purchase and Supply Agreement by and between E.I. Du Pont De
Nemours and Company and Fluoroware, Inc., dated January 7, 1999, which
was made effective retroactively to November 1, 1998, and supplemented
by the Assignment and Limited Amendment by and between the same
parties and Entegris, Inc., dated as of September 24, 1999
21.1** Subsidiaries of the Company
23.1 Consent of Dorsey & Whitney LLP (Included in Exhibit 5.1)
23.2** Consent of KPMG LLP
23.3** Consent of Arthur Andersen LLP
24.1** Powers of Attorney (Included on signature page)
27.1 Financial Data Schedule
27.2 Financial Data Schedule
27.3 Financial Data Schedule
27.4 Financial Data Schedule
</TABLE>
- --------
**Previously Filed
+ Confidential information has been omitted from these exhibits and filed
separately with the SEC accompanied by a confidential treatment request
pursuant to Rule 406 under the Securities Act of 1933, as amended.
<PAGE>
Exhibit 1.1
May __, 2000
BANC OF AMERICA SECURITIES LLC
DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION
SALOMON SMITH BARNEY INC.
U.S. BANCORP PIPER JAFFRAY INC.
As Representatives of the several Underwriters
c/o BANC OF AMERICA SECURITIES LLC
600 Montgomery Street
San Francisco, California 94111
Ladies and Gentlemen:
Introductory. Entegris, Inc., a corporation organized under the laws
of Minnesota (the "Company"), proposes to issue and sell to the several
underwriters named in Schedule A (the "Underwriters") an aggregate of 8,600,000
of its common shares, par value $0.01 per share (the "Common Shares"); and
Entegris, Inc. Employee Stock Ownership Plan (the "Plan") and WCB Holding LLC
("WCB") propose to sell to the Underwriters an aggregate of 4,400,000 Common
Shares. The Plan and WCB are sometimes collectively referred to herein as the
"Selling Shareholders." The 8,600,000 Common Shares to be sold by the Company
and the 4,400,000 Common Shares to be sold by the Selling Shareholders are
collectively called the "Firm Shares." In addition, the Company and WCB have
granted to the Underwriters an option to purchase up to an additional 1,950,000
Common Shares as provided in Section 2. The additional 1,950,000 Common Shares
to be sold by the Company and WCB are called the "Optional Shares." The Firm
Shares and, if and to the extent such option is exercised, the Optional Shares
are collectively called the "Shares." Banc of America Securities LLC,
Donaldson, Lufkin & Jenrette Securities Corporation, Salomon Smith Barney Inc.
and U.S. Bancorp Piper Jaffray Inc. have agreed to act as representatives of the
several Underwriters (in such capacity, the "Representatives") in connection
with the offering and sale of the Shares.
The Company has prepared and filed with the Securities and Exchange
Commission (the "Commission") a registration statement on Form S-1 (File No.
333-33668), which contains a form of prospectus to be used in connection with
the public offering and sale of the Shares. Such registration statement, as
amended, including the financial statements, exhibits and schedules thereto, in
the form in which it was declared effective by the Commission under the
Securities Act of 1933, as amended, and the rules and regulations promulgated
thereunder (collectively, the "Securities Act"), including any information
deemed to be a part thereof at the time of effectiveness pursuant to Rule 430A
or Rule 434 under the Securities Act, is called the "Registration Statement."
Any registration statement filed by the Company pursuant to Rule 462(b) under
the Securities Act is called the "Rule 462(b) Registration Statement", and from
and after the date and time of filing of the Rule 462(b) Registration Statement
the term "Registration Statement" shall include the Rule 462(b) Registration
Statement. Such prospectus, in the form first used by the Underwriters to
confirm sales of the Shares, is called the
<PAGE>
"Prospectus"; provided, however, if the Company has, with the consent of the
Representatives, elected to rely upon Rule 434 under the Securities Act, the
term "Prospectus" shall mean the Company's prospectus subject to completion
(each, a "preliminary prospectus") dated ________ ___, ______, together with the
applicable term sheet (the "Term Sheet") prepared and filed by the Company with
the Commission under Rules 434 and 424(b) under the Securities Act and all
references in this Agreement to the date of the Prospectus shall mean the date
of the Term Sheet. All references in this Agreement to the Registration
Statement, the Rule 462(b) Registration Statement, a preliminary prospectus, the
Prospectus or the Term Sheet, or any amendments or supplements to any of the
foregoing, shall include any copy thereof filed with the Commission pursuant to
its Electronic Data Gathering, Analysis and Retrieval System ("EDGAR").
The Company and each of the Selling Shareholders hereby confirm their
respective agreements with the Underwriters as follows:
Section 1. Representations and Warranties.
A. Representations and Warranties of the Company. The Company hereby
represents, warrants and covenants to each Underwriter as follows:
(a) Compliance with Registration Requirements. The Registration
Statement and any Rule 462(b) Registration Statement have been declared
effective by the Commission under the Securities Act. The Company has
complied to the Commission's satisfaction with all requests of the
Commission for additional or supplemental information. No stop order
suspending the effectiveness of the Registration Statement or any Rule
462(b) Registration Statement is in effect and no proceedings for such
purpose have been instituted or are pending or, to the best knowledge of
the Company, are contemplated or threatened by the Commission.
Each preliminary prospectus and the Prospectus when filed complied in
all material respects with the Securities Act and, if filed by electronic
transmission pursuant to EDGAR (except as may be permitted by Regulation S-
T under the Securities Act), was identical to the copy thereof delivered to
the Underwriters for use in connection with the offer and sale of the
Shares. Each of the Registration Statement, any Rule 462(b) Registration
Statement and any post-effective amendment thereto, at the time it became
effective and at all subsequent times up to and including the last to occur
of (i) the First Closing Date (and, if any Optional Shares are purchased,
the Second Closing Date, if applicable) and (ii) the last day of the
Prospectus Delivery Period (as defined in Section 3(A)(a) below), complied
and will comply in all material respects with the Securities Act and did
not and will not contain any 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. The Prospectus, as amended or
supplemented, as of its date and at all subsequent times up to and
including the last to occur of (i) the First Closing Date (and, if any
Optional Shares are purchased, the Second Closing Date, if applicable) and
(ii) the last day of the Prospectus Delivery Period, did not and will not
contain any untrue statement of a material fact or omit to state a material
fact necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading. The
representations and warranties set forth in the two immediately
2
<PAGE>
preceding sentences do not apply to statements in or omissions from the
Registration Statement, any Rule 462(b) Registration Statement, or any
post-effective amendment thereto, or the Prospectus, or any amendments or
supplements thereto, made in reliance upon and in conformity with
information relating to any Underwriter furnished to the Company in writing
by the Representatives expressly for use therein. There are no contracts or
other documents required to be described in the Prospectus or to be filed
as exhibits to the Registration Statement which have not been described or
filed as required.
(b) Offering Materials Furnished to Underwriters. The Company has
delivered to the Representatives four complete manually signed copies of
the Registration Statement and of each consent and certificate of experts
filed as a part thereof, and conformed copies of the Registration Statement
(without exhibits) and preliminary prospectuses and the Prospectus, as
amended or supplemented, in such quantities and at such places as the
Representatives have reasonably requested for each of the Underwriters.
(c) Distribution of Offering Material By the Company. The Company has
not distributed and will not distribute, prior to the later of the Second
Closing Date (as defined below) and the completion of the Underwriters'
distribution of the Shares, any offering material in connection with the
offering and sale of the Shares other than a preliminary prospectus, the
Prospectus or the Registration Statement.
(d) The Underwriting Agreement. This Agreement has been duly
authorized, executed and delivered by, and is a valid and binding agreement
of, the Company, enforceable in accordance with its terms, except as rights
to indemnification hereunder may be limited by applicable law and except as
the enforcement hereof may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws relating to or affecting
the rights and remedies of creditors or by general equitable principles.
(e) Authorization of the Shares. The Shares to be purchased by the
Underwriters from the Company have been duly authorized for issuance and
sale pursuant to this Agreement and, when issued and delivered by the
Company pursuant to this Agreement, will be validly issued, fully paid and
nonassessable.
(f) No Applicable Registration or Other Similar Rights. There are no
persons with registration or other similar rights to have any equity or
debt securities registered for sale under the Registration Statement or
included in the offering contemplated by this Agreement, except for such
rights as have been duly waived or complied with.
(g) No Material Adverse Change. Except as otherwise disclosed in the
Prospectus, subsequent to the respective dates as of which information is
given in the Prospectus: (i) there has been no material adverse change, or
any development that could reasonably be expected to result in a material
adverse change, in the condition, financial or otherwise, or in the
earnings, business, operations or prospects, whether or not arising from
transactions in the ordinary course of business, of the Company and its
subsidiaries, considered as one entity (any such change is called a
"Material Adverse Change"); (ii) the Company and its subsidiaries,
considered as one entity, have not incurred any
3
<PAGE>
material liability or obligation, indirect, direct or contingent, not in
the ordinary course of business nor entered into any material transaction
or agreement not in the ordinary course of business; and (iii) there has
been no dividend or distribution of any kind declared, paid or made by the
Company or, except for dividends paid to the Company or other subsidiaries,
any of its subsidiaries on any class of capital stock or repurchase or
redemption by the Company or any of its subsidiaries of any class of
capital stock.
(h) Independent Accountants. KPMG LLP and Arthur Andersen LLP, who
have expressed their opinion with respect to the financial statements
(which term as used in this Agreement includes the related notes thereto)
filed with the Commission as a part of the Registration Statement and
included in the Prospectus, are independent public or certified public
accountants as required by the Securities Act.
(i) Preparation of the Financial Statements. The financial statements
filed with the Commission as a part of the Registration Statement and
included in the Prospectus present fairly the consolidated financial
position of the Company and its subsidiaries as of and at the dates
indicated and the results of their operations and cash flows for the
periods specified. Such financial statements have been prepared in
conformity with United States generally accepted accounting principles
applied on a consistent basis throughout the periods involved, except as
may be expressly stated in the related notes thereto. No other financial
statements or supporting schedules are required to be included in the
Registration Statement. The financial data set forth in the Prospectus
under the captions "Prospectus Summary-Summary Consolidated Financial
Data", "Selected Consolidated Financial Data" and "Capitalization" fairly
present the information set forth therein on a basis consistent with that
of the audited financial statements contained in the Registration
Statement.
(j) Incorporation and Good Standing of the Company and its
Subsidiaries. Each of the Company and its subsidiaries has been duly
incorporated and is validly existing as a corporation in good standing
under the laws of the jurisdiction of its incorporation and has corporate
power and authority to own, lease and operate its properties and to conduct
its business as described in the Prospectus and, in the case of the
Company, to enter into and perform its obligations under this Agreement.
Each of the Company and each subsidiary is duly qualified as a foreign
corporation to transact business and is in good standing in each
jurisdiction in which such qualification is required, whether by reason of
the ownership or leasing of property or the conduct of business, except for
such jurisdictions where the failure to so qualify or to be in good
standing would not, individually or in the aggregate, result in a Material
Adverse Change. All of the issued and outstanding capital stock of each
subsidiary has been duly authorized and validly issued, is fully paid and
nonassessable and is owned by the Company, directly or through
subsidiaries, free and clear of any security interest, mortgage, pledge,
lien, encumbrance or claim. Fluoroware, Inc. and Empak, Inc. are the only
significant subsidiaries (as defined in Rule 405 under the Securities Act)
of the Company. The Company does not own or control, directly or
indirectly, any corporation, association or other entity other than the
subsidiaries listed in Exhibit 21.1 to the Registration Statement.
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(k) Capitalization and Other Capital Shares Matters. The authorized,
issued and outstanding capital stock of the Company is as set forth in the
Prospectus under the caption "Capitalization" (other than for subsequent
issuances, if any, pursuant to employee benefit plans described in the
Prospectus or upon exercise of outstanding options described in the
Prospectus). The Common Shares (including the Shares) conform in all
material respects to the description thereof contained in the Prospectus.
All of the issued and outstanding Common Shares (including the Common
Shares owned by the Selling Shareholders) have been duly authorized and
validly issued, are fully paid and nonassessable and have been issued in
compliance with federal and state securities laws. None of the outstanding
Common Shares were issued in violation of any preemptive rights, rights of
first refusal or other similar rights to subscribe for or purchase
securities of the Company. There are no authorized or outstanding options,
warrants, preemptive rights, rights of first refusal or other rights to
purchase, or equity or debt securities convertible into or exchangeable or
exercisable for, any capital stock of the Company or any of its
subsidiaries other than those accurately described in the Prospectus. The
description of the Company's stock option, stock bonus and other stock
plans or arrangements, and the options or other rights granted thereunder,
set forth in the Prospectus accurately and fairly presents the information
required to be shown with respect to such plans, arrangements, options and
rights.
(l) Stock Exchange Listing. The Common Shares have been approved for
listing on the Nasdaq National Market, subject only to official notice of
issuance.
(m) Non-Contravention of Existing Instruments; No Further
Authorizations or Approvals Required. Neither the Company nor any of its
subsidiaries is in violation of its charter or by-laws or is in default
(or, with the giving of notice or lapse of time, would be in default)
("Default") under any indenture, mortgage, loan or credit agreement, note,
contract, franchise, lease or other instrument to which the Company or any
of its subsidiaries is a party or by which it or any of them may be bound
or to which any of the property or assets of the Company or any of its
subsidiaries is subject including, without limitation, the Plan and the
documents or instruments governing the Plan (each, an "Existing
Instrument"), except for such Defaults as would not, individually or in the
aggregate, result in a Material Adverse Change. The Company's
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execution, delivery and performance of this Agreement and consummation of
the transactions contemplated hereby and by the Prospectus (i) have been
duly authorized by all necessary corporate action and will not result in
any violation of the provisions of the charter or by-laws of the Company or
any subsidiary, (ii) will not conflict with or constitute a breach of, or
Default or a Debt Repayment Triggering Event (as defined below) under, or
result in the creation or imposition of any lien, charge or encumbrance
upon any property or assets of the Company or any of its subsidiaries
pursuant to, or require the consent of any other party to, any Existing
Instrument, except for such conflicts, breaches, Defaults, liens, charges
or encumbrances as would not, individually or in the aggregate, result in a
Material Adverse Change, (iii) will not trigger any excise or other taxes
in connection with the Plan and (iv) will not result in any violation of
any law, administrative regulation or administrative or court decree
applicable to the Company or any subsidiary. No consent, approval,
authorization or other order of, or registration or filing with, any court
or other governmental or regulatory authority or agency, is required for
the Company's execution, delivery and performance of this Agreement and
consummation of the transactions contemplated hereby and by the Prospectus,
except such as have been obtained or made by the Company and are in full
force and effect under the Securities Act, applicable state securities or
blue sky laws and from the National Association of Securities Dealers, Inc.
(the "NASD"). As used herein, a "Debt Repayment Triggering Event" means any
event or condition which gives, or with the giving of notice or lapse of
time would give, the holder of any note, debenture or other evidence of
indebtedness (or any person acting on such holder's behalf) the right to
require the repurchase, redemption or repayment of all or a portion of such
indebtedness by the Company or any of its subsidiaries.
(n) No Material Actions or Proceedings. There are no legal or
governmental actions, suits or proceedings pending or, to the best of the
Company's knowledge, threatened (i) against or affecting the Company or any
of its subsidiaries, (ii) which has as the subject thereof any officer or
director of, or property owned or leased by, the Company or any of its
subsidiaries or (iii) relating to environmental or discrimination matters,
where in any such case (A) there is a reasonable possibility that such
action, suit or proceeding might be determined adversely to the Company or
such subsidiary and (B) any such action, suit or proceeding, if so
determined adversely, would reasonably be expected to result in a Material
Adverse Change or adversely affect the consummation of the transactions
contemplated by this Agreement. No labor dispute with the employees of the
Company or any of its subsidiaries exists or, to the best of the Company's
knowledge, is threatened or imminent. The Company is not aware of any
existing or imminent labor disturbance by the employees of any of its
material suppliers which may reasonably be expected to result in a Material
Adverse Change.
(o) Intellectual Property Rights. The Company and its subsidiaries own
or possess sufficient trademarks, trade names, patent rights, copyrights,
licenses, approvals, trade secrets and other similar rights (collectively,
"Intellectual Property Rights") reasonably necessary to conduct their
businesses as now conducted; and the expected expiration of any of such
Intellectual Property Rights would not result in a Material Adverse Change.
Neither the Company nor any of its subsidiaries has received any notice of
infringement or conflict with asserted Intellectual Property Rights of
others, which infringement or conflict, if the subject of an unfavorable
decision, would result in a Material Adverse Change.
(p) All Necessary Permits, etc. The Company and each subsidiary
possess such valid and current certificates, authorizations or permits
issued by the appropriate state, federal or foreign regulatory agencies or
bodies necessary to conduct their respective businesses, and neither the
Company nor any subsidiary has received any notice of proceedings relating
to the revocation or modification of, or non-compliance with, any such
certificate, authorization or permit which, singly or in the aggregate, if
the subject of an unfavorable decision, ruling or finding, could result in
a Material Adverse Change.
(q) Title to Properties. The Company and each of its subsidiaries has
good and marketable title to all the properties and assets reflected as
owned in the financial
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statements referred to in Section 1(A)(i) above (or elsewhere in the
Prospectus), in each case free and clear of any security interests,
mortgages, liens, encumbrances, equities, claims and other defects, except
such as do not materially and adversely affect the value of such property
and do not materially interfere with the use made or proposed to be made of
such property by the Company or such subsidiary. The real property,
improvements, equipment and personal property held under lease by the
Company or any subsidiary are held under valid and enforceable leases, with
such exceptions as are not material and do not materially interfere with
the use made or proposed to be made of such real property, improvements,
equipment or personal property by the Company or such subsidiary.
(r) Tax Law Compliance. The Company and its consolidated subsidiaries
have filed all necessary federal, state, local and foreign income and
franchise tax returns or have properly requested extensions thereof and
have paid all taxes required to be paid by any of them and, if due and
payable, any related or similar assessment, fine or penalty levied against
any of them, except as are being contested in good faith and by appropriate
procedures. The Company has made adequate charges, accruals and reserves in
the applicable financial statements referred to in Section 1(A)(i) above in
respect of all federal, state, local and foreign income and franchise taxes
for all periods as to which the tax liability of the Company or any of its
consolidated subsidiaries has not been finally determined.
(s) Company Not an "Investment Company." The Company is not, and after
receipt of payment for the Shares to be sold by it will not be, an
"investment company" within the meaning of Investment Company Act of 1940,
as amended (the "Investment Company Act"), and will conduct its business in
a manner so that it will not become subject to the Investment Company Act.
(t) Insurance. Each of the Company and its subsidiaries are insured by
recognized, financially sound and reputable institutions with policies in
such amounts and with such deductibles and covering such risks as are
generally deemed adequate and customary for their businesses including, but
not limited to, policies covering real and personal property owned or
leased by the Company and its subsidiaries against theft, damage,
destruction and acts of vandalism. To the best of the Company's knowledge,
the Company and its subsidiaries will be able (i) to renew existing
insurance coverage as and when such policies expire or (ii) to obtain
comparable coverage from similar institutions as may be necessary or
appropriate to conduct their business as now conducted and at a cost that
would not result in a Material Adverse Change. Neither of the Company nor
any subsidiary has been denied any insurance coverage which it has sought
or for which it has applied.
(u) No Price Stabilization or Manipulation. The Company has not taken
and will not take, directly or indirectly, any action designed to or that
might be reasonably expected to cause or result in stabilization or
manipulation of the price of the Common Shares to facilitate the sale or
resale of the Shares.
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(v) Related Party Transactions. There are no business relationships or
related-party transactions involving the Company or any subsidiary or any
other person required to be described in the Prospectus which have not been
described as required.
(w) No Unlawful Contributions or Other Payments. Neither the Company
nor any of its subsidiaries nor, to the best of the Company's knowledge,
any employee or agent of the Company or any subsidiary, has made any
contribution or other payment to any official of, or candidate for, any
federal, state or foreign office in violation of any law or of the
character required to be disclosed in the Prospectus.
(x) Company's Accounting System. The Company maintains a system of
accounting controls sufficient to provide reasonable assurances that (i)
transactions are executed in accordance with management's general or
specific authorization; (ii) transactions are recorded as necessary to
permit preparation of financial statements in conformity with generally
accepted accounting principles as applied in the United States and to
maintain accountability for assets; (iii) access to assets is permitted
only in accordance with management's general or specific authorization; and
(iv) the recorded accountability for assets is compared with existing
assets at reasonable intervals and appropriate action is taken with respect
to any differences.
(y) Compliance with Environmental Laws. Except as would not,
individually or in the aggregate, result in a Material Adverse Change (i)
neither the Company nor any of its subsidiaries is in violation of any
federal, state, local or foreign law or regulation relating to pollution or
protection of human health or the environment (including, without
limitation, ambient air, surface water, groundwater, land surface or
subsurface strata) or wildlife, including without limitation, laws and
regulations relating to emissions, discharges, releases or threatened
releases of chemicals, pollutants, contaminants, wastes, toxic substances,
hazardous substances, petroleum and petroleum products (collectively,
"Materials of Environmental Concern"), or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of Materials of Environmental Concern (collectively,
"Environmental Laws"), which violation includes, but is not limited to,
noncompliance with any permits or other governmental authorizations
required for the operation of the business of the Company or its
subsidiaries under applicable Environmental Laws, or noncompliance with the
terms and conditions thereof, nor has the Company or any of its
subsidiaries received any written communication, whether from a
governmental authority, citizens group, employee or otherwise, that alleges
that the Company or any of its subsidiaries is in violation of any
Environmental Law; (ii) there is no claim, action or cause of action filed
with a court or governmental authority, no investigation with respect to
which the Company has received written notice, and no written notice by any
person or entity alleging potential liability for investigatory costs,
cleanup costs, governmental responses costs, natural resources damages,
property damages, personal injuries, attorneys' fees or penalties arising
out of, based on or resulting from the presence, or release into the
environment, of any Material of Environmental Concern at any location
owned, leased or operated by the Company or any of its subsidiaries, now or
in the past (collectively, "Environmental Claims"), pending or, to the best
of the Company's knowledge, threatened against the Company or any of its
subsidiaries or any person or entity whose
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liability for any Environmental Claim the Company or any of its
subsidiaries has retained or assumed either contractually or by operation
of law; and (iii) to the best of the Company's knowledge, there are no past
or present actions, activities, circumstances, conditions, events or
incidents, including, without limitation, the release, emission, discharge,
presence or disposal of any Material of Environmental Concern, that
reasonably could result in a violation of any Environmental Law or form the
basis of a potential Environmental Claim against the Company or any of its
subsidiaries or against any person or entity whose liability for any
Environmental Claim the Company or any of its subsidiaries has retained or
assumed either contractually or by operation of law.
(z) ERISA Compliance. The Company and its subsidiaries and any
"employee benefit plan" (as defined under the Employee Retirement Income
Security Act of 1974, as amended, and the regulations and published
interpretations thereunder (collectively, "ERISA")) established or
maintained by the Company, its subsidiaries or their "ERISA Affiliates" (as
defined below) are in compliance in all material respects with ERISA and
the Internal Revenue Code of 1986, as amended, and the regulations and
published interpretations thereunder (the "Code"). "ERISA Affiliate" means,
with respect to the Company or a subsidiary, any member of any group of
organizations described in Sections 414(b),(c),(m) or (o) of the Code of
which the Company or such subsidiary is a member. No "reportable event" (as
defined under ERISA) has occurred or is reasonably expected to occur with
respect to any "employee benefit plan" established or maintained by the
Company, its subsidiaries or any of their ERISA Affiliates. No "employee
benefit plan" established or maintained by the Company, its subsidiaries or
any of their ERISA Affiliates, if such "employee benefit plan" were
terminated, would have any "amount of unfunded benefit liabilities" (as
defined under ERISA). Neither the Company, its subsidiaries nor any of
their ERISA Affiliates has incurred or reasonably expects to incur any
liability under (i) Title IV of ERISA with respect to termination of, or
withdrawal from, any "employee benefit plan" or (ii) Sections 412, 4971,
4975 or 4980B of the Code. Each "employee benefit plan" established or
maintained by the Company, its subsidiaries or any of their ERISA
Affiliates that is intended to be qualified under Section 401(a) of the
Code is so qualified and nothing has occurred, whether by action or failure
to act, which would cause the loss of such qualification.
(aa) Year 2000. All disclosure regarding year 2000 compliance that is
required to be described under the Securities Act (including disclosures
required by Staff Legal Bulletin No. 5) has been included in the
Prospectus. The Company has not incurred, and does not expect to incur, any
operating expenses or costs to ensure that its information systems will be
year 2000 complaint, other than as disclosed in the Prospectus.
(bb) Directed Shares. No consent, approval, authorization or order of,
or qualification with, any governmental body or agency, other than those
obtained, is required in connection with the offering of the Directed
Shares (as defined in Section 2 below). The Company has not offered, or
caused the Underwriters to offer, Shares to any person pursuant to the
directed share program with the specific intent to unlawfully influence (i)
a customer or supplier of the Company to alter the customer's or supplier's
level or type of business with the Company, or (ii) a trade journalist or
publication to write or publish favorable information about the Company or
its products.
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Any certificate signed by an officer of the Company and delivered to
the Representatives or to counsel for the Underwriters in connection with the
consummation of the transactions contemplated hereby shall be deemed to be a
representation and warranty by the Company to each Underwriter as to the matters
set forth therein.
B. Representations and Warranties of the Selling Shareholders. In addition
to the representations, warranties and covenants set forth in Section 1(A):
(a) Each Selling Shareholder severally and not jointly represents,
warrants and covenants to each Underwriter as follows:
(i) The Underwriting Agreement. This Agreement has been duly
authorized, executed and delivered by or on behalf of such Selling
Shareholder and is a valid and binding agreement of such Selling
Shareholder, enforceable in accordance with its terms, except as rights to
indemnification hereunder may be limited by applicable law and except as
the enforcement hereof may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws relating to or affecting
the rights and remedies of creditors or by general equitable principles.
(ii) The Custody Agreement. The Custody Agreement signed by such
Selling Shareholder and [_____], as custodian (the "Custodian"), relating
to the deposit of the Shares to be sold by such Selling Shareholder (the
"Custody Agreement"), has been duly authorized, executed and delivered by
such Selling Shareholder and is a valid and binding agreement of such
Selling Shareholder, enforceable in accordance with its terms, except as
rights to indemnification thereunder may be limited by applicable law and
except as the enforcement thereof may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws relating to or affecting
the rights and remedies of creditors or by general equitable principles.
(iii) Title to Shares to be Sold; All Authorizations Obtained. Such
Selling Shareholder has, and on the First Closing Date (as defined below)
will have, valid title to all of the Shares which may be sold by Selling
Shareholder pursuant to this Agreement on such date and the legal right and
power, and all authorizations and approvals required by law and, if
applicable, under its charter or by laws, limited liability company
agreement or other organizational documents to enter into this Agreement to
sell, transfer and deliver all of the Shares which may be sold by such
Selling Shareholder pursuant to this Agreement and to comply with its other
obligations hereunder and thereunder.
(iv) Delivery of the Shares to be Sold. Delivery of the Shares which
are sold by such Selling Shareholder pursuant to this Agreement will pass
good and valid title to such Common Shares, free and clear of any security
interest, mortgage, pledge, lien, encumbrance or other claim.
(v) Non-Contravention; No Further Authorizations or Approvals
Required. The execution and delivery by such Selling Shareholder of, and
the performance by such Selling Shareholder of its obligations under, this
Agreement and the Custody Agreement will not contravene or conflict with,
result in a breach of, or constitute a Default under, or
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require the consent of any other party to, the charter or by-laws, limited
liability company agreement or other organizational documents of such
Selling Shareholder or any other agreement or instrument to which such
Selling Shareholder is a party or by which it is bound or under which it is
entitled to any right or benefit, any provision of applicable law or any
judgment, order, decree or regulation applicable to such Selling
Shareholder of any court, regulatory body, administrative agency,
governmental body or arbitrator having jurisdiction over such Selling
Shareholder. No consent, approval, authorization or other order of, or
registration or filing with, any court or other governmental authority or
agency, is required for the consummation by such Selling Shareholder of the
transactions contemplated in this Agreement, except such as have been, or
will be, obtained or made by the Company, the trustee under the Plan or the
Underwriters and are, or will be, in full force and effect under the
Securities Act, applicable state securities or blue sky laws and from the
NASD.
(vi) No Registration or Other Similar Rights. Such Selling Shareholder
does not have any registration or other similar rights to have any equity
or debt securities registered for sale by the Company under the
Registration Statement or included in the offering contemplated by this
Agreement, except for such rights as are described in the Prospectus under
"Shares Eligible for Future Sale."
(vii) No Further Consents, etc. No consent, approval or waiver is
required under any instrument or agreement to which such Selling
Shareholder is a party or by which it is bound or under which it is
entitled to any right or benefit, in connection with the offering, sale or
purchase by the Underwriters of any of the Shares which may be sold by such
Selling Shareholder under this Agreement or the consummation by such
Selling Shareholder of any of the other transactions contemplated hereby.
(viii) Disclosure Made by Such Selling Shareholder in the Prospectus.
All information furnished by or on behalf of such Selling Shareholder in
writing expressly for use in the Registration Statement and Prospectus is,
and on the First Closing Date and the Second Closing Date will be, true,
correct, and complete in all material respects, and does not, and on the
First Closing Date and the Second Closing Date will not, contain any untrue
statement of a material fact or omit to state any material fact necessary
to make such information not misleading. Such Selling Shareholder confirms
as accurate the number of Common Shares set forth opposite such Selling
Shareholder's name in the Prospectus under the caption "Principal and
Selling Shareholders" (both prior to and after giving effect to the sale of
the Shares).
(ix) No Price Stabilization or Manipulation. Such Selling Shareholder
has not taken and will not take, directly or indirectly, any action
designed to or that might be reasonably expected to cause or result in
stabilization or manipulation of the price of the Common Shares to
facilitate the sale or resale of the Shares.
(x) Confirmation of Company Representations and Warranties. Such
Selling Shareholder has no reason to believe that the representations and
warranties of the Company contained in Section 1(A) hereof are not true and
correct, is familiar with the Registration Statement and the Prospectus and
has no knowledge of any material fact,
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condition or information not disclosed in the Registration Statement or the
Prospectus which has had or may have a Material Adverse Change and is not
prompted to sell shares of Shares by any information concerning the Company
which is not set forth in the Registration Statement and the Prospectus.
(b) The Plan hereby represents, warrants and covenants to each
Underwriter as follows:
(i) Establishment and Qualification of Plan. The Plan has been duly
adopted and established as a grantor trust in accordance with the laws of
the State of Minnesota. The Plan is qualified under Section 401 of the Code
and meets the requirements of an "employee stock ownership plan" within the
meaning of Section 4975(e)(7) of the Code and 407(d)(6) of ERISA. The
trustee under the Plan has all requisite trust powers to enter into the
transaction contemplated by this Agreement.
(ii) No Prohibited Transaction; No Fiduciary. The sale of the Shares
to be sold by the Plan to the Underwriters will not, in whole or in part,
constitute a prohibited transaction pursuant to Section 4975(c) of the Code
or Section 406 of ERISA, and none of the Underwriters or any person or
entity affiliated with them is a "fiduciary" (within the meaning of Section
3(21) of ERISA) of the Plan or a "named fiduciary" (as such term is defined
in Section 402(a) (2) of ERISA) of the Plan.
Any certificate signed by or on behalf of any Selling Shareholder and
delivered to the Representatives or to counsel for the Underwriters in
connection with the consummation of the transactions contemplated hereby shall
be deemed to be a representation and warranty by such Selling Shareholder to
each Underwriter as to the matters covered thereby.
Section 2. Purchase, Sale and Delivery of the Shares.
The Firm Shares. Upon the terms herein set forth, (i) the Company
agrees to issue and sell to the several Underwriters an aggregate of 8,600,000
Firm Shares and (ii) the Selling Shareholders agree to sell to the several
Underwriters an aggregate of 4,400,000 Firm Shares, each Selling Shareholder
selling the number of Firm Shares set forth opposite such Selling Shareholder's
name on Schedule B. On the basis of the representations, warranties and
agreements herein contained, and upon the terms but subject to the conditions
herein set forth, the Underwriters agree, severally and not jointly, to purchase
from the Company and the Selling Shareholders the respective number of Firm
Shares set forth opposite their names on Schedule A. The purchase price per
Firm Share to be paid by the several Underwriters to the Company and the Selling
Shareholders shall be $_________ per share.
The First Closing Date. Delivery of certificates for the Firm Shares
to be purchased by the Underwriters and payment therefor shall be made at the
offices of Banc of America Securities LLC, 600 Montgomery Street, San Francisco,
California (or such other place as may be agreed to by the Company and the
Representatives) at 6:00 a.m. San Francisco time, on _________ ____, 2000 or
such other time and date not later than 10:30 a.m. San Francisco time, on
__________ ___, 2000 as the Representatives shall designate by notice to the
Company and the Selling Shareholders (the time and date of such closing are
called the "First Closing
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Date"). The Company and the Selling Shareholders hereby acknowledge that
circumstances under which the Representatives may provide notice to postpone the
First Closing Date as originally scheduled include, but are in no way limited
to, any determination by the Company, the Selling Shareholders or the
Representatives to recirculate to the public copies of an amended or
supplemented Prospectus or a delay as contemplated by the provisions of Section
10.
The Optional Shares; the Second Closing Date. In addition, on the
basis of the representations, warranties and agreements herein contained, and
upon the terms but subject to the conditions herein set forth, the Company and
WCB hereby grant an option to the several Underwriters to purchase, severally
and not jointly, up to 1,290,000 Optional Shares from the Company and up to
660,000 Optional Shares from WCB at the purchase price per share to be paid by
the Underwriters for the Firm Shares. The option granted hereunder is for use
by the Underwriters solely in covering any over-allotments in connection with
the sale and distribution of the Firm Shares. The option granted hereunder may
be exercised at any time (but not more than once) upon notice by the
Representatives to the Company and WCB, which notice may be given at any time
within 30 days from the date of this Agreement. Such notice shall set forth (i)
the number of Optional Shares from each of the Company and WCB as to which the
Underwriters are exercising the option, (ii) the names and denominations in
which the certificates for the Optional Shares are to be registered and (iii)
the time, date and place at which such certificates will be delivered (which
time and date may be simultaneous with, but not earlier than, the First Closing
Date; and in such case the term "First Closing Date" shall refer to the time and
date of delivery of certificates for the Firm Shares and the Optional Shares).
Such time and date of delivery, if subsequent to the First Closing Date, is
called the "Second Closing Date" and shall be determined by the Representatives
and shall not be earlier than three nor later than five full business days after
delivery of such notice of exercise. If any Optional Shares are to be
purchased, (a) each Underwriter agrees, severally and not jointly, to purchase
the number of Optional Shares (subject to such adjustments to eliminate
fractional shares as the Representatives may determine) that bears the same
proportion to the total number of Optional Shares to be purchased as the number
of Firm Shares set forth on Schedule A opposite the name of such Underwriter
bears to the total number of Firm Shares and (b) the Company and WCB agree to
sell the total number of Optional Shares. The Representatives may cancel the
option at any time prior to its expiration by giving written notice of such
cancellation to the Company and WCB.
Public Offering of the Shares. The Representatives hereby advise the
Company and the Selling Shareholders that the Underwriters intend to offer for
sale to the public, as described in the Prospectus, their respective portions of
the Shares as soon after this Agreement has been executed and the Registration
Statement has been declared effective as the Representatives, in its sole
judgment, has determined is advisable and practicable. The Company and the
Underwriters hereby agree that up to ______ Firm Shares to be purchased to by
the Underwriters (the "Directed Shares") shall be reserved for sale by the
Underwriters to [persons having business relationships with the Company] (the
"Directed Share Purchasers"), as part of the distribution of the Shares by the
Underwriters subject to the terms of this Agreement, the applicable rules,
regulations and interpretations of the National Association of Securities
Dealers, Inc., and all other applicable laws, rules and regulations; provided,
however, that under no circumstances will the Representatives or any other
Underwriter be liable to the Company or to any of the Directed Share Purchasers
for any action taken or omitted in good faith in connection with the
transactions effected with regard to the Directed Share Purchasers. Any
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Directed Shares not orally confirmed for purchase by Directed Share Purchasers
by the end of the business day on which this Agreement is executed will be
offered to the public by the Underwriters as part of the offering contemplated
hereby.
Payment for the Shares. Payment for the Shares to be sold by the
Company shall be made at the First Closing Date (and, if applicable, at the
Second Closing Date) by wire transfer of immediately available funds to the
order of the Company. Payment for the Shares to be sold by WCB shall be made at
the First Closing Date (and, if applicable, at the Second Closing Date) by wire
transfer of immediately available funds to the order of WCB.
It is understood that the Representatives have been authorized, for
their own accounts and the accounts of the several Underwriters, to accept
delivery of and receipt for, and make payment of the purchase price for, the
Firm Shares and any Optional Shares the Underwriters have agreed to purchase.
Each of Banc of America Securities LLC, Donaldson, Lufkin & Jenrette Securities
Corporation, Salomon Smith Barney Inc. and U.S. Bancorp Piper Jaffray Inc.,
individually and not as Representatives of the Underwriters, may (but shall not
be obligated to) make payment for any Shares to be purchased by any Underwriter
whose funds shall not have been received by the Representatives by the First
Closing Date or the Second Closing Date, as the case may be, for the account of
such Underwriter, but any such payment shall not relieve such Underwriter from
any of its obligations under this Agreement.
Each Selling Shareholder hereby agrees that (i) it will pay all stock
transfer taxes, stamp duties and other similar taxes, if any, payable upon the
sale or delivery of the Shares to be sold by such Selling Shareholder to the
several Underwriters, or otherwise in connection with the performance of such
Selling Shareholder's obligations hereunder and (ii) the Underwriters are
authorized to deduct from such payment any such amounts from the proceeds to
such Selling Shareholder hereunder and to hold such amounts for the account of
such Selling Shareholder.
Delivery of the Shares. The Company and the Selling Shareholders
shall deliver, or cause to be delivered, to the Representatives for the accounts
of the several Underwriters certificates, if any, for the Firm Shares to be sold
by them at the First Closing Date, against the irrevocable release of a wire
transfer of immediately available funds for the amount of the purchase price
therefor. The Company and WCB shall also deliver, or cause to be delivered, to
the Representatives for the accounts of the several Underwriters, certificates,
if any, for the Optional Shares the Underwriters have agreed to purchase from
them at the First Closing Date or the Second Closing Date, as the case may be,
against the irrevocable release of a wire transfer of immediately available
funds for the amount of the purchase price therefor. The certificates for the
Shares shall be in definitive form and registered in such names and
denominations as the Representatives shall have requested at least two full
business days prior to the First Closing Date (or the Second Closing Date, as
the case may be) and shall be made available for inspection on the business day
preceding the First Closing Date (or the Second Closing Date, as the case may
be) at a location in New York City as the Representatives may designate. Time
shall be of the essence, and delivery at the time and place specified in this
Agreement is a further condition to the obligations of the Underwriters.
Delivery of Prospectus to the Underwriters. Not later than 12:00 p.m.
on the second business day following the date the Shares are first released by
the Underwriters for sale
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to the public, the Company shall deliver or cause to be delivered, copies of the
Prospectus in such quantities and at such places as the Representatives shall
request.
Section 3. Additional Covenants.
A. Covenants of the Company. The Company further covenants and agrees with
each Underwriter as follows:
(a) Representatives' Review of Proposed Amendments and Supplements.
During such period beginning on the date hereof and ending on the later of
the First Closing Date or such date, as in the opinion of counsel for the
Underwriters, the Prospectus is no longer required by law to be delivered
in connection with sales by an Underwriter or dealer (the "Prospectus
Delivery Period"), prior to amending or supplementing the Registration
Statement (including any registration statement filed under Rule 462(b)
under the Securities Act) or the Prospectus, the Company shall furnish to
the Representatives for review a copy of each such proposed amendment or
supplement, and the Company shall not file any such proposed amendment or
supplement to which the Representatives reasonably object.
(b) Securities Act Compliance. After the date of this Agreement, the
Company shall promptly advise the Representatives in writing (i) of the
receipt of any comments of, or requests for additional or supplemental
information from, the Commission, (ii) of the time and date of any filing
of any post-effective amendment to the Registration Statement or any
amendment or supplement to any preliminary prospectus or the Prospectus,
(iii) of the time and date that any post-effective amendment to the
Registration Statement becomes effective and (iv) of the issuance by the
Commission of any stop order suspending the effectiveness of the
Registration Statement or any post-effective amendment thereto or of any
order preventing or suspending the use of any preliminary prospectus or the
Prospectus, or of any proceedings to remove, suspend or terminate from
listing or quotation the Common Shares from any securities exchange upon
which it is listed for trading or included or designated for quotation, or
of the threatening or initiation of any proceedings for any of such
purposes. If the Commission shall enter any such stop order at any time,
the Company will use its best efforts to obtain the lifting of such order
at the earliest possible moment. Additionally, the Company agrees that it
shall comply with the provisions of Rules 424(b), 430A and 434, as
applicable, under the Securities Act and will use its reasonable efforts to
confirm that any filings made by the Company under such Rule 424(b) were
received in a timely manner by the Commission.
(c) Amendments and Supplements to the Prospectus and Other Securities
Act Matters. If, during the Prospectus Delivery Period, any event shall
occur or condition exist as a result of which it is necessary to amend or
supplement the Prospectus in order to make the statements therein, in the
light of the circumstances when the Prospectus is delivered to a purchaser,
not misleading, or if in the opinion of the Representatives or counsel for
the Underwriters it is otherwise necessary to amend or supplement the
Prospectus to comply with law, the Company agrees to promptly prepare
(subject to Section 3(A)(a) hereof), file with the Commission and furnish
at its own expense to the
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Underwriters and to dealers, amendments or supplements to the Prospectus so
that the statements in the Prospectus as so amended or supplemented will
not, in the light of the circumstances when the Prospectus is delivered to
a purchaser, be misleading or so that the Prospectus, as amended or
supplemented, will comply with law.
(d) Copies of any Amendments and Supplements to the Prospectus. The
Company agrees to furnish the Representatives, without charge, during the
Prospectus Delivery Period, as many copies of the Prospectus and any
amendments and supplements thereto as the Representatives may request.
(e) Blue Sky Compliance. The Company shall cooperate with the
Representatives and counsel for the Underwriters to qualify or register the
Shares for sale under (or obtain exemptions from the application of) the
state securities or blue sky laws or Canadian provincial securities laws of
those jurisdictions reasonably designated by the Representatives, shall
comply with such laws and shall continue such qualifications, registrations
and exemptions in effect so long as required for the distribution of the
Common Shares. The Company shall not be required to qualify as a foreign
corporation or to take any action that would subject it to general service
of process in any such jurisdiction where it is not presently qualified or
where it would be subject to taxation as a foreign corporation. The Company
will advise the Representatives promptly of the suspension of the
qualification or registration of (or any such exemption relating to) the
Shares for offering, sale or trading in any jurisdiction or any initiation
or threat of any proceeding for any such purpose, and in the event of the
issuance of any order suspending such qualification, registration or
exemption, the Company shall use its best efforts to obtain the withdrawal
thereof at the earliest possible moment.
(f) Use of Proceeds. The Company shall apply the net proceeds from the
sale of the Shares sold by it in the manner described under the caption
"Use of Proceeds" in the Prospectus.
(g) Transfer Agent. The Company shall engage and maintain, at its
expense, a registrar and transfer agent for the Common Shares.
(h) Earnings Statement. As soon as practicable, the Company will make
generally available to its security holders and to the Representatives an
earnings statement (which need not be audited) covering the twelve-month
period ending ____________ ___, 2001 that satisfies the provisions of
Section 11(a) of the Securities Act.
(i) Periodic Reporting Obligations. During the Prospectus Delivery
Period the Company shall file, on a timely basis, with the Commission and
the Nasdaq National Market all reports and documents required to be filed
under the Exchange Act. Additionally, the Company shall report the use of
proceeds from the issuance of the Common Shares as may be required under
Rule 463 under the Securities Act.
(j) Agreement Not To Offer or Sell Additional Securities During the
period of 180 days following the date of the Prospectus, the Company will
not, without the prior
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written consent of Banc of America Securities LLC (which consent may be
withheld at the sole discretion of Banc of America Securities LLC),
directly or indirectly, sell, offer, contract or grant any option to sell
(including without limitation any short sale), pledge, transfer or
establish an open "put equivalent position" within the meaning of Rule 16a-
1(h) under the Securities Exchange Act of 1934, as amended, (the "Exchange
Act"), or otherwise dispose of or transfer, or announce the offering of, or
file any registration statement under the Securities Act in respect of, any
Common Shares, options or warrants to acquire Common Shares or securities
exchangeable or exercisable for or convertible into Common Shares (other
than as contemplated by this Agreement with respect to the Shares);
provided, however, that the Company may issue Common Shares or options to
purchase its Common Shares, upon exercise of options, pursuant to any stock
option, stock bonus or other stock plan or arrangement described in the
Prospectus, but only if the holders of such shares, options, or shares
issued upon exercise of such options, agree in writing not to sell, offer,
dispose of or otherwise transfer any such shares or options during such 180
day period without the prior written consent of Banc of America Securities
LLC (which consent may be withheld at the sole discretion of Banc of
America Securities LLC).
(k) Future Reports to the Representatives. During the period
commencing on the date hereof and continuing for five years hereafter, the
Company will furnish to the Representatives at c/o Banc of America
Securities LLC, 600 Montgomery Street, San Francisco, CA 94111 (i) as soon
as practicable after the end of each fiscal year, copies of the Annual
Report of the Company containing the balance sheet of the Company as of the
close of such fiscal year and statements of income, shareholders' equity
and cash flows for the year then ended and the opinion thereon of the
Company's independent public or certified public accountants; (ii) as soon
as practicable after the filing thereof, copies of each proxy statement,
Annual Report on Form 10-K, Quarterly Report on Form 10-Q, Current Report
on Form 8-K or other report filed by the Company with the Commission, the
NASD or any securities exchange; and (iii) as soon as available, copies of
any report or communication of the Company mailed generally to holders of
its capital stock.
(l) Registration Statement on Form S-8. During the period of 180 days
following the date of the Prospectus, the Company will not, without the
prior written consent of Banc of America Securities LLC (which consent may
be withheld at the sole discretion of Banc of America Securities LLC), file
a registration statement on Form S-8 to register the Company's common
shares reserved for issuance or issued under any of the Company's option or
stock plans.
B. Covenants of the Selling Shareholders. Each Selling Shareholder further
covenants and agrees with each Underwriter:
(a) Agreement Not to Offer or Sell Additional Securities. Such Selling
Shareholder will not, without the prior written consent of Banc of America
Securities LLC (which consent may be withheld in its sole discretion),
directly or indirectly, sell, offer, contract or grant any option to sell
(including without limitation any short sale), pledge, transfer, establish
an open "put equivalent position" within the meaning of Rule 16a-1(h) under
the Exchange Act, or otherwise dispose of any Common Shares, options
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or warrants to acquire Common Shares, or securities exchangeable or
exercisable for or convertible into Common Shares currently or hereafter
owned either of record or beneficially (as defined in Rule 13d-3 under the
Exchange Act) by the undersigned, or publicly announce the undersigned's
intention to do any of the foregoing, for a period commencing on the date
hereof and continuing through the close of trading on the date 180 days
after the date of the Prospectus; provided, however, that the foregoing
shall not apply to any Common Shares which are required in accordance with
the terms of the Plan and Section 401(a)(9) of the Code to be distributed
from the Plan to employees, their heirs or beneficiaries on account of
death, Disability (as defined in the Plan) or retirement from the Company
after age 65.
(b) Delivery of Forms W-8 and W-9 . To deliver to the Representatives
prior to the First Closing Date a properly completed and executed United
States Treasury Department Form W-8 (if the Selling Shareholder is a non-
United States person) or Form W-9 (if the Selling Shareholder is a United
States Person).
Banc of America Securities LLC, on behalf of the several Underwriters,
may, in its sole discretion, waive in writing the performance by the Company or
the Selling Shareholder of any one or more of the foregoing covenants or extend
the time for their performance.
Section 4. Payment of Expenses. The Company agrees to pay all costs, fees
and expenses incurred in connection with the performance of its obligations
hereunder and in connection with the transactions contemplated hereby, including
without limitation (i) all expenses incident to the issuance and delivery of the
Shares (including all printing and engraving costs), (ii) all fees and expenses
of the registrar and transfer agent of the Shares, (iii) all necessary issue,
transfer and other stamp taxes in connection with the issuance and sale of the
Shares to the Underwriters, (iv) all fees and expenses of the Company's counsel,
independent public or certified public accountants and other advisors, (v) all
costs and expenses incurred in connection with the preparation, printing,
filing, shipping and distribution of the Registration Statement (including
financial statements, exhibits, schedules, consents and certificates of
experts), each preliminary prospectus and the Prospectus, and all amendments and
supplements thereto, and this Agreement, (vi) all filing fees, attorneys' fees
and expenses incurred by the Company or the Underwriters in connection with
qualifying or registering (or obtaining exemptions from the qualification or
registration of) all or any part of the Shares for offer and sale under the
state securities or blue sky laws or the provincial securities laws of Canada,
and, if requested by the Representatives, preparing and printing a "Blue Sky
Survey" or memorandum, and any supplements thereto, advising the Underwriters of
such qualifications, registrations and exemptions, (vii) the filing fees
incident to, and the reasonable fees and expenses of counsel for the
Underwriters in connection with, the NASD's review and approval of the
Underwriters' participation in the offering and distribution of the Shares,
(viii) the fees and expenses associated with listing the Common Shares on the
Nasdaq National Market, and (ix) all other fees, costs and expenses referred to
in Item 13 of Part II of the Registration Statement. Except as provided in this
Section 4, Section 6, Section 8 and Section 9 hereof, the Underwriters shall pay
their own expenses, including the fees and disbursements of their counsel.
The Selling Shareholders further agree with each Underwriter to pay
(directly or by reimbursement) all fees and expenses incident to the performance
of their obligations under
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this Agreement, including but not limited to (i) fees and expenses of counsel
and other advisors for such Selling Shareholders and (ii) taxes incident to the
sale and delivery of the Shares to be sold by such Selling Shareholders to the
Underwriters hereunder (which taxes, if any, may be deducted by the Underwriters
under the provisions of Section 2 of this Agreement).
This Section 4 shall not affect or modify any separate, valid
agreement relating to the allocation of payment of expenses between the Company,
on the one hand, and the Selling Shareholders, on the other hand.
Section 5. Conditions of the Obligations of the Underwriters. The
obligations of the several Underwriters to purchase and pay for the Shares as
provided herein on the First Closing Date and, with respect to the Optional
Shares, the Second Closing Date, shall be subject to the accuracy of the
representations and warranties on the part of the Company and the Selling
Shareholders set forth in Sections 1(A) and 1(B) hereof as of the date hereof
and as of the First Closing Date as though then made and, with respect to the
Optional Shares, as of the Second Closing Date as though then made, to the
timely performance by the Company and the Selling Shareholders of its covenants
and other obligations hereunder, and to each of the following additional
conditions:
(a) Accountants' Comfort Letter. On the date hereof, the
Representatives and the Selling Shareholders shall have received from KPMG
LLP, independent public or certified public accountants for the Company, a
letter dated the date hereof addressed to the Underwriters, in form and
substance satisfactory to the Representatives, containing statements and
information of the type ordinarily included in accountant's "comfort
letters" to underwriters, delivered according to Statement of Auditing
Standards No. 72 (or any successor bulletin), with respect to the audited
and unaudited financial statements and certain financial information
contained in the Registration Statement and the Prospectus (and the
Representatives shall have received an additional three conformed copies of
such accountants' letter).
(b) Compliance with Registration Requirements; No Stop Order; No
Objection from NASD. For the period from and after effectiveness of this
Agreement and prior to the First Closing Date and, with respect to the
Optional Shares, the Second Closing Date:
(i) the Company shall have filed the Prospectus with the
Commission (including the information required by Rule 430A under the
Securities Act) in the manner and within the time period required by Rule
424(b) under the Securities Act; or the Company shall have filed a post-
effective amendment to the Registration Statement containing the
information required by such Rule 430A, and such post-effective amendment
shall have become effective; or, if the Company elected to rely upon Rule
434 under the Securities Act and obtained the Representatives' consent
thereto, the Company shall have filed a Term Sheet with the Commission in
the manner and within the time period required by such Rule 424(b);
(ii) no stop order suspending the effectiveness of the
Registration Statement, any Rule 462(b) Registration Statement, or any
post-effective amendment to
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the Registration Statement, shall be in effect and no proceedings for such
purpose shall have been instituted or threatened by the Commission; and
(iii) the NASD shall have raised no objection to the fairness
and reasonableness of the underwriting terms and arrangements.
(c) No Material Adverse Change or Ratings Agency Change. For the
period from and after the date of this Agreement and prior to the First
Closing Date and, with respect to the Optional Shares, the Second Closing
Date:
(i) in the judgment of the Representatives there shall not have
occurred any Material Adverse Change; and
(ii) there shall not have occurred any downgrading, nor shall any
notice have been given of any intended or potential downgrading or of any
review for a possible change that does not indicate the direction of the
possible change, in the rating accorded any securities of the Company or
any of its subsidiaries by any "nationally recognized statistical rating
organization" as such term is defined for purposes of Rule 436(g)(2) under
the Securities Act.
(d) Opinion of Counsel for the Company. On each of the First Closing
Date and the Second Closing Date the Representatives shall have received
the favorable opinion of Dorsey & Whitney, LLP, special counsel for the
Company, dated as of such Closing Date, the form of which is attached as
Exhibit A (and the Representatives shall have received an additional two
conformed copies of such counsels' legal opinion).
(e) Opinion of Counsel for the Underwriters. On each of the First
Closing Date and the Second Closing Date the Representatives shall have
received the favorable opinion of Latham & Watkins, special counsel for the
Underwriters, dated as of such Closing Date, in form and substance
satisfactory to the Representatives (and the Representatives shall have
received an additional two conformed copies of such counsel's legal
opinion).
(f) Officers' Certificate. On each of the First Closing Date and the
Second Closing Date the Representatives shall have received a written
certificate executed by the Chairman of the Board, Chief Executive Officer
or President of the Company and the Chief Financial Officer or Chief
Accounting Officer of the Company, dated as of such Closing Date, to the
effect set forth in subsections (b)(ii) and (c)(ii) of this Section 5, and
further to the effect that:
(i) for the period from and after the date of this Agreement and
prior to such Closing Date, there has not occurred any Material Adverse
Change;
(ii) the representations, warranties and covenants of the Company
set forth in Section 1(A) of this Agreement are true and correct with the
same force and effect as though expressly made on and as of such Closing
Date; and
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(iii) the Company has complied with all the agreements hereunder
and satisfied all the conditions on its part to be performed or satisfied
hereunder at or prior to such Closing Date.
(g) Bring-down Comfort Letter. On each of the First Closing Date and
the Second Closing Date the Representatives shall have received from KPMG
LLP, independent public or certified public accountants for the Company, a
letter dated such date, in form and substance satisfactory to the
Representatives, to the effect that they reaffirm the statements made in
the letter furnished by them pursuant to subsection (a) of this Section 5,
except that the specified date referred to therein for the carrying out of
procedures shall be no more than three business days prior to the First
Closing Date or Second Closing Date, as the case may be (and the
Representatives shall have received an additional three conformed copies of
such accountants' letter for each of the several Underwriters).
(h) Opinion of Counsel for the Selling Shareholders. On each of the
First Closing Date and the Second Closing Date, the Representatives shall
have received the favorable opinion of counsel for the Selling
Shareholders, dated as of the First Closing Date, the form of which is
attached as Exhibit B (and the Representatives shall have received an
additional three conformed copies of such counsel's legal opinion for each
of the several Underwriters).
(i) Selling Shareholders' Certificate. On each of the First Closing
Date and the Second Closing Date the Representatives shall receive a
written certificate executed by each Selling Shareholder, dated as of such
Closing Date, to the effect that:
(i) the representations, warranties and covenants of such Selling
Shareholder set forth in Section 1(B) of this Agreement are true and
correct with the same force and effect as though expressly made by such
Selling Shareholder on and as of such Closing Date; and
(ii) such Selling Shareholder has complied with all the
agreements and satisfied all the conditions on its part to be performed or
satisfied at or prior to such Closing Date.
(j) Selling Shareholders' Documents. On the date hereof, the Company
and the Selling Shareholders shall have furnished for review by the
Representatives copies of the Custody Agreements executed by each of the
Selling Shareholders and such further information, certificates and
documents as the Representatives may reasonably request.
(k) Lock-Up Agreement from Certain Persons. On the date hereof, the
Company shall have furnished to the Representatives an agreement in the
form of Exhibit C hereto from each of the persons set forth on Schedule C,
and such agreement shall be in full force and effect on each of the First
Closing Date and the Second Closing Date.
(l) Additional Documents. On or before each of the First Closing Date
and the Second Closing Date, the Representatives and counsel for the
Underwriters shall have
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received such information, documents and opinions as they may reasonably
require for the purposes of enabling them to pass upon the issuance and
sale of the Shares as contemplated herein, or in order to evidence the
accuracy of any of the representations and warranties, or the satisfaction
of any of the conditions or agreements, herein contained.
If any condition specified in this Section 5 is not satisfied when and
as required to be satisfied, this Agreement may be terminated by the
Representatives by notice to the Company and the Selling Shareholders at any
time on or prior to the First Closing Date and, with respect to the Optional
Shares, at any time prior to the Second Closing Date, which termination shall be
without liability on the part of any party to any other party, except that
Section 4, Section 6, Section 8 and Section 9 shall at all times be effective
and shall survive such termination.
Section 6. Reimbursement of Underwriters' Expenses. If this Agreement is
terminated by the Representatives pursuant to Section 5, Section 7, Section 10
or Section 11 or Section 17, or if the sale to the Underwriters of the Shares on
the First Closing Date is not consummated because of any refusal, inability or
failure on the part of the Company or the Selling Shareholders to perform any
agreement herein or to comply with any provision hereof, the Company agrees to
reimburse the Representatives and the other Underwriters (or such Underwriters
as have terminated this Agreement with respect to themselves), severally, upon
demand for all out-of-pocket expenses that shall have been reasonably incurred
by the Representatives and the Underwriters in connection with the proposed
purchase and the offering and sale of the Shares, including but not limited to
fees and disbursements of counsel, printing expenses, travel expenses, postage,
facsimile and telephone charges.
Section 7. Effectiveness of this Agreement.
This Agreement shall not become effective until the later of (i) the
execution of this Agreement by the parties hereto and (ii) notification by the
Commission to the Company and the Representatives of the effectiveness of the
Registration Statement under the Securities Act.
Prior to such effectiveness, this Agreement may be terminated by any
party by notice to each of the other parties hereto, and any such termination
shall be without liability on the part of (a) the Company or the Selling
Shareholders to any Underwriter, except that the Company and the Selling
Shareholders shall be obligated to reimburse the expenses of the Representatives
and the Underwriters pursuant to Sections 4 and 6 hereof, (b) of any Underwriter
to the Company or the Selling Shareholders, or (c) of any party hereto to any
other party except that the provisions of Section 8 and Section 9 shall at all
times be effective and shall survive such termination.
Section 8. Indemnification.
(a) Indemnification of the Underwriters by the Company. The Company
agrees to indemnify and hold harmless each Underwriter, its officers and
employees, and each person, if any, who controls any Underwriter within the
meaning of the Securities Act and the Exchange Act against any loss, claim,
damage, liability or expense, as incurred, to which such Underwriter or
such controlling person may become subject,
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under the Securities Act, the Exchange Act or other federal or state
statutory law or regulation, or at common law or otherwise (including in
settlement of any litigation, if such settlement is effected with the
written consent of the Company), insofar as such loss, claim, damage,
liability or expense (or actions in respect thereof as contemplated below)
arises out of or is based (i) upon any untrue statement or alleged untrue
statement of a material fact contained in the Registration Statement, or
any amendment thereto, including any information deemed to be a part
thereof pursuant to Rule 430A or Rule 434 under the Securities Act, or the
omission or alleged omission therefrom of a material fact required to be
stated therein or necessary to make the statements therein not misleading;
or (ii) upon any untrue statement or alleged untrue statement of a material
fact contained in any preliminary prospectus or the Prospectus (or any
amendment or supplement thereto), or the omission or alleged omission
therefrom of a material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading; or (iii) in whole or in part upon any inaccuracy in the
representations and warranties of the Company or the Selling Shareholders
contained herein; or (iv) in whole or in part upon any failure of the
Company or the Selling Shareholders to perform their respective obligations
hereunder or under law; or (v) any act or failure to act or any alleged act
or failure to act by any Underwriter in connection with, or relating in any
manner to, the Common Shares or the offering contemplated hereby, and which
is included as part of or referred to in any loss, claim, damage, liability
or action arising out of or based upon any matter covered by clause (i) or
(ii) above, provided that the Company shall not be liable under this clause
(v) to the extent that a court of competent jurisdiction shall have
determined by a final judgment that such loss, claim, damage, liability or
action resulted directly from any such acts or failures to act undertaken
or omitted to be taken by such Underwriter through its bad faith or willful
misconduct; and to reimburse each Underwriter and each such controlling
person for any and all expenses (including the fees and disbursements of
counsel chosen by Banc of America Securities LLC) as such expenses are
reasonably incurred by such Underwriter or such controlling person in
connection with investigating, defending, settling, compromising or paying
any such loss, claim, damage, liability, expense or action; provided,
however, that the foregoing indemnity agreement shall not apply to any
loss, claim, damage, liability or expense to the extent, but only to the
extent, arising out of or based upon any untrue statement or alleged untrue
statement or omission or alleged omission made in reliance upon and in
conformity with written information furnished to the Company and the
Selling Shareholders by the Representatives expressly for use in the
Registration Statement, any preliminary prospectus or the Prospectus (or
any amendment or supplement thereto); and provided, further, that with
respect to any preliminary prospectus, the foregoing indemnity agreement
shall not inure to the benefit of any Underwriter from whom the person
asserting any loss, claim, damage, liability or expense purchased Shares,
or any person controlling such Underwriter, if copies of the Prospectus
were timely delivered to the Underwriter pursuant to Section 2 and a copy
of the Prospectus (as then amended or supplemented if the Company shall
have furnished any amendments or supplements thereto) was not sent or given
by or on behalf of such Underwriter to such person, if required by law so
to have been delivered, at or prior to the written confirmation of the sale
of the Shares to such person, and if the Prospectus (as so amended or
supplemented) would have cured the defect giving rise to such loss, claim,
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damage, liability or expense. The indemnity agreement set forth in this
Section 8(a) shall be in addition to any liabilities that the Company may
otherwise have.
(b) Indemnification of the Underwriters by the Selling Shareholders.
Each of the Selling Shareholders (1) jointly and severally with respect to
subsections (i), (ii), (iii)(x) and (v) below and (2) severally and not
jointly with respect to subsections (iii)(y) and (iv) below, agrees to
indemnify and hold harmless each Underwriter, its officers and employees,
and each person, if any, who controls any Underwriter within the meaning of
the Securities Act and the Exchange Act against any loss, claim, damage,
liability or expense, as incurred, to which such Underwriter or such
controlling person may become subject, under the Securities Act, the
Exchange Act or other federal or state statutory law or regulation, or at
common law or otherwise (including in settlement of any litigation, if such
settlement is effected with the written consent of the Company), insofar as
such loss, claim, damage, liability or expense (or actions in respect
thereof as contemplated below) arises out of or is based (i) upon any
untrue statement or alleged untrue statement of a material fact contained
in the Registration Statement, or any amendment thereto, including any
information deemed to be a part thereof pursuant to Rule 430A or Rule 434
under the Securities Act, or the omission or alleged omission therefrom of
a material fact required to be stated therein or necessary to make the
statements therein not misleading; or (ii) upon any untrue statement or
alleged untrue statement of a material fact contained in any preliminary
prospectus or the Prospectus (or any amendment or supplement thereto), or
the omission or alleged omission therefrom of a material fact necessary in
order to make the statements therein, in the light of the circumstances
under which they were made, not misleading; or (iii) in whole or in part
upon any inaccuracy in the representations and warranties of (x) the
Company (as if such Selling Shareholder had made such representations and
warranties jointly and severally with the Company) or (y) such Selling
Shareholder contained herein; or (iv) in whole or in part upon any failure
of such Selling Shareholder to perform its obligations hereunder or under
law; or (v) any act or failure to act or any alleged act or failure to act
by any Underwriter in connection with, or relating in any manner to, the
Common Shares or the offering contemplated hereby, and which is included as
part of or referred to in any loss, claim, damage, liability or action
arising out of or based upon any matter covered by clause (i) or (ii)
above, provided that no Selling Shareholder shall be liable under this
clause (v) to the extent that a court of competent jurisdiction shall have
determined by a final judgment that such loss, claim, damage, liability or
action resulted directly from any such acts or failures to act undertaken
or omitted to be taken by such Underwriter through its bad faith or willful
misconduct; and to reimburse each Underwriter and each such controlling
person for any and all expenses (including the fees and disbursements of
counsel chosen by Banc of America Securities LLC) as such expenses are
reasonably incurred by such Underwriter or such controlling person in
connection with investigating, defending, settling, compromising or paying
any such loss, claim, damage, liability, expense or action; provided,
however, that the foregoing indemnity agreement shall not apply to any
loss, claim, damage, liability or expense to the extent, but only to the
extent, arising out of or based upon any untrue statement or alleged untrue
statement or omission or alleged omission made in reliance upon and in
conformity with written information furnished to the Company and the
Selling Shareholders by the Representatives expressly for use in the
Registration Statement, any preliminary prospectus or the Prospectus (or
any amendment
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<PAGE>
or supplement thereto); and provided, further, that with respect to any
preliminary prospectus, the foregoing indemnity agreement shall not inure
to the benefit of any Underwriter from whom the person asserting any loss,
claim, damage, liability or expense purchased Shares, or any person
controlling such Underwriter, if copies of the Prospectus were timely
delivered to the Underwriter pursuant to Section 2 and a copy of the
Prospectus (as then amended or supplemented if the Company shall have
furnished any amendments or supplements thereto) was not sent or given by
or on behalf of such Underwriter to such person, if required by law so to
have been delivered, at or prior to the written confirmation of the sale of
the Shares to such person, and if the Prospectus (as so amended or
supplemented) would have cured the defect giving rise to such loss, claim,
damage, liability or expense; and provided, further, that the liability of
each Selling Shareholder under the foregoing indemnity agreement shall be
limited (the "Indemnification Limitation") to an amount equal to the
product of (i) the number of Shares sold by such Selling Shareholder
multiplied by (ii) the per share "Offering Price" less the per share
"Discounts and Commissions to Underwriters" set forth on the front cover
page of the Prospectus. The indemnity agreement set forth in this Section
8(a) shall be in addition to any liabilities that the Selling Shareholders
may otherwise have. The indemnification provided by each Selling
Shareholder pursuant to this Section 8(b) shall be a primary obligation of
such Selling Shareholder and not in the nature of a guarantee or other
secondary obligation.
(c) The liability of the Company under Section 8(a) and the liability
of the Selling Shareholders under Section 8(b) shall be proportional, as
among the Company and the Selling Shareholders, to the number of Shares
sold by the Company or such Selling Shareholder, as applicable, to the
aggregate number of Shares sold by the Company and the Selling
Shareholders; provided, however, that (i) the liability of the Selling
Shareholders under Section 8(b) shall be increased, proportionately to the
number of Shares sold by each Selling Shareholder, to the extent that the
Company does not pay its pro rata share of any loss, claim, damage,
liability or expense for which it is liable under Section 8(a), subject to
the Indemnification Limitation and (ii) no Selling Shareholder shall be
liable for the breach of any representation or warranty of any other
Selling Shareholder.
(d) Indemnification of the Company, its Directors and Officers and the
Selling Shareholders. Each Underwriter agrees, severally and not jointly,
to indemnify and hold harmless the Company, each of its directors, each of
its officers who signed the Registration Statement, the Selling
Shareholders and each person, if any, who controls the Company or any
Selling Shareholder within the meaning of the Securities Act or the
Exchange Act, against any loss, claim, damage, liability or expense, as
incurred, to which the Company, or any such director, officer, Selling
Shareholder or controlling person may become subject, under the Securities
Act, the Exchange Act, or other federal or state statutory law or
regulation, or at common law or otherwise (including in settlement of any
litigation, if such settlement is effected with the written consent of such
Underwriter), insofar as such loss, claim, damage, liability or expense (or
actions in respect thereof as contemplated below) arises out of or is based
upon any untrue or alleged untrue statement of a material fact contained in
the Registration Statement, any preliminary prospectus or the Prospectus
(or any amendment or supplement thereto), or
25
<PAGE>
arises out of or is 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 the Registration Statement, any
preliminary prospectus, the Prospectus (or any amendment or supplement
thereto), in reliance upon and in conformity with written information
furnished to the Company and the Selling Shareholders by the
Representatives expressly for use therein; and to reimburse the Company, or
any such director, officer, Selling Shareholder or controlling person for
any legal and other expense reasonably incurred by the Company, or any such
director, officer, Selling Shareholder or controlling person in connection
with investigating, defending, settling, compromising or paying any such
loss, claim, damage, liability, expense or action. [Each of] The Company
and each of the Selling Shareholders, hereby acknowledges that the only
information that the Underwriters have furnished to the Company and the
Selling Shareholders expressly for use in the Registration Statement, any
preliminary prospectus or the Prospectus (or any amendment or supplement
thereto) are the statements set forth in the table in the first paragraph
and the second paragraph under the caption "Underwriting" in the
Prospectus; and the Underwriters confirm that such statements are correct.
The indemnity agreement set forth in this Section 8(d) shall be in addition
to any liabilities that each Underwriter may otherwise have.
(e) Notifications and Other Indemnification Procedures. Promptly after
receipt by an indemnified party under this Section 8 of notice of the
commencement of any action, such indemnified party will, if a claim in
respect thereof is to be made against an indemnifying party under this
Section 8, notify the indemnifying party in writing of the commencement
thereof, but the omission so to notify the indemnifying party will not
relieve it from any liability which it may have to any indemnified party
for contribution or otherwise than under the indemnity agreement contained
in this Section 8 or to the extent it is not prejudiced as a proximate
result of such failure. In case any such action is brought against any
indemnified party and such indemnified party seeks or intends to seek
indemnity from an indemnifying party, the indemnifying party will be
entitled to participate in, and, to the extent that it shall elect, jointly
with all other indemnifying parties similarly notified, by written notice
delivered to the indemnified party promptly after receiving the aforesaid
notice from such indemnified party, to assume the defense thereof with
counsel reasonably satisfactory to such indemnified party; provided,
however, if the defendants in any such action include both the indemnified
party and the indemnifying party and the indemnified party shall have
reasonably concluded that a conflict may arise between the positions of the
indemnifying party and the indemnified party in conducting the defense of
any such action or that there may be legal defenses available to it and/or
other indemnified parties which are different from or additional to those
available to the indemnifying party, the indemnified party or parties shall
have the right to select one separate counsel to assume such legal defenses
and to otherwise participate in the defense of such action on behalf of
such indemnified party or parties as a group. Upon receipt of notice from
the indemnifying party to such indemnified party of such indemnifying
party's election so to assume the defense of such action and approval by
the indemnified party of counsel, the indemnifying party will not be liable
to such indemnified party under this Section 8 for any legal or other
expenses subsequently
26
<PAGE>
incurred by such indemnified party in connection with the defense thereof
unless (i) the indemnified party shall have employed separate counsel in
accordance with the proviso to the next preceding sentence (it being
understood, however, that the indemnifying party shall not be liable for
the expenses of more than one separate counsel (together with local
counsel), approved by the indemnifying party (Banc of America Securities
LLC in the case of Section 8(d) and Section 9 where the Underwriters are
the indemnifying parties), representing the indemnified parties who are
parties to such action) or (ii) the indemnifying party shall not have
employed counsel satisfactory to the indemnified party to represent the
indemnified party within a reasonable time after notice of commencement of
the action, in each of which cases the fees and expenses of counsel shall
be at the expense of the indemnifying party.
(f) Settlements. The indemnifying party under this Section 8 shall not
be liable for any settlement of any proceeding effected without its written
consent, but if settled with such consent or if there be a final judgment
for the plaintiff, the indemnifying party agrees to indemnify the
indemnified party against any loss, claim, damage, liability or expense by
reason of such settlement or judgment. Notwithstanding the foregoing
sentence, if at any time an indemnified party shall have requested an
indemnifying party to reimburse the indemnified party for fees and expenses
of counsel as contemplated by Section 8(e) hereof, the indemnifying party
agrees that it shall be liable for any settlement of any proceeding
effected without its written consent if (i) such settlement is entered into
more than 30 days after receipt by such indemnifying party of the aforesaid
request and (ii) such indemnifying party shall not have reimbursed the
indemnified party in accordance with such request prior to the date of such
settlement. No indemnifying party shall, without the prior written consent
of the indemnified party, effect any settlement, compromise or consent to
the entry of judgment in any pending or threatened action, suit or
proceeding in respect of which any indemnified party is or could have been
a party and indemnity was or could have been sought hereunder by such
indemnified party, unless such settlement, compromise or consent includes
an unconditional release of such indemnified party from all liability on
claims that are the subject matter of such action, suit or proceeding.
Section 9. Contribution.
If the indemnification provided for in Section 8 is for any reason
held to be unavailable to or otherwise insufficient to hold harmless an
indemnified party in respect of any losses, claims, damages, liabilities or
expenses referred to therein, then each indemnifying party shall contribute to
the aggregate amount paid or payable by such indemnified party, as incurred, as
a result of any losses, claims, damages, liabilities or expenses referred to
therein (i) in such proportion as is appropriate to reflect the relative
benefits received by the Company and the Selling Shareholders, on the one hand,
and the Underwriters, on the other hand, from the offering of the Shares
pursuant to this Agreement or (ii) if the allocation provided by clause (i)
above is not permitted by applicable law, in such proportion as is appropriate
to reflect not only the relative benefits referred to in clause (i) above but
also the relative fault of the Company and the Selling Shareholders, on the one
hand, and the Underwriters, on the other hand, in connection with the statements
or omissions or inaccuracies in the representations and warranties herein which
resulted in such losses, claims, damages, liabilities or expenses, as well as
any other
27
<PAGE>
relevant equitable considerations. The relative benefits received by the Company
and the Selling Shareholders, on the one hand, and the Underwriters, on the
other hand, in connection with the offering of the Shares pursuant to this
Agreement shall be deemed to be in the same respective proportions as the total
net proceeds from the offering of the Shares pursuant to this Agreement (before
deducting expenses) received by the Company and the Selling Shareholders, and
the total underwriting discount received by the Underwriters, in each case as
set forth on the front cover page of the Prospectus (or, if Rule 434 under the
Securities Act is used, the corresponding location on the Term Sheet) bear to
the aggregate initial public offering price of the Shares as set forth on such
cover. The relative fault of the Company and the Selling Shareholders, on the
one hand, and the Underwriters, on the other hand, shall be determined by
reference to, among other things, whether any such untrue or alleged untrue
statement of a material fact or omission or alleged omission to state a material
fact or any such inaccurate or alleged inaccurate representation or warranty
relates to information supplied by the Company or the Selling Shareholders, on
the one hand, or the Underwriters, on the other hand, and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission.
The amount paid or payable by a party as a result of the losses,
claims, damages, liabilities and expenses referred to above shall be deemed to
include, subject to the limitations set forth in Section 8(e), any legal or
other fees or expenses reasonably incurred by such party in connection with
investigating or defending any action or claim. The provisions set forth in
Section 8(e) with respect to notice of commencement of any action shall apply if
a claim for contribution is to be made under this Section 9; provided, however,
that no additional notice shall be required with respect to any action for which
notice has been given under Section 8(e) for purposes of indemnification.
The Company, the Selling Shareholders and the Underwriters agree that
it would not be just and equitable if contribution pursuant to this Section 9
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 in this Section 9.
Notwithstanding the provisions of this Section 9, no Underwriter shall
be required to contribute any amount in excess of the underwriting commissions
received by such Underwriter in connection with the Shares underwritten by it
and distributed to the public. No person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. The Underwriters' obligations to contribute pursuant to this
Section 9 are several, and not joint, in proportion to their respective
underwriting commitments as set forth opposite their names in Schedule A. For
purposes of this Section 9, each officer and employee of an Underwriter and each
person, if any, who controls an Underwriter within the meaning of the Securities
Act and the Exchange Act shall have the same rights to contribution as such
Underwriter, and each director of the Company, each officer of the Company who
signed the Registration Statement, and each person, if any, who controls the
Company with the meaning of the Securities Act and the Exchange Act shall have
the same rights to contribution as the Company.
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<PAGE>
Notwithstanding the provisions of this Section 9, no Selling
Shareholder shall be required to contribute any amount in excess of the product
of (i) the number of Shares sold by such Selling Shareholder multiplied by (ii)
the per share "Offering Price" less the per share "Discounts and Commissions to
Underwriters" set forth on the front cover page of the Prospectus (the
"Contribution Limitation").
The liability of the Company and the Selling Shareholders under this
Section 9 shall be proportional, as among the Company and the Selling
Shareholders, to the number of Shares sold by the Company or such Selling
Shareholder, as applicable, to the aggregate number of Shares sold by the
Company and the Selling Shareholders; provided, however, that (i) the liability
of the Selling Shareholders under this Section 9 shall be increased,
proportionately to the number of Shares sold by each Selling Shareholder, to the
extent that the Company does not pay its pro rata share of any loss, claim,
damage, liability or expense for which it is liable under this Section 9,
subject to the Contribution Limitation and (ii) no Selling Shareholder shall be
liable for the breach of any representation or warranty of any other Selling
Shareholder..
Section 10. Default of One or More of the Several Underwriters. If, on the
First Closing Date or the Second Closing Date, as the case may be, any one or
more of the several Underwriters shall fail or refuse to purchase Shares that it
or they have agreed to purchase hereunder on such date, and the aggregate number
of Shares which such defaulting Underwriter or Underwriters agreed but failed or
refused to purchase does not exceed 10% of the aggregate number of the Shares to
be purchased on such date, the other Underwriters shall be obligated, severally,
in the proportions that the number of Firm Shares set forth opposite their
respective names on Schedule A bears to the aggregate number of Firm Common
Shares set forth opposite the names of all such non-defaulting Underwriters, or
in such other proportions as may be specified by the Representatives with the
consent of the non-defaulting Underwriters, to purchase the Shares which such
defaulting Underwriter or Underwriters agreed but failed or refused to purchase
on such date. If, on the First Closing Date or the Second Closing Date, as the
case may be, any one or more of the Underwriters shall fail or refuse to
purchase Shares and the aggregate number of Shares with respect to which such
default occurs exceeds 10% of the aggregate number of Shares to be purchased on
such date, and arrangements satisfactory to the Representatives and the Company
for the purchase of such Shares are not made within 48 hours after such default,
this Agreement shall terminate without liability of any party to any other party
except that the provisions of Section 4, Section 6, Section 8 and Section 9
shall at all times be effective and shall survive such termination. In any such
case either the Representatives or the Company shall have the right to postpone
the First Closing Date or the Second Closing Date, as the case may be, but in no
event for longer than seven days in order that the required changes, if any, to
the Registration Statement and the Prospectus or any other documents or
arrangements may be effected.
As used in this Agreement, the term "Underwriter" shall be deemed to
include any person substituted for a defaulting Underwriter under this Section
10. Any action taken under this Section 10 shall not relieve any defaulting
Underwriter from liability in respect of any default of such Underwriter under
this Agreement.
Section 11. Termination of this Agreement. Prior to the First Closing Date
this Agreement may be terminated by the Representatives by notice given to the
Company and the
29
<PAGE>
Selling Shareholders if at any time (i) trading or quotation in any of the
Company's securities shall have been suspended or limited by the Commission or
by the Nasdaq National Market, or trading in securities generally on either the
Nasdaq Stock Market or the New York Stock Exchange shall have been suspended or
limited, or minimum or maximum prices shall have been generally established on
any of such stock exchanges by the Commission or the NASD; (ii) a general
banking moratorium shall have been declared by any of federal, New York,
California or Minnesota authorities; (iii) there shall have occurred any
outbreak or escalation of national or international hostilities or any crisis or
calamity, or any change in the United States or international financial markets,
or any substantial change or development involving a prospective substantial
change in United States' or international political, financial or economic
conditions, as in the judgment of the Representatives is material and adverse
and makes it impracticable to market the Shares in the manner and on the terms
described in the Prospectus or to enforce contracts for the sale of securities;
(iv) in the judgment of the Representatives there shall have occurred any
Material Adverse Change; or (v) the Company shall have sustained a loss by
strike, fire, flood, earthquake, accident or other calamity of such character as
in the judgment of the Representatives may interfere materially with the conduct
of the business and operations of the Company regardless of whether or not such
loss shall have been insured. Any termination pursuant to this Section 11 shall
be without liability on the part of (a) the Company or the Selling Shareholders
to any Underwriter, except that the Company and the Selling Shareholders shall
be obligated to reimburse the expenses of the Representatives and the
Underwriters pursuant to Sections 4 and 6 hereof, (b) any Underwriter to the
Company or the Selling Shareholders, or (c) of any party hereto to any other
party except that the provisions of Section 8 and Section 9 shall at all times
be effective and shall survive such termination.
Section 12. Representations and Indemnities to Survive Delivery. The
respective indemnities, agreements, representations, warranties and other
statements of the Company, of its officers, of the Selling Shareholders and of
the several Underwriters set forth in or made pursuant to this Agreement will
remain in full force and effect, regardless of any investigation made by or on
behalf of any Underwriter or the Company or any of its or their partners,
officers or directors or any controlling person, or the Selling Shareholders, as
the case may be, and will survive delivery of and payment for the Shares sold
hereunder and any termination of this Agreement.
Section 13. Notices. All communications hereunder shall be in writing and
shall be mailed, hand delivered or telecopied and confirmed to the parties
hereto as follows:
If to the Representatives:
Banc of America Securities LLC
600 Montgomery Street
San Francisco, California 94111
Facsimile: 415-913-5558
Attention: Steven P. Ortiz
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<PAGE>
with a copy to:
Banc of America Securities LLC
600 Montgomery Street
San Francisco, California 94111
Facsimile: (415) 913-5553
Attention: Jeffrey R. Lapic, Esq.
and with a copy to:
Latham & Watkins
233 S. Wacker Drive, Suite 5800
Chicago, Illinois 60606
Facsimile: (312) 993-9767
Attention: Christopher D. Lueking, Esq.
If to the Company:
Entegris, Inc.
3500 Lyman Boulevard
Chaska, Minnesota 55318
Facsimile: (952) 556-4480
Attention: James E. Dauwalter
with a copy to:
Dorsey & Whitney, LLP
220 South Sixth Street
Minneapolis, Minnesota 55402-1498
Facsimile: (612) 340-2600
Attention: John T. Kramer, Esq.
with a copy to:
Dunkley, Bennett & Christensen, P.A.
701 Fourth Avenue South, Suite 700
Minneapolis, Minnesota 55415
Facsimile: (612) 339-1290
Attention: Jay Bennett, Esq.
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<PAGE>
If to the Plan:
Entegris, Inc. Employee Stock Ownership Plan
3500 Lyman Boulevard
Chaska, Minnesota 55318
Facsimile: (952) 556-4480
Attention: ________________________
with a copy to:
McDermott, Will & Emery
227 West Monroe Street
Chicago, Illinois 60606-5096
Attention: Helen H. Morrison, Esq.
If to WCB:
WCB Holding LLC
[Street address]
[City, State, zip]
Facsimile:
Attention:
With a copy to:
[to come]
Any party hereto may change the address for receipt of communications by giving
written notice to the others.
Section 14. Successors. This Agreement will inure to the benefit of and
be binding upon the parties hereto, including any substitute Underwriters
pursuant to Section 10 hereof, and to the benefit of the employees, officers and
directors and controlling persons referred to in Section 8 and Section 9, and in
each case their respective successors, and no other person will have any right
or obligation hereunder. The term "successors" shall not include any purchaser
of the Shares as such from any of the Underwriters merely by reason of such
purchase.
Section 15. Partial Unenforceability. The invalidity or unenforceability
of any Section, paragraph or provision of this Agreement shall not affect the
validity or enforceability of any other Section, paragraph or provision hereof.
If any Section, paragraph or provision of this Agreement is for any reason
determined to be invalid or unenforceable, there shall be deemed to be made such
minor changes (and only such minor changes) as are necessary to make it valid
and enforceable.
Section 16. (a) Governing Law Provisions. THIS AGREEMENT SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL
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LAWS OF THE STATE OF NEW YORK APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED
IN SUCH STATE.
(b) Consent to Jurisdiction. Any legal suit, action or proceeding
arising out of or based upon this Agreement or the transactions contemplated
hereby ("Related Proceedings") may be instituted in the federal courts of the
United States of America located in the Northern District of California or the
courts of the State of California located in the County of San Mateo
(collectively, the "Specified Courts"), and each party irrevocably submits to
the exclusive jurisdiction (except for proceedings instituted in regard to the
enforcement of a judgment of any such court (a "Related Judgment"), as to which
such jurisdiction is non-exclusive) of such courts in any such suit, action or
proceeding. Service of any process, summons, notice or document by mail to such
party's address set forth above shall be effective service of process for any
suit, action or other proceeding brought in any such court. The parties
irrevocably and unconditionally waive any objection to the laying of venue of
any suit, action or other proceeding in the Specified Courts and irrevocably and
unconditionally waive and agree not to plead or claim in any such court that any
such suit, action or other proceeding brought in any such court has been brought
in an inconvenient forum.
(c) Waiver of Immunity. With respect to any Related Proceeding, each
party irrevocably waives, to the fullest extent permitted by applicable law, all
immunity (whether on the basis of sovereignty or otherwise) from jurisdiction,
service of process, attachment (both before and after judgment) and execution to
which it might otherwise be entitled in the Specified Courts, and with respect
to any Related Judgment, each party waives any such immunity in the Specified
Courts or any other court of competent jurisdiction, and will not raise or claim
or cause to be pleaded any such immunity at or in respect of any such Related
Proceeding or Related Judgment, including, without limitation, any immunity
pursuant to the United States Foreign Sovereign Immunities Act of 1976, as
amended.
Section 17. Failure of One or More of the Selling Shareholders to Sell and
Deliver Common Shares. If one or more of the Selling Shareholders shall fail to
sell and deliver to the Underwriters the Shares to be sold and delivered by such
Selling Shareholders at the First Closing Date pursuant to this Agreement, then
the Underwriters may at their option, by written notice from the Representatives
to the Company and the Selling Shareholders, either (i) terminate this Agreement
without any liability on the part of any Underwriter or, except as provided in
Sections 4, 6, 8 and 9 hereof, the Company or the Selling Shareholders, or (ii)
purchase the shares which the Company and other Selling Shareholders have agreed
to sell and deliver in accordance with the terms hereof. If one or more of the
Selling Shareholders shall fail to sell and deliver to the Underwriters the
Shares to be sold and delivered by such Selling Shareholders pursuant to this
Agreement at the First Closing Date or the Second Closing Date, then the
Underwriters shall have the right, by written notice from the Representatives to
the Company and the Selling Shareholders, to postpone the First Closing Date or
the Second Closing Date, as the case may be, but in no event for longer than
seven days in order that the required changes, if any, to the Registration
Statement and the Prospectus or any other documents or arrangements may be
effected.
Section 18. General Provisions. This Agreement constitutes the entire
agreement of the parties to this Agreement and supersedes all prior written or
oral
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<PAGE>
and all contemporaneous oral agreements, understandings and negotiations with
respect to the subject matter hereof. This Agreement may be executed in two or
more counterparts, each one of which shall be an original, with the same effect
as if the signatures thereto and hereto were upon the same instrument. This
Agreement may not be amended or modified unless in writing by all of the parties
hereto, and no condition herein (express or implied) may be waived unless waived
in writing by each party whom the condition is meant to benefit. The section
headings herein are for the convenience of the parties only and shall not affect
the construction or interpretation of this Agreement.
Each of the parties hereto acknowledges that it is a sophisticated
business person who was adequately represented by counsel during negotiations
regarding the provisions hereof, including, without limitation, the
indemnification provisions of Section 8 and the contribution provisions of
Section 9, and is fully informed regarding said provisions. Each of the parties
hereto further acknowledges that the provisions of Sections 8 and 9 hereto
fairly allocate the risks in light of the ability of the parties to investigate
the Company, its affairs and its business in order to assure that adequate
disclosure has been made in the Registration Statement, any preliminary
prospectus and the Prospectus (and any amendments and supplements thereto), as
required by the Securities Act and the Exchange Act.
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<PAGE>
If the foregoing is in accordance with your understanding of our
agreement, kindly sign and return to the Company, the Selling Shareholders and
the Custodian the enclosed copies hereof, whereupon this instrument, along with
all counterparts hereof, shall become a binding agreement in accordance with its
terms.
Very truly yours,
ENTEGRIS INC.
By:__________________________
Name:
Title:
SELLING SHAREHOLDERS:
Entegris, Inc. Employee Stock Ownership Plan
By: HSBC Bank USA, not in its individual or
corporate capacity, but solely as trustee
By:
Name:
Title:
WCB HOLDING LLC
By:__________________________
Name:
Title:
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<PAGE>
The foregoing Underwriting Agreement is hereby confirmed and accepted
by the Representatives in San Francisco, California as of the date first above
written.
BANC OF AMERICA SECURITIES LLC
DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION
SALOMON SMITH BARNEY, INC.
U.S. BANCORP PIPER JAFFRAY INC.
Acting as Representatives of the
several Underwriters named in
the attached Schedule A.
By BANC OF AMERICA SECURITIES LLC
By: __________________________
Name:
Title:
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<PAGE>
Exhibit 5.1
[Letterhead of Dorsey & Whitney LLP]
Entegris, Inc.
3500 Lyman Boulevard
Chaska, Minnesota 55318
Re: Registration Statement on Form S-1
Ladies and Gentlemen:
We have acted as counsel to Entegris, Inc., a Minnesota corporation (the
"Company"), in connection with a Registration Statement on Form S-1 (the
"Registration Statement") relating to the issuance and sale by the Company of up
to 9,890,000 shares (the "Common Stock") of common stock of the Company, par
value $0.01 per share (including 1,290,000 shares to be subject to the
Underwriters' over-allotment option) and the sale by selling shareholders of up
to 5,060,000 shares of Common Stock (including 660,000 shares to be subject to
Underwriters' over-allotment option). The Common Stock will be issued pursuant
to an Underwriting Agreement (the "Underwriting Agreement") to be entered into
among the Company, certain selling shareholders, Banc of America Securities LLC,
Donaldson, Lufkin & Jenrette, Salmon Smith Barney Inc. and U.S. Bancorp Piper
Jaffrey Inc., as representatives of the various underwriters named therein (the
"Underwriters").
We have examined such documents and have reviewed such questions of law as
we have considered necessary and appropriate for the purposes of our opinions
set forth below. In rendering our opinions set forth below, we have assumed the
authenticity of all documents submitted to us as originals, the genuineness of
all signatures and the conformity to authentic originals of all documents
submitted to us as copies. We have also assumed the legal capacity for all
purposes relevant hereto of all natural persons and, with respect to all parties
to agreements or instruments relevant hereto other than the Company, that such
parties had the requisite power and authority (corporate or otherwise) to
execute, deliver and perform such agreements or instruments, that such
agreements or instruments have been duly authorized by all requisite action
(corporate or otherwise), executed and delivered by such parties and that such
agreements or instruments are the valid, binding and enforceable obligations of
such parties. As to questions of fact material to our opinions, we have relied
upon certificates of officers of the Company and of public officials. We have
also assumed that the Common Stock will be sold for
<PAGE>
Exhibit 5.1
a price per share not less than the par value per share of the Common Stock and
will be priced by the Pricing Committee, established by the authorizing
resolutions adopted by the Company's Board of Directors, in accordance with such
resolutions and will be issued and sold as described in the Registration
Statement.
Based on the foregoing, we are of the opinion that the Common Stock to be
sold by the Company and the selling shareholders pursuant to the Registration
Statement have been duly authorized by all requisite corporate action and, upon
issuance, delivery and payment therefor, as described in the Registration
Statement, will be validly issued, fully paid and nonassessable.
Our opinions expressed above are limited to the laws of the State of
Minnesota.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to our firm under the caption "Legal
Matters" in the Prospectus constituting a part of the Registration Statement.
Dated: May 5, 2000
Very truly yours,
/s/ Dorsey & Whitney LLP
JTK
<PAGE>
Exhibit 10.3
ENTEGRIS, INC.
EMPLOYEE STOCK PURCHASE PLAN
Section 1. Establishment and Purpose
1.1 Establishment. Entegris, Inc., a Minnesota corporation (hereinafter called
"the Company"), hereby establishes a stock purchase plan for employees as
described herein, which shall be known as the ENTEGRIS, INC. EMPLOYEE STOCK
PURCHASE PLAN (hereinafter called the "Plan").
1.2 Purpose. The purpose of this Plan is to permit employees to purchase Stock
from the Company at the price specified in Section 5. The Plan is intended to be
an "employee stock purchase plan" under Section 423 of the Internal Revenue Code
of 1986, as amended (the "Code"), and shall be interpreted and administered in a
manner consistent with such intent.
Section 2. Definitions
2.1 Definitions. Whenever used hereinafter, the following terms shall have the
meanings set forth below:
(a) "Affiliate" means any U.S. corporation, a majority of the voting
stock of which is directly or indirectly owned by the Company and whose
participation in the Plan the Board has expressly approved.
(b) "Recognized Compensation" means wages within the meaning of Section
3401(a) of the Code for purposes of federal income tax withholding at
the source but determined without regard to any rules that limit the
remuneration included in wages based on the nature or location of the
employment or the services performed (such as the exception for
agricultural labor in Section 3401(a)(2) of the Code) and paid to the
Participant by the Employer for the applicable period; subject,
however, to the following:
(i) Included Items. In determining a Participant's Recognized
Compensation there shall be included elective contributions
made by the Employer on behalf of the Participant that are not
includable in gross income under Sections 125, 132(f),
402(e)(3), 402(h), 403(b), 414(h)(2) and 457 of the Code
including elective contributions authorized by the Participant
under a Retirement Savings Election, a cafeteria plan or any
other qualified cash or deferred arrangement under Section
401(k) of the Code.
(ii) Excluded Items. In determining a Participant's Recognized
Compensation there shall be excluded all of the following: (A)
incentive, discretionary, or signing bonuses and commissions,
(B) reimbursements or other expense allowances (including all
living and other expenses paid on account of the Participant
being on foreign assignment), (C) welfare and fringe benefits
(both cash and non-cash) including third-party sick pay (i.e.,
short-term and long-term
<PAGE>
disability insurance benefits), income imputed from insurance
coverages and premiums, employee discounts and other similar
amounts, payments for vacation or sick leave accrued but not
taken, final payments on account of termination of employment
(i.e., severance payments), except that final payments on
account of settlement for accrued but unused paid time off
shall be taken into account in determining a Participant's
Recognized Compensation, (D) moving expenses, (E) deferred
compensation (both when deferred and when received), and (F)
the value of a qualified or a non-qualified stock option
granted to a Participant by the Employer to the extent such
value is includable in the Participant's taxable income.
(iii) Pre-Participation Employment. Remuneration paid by the
Employer attributable to periods prior to the date the
Participant became a Participant in the Plan shall not be
taken into account in determining the Participant's Recognized
Compensation.
(iv) Attribution to Periods. A Participant's Recognized
Compensation shall be considered attributable to the period in
which it is actually paid and not when earned or accrued.
(v) Excluded Periods. Amounts received after the Participant's
termination of employment shall not be taken into account in
determining a Participant's Recognized Compensation.
(vi) Multiple Employers. If a Participant is employed by more
than one Employer in a Plan Year, a separate amount of
Recognized Compensation shall be determined for each Employer.
(c) "Board" means the Board of Directors of the Company.
(d) "Code" means the Internal Revenue Code of 1986, as amended.
(e) "Committee" means a committee of at least three persons appointed
by the Board empowered to take actions as stated in this Plan. Each
member of the Committee will remain a member for the duration of the
Plan unless such member resigns or is removed earlier by majority vote
of the Board.
(f) "Eligible Employee" means an Employee who meets the requirements
set forth herein for eligibility to participate in the Offering.
(g) "Employee" means any employee (including officers and directors who
are also employees) of the Company or its Affiliates. Neither service
as a Director nor payment of a director's fee shall be sufficient to
constitute "employment" by the Company or the Affiliate.
2
<PAGE>
(h) "Fair Market Value" means the value of a share of common stock as
determined in good faith by the Board. If the security is listed on any
established stock exchange or traded on the Nasdaq National Market or
the Nasdaq SmallCap Market, then the Fair Market Value of the security
shall be the closing sales price (rounded up where necessary to the
nearest whole cent) for such security as quoted on such exchange or
market as reported on the official Nasdaq website or reported in The
Wall Street Journal or such other source as the Board deems reliable.
If there is no closing sales price quoted for such day, then Fair
Market Value shall be equal to the average of the closing bid and ask
prices for such day. If neither closing sale nor closing bid nor ask
prices are quoted, then Fair Market Value shall be determined based
upon such information for the previous trading day.
(i) "Interest" means interest as determined pursuant to Section 5.2.
(j) "Participant" means an Eligible Employee who has elected to
participate in the Plan pursuant to Section 4.1.
(k) "Purchase Period" means a six-month period beginning on January 1
or July 1 of each calendar year; provided, however, that the initial
Purchase Period under this Plan shall commence on the day prior to the
effective date of the Company's initial public offering (i.e., the day
that the Company's offering is "priced" with the underwriters) rather
than July 1.
(l) "Stock" means the common stock, $.01 par value, of the Company.
Section 3. Stock Subject to the Plan
3.1 Number. The total number of shares of Stock available for distribution under
this Plan shall not exceed 4,000,000. These shares may consist, in whole or in
part, of authorized but unissued Stock not reserved for any other purpose.
3.2 Adjustment in Capitalization. In the event of any change in the outstanding
shares of Stock by reason of a Stock dividend or split, combination,
recapitalization, or reclassification, the shares of Stock issuable and the
price payable therefor under this Plan shall be appropriately adjusted by the
Committee, whose determination shall be conclusive. Except as provided above, no
adjustment shall be made in connection with the issuance by the Company of any
Stock or any warrants, rights, or options to acquire shares of Stock or of
securities convertible into Stock.
Section 4. Participation
4.1 Eligibility. Rights to participate hereunder shall be granted to employees
of the Company and, as approved by the Board, its Affiliates, provided, however,
that employees whose customary employment is twenty (20) hours or less per week
or whose customary employment is for not more than five (5) months in any
calendar year shall have no right to participate and shall not qualify as
Eligible Employees. An Eligible Employee may elect to become a Participant on
the first day of any Purchase Period, provided such Participant was an Eligible
Employee on the
3
<PAGE>
day immediately preceding the first day of such Purchase Period. Any election to
participate shall be made in accordance with rules adopted by the Committee.
However, in no event shall an Eligible Employee be granted the right to purchase
Stock under the Plan if after the purchase such Eligible Employee would own
stock of the Company possessing 5% or more of the total combined voting power or
value of all classes of stock of the Company. Also, an Eligible Employee may not
become or remain a Participant at any time when such Eligible Employee owns
stock possessing 5% or more of the total combined voting power or value of all
classes of stock of the Company. For purposes of this subsection, the rules of
Section 424(d) of the Code shall apply in determining the stock ownership of an
individual, and stock which an employee may purchase under outstanding options
shall be treated as stock owned by the employee.
4.2 The Board may provide that each person who, during the course of an
Offering, first becomes an Eligible Employee will, on a date or dates specified
in the Offering which coincides with the day on which such person becomes an
Eligible Employee or which occurs thereafter, receive a right to participate
under that Offering, which right to participate shall thereafter be deemed to be
a part of that Offering. Such right to participate shall have the same
characteristics as an rights to participate originally granted under that
Offering, as described herein, except that:
(a) the date on which such right to participate is granted shall be the
"Offering Date" of such right for all purposes, including determination
of the exercise price of such right;
(b) the period of the Offering with respect to such right to
participate shall begin on its Offering Date and end coincident with
the end of such Offering; and
(c) the Board may provide that if such person first becomes an Eligible
Employee within a specified period of time before the end of the
Offering, he or she will not receive any right to participate under
that Offering.
Section 5. Purchase of Stock
5.1 Contributions for Purchase of Stock. At the time an Eligible Employee elects
to become a Participant in the Plan, such Eligible Employee shall also elect the
form and manner of contributing funds for the purpose of Stock. A Participant
may elect to contribute funds for the purchase of Stock by directing his or her
employer to withhold any whole percentage less than or equal to 10% of his or
her Recognized Compensation for the purpose of purchasing Stock from the
Company. In no event shall the aggregate contributions for the purchase of Stock
exceed 10% of a Participant's Recognized Compensation. A Participant may modify
the rate of withholding from such Participant's Recognized Compensation only in
accordance with the following:
(a) A Participant may at any time direct reduction of the rate of
withholding to a rate lower than that previously in effect. However,
only one such direction to continue withholding at a rate lower than
that previously in effect may be made in any one Purchase Period.
4
<PAGE>
(b) A Participant may at any time direct discontinuance of withholding.
If a Participant directs discontinuance of withholding, such
Participant may direct resumption of withholding only as of the first
day of any subsequent Purchase Period.
(c) Except as provided in subsection (a) or (b) above, a Participant
may direct modification of the rate of withholding only as of the first
day of any Purchase Period. The modified rate may be any whole
percentage less than or equal to 10% of the Participant's Recognized
Compensation. Unless otherwise elected by the Participant, the rate of
withholding such Participant has elected will remain in effect for
subsequent Purchase Periods.
Any election or direction under this section shall be made in writing pursuant
to rules adopted by the Committee and shall become effective at a time specified
by the Committee.
5.2 Disposition of Contributions. Amounts withheld pursuant to Section 5.1 shall
be held by the employer until the end of the Purchase Period during which they
were withheld, subject to the following:
(a) A Participant who elects pursuant to Section 5.1(b) to discontinue
withholding may at any time withdraw all or any part of the amounts
previously withheld or otherwise contributed. Any such withdrawal shall
be paid to the Participant by his or her employer in cash with
Interest.
(b) During the last calendar month of each Purchase Period, each
Participant shall be permitted to elect to have all or any part of the
amounts withheld paid to such Participant in cash with Interest.
(c) Any withdrawal under (a) or (b) above shall be deemed to be on a
first-in-first-out basis. Interest shall be applied to the average
amount in the Participant's account at the end of each full calendar
month during the completed portion of the Purchase Period. Prior to the
first day of any Purchase Period, the Committee shall determine the
rate of Interest with respect to such Purchase Period. The Committee
shall give such publicity to said Interest rate as it deems
appropriate.
(d) Any portion of the amounts withheld that is not paid to the
Participant in cash shall be automatically applied to purchase Stock
under Section 5.3.
(e) Any election or direction under this section shall be made in
writing pursuant to rules adopted by the Committee.
5.3 Purchases of Stock. Amounts withheld from a Participant during a Purchase
Period (except any amounts refunded to such Participant in cash under Section
5.2) shall be used as of the last business day of such Purchase Period to
purchase Stock from the Company for a price equal to the lesser of (a) or (b).
5
<PAGE>
(a) 85% of the Fair Market Value of a share of Stock on the first
business day of the Purchase Period.
(b) 85% of the Fair Market Value of a share of Stock on the last
business day of the Purchase Period.
5.4 Issuance of Stock. Promptly after the end of each Purchase Period, a
certificate for the number of shares of Stock purchased by all Participants
shall be issued and delivered to an agent selected by the Company. The agent
will hold such certificate for the benefit of all participants who have
purchased shares of Stock and will maintain an account for each Participant
reflecting the number of shares (including fractional shares, if any) credited
to the account of each Participant. Each Participant will be entitled to direct
the voting of all shares credited to such Participant's account by the agent and
may also direct the agent to sell such shares and distribute the net proceeds of
the sale to the Participant. At any time, a Participant may either request that
the agent transfer the shares of Stock credited to the Participant's account to
another custodian or request from the agent a physical certificate representing
the shares of Stock credited to the Participant's account; provided, however,
that the agent shall not be required to issue a certificate representing a
fractional share and may instead pay the Participant a cash amount representing
the fair market value of such fractional share.
5.5 Privileges of a Stockholder. A Participant shall not have stockholder
privileges with respect to any Stock until the date of issuance of a certificate
to such Participant for such Stock.
5.6 Limitation on Stock Purchases. As required by Section 423 of the Code, no
Participant may purchase Stock under this Plan and all other employee stock
purchase plans of the Company and its Affiliates at a rate in excess of $25,000
in Fair Market Value of such Stock (determined at the time the option to
purchase Stock is granted) for each calendar year in which any such option to
purchase Stock granted to such Participant is outstanding at any time.
Notwithstanding the foregoing, the Fair Market Value (determined on the first
day of any Purchase Period) of shares of Stock that may be purchased by a
Participant during such Purchase Period shall not exceed the excess, if any, of
(i) $25,000 over (ii) the Fair Market Value (determined on the first day of the
relevant Purchase Period) of shares of Stock previously acquired by the
Participant in any prior Purchase Period during such calendar year.
Section 6. Termination of Employment
6.1 Termination of Employment. A Participant whose termination of employment
occurs more than three months prior to the close of a Purchase Period will not
be eligible to purchase any shares of Stock pursuant to this Plan with respect
to such Purchase Period. Any amount withheld from such a Participant during the
Purchase Period in which his or her termination of employment occurs shall be
paid to such Participant in cash with Interest calculated under Section 5.2(c)
as soon as administratively feasible after such Participant's termination of
employment. Any Participant whose termination of employment occurs within three
months prior to the last day of a Purchase Period may direct Stock purchases or
withdrawals with respect to that Purchase Period pursuant to Sections 5.2 and
5.3. However, if a Participant's death occurred at any time during the Purchase
Period, any amount withheld from the Participant
6
<PAGE>
during such Purchase Period shall be paid to the Participant's personal
representative in cash with Interest determined under Section 5.2(c), and no
portion thereof shall be applied to purchase Stock.
Section 7. Rights of Employees; Participants
7.1 Employment. Nothing in this Plan shall interfere with or limit in any way
the right of the Company or any of its Affiliates to terminate any Employee's,
Eligible Employee's, or Participant's employment at any time, nor confer upon
any such person any right to continue in the employ of the Company or any of its
Affiliates.
7.2 Nontransferability. No right or interest of any Participant in this Plan
shall be assignable, transferable, or subject to any lien, directly or
indirectly, by operation of law, or otherwise, including execution, levy,
garnishment, attachment, pledge, or bankruptcy. Any attempted assignment,
transfer, pledge or other disposition of any rights under the Plan shall be null
and void and shall automatically terminate all rights of a Participant under the
Plan.
Section 8. Administration
8.1 Administration. The Committee shall be responsible for the administration of
the Plan. The Committee, by majority action thereof, is authorized to interpret
the Plan, to prescribe, amend, and rescind rules and regulations relating to the
Plan, to provide for conditions and assurances deemed necessary or advisable to
protect the interests of the Company and to make all other determinations
necessary or advisable for the administration of the Plan, but only to the
extent not contrary to the express provisions of the Plan. The determination of
the Committee, interpretation or other action made or taken pursuant to the
provisions of the Plan shall be final and shall be binding and conclusive for
all purposes and upon all persons.
Section 9. Amendment, Modification, and Termination of Plan
9.1 Amendment, Modification, and Termination of the Plan. The Board, upon
recommendation of the Committee, at any time may terminate, and at any time and
from time to time and in any respect, may amend or modify the Plan, provided,
however, that no such action of the Board, without approval of the stockholders
of the Company, may:
(a) increase the total amount of Stock that may be awarded under the
Plan, except as provided in Section 3.2 of the Plan;
(b) change the class of Employees eligible to participate in the Plan;
(c) withdraw the administration of the Plan from the Committee;
(d) permit any person, while a member of the Committee, to be eligible
to participate in the Plan; or
(e) extend the duration of the Plan.
7
<PAGE>
Section 10. Requirements of Law
10.1 Requirements of Law. The issuance of Stock and the payment of cash pursuant
to this Plan shall be subject to all applicable laws, rules, and regulations,
and shares of Stock shall not be issued nor cash payments made except upon
approval of proper government agencies or stock exchanges as may be required.
10.2 Governing Law. The Plan, and all agreements hereunder, shall be construed
in accordance with and governed by the laws of the State of Minnesota.
Section 11. Effective Date of the Plan
11.1 Effective Date. The Plan, as amended, is effective as of March 15, 2000.
11.2 Duration of the Plan. Unless the Board terminates the Plan earlier, the
Plan shall remain in effect until all Stock subject to it shall be distributed
pursuant to the Plan.
8
<PAGE>
EXHIBIT 10.19
STAT-PRO(R)3000 and STAT-PRO(R)3000 E PURCHASE AND SUPPLY
---------------------------------------------------------
AGREEMENT
---------
This agreement, by and between
Miller Waste Mills, d/b/a RTP COMPANY, a corporation of the State of
Minnesota having offices at 580 Front Street, Winona, MN 55987 (hereafter "RTP")
and
FLUOROWARE, INC., a corporation of the State of Minnesota having offices at
3500 Lyman Blvd., Chaska, MN 55318 (hereafter "Fluoroware")
W I T N E S S E T H, That:
-------------------
WHEREAS RTP manufactures and sells Compounded PEEK(TM)resins;
WHEREAS Fluoroware has for some period of time purchased Compounded
PEEK(TM) resins from RTP; and
WHEREAS RTP desires to continue to supply Compounded PEEK(TM) resins to
Fluoroware, and Fluoroware desires to continue to purchase such resins from RTP;
NOW, THEREFORE, in consideration of the mutual covenants and promises set
forth herein, the parties agree as follows:
ARTICLE I - TERM AND SCOPE
- ---------------------------
1.01 This Agreement shall cover the period July 1, 1998, to August 31,
2003. No less than six (6) months prior to the end of such five year period, the
parties will enter into discussions regarding the terms and conditions under
which this Agreement may be extended.
1.02 Both Parties reserve the right to terminate this contract on August
31, 2001, at their sole discretion. This termination must be given via 90 day
written notice.
1.03 This Agreement shall relate solely to the supply of Compounded
PEEK(TM) resins by RTP to any Fluoroware designated location world wide.
ARTICLE 2 - PRODUCT
- -------------------
2.01 RTP will sell, and Fluoroware will purchase the following Compounded
PEEK(TM) resins (hereafter "Product") as further described in the Fluoroware
Resin Specification & Control Plan" as set forth on Attachment A, hereto or as
such attachment is amended and mutually agreed upon from time to time (hereafter
"Fluoroware Resin Specification"):
-1-
<PAGE>
Fluoroware Part Number 830 Stat-Pro(R) 3000
RTP 2299X59069 Natural/black
Fluoroware Part Number 900 Stat-Pro(R) 3000 E
RTP 2299X76246B Natural/black
2.02 RTP recognizes that Fluoroware Stat-Pro(R) 3000, RTP 2299X59069 and
Stat-Pro(R) 3000 E, RTP 2299X76246B Natural/black, are proprietary resins to
Fluoroware and will not be sold to any other customer.
ARTICLE 3 - EXCLUSIVITY
- -----------------------
3.01 Provided that Fluoroware purchases at least 50% of the annual
quantities specified in Article 7 of this agreement, RTP shall use the
combination of PEEK(TM) and the high purity carbon fiber found in Fluoroware
Part Number 900, solely and exclusively for Fluoroware uses in storage and
transportation carriers, pods, wafer transport modules, boxes and other mutually
agreed upon products exclusively for the semiconductor market.
3.02 In granting the above-referenced exclusivity, it is RTP's intent to
not knowingly sell to others who intend to utilize the Products for these
Applications,
3.03 Nothing herein shall be construed as granting Fluoroware any exclusive
right to purchase any products other than Product set forth in paragraph 2.01
for use in the Applications nor prohibit RTP from selling Product for use in any
applications other than the Applications set forth in paragraph 3.01
ARTICLE 4 - QUALITY ASSURANCE
- -----------------------------
4.01 RTP warrants to Fluoroware that the Product will conform to Product
specifications and will provide certification with each shipment of Product
indicating compliance with such specification.
ARTICLE 5 - INSPECTION
- ----------------------
5.01 For the purpose of confirming compliance with Fluoroware Resin
Specification all Product supplied hereunder shall be subject to inspection by
Fluoroware. RTP will submit two plaques molded from each lot of Product to
Fluoroware for use in inspection .
5.02 In the event that any of the Product shipped to Fluoroware under this
Agreement does not meet the appropriate Fluoroware Resin Specification, then
Fluoroware shall have the right to reject such Product by giving RTP prompt
notice thereof. RTP may at its option obtain samples of the rejected Product
from Fluoroware for analysis. RTP will ship replacement Product to Fluoroware
within three (3) days of receipt of notification of such rejection provided
-2-
<PAGE>
both parties agree on the cause of rejection, and RTP has a quantity of
acceptable raw materials to produce replacement material. RTP will fully credit
Fluoroware for the rejected Product provided RTP agrees that it is responsible
for causing the non-compliance. RTP will be responsible for any expenses
incurred in returning such rejected Product and in providing new product.
ARTICLE 6 - PACKAGING
- ---------------------
6.01 Product will be delivered in Gaylord boxes with a sealed polyethylene
liner, or other container as acceptable to RTP subject to the prior written
approval of Fluoroware.
ARTICLE 7 - QUANTITY
- --------------------
7.01 Provided that raw materials are available in 1998, RTP agrees to sell,
at a minimum, (*) pounds of Product to Fluoroware. Provided its total
requirements for Product equal or exceed (*) pounds in 1998, Fluoroware agrees
to purchase a minimum of (*) pounds of Product from RTP.
7.02 Provided that raw materials are available in 1999, RTP agrees to sell,
at a minimum, (*) pounds of Product to Fluoroware. Provided its total
requirements for Product equal or exceed (*) pounds in 1999, Fluoroware agrees
to purchase a minimum of (*) pounds of Product from RTP.
7.03 Provided that raw materials are available in 2000, RTP agrees to sell,
at a minimum, (*) pounds of Product to Fluoroware. Provided its total
requirements for Product equal or exceed (*) pounds in 2000, Fluoroware agrees
to purchase a minimum of (*) pounds of Product from RTP.
7.04 Provided that raw materials are available in 2001, RTP agrees to sell,
at a minimum, (*) pounds of Product to Fluoroware. Provided its total
requirements for Product equal or exceed (*) pounds in 2001, Fluoroware agrees
to purchase a minimum of (*) pounds of Product from RTP.
7.05 Provided that raw materials are available in 2002, RTP agrees to sell,
at a minimum, (*) pounds of Product to Fluoroware. Provided its total
requirements for Product equal or exceed (*) pounds in 2002, Fluoroware agrees
to purchase a minimum of (*) pounds of Product from RTP.
(*) Denotes confidential information that has been omitted and filed
separately, accompanied by a confidential treatment request, with the
Securities and Exchange Commission pursuant to Rule 406 of the Securities
Act of 1933, as amended.
-3-
<PAGE>
7.06 In the event that Fluoroware's total requirements for Product exceed
the minimum purchase and supply obligations set forth in paragraphs 7.01 through
7.05, RTP shall utilize best efforts to provide additional pounds to meet
Fluoroware's requirements.
7.07 RTP agrees to stock Product in quantities sufficient to meet
Fluoroware's forecast needs, during planned down times either at RTP or at RTP's
suppliers.
ARTICLE 8 - FORECAST REQUIREMENTS
- ---------------------------------
8.01 Fluoroware will provide RTP a written forecast of its Product
quantities on an annual basis no later than ninety (90) days prior to this
Agreement's anniversary date.
8.02 Quarterly forecast updates will be provided on or before the fifteenth
of the month preceding any quarter. This quarterly forecast will forecast
quantities in the following two quarters.
ARTICLE 9 - PURCHASE ORDERS
- ---------------------------
9.01 Purchase orders will be issued for Product indicating Fluoroware Resin
Specification revision level and quantities. Shipments will be authorized by
P.O. releases.
ARTICLE 10 - PRICE
- ------------------
10.01 RTP agrees the price of 830 shall not exceed $(*) per pound, and the
price for 900 shall not exceed $(*) per pound for the first year of this
Agreement and shall decrease each year thereafter. If Fluoroware purchases at
least 75% of the annual quantities called out in Article 7, the price shall
decrease a minimum of $0.30 per pound per year with reductions taking effect on
each anniversary date of this contract. If Fluoroware purchases 50%-74% of the
annual quantities called out in Article 7, the price shall decrease a minimum of
$0.15 per pound per year with reductions taking effect on each anniversary date
of this contract. If Fluoroware purchases less than 50% of the annual quantities
called out in Article 7, their will be no annual reduction required on the first
of each year, however both parties will continue to work in good faith to find
ways to reduce the cost of this material.
(*) Denotes confidential information that has been omitted and filed
separately, accompanied by a confidential treatment request, with the
Securities and Exchange Commission pursuant to Rule 406 of the Securities
Act of 1933, as amended.
-4-
<PAGE>
These decreases may be achieved by RTP reducing internal costs, or by RTP
submitting cost savings suggestions to Fluoroware in writing, where Fluoroware
accepts the suggestion and the purchase price is reduced. All cost savings
suggestions submitted in writing which end up reducing the price to Fluoroware,
will be put towards the annual $0.30 per pound per year reduction requirements.
10.02 Payment Terms are Net 15 days from date of Invoice. Invoices to be
consolidated monthly. Price of Product is FOB: Delivered, Freight Allowed, to
designated locations in the United States. Price of Product is FOB: Vessel, to
designated locations outside the United States.
10.03 RTP and Fluoroware agree to meet annually to set price reduction
targets for Product and will work together for continuous improvement in the
supply chain of this Product. RTP will actively pursue raw material cost savings
through the use of alternate raw materials. Any raw material changes must be
approved by Fluoroware. RTP will pass along any savings resulting from use of
alternate raw materials in the form of a Product price reduction.
10.04 RTP will make every effort to seek stable and/or decreasing prices
from its suppliers of the raw materials that make up the Stat Pro(R) 3000 and
Stat Pro(R) 3000 E. In the event there is a verified price increase in raw
materials during the term of this agreement, RTP may pass along that portion of
the price increase which directly impacts the cost of Fluoroware's Stat Pro(R)
3000 and Stat Pro(R) 3000 E, provided that RTP shares concrete evidence of the
price change, and negotiates in Fluoroware's behalf to neutralize any increases.
In the event of a reduction in the cost of any raw materials, RTP agrees to
share 50% of any raw material decreases with Fluoroware. These raw material
reductions will not affect the annual reductions called out in paragraph 10.01.
ARTICLE 11 -BEST PRICE
- ----------------------
11.01 Should RTP sell a resin similar to this Product (in like quantities)
to a third party for use in applications like those currently sold by Fluoroware
at a price lower than the price of such Product sold to Fluoroware hereunder,
then RTP shall offer such lower price to Fluoroware for Product for such term as
the lower price is in effect with the third party.
ARTICLE 12 - SUPPLY ASSURANCE
- -----------------------------
12.01 Except for adverse circumstances beyond the control of RTP such as an
Act of God, fire, explosion, flood, unavailability of raw materials, or war
which impact RTP's ability to supply Product hereunder, Fluoroware's
requirements will be assured before similar products are sold to other
customers.
-5-
<PAGE>
ARTICLE 13 - REPORTING
- ----------------------
13.01 On a quarterly basis, Fluoroware will provide RTP with Quality and
Delivery Performance Ratings. RTP agrees to develop corrective action plans for
review and approval by Fluoroware when Quality Performance falls below on
hundred percent (100%) and/or Delivery Performance falls below ninety-seven
percent (97%).
ARTICLE 14 - MISCELLANEOUS
- --------------------------
14.01 This Agreement is not assignable or transferable by either party, in
whole or in part, except with prior written consent of the other party.
14.02 This Agreement shall be governed by and interpreted in accordance
with the laws of the State of Minnesota. Any dispute relating to this Agreement
which the Parties are not able to resolve through amicable discussion and
negotiation shall be resolved by binding arbitration in Minneapolis, Minnesota,
pursuant to the COMMERCIAL RULES of the American Arbitration Association. The
decision of the arbitrator shall be final and shall be enforceable in any court
of competent jurisdiction.
14.03 This Agreement embodies the entire agreement and understanding
between RTP and Fluoroware relative to the subject matter hereof and there are
no understandings, agreements, conditions or representations, oral or written,
expressed or implied, with reference to the subject matter hereof that are not
merged or superseded hereby. No amendment, modification or release from any
provision hereof shall be of any force or effect unless it is in writing, signed
by the party claimed to be bound thereby, and specifically refers to this
Agreement.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
by their duly authorized representatives on the dates indicated below.
RTP, INC. FLUOROWARE, INC.
BY: /s/ Illegible BY: /s/ Ross Hanson
----------------------------------- -----------------------------------
TITLE: V.P., Business Management TITLE: Corporate Purchasing Manager
-------------------------------- --------------------------------
DATE: 6/29/98 DATE: 6/17/98
--------------------------------- --------------------------------
BY: /s/ Illegible BY: /s/ Illegible
----------------------------------- ----------------------------------
TITLE: C.E.O. TITLE: Supply Manager
-------------------------------- --------------------------------
DATE: 6/30/98 DATE: 6/17/98
--------------------------------- ---------------------------------
-6-
<PAGE>
Attachment A
FLUOROWARE RESIN SPECIFICATION & CONTROL PLAN
102 Jonathan Blvd. No. Chaska, Minnesota 55318 USA Telephone: 612/448-3131
Confidentiality
This specification is hereby designateed as confidential. Information on it is
proprietary to Fluoroware and shall not be used or disclosed to third persons
except in conformity with Fluoroware's consent.
----------------------------------------------------------------------
APPROVAL
Technology Research Group ________________
Purchasing _______________________________
Supplier _________________________________
----------------------------------------------------------------------
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------
Spec. No. 900 Rev. 1A ECO No. __________ Date_________ Page 1 of 1
----------- ---------
- ------------------------------------------------------------------------------------------------------
<S> <C>
Supplier: RTP Company Fluoroware Trade Name: STAT PRO(R) 3000E
----------------------------------- ----------------------
Mat'l Type: PEEK 150P 1st Filler Type/Percent: Carbon Fiber (CA3P116)
----------------------------------- ----------------------
Mat'l Grade: RTP 2299 X 76246B Nat/BLK 2nd Filler Type/Percent: None
----------------------------------- ----------------------
<CAPTION>
<S> <C> <C> <C> <C>
- ------------------------------ ---------------------------- ------------------- ------------------- ----------------
Supplier Reports Fluoroware
Critical Characteristics: Inspection Method: Certified Range: Inspection
- ------------------------------ ---------------------------- ------------------- ------------------- ----------------
1. Contamination: RTP-TP-17D (*) -
Foreign Particles FGTM 1200 Fluoroware Yes
- ------------------------------ ---------------------------- ------------------- ------------------- ----------------
Metal N/A RTP (*) -
FGTM 1218 Fluoroware (*) -
- ------------------------------ ---------------------------- ------------------- ------------------- ----------------
2. Surface resistance, RTP-TP- (*) Yes
ohms FGTM Fluoroware Yes
- ------------------------------ ---------------------------- ------------------- ------------------- ----------------
3. Static Decay RTP-TP-19A (*) Yes
FGTM 1208 Fluoroware Yes
- ------------------------------ ---------------------------- ------------------- ------------------- ----------------
4. Anion Extraction FGTM 1344 Fluoroware (*) Every 4th Lot
(Plaques)
- ------------------------------ ---------------------------- ------------------- ------------------- ----------------
5. Volatile Organics FGTM 1345 Fluoroware (*) Every 4th Lot
(@ 80C)
- ------------------------------ ---------------------------- ------------------- ------------------- ----------------
6. Trace Metals FGTM 1343 Fluroware (*)
- ------------------------------ ---------------------------- ------------------- ------------------- ----------------
7. Capillary Rheology RTP-TP-135 (*) Yes
- ------------------------------ ---------------------------- ------------------- ------------------- ----------------
- ------------------------------------------------------ ---------------------------------------------------
Packaging Requirements: Changes:
Five molded 6" X 6" plaques and 100g sample of base
resin and carbon fiber lot must be submitted with
each new incoming lot for inspection purposes. Ply
lined containers, with the poly liner secured
against contamination. Lot number and Fluoroware's
part number (900) clearly marked on each.
- ------------------------------------------------------ ---------------------------------------------------
</TABLE>
(*) Denotes confidential information that has been omitted and filed
separately, accompanied by a confidential treatment request, with the
Securities and Exchange Commission pursuant to Rule 406 of the Securities
Act of 1933, as amended.
-7-
<PAGE>
Attachment B
FLUOROWARE RESIN SPECIFICATION & CONTROL PLAN
102 Jonathan Blvd. No. Chaska, Minnesota 55318 USA Telephone: 612/448-3131
Confidentiality
This specification is hereby designated as confidential. Information on it is
proprietary to Fluoroware and shall not be used or disclosed to third persons
except in conformity with Fluoroware's consent.
----------------------------------------------------------------------
APPROVAL
Technology Research Group ________________
Purchasing _______________________________
Supplier _________________________________
----------------------------------------------------------------------
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
Spec. No. 830 Rev. D4 ECO No. __________ Date_________ Page 1 of 1
----------- ----------
- ----------------------------------------------------------------------------------------------------------
<S> <C>
Supplier: RTP Company Fluoroware Trade Name: STAT PRO(R)3000 HPF
--------------------------------------- ------------------------
Mat'l Type: PEEK 1st Filler Type/Percent: Carbon Fiber
--------------------------------------- ------------------------
Mat'l Grade: RTP 2299 X 59069 Nat/Blk 2nd Filler Type/Percent: None
--------------------------------------- ------------------------
<CAPTION>
<S> <C> <C> <C> <C>
- ------------------------------ -------------------------- ------------------- ------------------- ------------------
Supplier Reports Fluoroware
Critical Characteristics: Inspection Method: Certified Range: Inspection
- ------------------------------ -------------------------- ------------------- ------------------- ------------------
1. % Burn-off FGTM 1206 Fluoroware (*) Every 4th Lot
- ------------------------------ -------------------------- ------------------- ------------------- ------------------
2. Contamination: RTP-TP-17D (*) -
Foreign Particles FGTM 1200 Fluoroware Yes
- ------------------------------ -------------------------- ------------------- ------------------- ------------------
Metal N/A RTP (*) -
FGTM 1218 Fluoroware (*) -
- ------------------------------ -------------------------- ------------------- ------------------- ------------------
3. Surface RTP-TP-28 (*) Yes
resistivity, ohms/sq FGTM 1207 Fluoroware Yes
- ------------------------------ -------------------------- ------------------- ------------------- ------------------
4. Static Decay RTP-TP-19A (*) Yes
FGTM 1208 Fluoroware Yes
- ------------------------------ -------------------------- ------------------- ------------------- ------------------
5. Extractable anions FGTM 1344 Fluoroware (*) Every 4th Lot
(Plaques)
- ------------------------------ -------------------------- ------------------- ------------------- ------------------
6. Volatile organics FGTM 1345 Fluoroware (*) Every 4th Lot
(Resins)
- ------------------------------ -------------------------- ------------------- ------------------- ------------------
7. Trace Metals FGTM 1343 Fluoroware (*) Every 4th Lot
(Resins)
- ------------------------------ -------------------------- ------------------- ------------------- ------------------
- ------------------------------------------------------ ---------------------------------------------------
Packaging Requirements: Changes:
A molded plaque and 100g sample of base resin and CF (*)
lot used must be submitted with each inc. lot for
insp. Purposes. Poly lined containers, with the
poly liner secured against contamination. Lot
number and Flu p.n. (830) clearly marked on each
container.
- ------------------------------------------------------ ---------------------------------------------------
</TABLE>
(*) Denotes confidential information that has been omitted and filed
separately, accompanied by a confidential treatment request, with the
Securities and Exchange Commission pursuant to Rule 406 of the Securities
Act of 1933, as amended.
-8-
<PAGE>
CONFIDENTIALITY AGREEMENT
FLUOROWARE, INC. ("Recipient") has requested RTP Company ("RTP") to provide
certain specific technical and other information ("Material Information") highly
confidential to RTP regarding the following RTP materials ("Materials"):
COMPOUNDS FOR STAT PRO(R) 3000 LS
- ---------------------------------
Because of the extremely sensitive nature of the Material Information, this
agreement shall exclusively govern Recipient's obligations regarding use and
nondisclosure of the Material Information, whether or not labeled as
confidential. Any samples of the Material shall be deemed Confidential Samples,
use and disclosure of which are also restricted below.
1. Recipient's Obligations
a) Recipient will use the Material Information solely in connection
with and for the purpose of:
Approving RTP's materials for use in recipient's production processes
at its facility in Chaska, MN.
Without limitation of the foregoing, Recipient may not use the Material
Information to produce, or assist any other person to produce products
competitive with the Materials. Recipient shall not disclose the Material
Information to any person outside of Recipient, whether another Recipient
supplier, a competitor of RTP, a customer of Recipient or otherwise.
b) Confidential Samples shall be used solely for testing in connection
with the Permitted Purpose and in no case shall they be analyzed for
content, sold or made available to any other person.
c) Within Recipient, Recipient shall protect and keep confidential the
Material Information with the highest degree of care and shall disclose it
solely to Recipient employees with a need to know for the Permitted
Purpose. Recipient shall be responsible for enforcing this agreement for
the benefit of RTP.
d) All documents containing the Material Information (whether
delivered by RTP or prepared by Recipient) are and will remain RTP's
property. At RTP's written request, Recipient must promptly return to RTP
all those materials and any copies promptly at RTP's request. Recipient's
obligations under this Agreement will last indefinitely.
2. Exclusions. Recipient's obligations under this Agreement shall not apply
to information which:
a. is or becomes known to the public through no fault of Recipient or
its employees;
-9-
<PAGE>
b. is already known to Recipient prior to its receipt as shown by the
written records of Recipient (but Recipient acknowledges that the requested
information is not now known to Recipient); or
c. becomes known to Recipient by disclosure from a third party who has
a lawful right to disclose the information.
3. Entire Agreement. This is the complete Agreement between the parties
regarding the treatment of the Material Information and Confidential Samples,
and may be changed only by a written amendment.
Recipient: FLUOROWARE, INC. RTP COMPANY
BY: /s/ Illegible BY: /s/ Illegible
------------------------------ --------------------------------------
TITLE: Supply Manager TITLE: Vice President, Business Management
--------------------------- -----------------------------------
DATE: 4/6/98 DATE: April 2, 1998
---------------------------- ------------------------------------
-10-
<PAGE>
Exhibit 10.21
PFA Purchase and Supply Agreement
This Agreement, by and between E. I. DU PONT DE NEMOURS AND COMPANY, a
corporation of the State of Delaware having offices at 1007 Market Street,
Wilmington, Delaware 19898 (hereafter "DuPont") and FLUOROWARE, INC., a
corporation of the State of Minnesota, having offices at 3500 Lyman Boulevard,
Chaska, Minnesota 55318 (hereafter "Fluoroware").
W I T N E S E T H
WHEREAS DuPont manufactures and sells PFA resins;
WHEREAS Fluoroware has for some period of time has purchased PFA resins
from DuPont; and
WHEREAS DuPont desires to continue to supply PFA resins to Fluoroware,
and Fluoroware desires to continue to purchase such resins from DuPont;
WHEREAS Fluoroware generates regrind PFA as a result of its molding
operations and is interested in making a certain quantity of this regrind PFA
available to DuPont for purchase, and DuPont is interested in having a right of
first refusal to purchase such product;
NOW, THEREFORE, in consideration of the mutual covenants and promises
set forth herein, the parties agree as follows:
ARTICLE 1 - TERM AND SCOPE
1.1 This Agreement shall cover the period November 1, 1998 to August
31, 2000. No less than six (6) months prior to the end of such period, the
parties will enter into discussions regarding the terms and conditions under
which this Agreement can be extended.
1.2 This Agreement shall relate solely to the following matters:
(A) supply of PFA resins by DuPont to Fluoroware in the United
States; and
(B) DuPont's right of first refusal to purchase regrind PFA
generated from Fluoroware's molding operations in the United States.
ARTICLE 2 - PRODUCT
2.1 DuPont will sell, and Fluoroware will purchase the following PFA
resins (hereafter "PFA Product") as further described in the "Fluoroware Resin
Specification & Control
-1-
<PAGE>
Plans" as set forth on Attachments A, B, C, D, E, F and G hereto or as such
attachments are amended and mutually agreed upon from time to time (hereafter
"Fluoroware Resin Specifications"):
440 HP (A, B, and D Grades)
445 HP
450 HP
TE-5789 Conductive PFA Resin
TE-7016 Rotomolding Powder
2.2 Fluoroware will make available, and DuPont will have a right of
first refusal to purchase a certain quantity of Regrind PFA (hereafter
"Regrind") that is generated from Fluoroware's molding operations and which is
in excess of Fluoroware's internal Regrind needs. This Regrind will be made
available in three different classes: Class A, Class C, and Class D, which
classifications describe the types of Regrind in terms of degree of cleanliness,
as shown in Attachment H.
2.3 New Resins introduced into the market by DuPont are not included as
part of this agreement, but can be made part of this agreement upon mutual
agreement between Fluoroware and DuPont.
ARTICLE 3 - QUALITY ASSURANCE
3.1 DuPont warrants to Fluoroware that the PFA Product will conform to
DuPont's PFA Product specifications and will provide certification with each
shipment of PFA Product indicating compliance with appropriate Fluoroware Resin
Specifications. Other than the foregoing, DUPONT MAKES NO WARRANTIES OF
MERCHANTABILITY OR OF FITNESS FOR A PARTICULAR PURPOSE EVEN IF THAT PURPOSE IS
KNOWN TO DUPONT, NOR ANY OTHER EXPRESS OR IMPLIED WARRANTY. Fluoroware assumes
all risk and liability for results obtained by the use of the PFA Product
covered by this Agreement, whether used singly or in combination with other
products.
ARTICLE 4 - INSPECTION
4.1 For the purpose of confirming compliance with Fluoroware Resins
Specifications all PFA Product supplied hereunder shall be subject to inspection
by Fluoroware. In the event that Fluoroware and DuPont mutually agree that any
of the PFA Product shipped to Fluoroware under this Agreement does not meet the
appropriate Fluoroware Resin Specifications, then Fluoroware shall have the
right to reject such PFA Product by giving DuPont prompt notice thereof. DuPont
may at its option obtain samples of the rejected PFA Product from Fluoroware for
analysis. DuPont will, subject to availability, endeavor to ship replacement PFA
Product to Fluoroware within twenty-one (21) days of receipt of notification of
such rejection and will fully
-2-
<PAGE>
credit Fluoroware for the rejected PFA Product. DuPont will be responsible for
any expenses incurred in returning such rejected PFA Product.
ARTICLE 5 - PACKAGING
5.1 Product will be delivered in bulk containers (each nominally
holding sixteen hundred (1600) pounds), or one hundred (100) pound fiber drums
with polyethylene liners, or other containers acceptable to DuPont subject to
the prior written approval of Fluoroware.
ARTICLE 6 - QUANTITY
6.1 In Fluoroware's fiscal years 1999 (Sept. 1, 1998 - Aug. 31, 1999)
through its fiscal year 2000 (Sept. 1, 1999 through August 31, 2000) DuPont
agrees to sell to Fluoroware, at a minimum, the volume of PFA Product shown in
Attachment I. Provided that Fluoroware's total requirements for PFA equal or
exceed the volume shown in Attachment I for the above-identified fiscal years,
Fluoroware agrees to purchase said volume at a minimum. In the event that
Fluoroware's total requirements for PFA fall below the volume set forth in
Attachment I for any of the fiscal years 1999 and 2000, Fluoroware agrees to
purchase a minimum of (*) of its total requirements of PFA for each such year
from DuPont under the terms of this Agreement.
6.2 In each of the fiscal years, DuPont agrees to make available for
sale, at a minimum, an additional (*) of Product to Fluoroware over the agreed
upon volume for the coming fiscal year.
6.3 In the event that Fluoroware's total requirements for PFA exceed
the minimum purchase and supply obligations set forth above in any of the fiscal
years , Fluoroware shall offer DuPont the opportunity to supply under the terms
of this Agreement such additional quantities of Product as shall allow DuPont to
supply in the aggregate a minimum of (*) of Fluoroware's PFA requirements for
that fiscal year. DuPont may elect to supply all or any portion of such
additional quantities of Product.
6.4 The maximum monthly quantity ordered by Fluoroware will not exceed
ten percent (10%) of Fluoroware's annual forecast, as provided for under Article
7, unless agreed to by the parties sixty (60) days prior to the requested ship
date.
ARTICLE 7 - FORECAST REQUIREMENTS
7.1 Fluoroware will provide DuPont a written forecast of its
requirements for PFA Product on an annual basis (by Fluoroware Resin
Specification) no later than ninety (90) days prior to the end of each fiscal
year.
(*) Denotes confidential information that has been omitted and filed
separately, accompanied by a confidential treatment request, with the
Securities and Exchange Commission pursuant to Rule 406 of the
Securities Act of 1933, as amended.
-3-
<PAGE>
7.2 Monthly forecast updates will be provided on or before the 30th of
each month. This monthly forecast update will reconfirm the next month's
forecast (Month #1) and will forecast quantities for the next three months
(Months #2, #3, and #4).
ARTICLE 8 - PURCHASE ORDERS
8.1 Purchase orders will be issued for each PFA Product specifying
desired quantities by grade.
ARTICLE 9 - PRICE
9.1 The price of PFA Product will be:
440 HP $(*)/lb.
445 HP $(*)/lb.
450 HP $(*)/lb.
TE-5789 $(*)/lb.
TE-7016 $(*)/lb.
9.2 The price of PFA Regrind purchased from Fluoroware will be more
favorable than the median price for PFA regrind that Fluoroware can obtain in
the open market by a minimum of $(*) per pound. Market price will be established
once per year ( at least 60 days prior to the beginning of the following fiscal
year) by mutual agreement between Fluoroware and DuPont.
9.3 Pricing for new resins developed by DuPont is not a part of this
Agreement and will be agreed upon separately should need arise.
9.4 Should DuPont sell Product, or any other first quality Teflon(& PFA
resin, suitable for use in applications like those currently sold by Fluoroware
to a third party at a price lower than the price of comparable Product sold to
Fluoroware hereunder, then DuPont shall offer Fluoroware the same PFA resin at
the lower price in comparable quantity for such term as the lower price is in
effect with the third party to the extent DuPont is permitted to offer such
lower price by applicable laws and regulations. The foregoing provision of this
Section 9.4 shall only apply to sales from DuPont facilities based in the United
States to customers based in the United States.
(*) Denotes confidential information that has been omitted and filed
separately, accompanied by a confidential treatment request, with the
Securities and Exchange Commission pursuant to Rule 406 of the
Securities Act of 1933, as amended.
-4-
<PAGE>
ARTICLE 10 - MARKETING
10.1 During the term of this Agreement, Fluoroware agrees not to
actively promote any other manufacturer of PFA fluoropolymers in the
marketplace.
10.2 DuPont recognizes the contribution Fluoroware has made in
marketing and promoting the attributes and value of Teflon(R) PFA HP product to
the semiconductor industry. Fluoroware's market information access, and
recognition as a leader in the industry are valued. As part of this agreement,
DuPont expects Fluoroware's continuing effort in gaining access and information
regarding new applications and market trends.
10.3 The Parties acknowledge that TEFLON(R) is a registered trademark
of DuPont for its brand of fluoropolymer resins which can only be licensed by
DuPont for use in approved applications. Use of the TEFLON(R) trademark in
connection with DuPont products is not permitted without a license. This license
to be provided under separate agreement.
ARTICLE 11 - SUPPLY ASSURANCE
11.1 Except for adverse circumstances as described in Paragraph 5 of
DuPont's Standard Conditions of Sale, a copy of which is attached hereto as
Attachment J, in the event of a production disruption impacting DuPont's ability
to supply PFA Product hereunder, Fluoroware's pro rata allocation of available
Product quantities will be the most favorable of any offered to any of DuPont's
PFA customers.
ARTICLE 12 - REPORTING
12.1 On a quarterly basis, Fluoroware will provide DuPont with Quality
and Deliverance Performance Ratings. DuPont agrees to develop corrective action
plans for review and approval by Fluoroware when Quality Performance falls below
one hundred percent (100%) and/or Delivery Performance falls below ninety-eight
percent (98%).
ARTICLE 13 - MISCELLANEOUS
13.1 Except as otherwise specifically provided in this Agreement, the
provisions of DuPont's Standard Conditions of Sale shall govern each sale and
shipment made hereunder. A copy of DuPont's Standard Conditions of Sale is made
a part hereof and is set forth as Attachment J hereto.
13.2 This Agreement is not assignable or transferable by either party,
in whole or in part, except with the prior written consent of the other party.
-5-
<PAGE>
13.3 This Agreement shall be governed by and interpreted in accordance
with the laws of the State of Delaware. The courts of the State of Delaware
shall have exclusive jurisdiction over any dispute relating to the terms and
conditions of this Agreement.
13.4 The parties mutually agree to the terms of Attachment K, "Year
2000 Agreement."
13.5 This Agreement embodies the entire agreement and understanding
between DuPont and Fluoroware relative to the subject matter hereof and there
are no understandings, agreements, conditions or representations, oral or
written, expressed or implied, with reference to the subject matter hereof that
are not merged or superseded hereby. No amendment, modification or release from
any provision hereof shall be of any force or effect unless it is in writing,
signed by the party claimed to be bound thereby, and specifically refers to this
Agreement.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their duly authorized representatives on the dates indicated below.
E. I. DU POINT DE NEMOURS AND
COMPANY
By: /s/ Henry Voigt
--------------------------------------------
Henry Voigt
Title: Global Business Director Fluoroproducts
----------------------------------------
Date:
----------------------------------------
FLUOROWARE, INC.
By: /s/ Guy L. Milliren
--------------------------------------------
Guy L. Milliren
Title: Senior Vice President of Operations
----------------------------------------
Date: 1/7/99
----------------------------------------
-6-
<PAGE>
Attachment A
FLUOROWARE RESIN SPECIFICATION & CONTROL PLAN
102 Jonathan Blvd. No. Chaska, Minnesota 55318 USA Telephone: 612/448-3131
Confidentiality
This specification is hereby designated as confidential. Information on it is
proprietary to Fluoroware and shall not be used or disclosed to third persons
except in conformity with Fluoroware's consent.
--------------------------------------------------------------
APPROVAL
Technology Research Group ________________________
Purchasing _______________________________________
Supplier _________________________________________
--------------------------------------------------------------
<TABLE>
<CAPTION>
===========================================================================================================
Spec. No. 115 Rev. C1 ECO No. Date 3-22-95 Page 1 of 1
----- --- --------- ------- --- ---
===========================================================================================================
<S> <C>
Supplier: DuPont Fluoroware Trade Name: None
========================================= =======================
Mat'l type: PFA 1st Filler Type/Percent: None
========================================= =======================
Mat'l Grade: 440 HP (Range A) 2nd Filler type/Percent: None
========================================= =======================
<CAPTION>
- ----------------------------------------- -------------------------------- ---------------- ------------- --------------
Critical Inspection Certified Supplier Fluoroware
Characteristic Method Range Reports Inspection
- ----------------------------------------- -------------------------------- ---------------- ------------- --------------
<S> <C> <C> <C> <C>
- ----------------------------------------- -------------------------------- ---------------- ------------- --------------
1. Melt Flow Rate, g/10 min. WW-3739 (DuPont) (*) Yes
FGTM 1202 Fluoroware (*) Yes
2. Color %G & YID WW-3659 (DuPont) (*) Yes
3. Contamination Type 1 WW-3904 Laser DuPont (*) Yes
(Mat'l produced after 1/1/93) (*)
FGTM 1200 Fluoroware (*) Yes
Contamination Type 2 WW-3905 DuPont (*) Yes
FGTM 1200 Fluoroware Yes
4. Pellet Size: Through 6 T-233 7500 (DuPont) (*) -
Through 10 (*)
5. Extractable fluoride Ions, ppm WW-3782 DuPont (*) -
FGTM 1201 Fluoroware -
6. MWDI T-207 500 DuPont (*) Yes
FGTM 1215 Fluoroware (*) Yes
7. PPVE Index WW-3910 DuPont (*) Yes
- ----------------------------------------- -------------------------------- ---------------- ------------- --------------
- -------------------------------------------------------------- -----------------------------------------------
Packaging Requirements: Changes:
Two 50 lb. sealed poly bags per poly lined fiber drum. Poly
liner of drum closed with twist tie. Lot number. Melt flow (*)
Rate and Fluoroware's part number must be on each drum.
- -------------------------------------------------------------- -----------------------------------------------
</TABLE>
Form QS0092 Rev. A
(*) Denotes confidential information that has been omitted and filed
separately, accompanied by a confidential treatment request, with the
Securities and Exchange Commission pursuant to Rule 406 of the Securities
Act of 1933, as amended.
-7-
<PAGE>
Attachment B
FLUOROWARE RESIN SPECIFICATION & CONTROL PLAN
102 Jonathan Blvd. No. Chaska, Minnesota 55318 USA Telephone: 612/448-3131
Confidentiality
This specification is hereby designated as confidential. Information on it is
proprietary to Fluoroware and shall not be used or disclosed to third persons
except in conformity with Fluoroware's consent.
--------------------------------------------------------------
APPROVAL
Technology Research Group ________________________
Purchasing _______________________________________
Supplier _________________________________________
--------------------------------------------------------------
<TABLE>
<CAPTION>
======================================================================================================
Spec. No. 158 Rev. C1 ECO No. Date 3-22-95 Page 1 of 1
----- --- --------- ------- --- ---
======================================================================================================
<S> <C>
Supplier: Dupont Fluoroware Trade Name: None
=============================== ==========================
Mat'l type: PFA 1st Filler Type/Percent: None
=============================== ==========================
Mat'l Grade: 440 HP (Range B) 2nd Filler type/Percent: None
=============================== ==========================
<CAPTION>
- ---------------------------------------- ---------------------------- -------------------- --------------- --------------
Critical Inspection Certified Supplier Fluoroware
Characteristic Method Range Reports Inspection
- ---------------------------------------- ---------------------------- -------------------- --------------- --------------
<S> <C> <C> <C> <C>
- ---------------------------------------- ---------------------------- -------------------- --------------- --------------
1. Melt Flow Rate, g/10 min. WW-3739 (Dupont) (*) Yes
FGTM 1202 Fluoroware (*) Yes
2. Color %G & YID WW-3659 (Dupont) (*) Yes
3. Contamination Type 1 WW-3904 Laser Dupont (*) Yes
(Mat'l produced after 1/1/93) (*)
FGTM 1200 Fluoroware (*) Yes
4. Contamination, Type 2 WW - 3905 Dupont (*) Yes
FGTM 1200 Fluoroware Yes
5. Pellet size: Through 6 T-233.7500 Dupont (*)
Through 10 (*)
6. Extractable Fluoride Ions. ppm WW-3782 (Dupont) (*) -
FGTM 1201 (Flu) - -
7. MWDI T-207 500 (Dupont) (*) Yes
FGTM 1215 (Flu) (*) Yes
8. PPVE Index WW-3910 (Dupont) (*) Yes
- ---------------------------------------- ---------------------------- -------------------- --------------- --------------
- ---------------------------------------------------------------- -------------------------------------------------------
Packaging Requirements: Changes:
Sealed PE / aluminum totes or two 50 lb. sealed poly bags per
poly lined fiber drum. Poly liner of drum closed with twist tie (*)
Lot number. Melt Flow Rate and Fluoroware's part number
must be on each drum.
- ---------------------------------------------------------------- -------------------------------------------------------
</TABLE>
Form QS0092 Rev. A
(*) Denotes confidential information that has been omitted and filed
separately, accompanied by a confidential treatment request, with the
Securities and Exchange Commission pursuant to Rule 406 of the Securities
Act of 1933, as amended.
-8-
<PAGE>
Attachment C
FLUOROWARE RESIN SPECIFICATION & CONTROL PLAN
102 Jonathan Blvd. No. Chaska, Minnesota 55318 USA Telephone: 612/448-3131
Confidentiality
This specification is hereby designated as confidential. Information on it is
proprietary to Fluoroware and shall not be used or disclosed to third persons
except in conformity with Fluoroware's consent.
--------------------------------------------------------------
APPROVAL
Technology Research Group ________________________
Purchasing _______________________________________
Supplier _________________________________________
--------------------------------------------------------------
<TABLE>
<CAPTION>
==========================================================================================================
Spec. No. 127 Rev. C ECO No. Date 4-12-94 Page 1 of 1
----- --- --------- ------- --- ---
==========================================================================================================
<S> <C>
Supplier: Dupont Fluoroware Trade Name: None
========================================= =====================
Mat'l type: PFA 1st Filler Type/Percent: None
========================================= =====================
Mat'l Grade: 440 HP (Range C) 2nd Filler type/Percent: None
========================================= =====================
<CAPTION>
- ------------------------------------------ --------------------------- ------------------- ------------- --------------
Critical Inspection Certified Supplier Fluoroware
Characteristic Method Range Reports Inspection
- ------------------------------------------ --------------------------- ------------------- ------------- --------------
<S> <C> <C> <C> <C>
- ------------------------------------------ --------------------------- ------------------- ------------- --------------
1. Melt Flow Rate, g/10 min. WW-3739 (Dupont) (*) Yes
FGTM 1202 (Flu) (*) Yes
2. Color %G & YID WW-3659 (Dupont) (*) Yes
3. Contamination Type 1 WW-3904 Laser (Dupont) (*) Yes
(*)
FGTM 1200 (Flu) (*) Yes
Contamination Type 2 WW-3905 (Dupont) (*) Yes
FGTM 1200 (Flu) Yes
4. Pellet Size: Through 6 T-233 7500 (Dupont) (*)
Through 10 (*)
5. Extractable Fluoride Ions, ppm WW-3782 (Dupont) (*) -
FGTM 1201 (Flu) - -
6. MWDI T-207 500 (Dupont) (*) Yes
FGTM 1215 (Flu) (*) -
7. PPVE Index WW-3910 (Dupont) (*) Yes
- ------------------------------------------ --------------------------- ------------------- ------------- --------------
- ---------------------------------------------------------------- -----------------------------------------------
Packaging Requirements: Changes:
Sealed PE / aluminum totes or two 50 lb sealed poly bags per (*)
poly lined fiber drum. Poly liner of drum closed with twist tie
Lot number. Melt flow Rate and Fluoroware's part number
must be on each drum.
- ---------------------------------------------------------------- -----------------------------------------------
</TABLE>
Form QS0092 Rev. A
(*) Denotes confidential information that has been omitted and filed
separately, accompanied by a confidential treatment request, with the
Securities and Exchange Commission pursuant to Rule 406 of the Securities
Act of 1933, as amended.
-9-
<PAGE>
Attachment D
FLUOROWARE RESIN SPECIFICATION & CONTROL PLAN
102 Jonathan Blvd. No. Chaska, Minnesota 55318 USA Telephone: 612/448-3131
Confidentiality
This specification is hereby designated as confidential. Information on it is
proprietary to Fluoroware and shall not be used or disclosed to third persons
except in conformity with Fluoroware's consent.
--------------------------------------------------------------
APPROVAL
Technology Research Group ________________________
Purchasing ______________________________________
Supplier _________________________________________
--------------------------------------------------------------
<TABLE>
<CAPTION>
========================================================================================================
Spec. No. 132 Rev. C ECO No. Date 4-12-94 Page 1 of 1
----- --- --------- ------- --- ---
========================================================================================================
<S> <C>
Supplier: Dupont Fluoroware Trade Name: None
========================================= ==========================
Mat'l type: PFA 1st Filler Type/Percent: None
========================================= ==========================
Mat'l Grade: 440 HP (Range D) 2nd Filler type/Percent: None
========================================= ==========================
<CAPTION>
- ---------------------------------------- ----------------------------- ------------------ --------------- --------------
Critical Inspection Certified Supplier Fluoroware
Characteristic Method Range Reports Inspection
- ---------------------------------------- ----------------------------- ------------------ --------------- --------------
<S> <C> <C> <C> <C>
- ---------------------------------------- ----------------------------- ------------------ --------------- --------------
1. Melt Flow Rate, g/10 min. WW-3739 (Dupont) (*) Yes
FGTM 1202 (Flu) (*) Yes
2. Color %G & YID WW-3659 (Dupont) (*) Yes
3. Contamination Type 1 WW-3904 Laser (Dupont) (*) Yes
(*)
FGTM 1200 Fluoroware (*) Yes
Contamination, Type 2 WW - 3905 Dupont (*) Yes
FGTM 1200 (Flu) Yes
4. Pellet size: Through 6 mesh. % T-233.7500 (Dupont) (*)
Through 10 mesh. % (*)
5. Extractable Fluroide Ions. ppm WW-3782 (Dupont) (*) -
FGTM 1201 (Flu) - -
6. MWDI T-207 500 (Dupont) (*) Yes
FGTM 1215 (Flu) (*) -
7. PPVE Index WW-3910 (Dupont) (*) Yes
- ---------------------------------------- ----------------------------- ------------------ --------------- --------------
- ------------------------------------------------------------------- -----------------------------------------------
Packaging Requirements: Changes:
Sealed PE / aluminum totes or two 50 lb. sealed poly bags per (*)
poly lined fiber drum. Poly liner of drum closed with twist tie
Lot number. Melt Flow Rate and Fluoroware's part number
must be on each drum.
- ------------------------------------------------------------------- -----------------------------------------------
</TABLE>
Form QS0092 Rev. A
(*) Denotes confidential information that has been omitted and filed
separately, accompanied by a confidential treatment request, with the
Securities and Exchange Commission pursuant to Rule 406 of the Securities
Act of 1933, as amended.
-10-
<PAGE>
Attachment E
FLUOROWARE RESIN SPECIFICATION & CONTROL PLAN
102 Jonathan Blvd. No. Chaska, Minnesota 55318 USA Telephone: 612/448-3131
Confidentiality
This specification is hereby designated as confidential. Information on it is
proprietary to Fluoroware and shall not be used or disclosed to third persons
except in conformity with Fluoroware's consent.
--------------------------------------------------------------
APPROVAL
Technology Research Group ________________________
Purchasing ______________________________________
Supplier _________________________________________
--------------------------------------------------------------
<TABLE>
<CAPTION>
===============================================================================================================
Spec. No. 164 Rev. B ECO No. Date 2-16-93 Page 1 of 1
----- --- --------- ------- --- ---
===============================================================================================================
<S> <C>
Supplier: Dupont Fluoroware Trade Name: None
=================================== ==========================
Mat'l type: PFA 1st Filler Type/Percent: None
=================================== ==========================
Mat'l Grade: TE 9769 (445 HP) 2nd Filler type/Percent: None
=================================== ==========================
<CAPTION>
- ----------------------------------------- ---------------------------- ----------------- --------------- --------------
Critical Inspection Certified Supplier Fluoroware
Characteristic Method Range Reports Inspection
- ----------------------------------------- ---------------------------- ----------------- --------------- --------------
<S> <C> <C> <C> <C>
- ----------------------------------------- ---------------------------- ----------------- --------------- --------------
1. Melt Flow Rate, g/10 min. WW-3739 (Dupont) (*) Yes
FGTM 1202 (Flu) (*) Yes
2. Color %G & YID WW-3659 (Dupont) (*) Yes
3. Contamination Type 1 WW-3904 Laser (Dup) (*) Yes
(Mat'l produced after 1/1/93) (*)
FGTM 1200 (Flu) (*) Yes
Contamination Type 2 WW-3905 (Dupont) (*) Yes
FGTM 1200 (Flu) Yes
4. Pellet Size: Through 6 mesh. % T-233 7500 (Dupont) (*) -
Through 10 mesh % (*)
5. Extractable fluoride Ions, ppm WW-3782 (Dupont) (*) -
FGTM 1201 (Flu) -
6. MWDI T-207 500 (Dupont) (*) Yes
FGTM 1215 (Flu) (*) Yes
7. PPVE Index WW-3910 (Dupont) (*) Yes
- ----------------------------------------- ---------------------------- ----------------- --------------- --------------
- ------------------------------------------------------------------ -----------------------------------------------
Packaging Requirements: Changes:
Two 50 lb. sealed poly bags per poly lined fiber drum. Poly
liner of drum closed with twist tie. Lot number. Melt flow
Rate and Fluoroware's part number must be on each drum.
- ------------------------------------------------------------------ -----------------------------------------------
</TABLE>
Form QS0092 Rev. A
(*) Denotes confidential information that has been omitted and filed
separately, accompanied by a confidential treatment request, with the
Securities and Exchange Commission pursuant to Rule 406 of the Securities
Act of 1933, as amended.
-11-
<PAGE>
Attachment F
FLUOROWARE RESIN SPECIFICATION & CONTROL PLAN
102 Jonathan Blvd. No. Chaska, Minnesota 55318 USA Telephone: 612/448-3131
Confidentiality
This specification is hereby designated as confidential. Information on it is
proprietary to Fluoroware and shall not be used or disclosed to third persons
except in conformity with Fluoroware's consent.
--------------------------------------------------------------
APPROVAL
Technology Research Group ________________________
Purchasing _______________________________________
Supplier _________________________________________
--------------------------------------------------------------
<TABLE>
<CAPTION>
=============================================================================================================
Spec. No. 146 Rev. C ECO No. Date 9-9-93 Page 1 of 1
----- --- --------- ------- --- ---
=============================================================================================================
<S> <C>
Supplier: Dupont Fluoroware Trade Name: None
========================================= ==========================
Mat'l type: PFA 1st Filler Type/Percent: None
========================================= ==========================
Mat'l Grade: 450 HP 2nd Filler type/Percent: None
========================================= ==========================
<CAPTION>
- ----------------------------------------- ---------------------------- ---------------- --------------- --------------
Critical Inspection Certified Supplier Fluoroware
Characteristic Method Range Reports Inspection
- ----------------------------------------- ---------------------------- ---------------- --------------- --------------
<S> <C> <C> <C> <C>
- ----------------------------------------- ---------------------------- ---------------- --------------- --------------
1. Melt Flow Rate, g/10 min. WW-3739 (Dupont) (*) Yes
FGTM 1202 Fluoroware (*) Yes
2. Color %G & YID WW-3659 Dupont (*) Yes
3. Contamination Type 1 WW-3904 Dupont (*) Yes
(after xxxx CPA xxx 1002) (*)
FGTM 1200 Fluoroware (*) Yes
Contamination Type 2 WW-3905 Dupont (*) Yes
FGTM 1200 Fluoroware Yes
4. Pellet Size: Through 6 mesh. % T-233 7500 (Dupont) (*) -
Through 10 mesh % (*)
5. Extractable Fluoride Ions, ppm WW-3782 Dupont (*) -
FGTM 1201 Fluoroware -
6. MWDI T-207 500 Dupont (*) Yes
FGTM 1215 Fluoroware (*) Yes
7. PPVE Index WW-3910 Dupont (*) Yes
- ----------------------------------------- ---------------------------- ---------------- --------------- --------------
- ------------------------------------------------------------------ -------------------------------------------------
Packaging Requirements: Changes:
Two 50 lb. sealed poly bags per poly lined fiber drum. Poly (*)
liner of drum closed with twist tie. Lot number. Melt flow
Rate and Fluoroware's part number must be on each drum.
- ------------------------------------------------------------------ -------------------------------------------------
</TABLE>
Form QS0092 Rev. A
(*) Denotes confidential information that has been omitted and filed
separately, accompanied by a confidential treatment request, with the
Securities and Exchange Commission pursuant to Rule 406 of the Securities
Act of 1933, as amended.
-12-
<PAGE>
Attachment G
FLUOROWARE RESIN SPECIFICATION & CONTROL PLAN
102 Jonathan Blvd. No. Chaska, Minnesota 55318 USA Telephone: 612/448-3131
Confidentiality
This specification is hereby designated as confidential. Information on it is
proprietary to Fluoroware and shall not be used or disclosed to third persons
except in conformity with Fluoroware's consent.
--------------------------------------------------------------
APPROVAL
Technology Research Group ________________________
Purchasing _______________________________________
Supplier _________________________________________
--------------------------------------------------------------
<TABLE>
<CAPTION>
=========================================================================================================
Spec. No. 160 Rev. E ECO No. Date 5-13-94 Page 1 of 1
----- --- --------- ------- --- ---
=========================================================================================================
<S> <C>
Supplier: Dupont Fluoroware Trade Name: STAT-PRO(R)1000
========================================= ==========================
Mat'l type: Carbon Powder PFA 1st Filler Type/Percent: Carbon Powder / 4 - 5%
========================================= ==========================
Mat'l Grade: TE 5789 2nd Filler type/Percent: None
========================================= ==========================
<CAPTION>
- ------------------------------------------ ------------------------------ --------------- --------------- --------------
Critical Inspection Certified Supplier Fluoroware
Characteristic Method Range Reports Inspection
- ------------------------------------------ ------------------------------ --------------- --------------- --------------
<S> <C> <C> <C> <C>
- ------------------------------------------ ------------------------------ --------------- --------------- --------------
1. Melt Flow Rate, g/10 min. WW-3739 Dupont (*) Yes
FGTM 1202 Fluoroware (*) Yes
2. % Burn-off WW-3659 Dupont (*) Yes
FGTM 1206 Fluoroware (*) Yes
3. Contamination: Type 2 WW-3905 Dupont (*) Yes
FGTM 1218 Fluoroware (*) -
4. Volume Resistivity, ohm-cm WW-4004 Dupont (*) Yes -
FGTM 1207 Fluoroware
5. Pellet size: Through 6 mesh% TO-233.7500 Dupont (*) -
Through 10 mesh %
6. Tensile Strength, psi ASTM D3307 Dupont (*) -
(Tested Annually)
7. Tensile Flongation, % ASTM D3307 Dupont (*) -
(Tested Annually)
- ------------------------------------------ ------------------------------ --------------- --------------- --------------
- ------------------------------------------------------------------- ----------------------------------------------
Packaging Requirements: Changes:
Sealed PE / aluminum totes or two 50 lb. sealed poly bags per (*)
poly lined fiber drum. Poly liner of drum closed with twist tie
Lot number. Melt Flow Rate and Fluoroware's part number
must be on each drum.
- ------------------------------------------------------------------- ----------------------------------------------
</TABLE>
Form QS0092 Rev. A
(*) Denotes confidential information that has been omitted and filed
separately, accompanied by a confidential treatment request, with the
Securities and Exchange Commission pursuant to Rule 406 of the Securities
Act of 1933, as amended.
-13-
<PAGE>
Attachment H
Fluoroware, Inc. Work Instruction Number: 10323
Department: Plants 2, 3, 4 Page Number: 1 of 2
Submitted by: Greg Gestach Prevision Level: H
Reference Procedure: 4.9.1 Effective Date: 03-31-98
Supersedes: 02-24-98
- --------------------------------------------------------------------------------
Approvals: Signature: Date:
Department Manager
(or Designee) --------------------------- ---------------------
- --------------------------------------------------------------------------------
IDENTIFYING, CLASSIFYING, TRANSPORTING, GRINDING AND
INVENTORYING TEFLON(R) PFA REGRIND
Introduction:
- -------------
This instruction is performed by manufacturing personnel.
Instructions:
- -------------
1. Stainless Steel containers are used to deposit hot scrap into. Clean
plastic bags may be used for cold scrap.
2. Containers used for inventorying and transporting must be lined with
plastic bag.
3. Identify containers and bags with pertinent information describing contents
on Regrind Card.
A. Date
B. 3 digit material code (Fluoroware part number) followed by regrind
classification as shown below:
1) XXX R - Class A regrind (see step 4)
2) XXX RC - Class C regrind (see step 4)
3) XXX RDC - Class CD (dingy) (see step 4)
4. CLASSIFYING MOLDED TEFLON PFA FOR REGRIND:
A. CLASS A - Molded article is pure. Free from carbon specks,
discoloration and contaminants. Includes colored PFA.
B. CLASS C - Molded article contains carbon specks, discoloration or
both. Includes colored PFA.
-14-
<PAGE>
C. CLASS CD (DINGY) - Molded article is contaminated with foreign
substance, except cutting fluids {See 4.C.2) below}. Examples of dingy
are metal, dirt, paint chips. Includes colored PFA.
1) Stat-Pro 1000 will be handled as Class A regrind.
2) Teflon product that is wet (tubing startup) or contaminated with
cutting fluid will not be reground. These products will be
dispositioned in their molded form.
5. Containers used for regrind must be covered to prevent airborne
contamination. All bags must be taped shut.
6. Containers will be moved from manufacturing area to designated area
allocated for regrind on a daily basis.
7. GRINDING TEFLON(R)PFA:
A. Granulator cleaning instructions are posted in grinding room.
B. Regrind items in closed bags must be opened approximately one hour
prior to grinding to neutralize air. Avoid breathing into bag when
opening.
C. Grinding personnel wear lint free gloves while handling scrap.
D. Scrap is visually checked for class verification. Granulators are
designated for Classifications.
E. Scrap is blown off using ionized air guns before entering granulator.
F. Class A, C and CD regrind is weighed out from holding bin into
container lined with clean plastic bag. Container is labeled with
following information:
1) Material code
2) Date - enter date container was filled
3) Lbs - enter net weight of regrind (minus container, cover, and
bag)
4) Name - enter your name
G. Enter weight or regrind ground into material in-out inventory sheet
1) Locate appropriate code section
2) Enter information in ink
a. Your name
b. Date entered
c. Type of regrind
d. Pounds being entered into inventory
e. Inventory balance
-15-
<PAGE>
Attachment I
Fluoroware Forecast
- -----------------------------------------------------------------------------
DuPont Product Code Fluoroware Part Number FY `99 lbs. FY `00 lbs.
- ------------------- ---------------------- ----------- -----------
TEF440HPA 115 (*) (*)
TEF440HPB 158 (*) (*)
TEF440HPD 132 (*) (*)
TEF450HP 146 (*) (*)
TEFTE5789 160 (*) (*)
TEF445HP 164 (*) (*)
TEFTE7016 103-C (*) (*)
Total (*) (*)
- -----------------------------------------------------------------------------
(*) Denotes confidential information that has been omitted and filed
separately, accompanied by a confidential treatment request, with the
Securities and Exchange Commission pursuant to Rule 406 of the Securities
Act of 1933, as amended.
-16-
<PAGE>
Attachment J
------------
STANDARD CONDITIONS OF SALE
---------------------------
1. Seller warrants that the products or materials (hereafter "products")
delivered hereunder meet Seller's standard specifications for the products or
such other specifications as may have been expressly agreed to herein. SELLER
MAKES NO WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE, OR
ANY OTHER EXPRESS OR IMPLIED WARRANTY, EXCEPT AS PROVIDED IN CONDITIONS 3 AND 4
HEREIN. Buyer assumes all risk and liability resulting from use of the products
delivered hereunder, whether used singly or in combination with other products.
2. No claim of any kind, whether as to products delivered or for
nondelivery of products, and whether or not based on negligence, shall be
greater in amount than the purchase price of the products in respect of which
damages are claimed; and failure to give notice of claim within ninety (90) days
from date of delivery or the date fixed for delivery (in the case of
nondelivery), shall constitute a waiver by Buyer of all claims in respect of
such products. No charge or expense incident to any claims will be allowed
unless approve by an authorized representative of Seller. Products shall not be
returned to Seller without Seller's prior permission, and then only in the
manner prescribed by Seller. The remedy hereby provided shall be the exclusive
and sole remedy of Buyer. In no event shall either party be liable for special,
indirect or consequential damages, whether or not caused by or resulting from
the negligence of such party.
3. Seller warrants that the use or sale of the products delivered hereunder
will not infringe the claims of any United States patent covering the products
themselves; but does not warrant against infringement by reason of the use
thereof in combination with other products or in the operation of any process.
4. Seller warrants that all products delivered hereunder were produced in
compliance with the requirements of the Fair Labor Standards Act of 1938, as
amended.
5. No liability shall result from delay in performance or nonperformance,
directly or indirectly caused by circumstances beyond the control of the party
affected, including, but not limited to, Act of God, fire explosion, flood, war,
act of or authorized by any Government, accident, labor trouble or shortage,
inability to obtain material, equipment or transportation. Quantities so
affected may be eliminated from the agreement without liability, but the
agreement shall remain otherwise unaffected. Seller shall have no obligation to
purchase supplies of the products specified herein to enable it to perform this
agreement.
6. If this agreement covers products that must necessarily be manufactured
especially for Buyer and is suspended or terminated for any reason, Buyer will
take delivery of and make payment for such products as have been completed and
such as are in process on the date notice of suspension or termination is
received by Seller, provided that if Buyer for any reason cannot accept delivery
of such products, it will make payment therefor as though delivery had been made
and Seller will store such products for Buyer's account and at Buyer's expense.
-17-
<PAGE>
7. If for any reason including but not limited to Force Majeure Seller is
unable to supply the total demand for products specified herein, Seller may
distribute its available supply among any or all purchasers, as well as
departments and divisions of Seller on such basis as it may deem fair and
practical, without liability for any failure of performance which may result
therefrom.
8. If any Government action should place or continue limitations on the
price provided for in this agreement such that it would be illegal or against
public or Government policy for Seller to charge, assess or receive the full
amount of or to increase such prices as determined by this agreement, then
Seller shall have the option (1) to continue to perform under this agreement
subject to such adjustments in prices that Seller may deem necessary to comply
with such Government action; (2) to revise this agreement, subject to Buyer's
approval in order to most nearly accomplish the original intent of this
agreement, or (3) to terminate performance of the affected portions of the
agreement without liability for any damages.
9. At Buyer's request, Seller may furnish such technical assistance and
information as it has available with respect to the use of the products covered
by this agreement. Unless otherwise agreed in writing, all such technical
assistance and information will be provided gratis, and Buyer assumes sole
responsibility for results obtained in reliance thereon.
10. Buyer acknowledges that it has received and is familiar with Seller's
labeling and literature concerning the products sold hereunder and will forward
such information to its employees who handle, process, or sell such products and
customers of such products, if any. Buyer agrees that products sold hereunder
will not knowingly be resold or given in sample form to persons using or
proposing to use the products for purposes contrary to recommendations given by
DuPont or prohibited by law, but will be sold or given as samples only to
persons, who in the opinion of Buyer, can handle, use and dispose of the
products safely.
11. The Buyer shall reimburse the Seller for all taxes (excluding income
taxes), excises or other charges which the Seller may be required to pay to any
Government (National, State or Local) upon the sale, production or
transportation of the products sold hereunder.
12. In the event Buyer fails to fulfill Seller's terms of payment or in
case Seller shall have any doubt at any time as to Buyer's financial
responsibility, Seller may decline to make further deliveries except upon
receipt of cash or satisfactory security.
13. This agreement is not assignable or transferable by either party, in
whole or in part, except with the prior written consent of the other party.
14. In addition to the Standard Conditions of Sale set forth herein, any
Special Conditions of Sale set forth on the front of this invoice or in the
current price list for the products sold hereunder shall apply and are
incorporated by reference herein.
15. This document, along with documents specifically referred to herein,
contains all of the terms and conditions with respect to the sale and purchase
of the products sold hereunder. These terms and conditions supersede any of
previous date and no modification thereof shall be binding on either party
unless in writing and signed by both parties. No modification-shall be effected
by the acknowledgment or acceptance of purchase order forms stipulating
different
-18-
<PAGE>
conditions. Unless Buyer shall notify Seller in writing to the contrary as soon
as practicable after receipt of this document by Buyer, the Buyer's acceptance
of the products or payment therefor shall be equivalent to Buyer's assent to the
terms and conditions hereof. Waiver by either party of any default by the other
hereunder shall not be deemed a waiver by such party of any default by the other
which may thereafter occur.
-19-
<PAGE>
Attachment K
------------
"YEAR 2000" AGREEMENT
---------------------
A. Each party covenants and agrees that it will not permit a Year 2000
Problem to computer systems, software or equipment owned, leased or licensed by
it, its affiliates or subsidiaries to interfere with its performance under this
Agreement. Each party further agrees to request, from those of its suppliers
whose performance may materially affect that party's performance hereunder, that
each such supplier undertake the same obligation with respect to such material
performance. The parties will use reasonable commercial efforts to cooperate and
share information to further comply with this Addendum, and to minimize the
impact of any Year 2000 Problem on performance of this Agreement. Each party
will inform the other party of any circumstance indicating a possible obstacle
to such compliance, and the steps being taken to avoid or overcome the obstacle.
B. Provided a party complies with Section A, it will not be liable to the
other party for any failure to perform obligations under this Agreement to the
extent such failure arises from a Year 2000 Problem (1) affecting one of the
non-performing party's suppliers or (2) beyond that party's reasonable control
(e.g., a Year 2000 Problem affecting a governmental entity).
C. A "Year 2000 Problem" means a date handling problem relating to the Year
2000 date change that would cause a computer system, software or equipment to
fail to correctly perform, process and handle date-related data for the dates
within and between the twentieth and twenty-first centuries and all other
centuries.
-20-
<PAGE>
Attachment L
FLUOROWARE RESIN SPECIFICATION & CONTROL PLAN
102 Jonathan Blvd. No. Chaska, Minnesota 55318 USA Telephone: 612/448-3131
Confidentiality
This specification is hereby designated as confidential. Information on it is
proprietary to Fluoroware and shall not be used or disclosed to third persons
except in conformity with Fluoroware's consent.
--------------------------------------------------------------
APPROVAL
Technology Research Group ________________________
Purchasing ______________________________________
Supplier _________________________________________
--------------------------------------------------------------
<TABLE>
<CAPTION>
===================================================================================================================================
Spec. No. 103-C Rev. A1 ECO No. 35516 Date Page 1 of 1
----- --- ----- ------- --- ---
===================================================================================================================================
<S> <C>
Supplier: DuPont Fluoroware Trade Name: None
======================================= ==========================
Mat'l type: PFA Rotomolding 1st Filler Type/Percent: None
======================================= ==========================
Mat'l Grade: TE - 7016 2nd Filler type/Percent: None
======================================= ==========================
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Critical Inspection Certified Supplier Fluoroware
Characteristics Method Range Reports Inspection
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1. Dry Sieve Analysis (%) U.S. WW-3890 (DuPont) (*) Yes
Flow Rate, g/10 min.
sieves: 30, 40, 50, 60, 80, FGTM 1214 (Fluoroware) -
100, 120, and pan
2. Melt flow rate, g/10 min. WW-3739 (DuPont) (*) Yes
FGTM 1202 (Fluoroware) (*) -
3. Contamination: Type 1 OD 86.1.5.7 (DuPont) (*) Yes
FGTM 1200 (Fluoroware) Yes
4. Contamination: Type 2 (metal) OD 86.1.5.7 (DuPont) (*) Yes
FGTM 1200 (Fluoroware) Yes
5. IR End Groups (-COF) per 10E6 WW-3912 (DuPont) (*) Yes
carbons
6. Extractable fluoride ions, ppm WW-3782 (DuPont) (*) Yes
FGTM 1201 (Fluoroware) (*) -
7. PPVE wt% WW-3910 (DuPont) (*) -
8. MWDI T-207-500 (DuPont) (*) -
FGTM 1216 (Fluoroware) (*)
9. Ion Chromatography (IC) FGTM 1344 (Fluoroware) (*) Yes
(Every 4th
lot)
- -----------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------- ---------------------------------------------------------
Packaging Requirements: Changes:
Two 50-lb. sealed poly bags per poly lined fiber drum. Poly liner
of drum closed with twist tie. Lot number, Melt Flow Rate and
Fluoroware's part number (103-C) must be on each drum.
- ---------------------------------------------------------------------- ---------------------------------------------------------
</TABLE>
Form QS0092 Rev. A
(*) Denotes confidential information that has been omitted and filed
separately, accompanied by a confidential treatment request, with the
Securities and Exchange Commission pursuant to Rule 406 of the Securities
Act of 1933, as amended.
-21-
<PAGE>
Attachment M
FLUOROWARE RESIN SPECIFICATION & CONTROL PLAN
102 Jonathan Blvd. No. Chaska, Minnesota 55318 USA Telephone: 612-448-3131
Confidentiality:
This specification is hereby designated as confidential. Information on it is
proprietary to Fluoroware and shall not be used or disclosed to third persons
except in conformity with Fluoroware's consent.
- ---------
printer
icon
- ---------
Approval
---------------------------------------------------------------------
Materials Engineer: ________________________
Purchasing: ________________________
Supplier: ________________________
---------------------------------------------------------------------
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Spec. No. 607 Rev. A3 ECO No. Date
----- --- --------- -------
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Supplier: DuPont Fluoroware Trade Name: None
========================================= ==========================
Material Type: PBT Elastomer Filler None
========================================= ==========================
Material Grade: HYTREL(R)5556 HP Type None
========================================= ==========================
Percent
==========================
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Critical Inspection Certified Supplier Fluoroware
Characteristics Method Range Reports Inspection
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1. Melt Flow Rate, g/10 min. FGTM 1202 - Fluoroware (*) Yes
H970.5100 - DuPont (*) Yes
2. Contamination: Foreign Particles FGTM 1200 - Fluoroware (*) Yes
H970.3600 - DuPont (*) -
(*)
3. Contamination: Metal FGTM 1218 - Fluoroware (*) - -
4. Color FGTM 1200 - Fluoroware Yes
H970.1600 - DuPont (*) -
5. Moisture (H2O) H970.5250 - DuPont (*) Yes -
6. Trace metals FGTM 1343 - Fluoroware (*) - Yes
7. Extractable Anions FGTM 1344 - Fluoroware (*) - Yes
8. Volatile Organics FGTM 1345 - Fluoroware (*) - Yes
- -----------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------- ---------------------------------------------------------
Packaging Requirements: Changes:
Poly-lined containers, sealed against contamination with Fluoroware's (*)
part number (607) and lot number clearly marked on each container.
- ---------------------------------------------------------------------- ---------------------------------------------------------
</TABLE>
Form QS0092 Rev. A
(*) Denotes confidential information that has been omitted and filed
separately, accompanied by a confidential treatment request, with the
Securities and Exchange Commission pursuant to Rule 406 of the Securities
Act of 1933, as amended.
-22-
<PAGE>
ASSIGNMENT AND LIMITED AMENDMENT
This is an ASSIGNMENT and LIMITED AMENDMENT ("Assignment") to the PFA
Purchase and Supply Agreement dated January 7, 1999, which was made effective
retroactively to November 1, 1998 (hereinafter the "Original Agreement") between
E. I. du Pont de Nemours and Company ("DuPont") and Fluoroware, Inc.
("Fluoroware"). Fluoroware merged with Empak, Inc. in June, 1999, to form a new
corporation, Entegris, Inc. ("Entegris"). The purpose of this Assignment and
Limited Amendment is to reflect the assignment by Fluoroware of its rights and
obligations under the Original Agreement to Entegris a Minnesota corporation
with a principal place of business at 3500 Lyman Boulevard, Chaska, MN 55318, to
which DuPont has consented; and the Original Agreement, as modified by this
Assignment and Limited Amendment, is referred to herein as the "Agreement."
1. Assignment. FOR VALUE RECEIVED, Fluoroware, through Entegris, its
successor in interest, hereby assigns and transfers to Entegris, with the
consent of DuPont, all of its rights, interests and obligations in the Original
Agreement (herein, the "Assigned Rights and Obligations"), and Entegris hereby
accepts and assumes such Assigned Rights and Obligations. DuPont and Entegris
shall cooperate with respect to transition issues and matters raised by this
Assignment and relating to the Agreement; and each shall execute and/or exchange
such further documentation as is reasonably necessary for such purposes.
2. Amendments.
(a) References to DuPont. With respect to all matters arising under
the Agreement on or after the Effective Date, all references in the
Original Agreement to "Fluoroware" shall be deemed to refer to "Entegris."
(b) Period of Agreement. The first sentence of Section 1.1 of the
Original Agreement is hereby amended in its entirety to read as follows:
"This Agreement shall cover the period November 1, 1998, through August 31,
2003."
(c) Scope. Section 1.2(A) of the Original Agreement is amended in its
entirety to read as follows:
This Agreement shall relate solely to the following matters:
(A) supply of PFA resins by DuPont to all Entegris facilities in
the United States;....
(d) Quantity.
(i) Section 6.1 of the Original Agreement is amended in its
entirety to read as follows:
-23-
<PAGE>
DuPont agrees to sell to Fluoroware, at a minimum, the
volume of PFA. Product shown in Attachment I, during the
Fluoroware fiscal years indicated therein. Provided that
Fluoroware's total requirements for PFA equal or exceed the
volume shown in Attachment I for such fiscal years,
Fluoroware agrees to purchase said volume at a minimum. For
any year in which Fluoroware's total requirements for PFA
fall below the volume set forth in Attachment I, Fluoroware
agrees to purchase a minimum of (*) of its total
requirements of PFA for each such year from DuPont under the
terms of this Agreement.
(ii) Attachment I from the Original Agreement is hereby replaced
in its entirety by the new Attachment I, attached hereto as
Exhibit A.
4. Prices. Section 9.1 of the Original Agreement is amended in its entirety
to read as follows:
(a) The price of PFA Product for the period November 1, 1998 to August 31,
2000 will be:
Product Price
------- -----
440 HP $(*)/lb.
445 HP $(*)/lb.
450 HP $(*)/lb.
TE-5789 $(*)/lb.
TE-7016 $(*)/lb.
(b) The price of PFA Product for the period September 1, 2000 through
August 31, 2003 will be:
Product Price
------- -----
440 HP $(*)/lb.
445 HP $(*)/lb.
450 HP $(*)/lb.
TE-5789 $(*)/lb.
TE-7016 $(*)/lb.
(*) Denotes confidential information that has been omitted and filed
separately, accompanied by a confidential treatment request, with the
Securities and Exchange Commission pursuant to Rule 406 of the
Securities Act of 1933, as amended.
-24-
<PAGE>
(c) Fluoroware acknowledges that DuPont intends to replace TE-7016 with a
new resin by approximately the fourth quarter of 1999. Pricing for
that resin will be negotiated at the time of the resin introduction.
3. Survival: Confirmation. Except as expressly modified hereby, all of the
terms and conditions of the Original Agreement remain in full force and effect
and the parties hereby confirm them in all respects.
ACCORDINGLY, the parties have caused this ASSIGNMENT and LIMITED AMENDMENT
to be executed and delivered by their duly authorized representatives.
E. I. du Pont de Nemours and Company
By: /s/ Klaus Kimpel
-------------------------------------------
Title: Director, Fluoropolymers Americas
---------------------------------------
Date: September 20, 1999
----------------------------------------
Fluoroware, Inc. (now known as Entegris,
Inc.)
By: /s/ Ross Hanson
------------------------------------------
Title: Materials Manager
---------------------------------------
Date: September 24, 1999
----------------------------------------
Entegris, Inc.
By: Guy Milliren
------------------------------------------
Title: Senior Vice President of Operations
---------------------------------------
Date: September 24, 1999
----------------------------------------
-25-
<PAGE>
Exhibit A
Entegris, Inc. Five Year Forecast
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
Entegris Part # DuPont Product # FY -98 (actual) FY `99 FY `00 FY `01 FY `02 FY `03
- ----------------------------------==============================================================
Thousands of pounds
- ----------------------------------==============================================================
<S> <C> <C> <C> <C> <C> <C> <C>
115 440 HPA (*) (*) (*) (*) (*) (*)
- ------------------------------------------------------------------------------------------------
158 440 HPB (*) (*) (*) (*) (*) (*)
- ------------------------------------------------------------------------------------------------
132 440 HPD (*) (*) (*) (*) (*) (*)
- ------------------------------------------------------------------------------------------------
146 450 HP (*) (*) (*) (*) (*) (*)
- ------------------------------------------------------------------------------------------------
160 5789 (*) (*) (*) (*) (*) (*)
- ------------------------------------------------------------------------------------------------
164 445 HP (*) (*) (*) (*) (*) (*)
- ------------------------------------------------------------------------------------------------
103 7016 (*) (*) (*) (*) (*) (*)
- ------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------
Total (*) (*) (*) (*) (*) (*)
- ------------------------------------------------------------------------------------------------
</TABLE>
9/17/1999
(*) Denotes confidential information that has been omitted and filed
separately, accompanied by a confidential treatment request, with the
Securities and Exchange Commission pursuant to Rule 406 of the Securities
Act of 1933, as amended.
-26-
<PAGE>
Exhibit 23.2
Independent Auditors' Report and Consent
The Board of Directors
Entegris, Inc.:
The audits referred to in our report dated October 27, 1999, except as to
notes 7 and 21 which are as of December 22, 1999 and March 31, 2000, included
the related financial statement schedule as of August 31, 1999, and for each of
the years in the three-year period ended August 31, 1999, included in the
registration statement. This financial statement schedule is the responsibility
of the Company's management. Our responsibility is to express an opinion on
this financial statement schedule based on our audits. In our opinion based on
our audits and the reports of other auditors, such 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.
We consent to the use of our reports included herein and to the reference to
our firm under the heading "Experts" in the prospectus. Our reports with
respect to the 1997 and 1998 consolidated financial statements is based in part
on the report of other auditors.
/s/ KPMG LLP
Minneapolis, Minnesota
May 5, 2000
<PAGE>
Exhibit 23.3
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our report
dated October 8, 1998 included in Entegris, Inc.'s Form S-1 on the August 31,
1998 and 1997 consolidated financial statements of Empak, Inc. and subsidiaries
and to all references to our firm included in this registration statement.
/s/ Arthur Andersen LLP
Denver, Colorado
May 5, 2000
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> AUG-28-1999
<PERIOD-START> AUG-30-1998
<PERIOD-END> AUG-28-1999
<CASH> 16,411
<SECURITIES> 0
<RECEIVABLES> 44,099
<ALLOWANCES> 1,205
<INVENTORY> 35,047
<CURRENT-ASSETS> 105,365
<PP&E> 242,924
<DEPRECIATION> 125,300
<TOTAL-ASSETS> 242,064
<CURRENT-LIABILITIES> 56,505
<BONDS> 48,023
0
0
<COMMON> 184
<OTHER-SE> (20,991)
<TOTAL-LIABILITY-AND-EQUITY> 242,064
<SALES> 241,952
<TOTAL-REVENUES> 241,952
<CGS> 148,106
<TOTAL-COSTS> 148,106
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 213
<INTEREST-EXPENSE> 5,498
<INCOME-PRETAX> 11,297
<INCOME-TAX> 4,380
<INCOME-CONTINUING> 5,729
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,729
<EPS-BASIC> 0.10
<EPS-DILUTED> 0.09
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> AUG-29-1998
<PERIOD-START> AUG-31-1997
<PERIOD-END> AUG-29-1998
<CASH> 8,235
<SECURITIES> 0
<RECEIVABLES> 38,800
<ALLOWANCES> 1,322
<INVENTORY> 36,935
<CURRENT-ASSETS> 96,621
<PP&E> 236,900
<DEPRECIATION> 103,577
<TOTAL-ASSETS> 252,941
<CURRENT-LIABILITIES> 54,844
<BONDS> 67,547
0
0
<COMMON> 184
<OTHER-SE> 70,309
<TOTAL-LIABILITY-AND-EQUITY> 252,941
<SALES> 266,591
<TOTAL-REVENUES> 266,591
<CGS> 156,508
<TOTAL-COSTS> 156,508
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 57
<INTEREST-EXPENSE> 6,995
<INCOME-PRETAX> 17,913
<INCOME-TAX> 4,536
<INCOME-CONTINUING> 13,083
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 13,083
<EPS-BASIC> 0.22
<EPS-DILUTED> 0.21
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> AUG-30-1997
<PERIOD-START> SEP-01-1996
<PERIOD-END> AUG-30-1997
<CASH> 11,354
<SECURITIES> 0
<RECEIVABLES> 46,399
<ALLOWANCES> 1,489
<INVENTORY> 43,745
<CURRENT-ASSETS> 118,303
<PP&E> 203,203
<DEPRECIATION> 83,049
<TOTAL-ASSETS> 260,885
<CURRENT-LIABILITIES> 67,312
<BONDS> 74,412
0
0
<COMMON> 182
<OTHER-SE> 32,475
<TOTAL-LIABILITY-AND-EQUITY> 260,885
<SALES> 277,290
<TOTAL-REVENUES> 277,290
<CGS> 161,732
<TOTAL-COSTS> 161,732
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 404
<INTEREST-EXPENSE> 6,652
<INCOME-PRETAX> 26,335
<INCOME-TAX> 10,578
<INCOME-CONTINUING> 16,934
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 16,934
<EPS-BASIC> 0.28
<EPS-DILUTED> 0.27
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 6-MOS 6-MOS
<FISCAL-YEAR-END> AUG-27-2000 AUG-28-1999
<PERIOD-START> AUG-29-1999 AUG-30-1998
<PERIOD-END> FEB-26-2000 FEB-27-1999
<CASH> 25,029 4,825
<SECURITIES> 0 0
<RECEIVABLES> 58,672 40,315
<ALLOWANCES> 1,311 2,447
<INVENTORY> 35,132 34,604
<CURRENT-ASSETS> 130,176 98,495
<PP&E> 242,817 241,919
<DEPRECIATION> 130,617 113,091
<TOTAL-ASSETS> 266,540 248,164
<CURRENT-LIABILITIES> 60,064 56,190
<BONDS> 46,274 59,584
0 0
0 0
<COMMON> 368 184
<OTHER-SE> (60,379) 23,201
<TOTAL-LIABILITY-AND-EQUITY> 266,540 248,164
<SALES> 156,662 111,590
<TOTAL-REVENUES> 156,662 111,590
<CGS> 85,260 72,026
<TOTAL-COSTS> 85,260 72,026
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 106 245
<INTEREST-EXPENSE> 2,020 3,040
<INCOME-PRETAX> 34,468 1,369
<INCOME-TAX> 11,589 89
<INCOME-CONTINUING> 23,113 100
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 23,113 100
<EPS-BASIC> 0.39 0.00
<EPS-DILUTED> 0.36 0.00
</TABLE>
