<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 3, 2000
REGISTRATION NO. 333-95093
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
------------------------
AMENDMENT NO. 4
TO
FORM S-1
REGISTRATION STATEMENT
UNDER THE
SECURITIES ACT OF 1933
------------------------
CABOT MICROELECTRONICS CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
DELAWARE 3291 36-4324765
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
</TABLE>
------------------------
870 NORTH COMMONS DRIVE
AURORA, ILLINOIS 60504
(630) 375-6631
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
MATTHEW NEVILLE
CABOT MICROELECTRONICS CORPORATION
CHIEF EXECUTIVE OFFICER
870 NORTH COMMONS DRIVE
AURORA, ILLINOIS 60504
(630) 375-6631
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
------------------------
COPIES TO:
<TABLE>
<S> <C>
THOMAS W. CHRISTOPHER, ESQ. DUNCAN C. MCCURRACH, ESQ.
FRIED, FRANK, HARRIS, SHRIVER & JACOBSON SULLIVAN & CROMWELL
ONE NEW YORK PLAZA 125 BROAD STREET
NEW YORK, NEW YORK 10004 NEW YORK, NEW YORK 10004
(212) 859-8000 (212) 558-4000
</TABLE>
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
------------------------
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,
check the following box. [ ]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ] ----------
If this form is a post-effective amendment filed pursuant to Rule 462(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 registration statement for the same
offering. [ ] ----------
If delivery of the prospectus is expected to be made pursuant to Rule 434,
check the following box. [ ] ----------
------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
NUMBER OF PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF SECURITIES AGGREGATE OFFERING AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED TO BE REGISTERED PRICE PER SHARE(1) OFFERING PRICE(1) REGISTRATION FEE(2)
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, par value $.001 per
share................................ 4,600,000 $17.00 $78,200,000 $20,645
- ---------------------------------------------------------------------------------------------------------------------------------
Preferred Share Purchase Rights(3)..... 4,600,000 -- -- --
- ---------------------------------------------------------------------------------------------------------------------------------
Total.................................. 9,200,000 -- $78,200,000 $20,645
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(a) under the Securities Act of 1933.
(2) The Registrant previously paid a fee of $19,800 in connection with the
initial filing of the Registration Statement and an additional fee of $845
in connection with the filing of Amendment No. 2.
(3) The rights will initially trade together with the common stock. The value
attributable to the rights, if any, is reflected in the market price of the
common stock.
------------------------
THE REGISTRANT HEREBY AMENDS THE REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2
THE INFORMATION IN THIS PRELIMINARY PROSPECTUS IS NOT COMPLETE AND MAY BE
CHANGED. THESE SECURITIES MAY NOT BE SOLD UNTIL THE REGISTRATION
STATEMENT FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE.
THIS PRELIMINARY PROSPECTUS IS NOT AN OFFER TO SELL NOR DOES IT SEEK AN
OFFER TO BUY THESE SECURITIES IN ANY JURISDICTION WHERE THE OFFER OR SALE
IS NOT PERMITTED.
SUBJECT TO COMPLETION. DATED APRIL 3, 2000.
4,000,000 Shares
[cabot microelectronics logo]
Common Stock
------------------------
This is an initial public offering of shares of common stock of Cabot
Microelectronics Corporation. All of the 4,000,000 shares of common stock are
being sold by Cabot Microelectronics. We expect that all or substantially all of
the net proceeds of this offering will be paid to Cabot Corporation, our parent
corporation, in the form of a dividend.
Prior to this offering, there has been no public market for the common
stock. It is currently estimated that the initial public offering price per
share will be between $15.00 and $17.00. Our common stock has been approved for
listing on the Nasdaq National Market under the symbol "CCMP".
Upon completion of this offering, Cabot Corporation will directly own at
least 80% of our outstanding common stock and will continue to control us.
SEE "RISK FACTORS" BEGINNING ON PAGE 7 TO READ ABOUT FACTORS YOU SHOULD
CONSIDER BEFORE BUYING SHARES OF THE COMMON STOCK.
------------------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY OTHER REGULATORY BODY
HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
------------------------
<TABLE>
<CAPTION>
PER SHARE TOTAL
--------- -----
<S> <C> <C>
Initial public offering price............................. $ $
Underwriting discount..................................... $ $
Proceeds, before expenses, to Cabot Microelectronics...... $ $
</TABLE>
To the extent that the underwriters sell more than 4,000,000 shares of
common stock, the underwriters have the option to purchase up to an additional
600,000 shares from us at the initial public offering price less the
underwriting discount.
------------------------
The underwriters expect to deliver the shares on , 2000.
GOLDMAN, SACHS & CO.
MERRILL LYNCH & CO.
ROBERTSON STEPHENS
------------------------
Prospectus dated , 2000.
<PAGE> 3
INSIDE FRONT COVER
OUTSIDE PORTION OF GATEFOLD:
[Graphical depiction of the role of our CMP products in the microchip
manufacturing process and the applications in which microchips are used.]
Our products are an increasingly important part of the microchip manufacturing
process.
Our products play an important part in the manufacture of advanced integrated
circuit (IC) devices, which have become critical components in a wide variety of
products and applications -- computers, wireless communications,
telecommunications switches, personal data assistants, internet servers and many
more.
While we do not make the electronic products shown above, our CMP slurries play
a key role in manufacturing the IC devices used in those products.
LEFT-HAND PAGE OF GATEFOLD:
[Graphical depiction of cross-sections of IC devices, as taken from a silicon
wafer, with, and without, the chemical mechanical planarization process.]
We supply sophisticated polishing slurries that play a critical role in our
customers' manufacturing processes. Our products enable:
-- IC manufacturers to make smaller, faster and more complex devices and
improve their production processes
-- Hard disk drive manufacturers to significantly increase the storage
capacity and improve the speed and reliability of information exchange
CHEMICAL MECHANICAL PLANARIZATION -
Our polishing slurries are used in a process known as chemical mechanical
planarization (CMP). Using our slurries, manufacturers planarize, or level and
smooth, many of the multiple layers that are built upon silicon wafers to
produce IC devices. CMP is also used to remove excess materials that are
deposited on layers. Hard disk drive manufacturers use a similar process to
smooth the surface of the coatings on hard disks before depositing magnetic
media.
RIGHT-HAND PAGE OF GATEFOLD:
[Graphical depiction of CMP polishing process and example of Epic polishing
pad.]
CMP SLURRY -
CMP slurries are liquid compounds composed of high-purity deionized water,
chemical additives and abrasive agents that chemically interact with the surface
material at an atomic level. Our Semi-Sperse(R) and Lustra(TM) slurries are
formulated specifically for the particular surface to be polished.
CMP POLISHING PAD -
While we have not yet commenced commercial production, our Epic(TM) pads have
been designed to be used in conjunction with a CMP slurry to optimize the
polishing process. These pads play a critical role in achieving planarity and in
providing highly consistent and reliable CMP process results.
<PAGE> 4
PROSPECTUS SUMMARY
You should read the following summary together with the more detailed
information about our company and common stock and our financial statements and
the notes to those statements appearing elsewhere in this prospectus.
The information in this prospectus assumes that the initial public offering
price will be $16.00 per share, the midpoint of the range disclosed on the cover
of this prospectus.
Unless otherwise indicated, all references in this prospectus to us are to
Cabot Microelectronics, to Cabot Corporation are to Cabot and its subsidiaries
other than us, and to years are to our fiscal years ended September 30 of the
year indicated.
Unless otherwise indicated, all references in this prospectus to the number
of outstanding shares of our common stock give effect to an increase in the
number of our authorized shares of common stock from 5,000 shares to 200,000,000
shares and an 18,989.744 to 1 stock split, both of which will be effected prior
to the completion of this offering.
Unless otherwise indicated, all information in this prospectus assumes the
underwriters' option to purchase additional shares in this offering will not be
exercised.
OUR BUSINESS
We are the leading supplier of slurries used in chemical mechanical
planarization, or CMP, a polishing process used in the manufacturing of
integrated circuit, or IC, devices. CMP is an increasingly important part of the
IC device manufacturing process because it helps manufacturers make smaller,
faster and more complex IC devices and improves their production efficiency. CMP
slurries are liquids containing abrasives and chemicals that facilitate and
enhance the CMP polishing process. We believe that our products account for
approximately 80% of all CMP slurry revenue from IC device manufacturers
worldwide.
For the fiscal year ended September 30, 1999, our sales increased 68% over
the prior year to approximately $98.7 million and our net income increased 190%
over the prior year to approximately $12.3 million. On a pro forma basis, for
the fiscal year ended September 30, 1999, our sales would have been
approximately $97.7 million and our net income would have been approximately
$7.9 million. For the three months ended December 31, 1999, our sales increased
68% over the same period in the prior year to approximately $35.0 million and
our net income increased 142% over the same period in the prior year to
approximately $5.7 million. On a pro forma basis, for the three months ended
December 31, 1999, our sales would have been approximately $34.8 million and our
net income would have been approximately $4.7 million. For a discussion of the
pro forma adjustments, see "Unaudited Pro Forma Combined Statements of Income".
Since the first significant commercial sales of CMP slurries to the
semiconductor industry in the early 1990s, use of CMP in the production of IC
devices has grown rapidly. We estimate that sales of CMP slurries have grown at
an average annual compound rate of 60% since 1997 and increased to a total of
approximately $120 million for 1999.
CMP is used in the production of a wide variety of IC devices, including
logic devices, such as microprocessors, and memory chips that store computer
data. The benefits of CMP become increasingly important to IC device
manufacturers as the size of the devices shrink and their complexity increases.
By reducing the size of IC devices, manufacturers increase their throughput, or
the number of IC devices that they manufacture in a given time period. CMP also
helps reduce the number of defective or substandard IC devices produced, which
increases the device yield. Improvements in throughput and yield reduce an IC
device manufacturer's total production costs. Based on existing technology, we
believe that CMP is required for the efficient manufacturing of today's advanced
IC devices.
We have developed several different types and generations of slurries for
polishing
3
<PAGE> 5
the insulating layers of IC devices, historically
the most common use of CMP. We developed and introduced in 1994 a CMP slurry for
polishing the tungsten plugs used to connect the multiple wiring layers of IC
devices. In 1999, sales of CMP slurries for polishing insulating layers
represented approximately two-thirds of our total sales and sales of CMP
slurries for polishing tungsten plugs represented almost all of the balance.
We have also begun selling new slurries for CMP polishing of the magnetic
heads and the coating on hard disks in hard disk drives. In addition, we
recently began limited production of CMP polishing pads for customer evaluation
and qualification.
INDUSTRY TRENDS
The rapid growth of the CMP slurry market has been driven in large part by
the significant growth and technological advances the semiconductor industry has
experienced over the past decade. IC devices have become critical components in
an increasingly wide variety of products and applications and the use of IC
devices in these products and applications has grown significantly in recent
years. According to industry sources, the worldwide semiconductor market as
measured by total sales grew at an average annual compound rate of 11% in the
period from 1988 through 1998. We believe that worldwide revenues from the sale
of CMP slurries to IC device manufacturers grew to approximately $120 million in
1999. Industry surveys project that annual worldwide revenues in this market
will grow to between approximately $300 and $400 million by 2003.
STRATEGY
Our objective is to maximize our profitability and stockholder value by
maintaining and leveraging our leading position in the CMP slurry market. We
will pursue the following strategies to achieve our objective:
- - remain the technology leader in CMP slurries;
- - build and maintain customer intimacy;
- - expand globally;
- - attract and retain top quality personnel;
- - maintain top quality products and supply; and
- - expand into new applications and products.
RELATIONSHIP WITH CABOT CORPORATION
We are a wholly owned subsidiary of Cabot Corporation, a global chemical
manufacturing company based in Boston, Massachusetts. Prior to the transfer to
us of the assets and liabilities relating to our business, our business was
operated as a division of Cabot. After this offering, we will continue to be
controlled by Cabot, which will own at least 80% of the outstanding shares of
our common stock. As our controlling stockholder, Cabot will be able to approve
or reject major corporate transactions without the support of any other
stockholder, including a merger, consolidation or sale of substantially all our
assets.
Cabot has indicated that, following this offering, it intends to divest its
remaining equity interest in us by means of a distribution to its stockholders
within six to twelve months after the date of a private letter ruling from the
IRS confirming that the spin-off is tax-free to Cabot. This transaction is
sometimes referred to in this prospectus as the spin-off. Cabot may not complete
its divestiture of its remaining equity interest in us in this time frame or at
all.
We have entered into agreements with Cabot governing various interim and
ongoing relationships between us and Cabot. For a further discussion of these
agreements, see "Relationships Between Our Company and Cabot Corporation".
4
<PAGE> 6
THE OFFERING
<TABLE>
<S> <C>
Common stock offered by us................... 4,000,000 shares
Common stock to be outstanding after this
offering................................... 22,989,744 shares or 23,589,744 shares if the
underwriters exercise their over-allotment option in
full. These shares do not include 3,500,000 shares
reserved for issuance pursuant to options that we may
issue in the future pursuant to our stock option
plan. In addition, these shares do not include
475,000 shares available for purchase under our
employee stock purchase plan.
Use of proceeds.............................. We expect that all or substantially all of the net
proceeds of this offering will be paid to Cabot in
the form of a dividend.
Proposed Nasdaq symbol....................... CCMP
</TABLE>
----------------------
We were incorporated in Delaware in October 1999. Our principal executive
offices are located at 870 North Commons Drive, Aurora, Illinois, 60504. Our
telephone number at that location is (630) 375-6631.
5
<PAGE> 7
SUMMARY AND PRO FORMA FINANCIAL DATA
The following table presents our summary and pro forma condensed combined
financial data and has been derived from our audited financial statements for
the fiscal years ended September 30, 1997, 1998 and 1999 and from our unaudited
financial statements for the three months ended December 31, 1998 and 1999, each
of which are included elsewhere in this prospectus, and from our unaudited
financial statements for the fiscal years ended September 30, 1995 and 1996. The
unaudited interim financial information for the three month periods ended
December 31, 1998 and 1999 has been prepared on the same basis as the annual
financial statements and includes all adjustments, consisting only of normal
recurring adjustments, which management considers necessary for the fair
presentation of that financial information. The unaudited results for interim
periods are not necessarily indicative of results to be expected for any other
interim period or the full year. The unaudited pro forma combined statement of
operations data give effect to our new fumed metal oxide supply agreement and
new dispersion services agreement with Cabot, each of which will become
effective upon completion of this offering, as if they had been in effect since
October 1, 1998 and do not purport to represent our results of operations for
any future period. Because we began to operate as a separate division of Cabot
in July 1995, the statement of operations data for 1995 include only three
months of activity. As adjusted balance sheet data give effect to the proceeds
from the sale of 4,000,000 shares of common stock in this offering, the
dividends to Cabot and the transfer of our business from Cabot to us. The data
below should be read in conjunction with "Selected Financial Data", "Unaudited
Pro Forma Combined Statements of Income", "Management's Discussion and Analysis
of Financial Condition and Results of Operations" and our combined financial
statements and the notes to our combined financial statements, each of which is
included elsewhere in this prospectus.
An income tax benefit was recorded in 1997 as a result of a tax credit for
research and development activities that exceeded our statutory taxes for that
period.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED SEPTEMBER 30, DECEMBER 31,
THREE MONTHS --------------------------------------------------- ---------------------------
ENDED PRO PRO
SEPTEMBER 30, FORMA FORMA
1995 1996 1997 1998 1999 1999 1998 1999 1999
------------- ---- ---- ---- ---- ----- ---- ---- -----
(in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
COMBINED STATEMENT OF
OPERATIONS DATA:
Total revenue........ $5,003 $24,334 $35,211 $58,831 $98,690 $97,695 $20,875 $35,046 $34,804
Gross profit......... 1,978 10,987 15,290 29,176 50,799 45,223 10,839 18,858 17,554
Income (loss) before
income taxes....... 577 (1,513) 663 6,448 19,076 12,287 3,690 9,048 7,428
Net income (loss).... 355 (866) 708 4,237 12,280 7,910 2,377 5,748 4,719
</TABLE>
<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1999
------------------------
PRO FORMA
ACTUAL AS ADJUSTED
------ -----------
(in thousands)
<S> <C> <C>
COMBINED BALANCE SHEET DATA:
Cash........................................................ $ 103 $ 3,103
Working capital............................................. 25,293 27,280
Total assets................................................ 82,986 84,386
Current liabilities......................................... 7,402 8,415
Total liabilities........................................... 7,930 24,930
Division equity............................................. 75,056 59,456
Total liabilities and division equity....................... 82,986 84,386
</TABLE>
6
<PAGE> 8
RISK FACTORS
You should carefully consider the risks described below before you decide
to buy our common stock. If any of the following risks were to occur, our
business, financial condition or results of operations could suffer. In that
event, the trading price of our common stock could decline, and you may lose all
or part of your investment.
This prospectus contains forward-looking statements based on our current
expectations, assumptions, estimates and projections about our company and our
industry. These forward-looking statements involve risks and uncertainties. Our
actual results could differ materially from those anticipated in these
forward-looking statements as a result of various factors, as more fully
described below and elsewhere in this prospectus.
RISKS RELATING TO OUR BUSINESS
WE HAVE NEVER OPERATED AS A STAND-ALONE ENTITY AND OUR BUSINESS COULD SUFFER IF
WE FAIL TO DEVELOP THE SYSTEMS AND INFRASTRUCTURE NECESSARY TO SUPPORT OUR
BUSINESS AS A STAND-ALONE ENTITY
Following this offering, we will operate as a stand-alone entity and,
accordingly, must develop and implement the systems and infrastructure necessary
to support our current and future business. If we fail to develop these systems
and infrastructure, our business will suffer. We have been a part of Cabot since
we began developing CMP slurries in 1985. We were organized as a separate
division of Cabot in July 1995. Cabot has historically provided us with
operational, financial and other support. Although Cabot will provide us with
the various interim and ongoing services described in "Relationships Between Our
Company and Cabot Corporation", these arrangements will terminate upon the
spin-off. After the expiration of these various arrangements, we may not be able
to replace the interim and ongoing services on terms and conditions, including
costs, as favorable as those that we had as a division of Cabot or pursuant to
these arrangements. We also may not be able to develop the necessary systems and
infrastructure to operate as a stand-alone entity. Any failure to do so could
seriously harm our business, results of operations and financial condition.
BECAUSE OUR HISTORICAL FINANCIAL INFORMATION MAY NOT BE REPRESENTATIVE OF OUR
RESULTS AS A SEPARATE COMPANY, YOU HAVE LIMITED FINANCIAL INFORMATION ON WHICH
TO EVALUATE OUR BUSINESS AND YOUR INVESTMENT DECISION
The historical financial information we have included in this prospectus
may not reflect what our results of operations, financial position and cash
flows would have been had we been a separate, stand-alone entity during the
periods presented and may not be indicative of what our results of operations,
financial position and cash flows will be in the future. As a result, you have
limited information on which to evaluate our business and your investment
decision. This is because:
- - as a division of Cabot, Cabot provided us with various services and allocated
expenses for these services to us in amounts that may not have been the same
as the expenses we would have incurred had we performed or acquired these
services ourselves;
- - we are changing our fumed metal oxide supply and dispersion services
arrangements with Cabot and the prices that we will pay under our new
agreements will be higher than the prices we paid in the past; and
- - the information does not reflect other events and changes that will occur as a
result of our separation from Cabot, including the establishment of our
capital structure, the incurrence of debt and changes in our expenses as a
result of new employee, tax and other structures and matters.
WE HAVE A NARROW PRODUCT RANGE AND OUR PRODUCTS MAY BECOME OBSOLETE, OR
TECHNOLOGICAL CHANGES MAY REDUCE OR LIMIT INCREASES IN CMP CONSUMPTION
Our business is substantially dependent on a single class of products, CMP
slurries, which accounted for almost all of our revenue in 1999. Our business
would suffer if these products became obsolete or if consumption of these
products decreased. Our success depends on our ability to keep pace with
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<PAGE> 9
technological changes and advances in the
semiconductor industry and to adapt and improve our products in response to
evolving customer needs and industry trends. Since its inception the
semiconductor industry has experienced rapid technological changes and advances
in the design, manufacture, performance and application of IC devices and these
changes and advances are expected to continue in the future. One or more
developments in the semiconductor industry may render our products obsolete or
less important to the IC device manufacturing process, including:
- - increased competition from new or existing producers of CMP slurries,
including the introduction of new or substitute products;
- - a shift toward recycling slurries;
- - the adoption of a new process to create the wiring in IC devices, known as
dual damascene, which may reduce the number of CMP steps required to produce
an IC device and which we expect will become predominant in IC device
manufacturing in the next five to ten years; and
- - advances in CMP technology that make it possible to perform CMP without a
slurry.
There may also be physical and other limits on the ability of IC device
manufacturers to continue to shrink the size and increase the density of IC
devices, which are trends currently driving the growth in CMP. Any of the
foregoing developments could cause a decline in the CMP slurry market in general
or seriously harm our business, financial condition and results of operations in
particular.
A SIGNIFICANT AMOUNT OF OUR BUSINESS COMES FROM A LIMITED NUMBER OF LARGE
CUSTOMERS AND OUR REVENUE AND PROFITS COULD DECREASE SIGNIFICANTLY IF WE LOST
ONE OR MORE OF THEM AS CUSTOMERS
Our customer base is concentrated among a limited number of large
customers. One or more of these principal customers may stop buying CMP slurries
from us or may substantially reduce the quantity of CMP slurries they purchase
from us. Any cancellation, deferral or significant reduction in CMP slurries
sold to these principal customers or a significant number of smaller customers
could seriously harm our business, financial condition and results of
operations.
For 1999, our five largest customers accounted for approximately 58% of our
revenue, with Intel accounting for approximately 22% of our revenue, Marketech
accounting for approximately 15% of our revenue, and Takasago accounting for
approximately 10% of our revenue. Marketech and Takasago are distributors. We
believe that in the same year sales of our products to our five largest end user
customers accounted for approximately 45% of our revenue. For the three months
ended December 31, 1999, our five largest customers accounted for approximately
53% of our revenue, with Intel accounting for approximately 14% of our revenue,
Marketech accounting for approximately 15% of our revenue, and Takasago
accounting for approximately 11% of our revenue. The decline in the percentage
of our total revenue attributable to sales to Intel resulted from, among other
things, Intel's decision to significantly reduce purchases of one type of CMP
slurry from us. See "Business -- Customers, Sales and Marketing" for more
information relating to our customers.
IF WE LOSE PENDING OR FUTURE INTELLECTUAL PROPERTY LAWSUITS RELATING TO OUR
BUSINESS, WE COULD BE LIABLE FOR SIGNIFICANT DAMAGES AND LEGAL EXPENSES AND
COULD BE ENJOINED FROM MANUFACTURING OUR SLURRY PRODUCTS
Cabot is currently the subject of two lawsuits against it involving
infringement claims relating to our business. If Cabot or we were to lose these
or future lawsuits, we could be liable for significant damages and legal
expenses and could be enjoined from manufacturing our slurry products. Although
Cabot is the only named defendant in these lawsuits, we have agreed to indemnify
Cabot for any and all losses and expenses arising out of this litigation as well
as any other litigation arising out of our business.
In June 1998, Rodel, Inc. commenced a lawsuit against Cabot in the United
States District Court for the District of Delaware seeking injunctive relief and
damages relating to allegations that Cabot is infringing a United
8
<PAGE> 10
States patent owned by an affiliate of Rodel that relates to polishing metal
surfaces. In April 1999, Rodel commenced a second lawsuit against Cabot in the
same court seeking injunctive relief and damages relating to allegations that
Cabot is infringing two other United States patents owned by an affiliate of
Rodel. Rodel may claim that many of our products infringe its patents. The
defense of these claims may not be successful. If Rodel wins either of these
cases, we may have to pay damages and, in the future, may be prohibited from
producing any products found to infringe those patents or required to pay Rodel
royalty and licensing fees with respect to sales of those products. For a
further description of these lawsuits, see "Business -- Legal Proceedings".
In addition, we may be subject to future infringement claims by Rodel or
others with respect to our products and processes. These claims, even if they
are without merit, could be expensive and time consuming to defend and if we
were to lose any future infringement claims we could be subject to injunctions,
damages and/or royalty or licensing agreements. Royalty or licensing agreements,
if required as a result of any pending or future claims, may not be available to
us on acceptable terms or at all.
ANY PROBLEM OR INTERRUPTION IN OUR SUPPLY FROM CABOT OF FUMED METAL OXIDES, OUR
MOST IMPORTANT RAW MATERIALS, COULD DELAY OUR SLURRY PRODUCTION AND ADVERSELY
AFFECT OUR SALES
Fumed metal oxides are the primary raw materials we use in many of our CMP
slurries. Our business would suffer from any problem or interruption in our
supply of fumed metal oxides.
Cabot is currently our exclusive supplier of fumed metal oxides. We have
entered into a fumed metal oxide supply agreement with Cabot, which will be
effective upon completion of this offering and under which Cabot will continue
to be our exclusive supplier of fumed metal oxides for our current slurry
products. We also expect that Cabot will be our primary supplier of fumed metal
oxides for products that we develop in the future. Our continued supply of fumed
metal oxides from Cabot is subject to a number of risks, including:
- - the destruction of one of Cabot's fumed metal oxides manufacturing facilities,
particularly its Tuscola facility, or its distribution infrastructure;
- - a work stoppage or strike by Cabot employees who manufacture fumed metal
oxides;
- - the failure of Cabot to provide fumed metal oxides of the requisite quality
for production of our various CMP slurries;
- - the failure of essential fumed metal oxides manufacturing equipment at a Cabot
plant;
- - the failure or shortage of supply of raw materials to Cabot; and
- - contractual amendments and disputes with Cabot, including those relating to
the fumed metal oxide supply agreement.
Any of these factors could interfere with our ability to produce our CMP
slurries in the quantities and of the quality required by our customers and in
accordance with their delivery schedules. It may also be difficult to secure
alternative sources of fumed metal oxides in the event Cabot encounters supply
problems.
In addition, if we change the supplier or type of fumed metal oxides that
we use to make our CMP slurries or are required to purchase them from a
different Cabot manufacturing facility, our customers might be forced to
requalify our CMP slurries for their manufacturing processes and products. The
requalification process would likely take a significant amount of time to
complete, during which our sales of CMP slurries to these customers could be
interrupted or reduced. For a further discussion of the qualification and
requalification process for CMP slurries, see "Business -- CMP slurries".
We have also specifically engineered our slurry chemistries with the fumed
metal oxides currently used in the production of our CMP products. A change in
the fumed metal oxides we use to make our slurry products could require us to
modify our chemistries.
9
<PAGE> 11
This modification may involve a significant amount of time and cost to complete
and therefore have an adverse effect on our business and sales.
OUR BUSINESS COULD BE SERIOUSLY HARMED IF OUR EXISTING OR FUTURE COMPETITORS
DEVELOP SUPERIOR SLURRY PRODUCTS OR OFFER BETTER PRICING TERMS OR SERVICE, OR IF
ANY OF OUR MAJOR CUSTOMERS DEVELOP IN-HOUSE SLURRY MANUFACTURING CAPABILITY
Increased competition from current CMP slurry manufacturers, new entrants
to the CMP slurry market or a decision by any of our major customers to produce
slurry products in-house could seriously harm our business and results of
operations. We are aware of only four other manufacturers of CMP slurries
currently selling significant volumes to IC device manufacturers. Opportunities
exist for companies with sufficient financial or technological resources to
emerge as potential competitors by developing their own CMP slurry products.
Some of our major customers, and some potential customers, currently manufacture
slurries in-house and others have the financial and technological capability to
do so. The existence or threat of increased competition and in-house production
could limit or reduce the prices we are able to charge for our slurry products.
In addition, our competitors may have or obtain intellectual property rights
which may restrict our ability to market our existing products and/or to
innovate and develop new products.
OUR INABILITY TO ATTRACT AND RETAIN KEY MANAGEMENT PERSONNEL OR TECHNICAL
EMPLOYEES COULD CAUSE OUR BUSINESS TO SUFFER
If we fail to recruit and retain the necessary management personnel, our
business and our ability to maintain existing and obtain new customers, develop
new products and provide acceptable levels of customer service could suffer. The
success of our business is also heavily dependent on the leadership of our key
management personnel, all of whom are employees-at-will. We have no key man
insurance on any of our personnel. The loss of any number of our key management
personnel could harm our business and results of operations.
Our success also depends on our ability to recruit, retain and motivate
technical personnel for our research and development activities. Competition for
qualified personnel, particularly those with significant experience in the CMP
and IC device industries, is intense, and we may not be able to successfully
recruit, train or retain these employees. The loss of the services of any key
technical employee could harm our business generally as well as our ability to
research and develop new and existing products and to provide technical support
and service to our customers.
After indicating his desire to leave our company in January 2000, Chris Yu,
our former Director of Research and Technology, decided to resign from that
position but to remain with our company and focus on product development of CMP
slurries for copper-based applications and technology-based applications for
customers.
BECAUSE WE HAVE LIMITED EXPERIENCE IN MANUFACTURING AND SELLING CMP POLISHING
PADS AND SLURRIES FOR CMP POLISHING OF THE MAGNETIC HEADS AND THE COATING ON
HARD DISKS IN HARD DISK DRIVES, EXPANSION OF OUR BUSINESS INTO THESE AREAS AND
APPLICATIONS MAY NOT BE SUCCESSFUL
An element of our strategy is to leverage our current customer
relationships and technological expertise to expand our business into new
product areas and applications, including manufacturing CMP polishing pads and
slurries for CMP polishing of the magnetic heads and the coating on hard disks
in hard disk drives. We have had limited experience in developing and marketing
these products, particularly polishing pads, which involve technologies and
production processes that are new to us. For these reasons, the expansion of our
business into these new product areas or applications may not be successful. For
a more detailed discussion of the risks we might encounter in entering the
market for polishing pads, see "Business -- Polishing Pads".
10
<PAGE> 12
BECAUSE WE RELY HEAVILY ON OUR INTELLECTUAL PROPERTY, OUR FAILURE TO ADEQUATELY
PROTECT IT COULD SERIOUSLY HARM OUR BUSINESS
Protection of intellectual property is particularly important in our
industry because CMP slurry manufacturers develop complex and technical formulas
for CMP slurries which are proprietary in nature and differentiate their
products from those of competitors. Our intellectual property is important to
our success and ability to compete. We attempt to protect our intellectual
property rights through a combination of patent, trademark, copyright and trade
secret laws, as well as employee and third-party nondisclosure and assignment
agreements. Our failure to obtain or maintain adequate protection of our
intellectual property rights for any reason could seriously harm our business.
Policing the unauthorized use of our intellectual property is difficult,
and the steps we have taken may not detect or prevent the misappropriation or
unauthorized use of our technologies. In addition, other parties may
independently develop or otherwise acquire the same or substantially equivalent
technologies to ours.
WE ARE SUBJECT TO SOME RISKS ASSOCIATED WITH OUR FOREIGN OPERATIONS
We currently have operations and a large customer base outside the United
States. For 1999, approximately 46% of our revenue was generated by sales to
customers outside the United States. For the three months ended December 31,
1999, approximately 50% of our revenue was generated by sales to customers
outside the United States. We encounter potential risks in doing business in
foreign countries, including:
- - the difficulty of enforcing agreements and collecting receivables through some
foreign legal systems;
- - foreign customers may have longer payment cycles than customers in the United
States;
- - tax rates in some foreign countries may exceed those of the United States and
foreign earnings may be subject to withholding requirements or the imposition
of tariffs, exchange controls or other restrictions;
- - general economic and political conditions in the countries where we operate
may have an adverse effect on our operations in those countries;
- - the difficulties associated with managing a large organization spread
throughout various countries; and
- - the potential difficulty in enforcing intellectual property rights in some
foreign countries.
As we continue to expand our business globally, our success will depend, in
part, on our ability to anticipate and effectively manage these and other risks.
EXCHANGE RATE FLUCTUATIONS COULD ADVERSELY AFFECT OUR FINANCIAL RESULTS
As a result of our international operations, we expect to generate an
increasing portion of our revenue and incur a significant portion of our
expenses in currencies other than U.S. dollars. To the extent we are unable to
match revenue received in foreign currencies with costs paid in the same
currency, exchange rate fluctuations in any foreign currency could have a
negative impact on our financial condition or results of operations.
The financial condition and results of operations of some of our operating
entities are reported in various foreign currencies and then translated into
U.S. dollars at the applicable exchange rate for inclusion in our consolidated
financial statements. As a result, appreciation of the U.S. dollar against these
foreign currencies will have a negative impact on our reported revenue and
operating profits. For information about the impact of foreign currency
translation on our financial condition, see "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Effect of Currency
Exchange Rate and Exchange Rate Risk Management" and "-- Market Risk and
Sensitivity Analysis".
11
<PAGE> 13
OUR ABILITY TO RAISE CAPITAL IN THE FUTURE MAY BE LIMITED AND THIS MAY LIMIT OUR
ABILITY TO EXPAND OUR BUSINESS AND IMPROVE OUR TECHNOLOGY
We plan to expand our business and continue to improve our technology. To
do so we may be required to raise additional funds in the future through public
or private equity or debt financing, strategic relationships or other
arrangements. Financing may not be available on acceptable terms, or at all, and
our failure to raise capital when needed could negatively impact our financial
condition or results of operations. Because we have agreed with Cabot that we
will not issue any securities if doing so would reduce Cabot's ownership of us
to less than 80.5% prior to the spin-off, our ability to raise capital through
further sales of equity securities is limited until the spin-off occurs.
Additional equity financing may be dilutive to the holders of our common stock
and debt financing, if available, may involve restrictive covenants. For a
discussion of our liquidity and capital resources, see "Management's Discussion
and Analysis of Financial Condition and Results of Operations -- Liquidity and
Capital Resources".
RISKS RELATING TO OUR SEPARATION FROM CABOT
WE WILL BE CONTROLLED BY CABOT AS LONG AS IT OWNS A MAJORITY OF OUR COMMON STOCK
AND OUR OTHER STOCKHOLDERS WILL BE UNABLE TO AFFECT THE OUTCOME OF STOCKHOLDER
VOTING DURING THAT TIME
After the completion of this offering, Cabot will beneficially own
approximately 82.6% of our outstanding shares of common stock, or 80.5% if the
underwriters exercise their over-allotment option in full. Under the initial
public offering and distribution agreement, Cabot will have the right to
maintain an 80.5% ownership of our common stock until the spin-off. As long as
Cabot owns a majority of our outstanding common stock, Cabot will continue to be
able to elect our entire board of directors and generally to determine the
outcome of all corporate actions requiring stockholder approval. As a result,
Cabot will be in a position to continue to control all matters affecting our
company. For a discussion of these matters, see "Relationships between Our
Company and Cabot Corporation -- Cabot as Our Controlling Stockholder".
Cabot has indicated that it intends to divest its remaining equity interest
in us within six to twelve months after the date of a private letter ruling from
the IRS confirming that the spin-off is tax-free to Cabot. However, Cabot may
not complete a divestiture of its remaining equity interest in us in this time
frame or at all.
A NUMBER OF OUR DIRECTORS MAY HAVE CONFLICTS OF INTEREST BECAUSE THEY ARE ALSO
DIRECTORS OR EXECUTIVE OFFICERS OF CABOT OR OWN CABOT STOCK
Three members of our board of directors are directors or executive officers
of Cabot. Our directors who are also directors or executive officers of Cabot
will have obligations to both companies and may have conflicts of interest with
respect to matters involving or affecting us, such as acquisitions and other
corporate opportunities that may be suitable for both us and Cabot. In addition,
after this offering and the spin-off, a number of our directors and executive
officers will continue to own Cabot stock and options on Cabot stock they
acquired as employees of Cabot. This ownership could create, or appear to
create, potential conflicts of interest when these directors and officers are
faced with decisions that could have different implications for our company and
Cabot. While there will be provisions in our certificate of incorporation
designed to resolve these conflicts in a manner that is fair to both us and
Cabot, these conflicts may not ultimately be resolved in a fair manner to both
parties. See "Description of Capital Stock -- Corporate Opportunities".
WE MAY HAVE CONFLICTS WITH CABOT WITH RESPECT TO OUR PAST AND ONGOING
RELATIONSHIPS
We may have conflicts with Cabot after this offering that we cannot resolve
and, even if we are able to do so, the resolution of these conflicts may not be
as favorable as if we were dealing with an unaffiliated party. Upon the
completion of this offering, Cabot will continue to be our exclusive supplier of
12
<PAGE> 14
fumed metal oxides for our existing slurries under a fumed metal oxide supply
agreement between Cabot and our company. While we are not required to do so
under the terms of that agreement, we expect we also will purchase from Cabot
most of the fumed metal oxides we require for any new slurries we develop.
Furthermore, we currently have and, after this offering and the spin-off will
continue to have, contractual arrangements with Cabot requiring Cabot and its
affiliates to provide us with various interim, ongoing and other services. As a
result, conflicts of interest may arise between Cabot and us in a number of
areas relating to our past and ongoing relationships, including:
- - the terms of our fumed metal oxide supply agreement and other interim and
ongoing agreements with Cabot;
- - Cabot's ability to control our management and affairs;
- - the nature, quality and pricing of transitional services Cabot has agreed to
provide us;
- - business opportunities that may be attractive to both Cabot and us;
- - litigation, labor, tax, employee benefit and other matters arising from our
separation from Cabot;
- - the incurrence of debt and major business combinations by us; and
- - sales or distributions by Cabot of all or any portion of its ownership
interest in us.
In addition, the contractual agreements we have with Cabot may be amended
from time to time upon agreement between the parties and, as long as Cabot is
our controlling stockholder, it will have the ability to require us to agree to
any such amendments. These agreements were made in the context of an affiliated
relationship and were negotiated in the overall context of our separation from
Cabot. The prices and other terms under these agreements may be less favorable
to us than what we could have obtained in arm's-length negotiations with
unaffiliated third parties for similar services or under similar leases. It is
particularly difficult to assess whether the price for fumed metal oxides
provided for under our fumed metal oxide supply agreement with Cabot is the same
as or different than the price we could have obtained in arm's-length
negotiations with an unaffiliated third party in light of the long-term nature
of the contract, the volumes provided for under the agreement and our particular
quality requirements. For more information about these arrangements, see
"Business -- Cabot as Our Raw Materials Supplier", "Business -- Dispersion
Services Agreement with Cabot" and "Relationships Between Our Company and Cabot
Corporation".
WE FACE RISKS ASSOCIATED WITH BEING A MEMBER OF CABOT'S CONSOLIDATED GROUP FOR
FEDERAL INCOME TAX PURPOSES
For so long as Cabot continues to own 80% of the vote and value of our
capital stock, we will be included in Cabot's consolidated group for federal
income tax purposes. Under a tax sharing agreement with Cabot that will become
effective upon completion of this offering, we will pay Cabot the amount of
federal, state and local income taxes that we would be required to pay to the
relevant taxing authorities if we were a separate taxpayer not included in
Cabot's consolidated or combined returns. In addition, by virtue of its
controlling ownership and the tax sharing agreement, Cabot will effectively
control substantially all of our tax decisions. Under the tax sharing agreement,
Cabot will have sole authority to respond to and conduct all tax proceedings
including tax audits relating to Cabot consolidated or combined income tax
returns in which we are included. Moreover, notwithstanding the tax sharing
agreement, federal law provides that each member of a consolidated group is
liable for the group's entire tax obligation. Thus, to the extent Cabot or other
members of the group fail to make any federal income tax payments required of
them by law, we could be liable for the shortfall. Similar principles may apply
for state income tax purposes in many states.
IF THE ANTICIPATED SPIN-OFF IS NOT TAX-FREE, WE COULD BE LIABLE TO CABOT FOR THE
RESULTING TAXES
As described above under "Prospectus Summary -- Relationship with Cabot
Corpo-
13
<PAGE> 15
ration", we will, after this offering, continue to be controlled by Cabot and
Cabot intends to divest itself of its remaining equity interest in us by means
of a tax-free spin-off. We will agree to indemnify Cabot in the event that the
spin-off is not tax-free to Cabot as a result of various actions taken by or
with respect to us or our failure to take various actions, all as to be set
forth in our tax sharing agreement with Cabot. We may not be able to control
some of the events that could trigger this liability. In particular, any
acquisition of us by a third party within two years of the spin-off could result
in the spin-off becoming a taxable transaction and give rise to our obligation
to indemnify Cabot for any resulting tax liability. For a discussion of the
other actions which could give rise to our obligation to indemnify Cabot if the
spin-off is not tax-free to Cabot, see "Relationships Between Our Company and
Cabot Corporation -- Tax Sharing Agreement".
RISKS RELATING TO THIS OFFERING
SINCE OUR COMMON STOCK HAS NOT TRADED PUBLICLY, THE INITIAL PUBLIC OFFERING
PRICE MAY NOT BE INDICATIVE OF THE MARKET PRICE OF OUR COMMON STOCK AFTER THIS
OFFERING, AND THE MARKET PRICE OF OUR COMMON STOCK MAY FLUCTUATE WIDELY AND
RAPIDLY
There is currently no public market for our common stock, and an active
trading market may not develop or be sustained after this offering. The initial
public offering price has been determined through negotiation between us and
representatives of the underwriters and may not be indicative of the market
price for our common stock after this offering.
The market price of our common stock could fluctuate significantly as a
result of:
- - economic and stock market conditions generally and specifically as they may
impact participants in the semiconductor industry;
- - changes in financial estimates and recommendations by securities analysts
following our stock;
- - earnings and other announcements by, and changes in market evaluations of,
participants in the semiconductor industry;
- - changes in business or regulatory conditions affecting participants in the
semiconductor industry;
- - announcements or implementation by us or our competitors of technological
innovations or new products; and
- - trading volume of our common stock.
The securities of many companies have experienced extreme price and volume
fluctuations in recent years, often unrelated to the companies' operating
performance. Specifically, market prices for securities of technology related
companies have frequently reached elevated levels, often following their initial
public offerings. These levels may not be sustainable and may not bear any
relationship to these companies' operating performances. If the market price of
our common stock reaches an elevated level following this offering, it may
materially and rapidly decline. In the past, following periods of volatility in
the market price of a company's securities, stockholders have often instituted
securities class action litigation against the company. If we were involved in a
class action suit, it could divert the attention of senior management, and, if
adversely determined, have a negative impact on our business, results of
operations and financial condition.
THE ACTUAL OR POSSIBLE SALE OF OUR SHARES BY CABOT, WHICH WILL OWN MORE THAN 80%
OF OUR OUTSTANDING SHARES, COULD DEPRESS OR REDUCE THE MARKET PRICE OF OUR
COMMON STOCK OR CAUSE OUR SHARES TO TRADE BELOW THE PRICES AT WHICH THEY WOULD
OTHERWISE TRADE
The market price of our common stock could drop as a result of sales of a
large number of shares of our common stock in the market after this offering or
the perception that these sales could occur. These factors also could make it
more difficult for us to raise funds through future offerings of our common
stock.
Upon the completion of this offering, there will be 22,989,744 shares of
our common stock outstanding, assuming the underwriters do not exercise their
option to purchase additional shares from us. Based on the same assumption,
after this offering
14
<PAGE> 16
Cabot will beneficially own 82.6% of our outstanding common stock. The shares of
our common stock sold in this offering will be freely tradable without
restriction, except for any shares acquired by an affiliate of our company
(which can be sold under Rule 144 under the Securities Act, subject to various
volume and other limitations). Cabot is not obligated to retain these shares,
except that subject to limited exceptions, it has agreed not to sell or
otherwise dispose of any shares of common stock for 180 days after the
completion of this offering without the consent of our underwriters. After the
expiration of this 180 day period, Cabot could dispose of its shares of our
common stock through a public offering, spin-off or other transaction and has
indicated its intention to do so through a spin-off.
ANTI-TAKEOVER PROVISIONS UNDER OUR CERTIFICATE OF INCORPORATION AND BYLAWS, OUR
RIGHTS PLAN AND DELAWARE GENERAL CORPORATION LAW MAY ADVERSELY AFFECT THE PRICE
OF OUR COMMON STOCK, DISCOURAGE THIRD PARTIES FROM MAKING A BID FOR OUR COMPANY
OR REDUCE ANY PREMIUMS PAID TO OUR STOCKHOLDERS FOR THEIR COMMON STOCK
Amendments we intend to make to our certificate of incorporation, our
bylaws, our rights plan and various provisions of the Delaware General
Corporation Law may make it more difficult to effect a change in control of our
company. These amendments, our bylaws, our rights plan and the various
provisions of Delaware General Corporation Law may adversely affect the price of
our common stock, discourage third parties from making a bid for our company or
reduce any premiums paid to our stockholders for their common stock. For
example, we intend to amend our certificate of incorporation to authorize our
board of directors to issue up to 20 million shares of blank check preferred
stock and to attach special rights and preferences to this preferred stock. The
issuance of this preferred stock may make it more difficult for a third party to
acquire control of us. We also intend to amend our certificate of incorporation
to provide for the division of our board of directors into three classes as
nearly equal in size as possible with staggered three-year terms. This
classification of our board of directors could have the effect of making it more
difficult for a third party to acquire our company, or of discouraging a third
party from acquiring control of our company. In addition, the rights issued to
our stockholders under our rights plan may make it more difficult or expensive
for another person or entity to acquire control of us without the consent of our
board of directors. See "Description of Capital Stock -- Preferred Stock",
"-- Anti-takeover Effects of Our Certificate of Incorporation and Bylaws and
Provisions of Delaware Law" and "-- Rights Plan" for a more complete description
of our capital stock, our certificate of incorporation, our rights plan and the
effects of the Delaware General Corporation Law that could hinder a third
party's attempts to acquire control of us.
INVESTORS IN THIS OFFERING WILL EXPERIENCE IMMEDIATE AND SUBSTANTIAL DILUTION
If you purchase common stock in this offering, you will pay more for your
shares than the amounts paid by Cabot for its shares. As a result, you will
experience immediate and substantial dilution of approximately $13.58 per share,
representing the difference between the assumed initial public offering price of
$16.00 per share and our net tangible book value per share as of December 31,
1999 after giving effect to this offering. In addition, you may experience
further dilution to the extent that shares of our common stock are issued upon
the exercise of stock options or under our employee stock purchase plan. The
shares initially issuable under our employee stock purchase plan will be issued
at a purchase price less than the public offering price per share in this
offering. In addition, some of the stock options we may issue in the future may
have exercise prices below the initial public offering price. See "Dilution" for
a more complete description of how the value of your investment in our common
stock will be diluted upon the completion of this offering.
15
<PAGE> 17
USE OF PROCEEDS
We estimate the net proceeds from our sale of 4,000,000 shares of common
stock will be $57.2 million, after deducting the underwriting discount and
estimated expenses of this offering and of the asset transfer. If the
underwriters' over-allotment option is exercised in full, we estimate the net
proceeds will be $66.1 million.
We intend to use all of the net proceeds from this offering to pay a
dividend to Cabot in an amount equal to the lesser of the amount of the net
proceeds and Cabot's tax basis in us as of the completion of this offering. Any
net proceeds not used for this purpose will be used for general working capital
purposes. See "Capitalization" for a further discussion of Cabot's tax basis in
us.
DIVIDEND POLICY
Except for the $17.0 million dividend that we expect to pay to Cabot prior
to the completion of this offering using borrowings under our term credit
facility and the dividend that we expect to pay to Cabot immediately following
the completion of this offering, we have never declared or paid any cash
dividends on our capital stock. We presently intend to retain future earnings,
if any, to finance the expansion of our business and do not expect to pay any
cash dividends in the foreseeable future. Payment of future cash dividends, if
any, will be at the discretion of our board of directors after taking into
account various factors, including our financial condition, operating results,
current and anticipated cash needs and plans for expansion.
16
<PAGE> 18
CAPITALIZATION
Prior to the completion of this offering, we expect to borrow $17.0 million
under our new term credit facility and to pay the proceeds of this borrowing to
Cabot as a dividend. We also intend to pay a subsequent dividend to Cabot at the
completion of this offering in an amount equal to the lesser of the net proceeds
of this offering and Cabot's estimated tax basis in us as of the completion
date.
Cabot's estimated tax basis in us was approximately $71.2 million at
December 31, 1999. This estimated tax basis is expected to increase as a result
of our earnings and any capital contributions made by Cabot after December 31,
1999 and will decrease by the $17.0 million that we will pay to Cabot as a
dividend from borrowings under our term credit facility. After payment of this
dividend, Cabot estimates that its tax basis in us as of the completion date
will be approximately $66.2 million.
The following table sets forth, as of December 31, 1999, our capitalization
on an actual basis and on a pro forma as adjusted basis to give effect to:
- - our borrowing of $17.0 million under our term credit facility;
- - our payment to Cabot of a cash dividend of $17.0 million from the borrowing
under our term credit facility;
- - our receipt of net proceeds from this offering equal to $57.2 million, which
is based on an assumed initial public offering price of $16.00 per share,
estimated underwriting discounts and expenses of $6.8 million and the
assumption that the underwriters do not exercise their option to acquire
additional shares from us;
- - our payment to Cabot of a cash dividend of $54.2 million, which represents
Cabot's estimated tax basis in us at December 31, 1999 ($71.2 million) minus
the $17.0 million dividend we intend to pay to Cabot from the borrowing under
our term credit facility; and
- - the retention by Cabot of the fumed alumina plant in Tuscola, Illinois and the
land and building at Cabot's dispersions facility in Barry, Wales (the total
value of all of these assets was approximately $1.6 million at December 31,
1999).
The foregoing adjustments are based on Cabot's estimated tax basis in us at
December 31, 1999 of $71.2 million. While we expect that Cabot's estimated tax
basis in us will increase prior to the completion date of this offering as a
result of our earnings and any capital contributions made by Cabot after
December 31, 1999, these earnings and capital contributions will increase our
Division equity by about the same amount. As noted above, Cabot estimates that
its tax basis in us as of the completion date after payment of the $17.0 million
dividend referred to above will be approximately $66.2 million. If we had used
this estimated tax basis in the foregoing adjustments, then the amount of the
second dividend to Cabot would have been $57.2 million, the total assumed net
proceeds of this offering (because they are less than the $66.2 million
estimated tax basis).
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<PAGE> 19
This table should be read in conjunction with "Selected Financial Data",
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and our combined financial statements and the notes to our combined
financial statements, each of which is included in this prospectus.
<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1999
------------------------
PRO FORMA
ACTUAL AS ADJUSTED
------ -----------
(in thousands)
<S> <C> <C>
Total long term debt, less current portion of $1,013........ $ -- $15,987
Division equity............................................. 75,056 59,456
------- -------
Total capitalization.............................. $75,056 $75,443
======= =======
</TABLE>
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<PAGE> 20
DILUTION
Our net tangible book value as of December 31, 1999 was approximately $71.2
million, or $3.75 per share. Net tangible book value per share is equal to our
total tangible assets minus our total liabilities divided by the number of
shares of our common stock outstanding. Assuming we had sold the 4,000,000
shares of common stock offered by this prospectus at an assumed initial public
offering price of $16.00 per share, and after deducting discounts and
commissions and estimated offering expenses payable by us and the two dividend
payments to Cabot referred to above under "Capitalization" totaling $71.2
million, our pro forma net tangible book value at December 31, 1999 would have
been approximately $55.6 million, or $2.42 per share. This represents an
immediate decrease in net tangible book value of $1.33 per share to Cabot and an
immediate dilution of $13.58 per share to new investors. Dilution is determined
by subtracting net tangible book value per share after the offering from the
amount of cash paid by a new investor for a share of common stock. The following
table illustrates the substantial and immediate per share dilution to new
investors:
<TABLE>
<CAPTION>
PER SHARE
----------------
<S> <C> <C>
Assumed initial public offering price....................... $16.00
Net tangible book value as of December 31, 1999........... $ 3.75
Dividend payments to Cabot................................ (3.75)
Increase in pro forma net tangible book value attributable
to new investors....................................... 2.42
------
Pro forma net tangible book value after this offering....... 2.42
------
Dilution to new investors................................... $13.58
======
</TABLE>
The following table summarizes as of December 31, 1999 the number of shares
of common stock purchased from us, the total consideration paid to us and the
average price per share paid by Cabot and by new investors at an assumed initial
public offering price of $16.00 per share and without giving effect to the
underwriting discount and assumed offering expenses:
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION
--------------------- ---------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
------ ------- ------ ------- -------------
<S> <C> <C> <C> <C> <C>
Existing stockholders......... 18,989,744 82.6% $ 4,870,000 7.1% $ 0.26
New investors................. 4,000,000 17.4 64,000,000 92.9 16.00
---------- ----- ----------- ------
Total....................... 22,989,744 100.0% $68,870,000 100.0%
========== ===== =========== ======
</TABLE>
If the underwriters exercise their over-allotment option in full, the net
tangible book value per share of common stock as of December 31, 1999 would have
been $2.73 per share, which would result in dilution to the new investors of
$13.27 per share, and the number of shares held by the new investors will
increase to 4,600,000, or 19.5% of the total number of shares to be outstanding
after this offering, and the number of shares held by Cabot will be 18,989,744
shares, or 80.5% of the total number of shares to be outstanding after this
offering.
19
<PAGE> 21
SELECTED FINANCIAL DATA
The following selected financial data should be read in conjunction with,
and are qualified by reference to, "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and our combined financial
statements and the notes to our combined financial statements, each of which is
included elsewhere in this prospectus. The selected financial data presented is
for the five-year period ended September 30, 1999 and for the three months ended
December 31, 1998 and 1999. The combined statement of operations data for the
fiscal years ended September 30, 1997, 1998 and 1999 and the combined balance
sheet data as of September 30, 1998 and 1999 are derived from our combined
financial statements, which have been audited by PricewaterhouseCoopers LLP,
independent public accountants, and are included elsewhere in this prospectus.
The combined statement of operations data for the fiscal years ended September
30, 1995 and 1996 and the combined balance sheet information as of September 30,
1995, 1996 and 1997 are derived from our unaudited combined financial
statements, which are not included in this prospectus. The combined statements
of operations data for the three months ended December 31, 1998 and 1999 and the
combined balance sheet information as of December 31, 1999 are derived from our
unaudited interim combined financial statements, which are included elsewhere in
this prospectus. Because we began to operate as a separate division of Cabot in
July 1995, the combined statement of operations data for 1995 includes only
three months of activity.
The unaudited interim financial information for the three months ended
December 31, 1998 and 1999 has been prepared on the same basis as the annual
financial statements and includes all adjustments, consisting only of normal
recurring adjustments, which management considers necessary for the fair
presentation of that financial information. The unaudited results for interim
periods are not necessarily indicative of results to be expected for any other
interim period or the full year.
Unaudited pro forma net income per share has been calculated using the
18,989,744 shares that will be owned by Cabot at the completion of this offering
and the number of shares that we would have been required to issue to fund a
dividend to Cabot in an amount equal to Cabot's tax basis in us at each period
end minus the earnings from that period at an issue price per share equal to
$14.30, which is the assumed initial public offering price of $16.00 per share
less the estimated underwriting discounts and offering expenses.
An income tax benefit was recorded in 1997 as a result of a tax credit for
research and development activities that exceeded our statutory taxes for that
period.
20
<PAGE> 22
<TABLE>
<CAPTION>
THREE MONTHS
THREE MONTHS ENDED
ENDED YEAR ENDED SEPTEMBER 30, DECEMBER 31,
SEPTEMBER 30, --------------------------------------- -----------------
1995 1996 1997 1998 1999 1998 1999
------------- ------- ------- ------- ------- ------- -------
(in thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C> <C>
COMBINED STATEMENT OF OPERATIONS
DATA:
Revenue -- external................ $4,242 $23,373 $33,851 $56,862 $95,701 $20,325 $34,230
Revenue -- related party........... 761 961 1,360 1,969 2,989 550 816
------ ------- ------- ------- ------- ------- -------
Total revenue...................... 5,003 24,334 35,211 58,831 98,690 20,875 35,046
------ ------- ------- ------- ------- ------- -------
Cost of goods sold -- external..... 2,264 12,386 18,561 27,686 44,902 9,486 15,372
Cost of goods sold -- related
party............................ 761 961 1,360 1,969 2,989 550 816
------ ------- ------- ------- ------- ------- -------
Total cost of goods sold........... 3,025 13,347 19,921 29,655 47,891 10,036 16,188
------ ------- ------- ------- ------- ------- -------
Gross profit................... 1,978 10,987 15,290 29,176 50,799 10,839 18,858
Operating expenses:
Research and development......... 27 6,984 8,411 10,139 14,551 3,445 4,484
Selling and marketing............ 591 674 1,028 3,293 4,572 954 1,250
General and administrative....... 604 4,122 4,468 8,576 11,880 2,570 3,896
Amortization of goodwill and
other intangibles.............. 179 720 720 720 720 180 180
------ ------- ------- ------- ------- ------- -------
Total operating expenses....... 1,401 12,500 14,627 22,728 31,723 7,149 9,810
------ ------- ------- ------- ------- ------- -------
Income (loss) before income
taxes............................ 577 (1,513) 663 6,448 19,076 3,690 9,048
Provision for (benefit from) income
taxes............................ 222 (647) (45) 2,211 6,796 1,313 3,300
------ ------- ------- ------- ------- ------- -------
Net income (loss).............. $ 355 $ (866) $ 708 $ 4,237 $12,280 $ 2,377 $ 5,748
====== ======= ======= ======= ======= ======= =======
Unaudited pro forma net income per
share............................ $ 0.58 $ 0.26
======= =======
Unaudited pro forma shares
outstanding...................... 21,054 22,378
======= =======
</TABLE>
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
AS OF SEPTEMBER 30, -----------------------
----------------------------------------------- PRO FORMA
1995 1996 1997 1998 1999 1999 1999
---- ---- ---- ---- ---- ---- ---------
(in thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
COMBINED BALANCE SHEET DATA:
Current assets....................... $ 3,957 $ 5,817 $ 8,781 $15,581 $26,120 $32,695 $32,695
Property, plant and equipment, net... 4,045 16,797 17,195 24,713 40,031 46,400 44,800
Other assets......................... 6,928 6,284 5,547 4,837 4,123 3,891 3,891
------- ------- ------- ------- ------- ------- -------
Total assets......................... $14,930 $28,898 $31,523 $45,131 $70,274 $82,986 $81,386
======= ======= ======= ======= ======= ======= =======
Current liabilities.................. $ 651 $ 2,649 $ 2,980 $ 4,870 $ 7,775 $ 7,402 $78,602
Long-term liabilities................ 61 40 119 233 422 528 528
------- ------- ------- ------- ------- ------- -------
Total liabilities.................... 712 2,689 3,099 5,103 8,197 7,930 79,130
Division equity...................... 14,218 26,209 28,424 40,028 62,077 75,056 2,256
------- ------- ------- ------- ------- ------- -------
Total liabilities and division
equity............................. $14,930 $28,898 $31,523 $45,131 $70,274 $82,986 $81,386
======= ======= ======= ======= ======= ======= =======
</TABLE>
21
<PAGE> 23
UNAUDITED PRO FORMA COMBINED STATEMENTS OF INCOME
The following unaudited pro forma combined statements of income have been
prepared to reflect adjustments to our historical results of operations to give
effect to various transactions as if those transactions had been consummated at
earlier dates, as described in this prospectus.
We historically sold various dispersion products to Cabot at our cost of
manufacturing. We have entered into a new dispersion services agreement with
Cabot, which will become effective upon the completion of this offering, under
which we will provide dispersion products to Cabot at our cost plus a standard
margin. Under the new agreement, Cabot will supply us with the fumed metal oxide
raw materials for these dispersions at no cost to us, which will reduce both our
cost of goods sold and revenue for these dispersions. The unaudited pro forma
combined statements of income have been adjusted to reflect the reduction in
revenue and related cost of goods sold which would have resulted had the
dispersion services agreement been in effect for the year ended September 30,
1999.
We historically purchased fumed metal oxides, critical raw materials for
our slurries, from Cabot at Cabot's budgeted standard cost. We have entered into
a new fumed metal oxide supply agreement with Cabot which will become effective
upon the completion of this offering under which we will purchase fumed metal
oxides at a contractually agreed upon price. The agreement provides for fixed
price increases each year and other price increases if Cabot's cost of producing
fumed metal oxides increases. The unaudited pro forma combined statements of
income have been adjusted to reflect the additional costs that we would have
incurred based on the initial contractual price if the fumed metal oxide supply
agreement had been in effect for the year ended September 30, 1999.
The unaudited pro forma combined statements of income should be read in
connection with, and are qualified by reference to, our combined financial
statements and related notes, as well as "Management's Discussion and Analysis
of Financial Condition and Results of Operations", included elsewhere in this
prospectus. We believe that the assumptions used provide a reasonable basis for
presenting the significant effects directly attributable to the transactions
discussed above. The unaudited pro forma combined statements of income are not
necessarily indicative of the results that would have been reported had such
events actually occurred on the dates specified, nor are they indicative of our
future results.
22
<PAGE> 24
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED
DECEMBER 31, 1999
----------------------------------------
PRO FORMA
HISTORICAL ADJUSTMENTS PRO FORMA
---------- ----------- ---------
(in thousands, except per share data)
(unaudited)
<S> <C> <C> <C>
Revenue -- external.................................. $34,230 $ -- $34,230
Revenue -- related party............................. 816 (242)(a) 574
------- ------- -------
Total revenue........................................ 35,046 (242) 34,804
------- ------- -------
Cost of goods sold -- external....................... 15,372 1,388(b) 16,760
Cost of goods sold -- related party.................. 816 (326)(a) 490
------- ------- -------
Total cost of goods sold............................. 16,188 1,062 17,250
------- ------- -------
Gross profit.................................... 18,858 (1,304) 17,554
Operating expenses:
Research and development........................... 4,484 4,484
Selling and marketing.............................. 1,250 1,250
General and administrative......................... 3,896 --(c) 3,896
Amortization of goodwill and other intangibles..... 180 180
------- -------
Total operating expenses........................ 9,810 9,810
------- ------- -------
Operating income..................................... 9,048 (1,304) 7,744
Interest expense..................................... -- (316)(d) (316)
------- ------- =======
Income before income taxes........................... 9,048 (1,620) 7,428
Provision for income taxes........................... 3,300 (591)(e) 2,709
------- ------- -------
Net income...................................... $ 5,748 (1,029) $ 4,719
======= ======= =======
Pro forma net income per share(f).................... $ 0.26 $ 0.21
======= =======
Pro forma weighted average shares outstanding(f)..... 22,378 22,378
======= =======
</TABLE>
23
<PAGE> 25
<TABLE>
<CAPTION>
FOR THE YEAR ENDED SEPTEMBER 30, 1999
----------------------------------------
PRO FORMA
HISTORICAL ADJUSTMENTS PRO FORMA
---------- ----------- ---------
(in thousands, except per share data)
(unaudited)
<S> <C> <C> <C>
Revenue -- external............................ $95,701 $ -- $95,701
Revenue -- related party....................... 2,989 (995)(a) 1,994
------- -------- -------
Total revenue.................................. 98,690 (995) 97,695
------- -------- -------
Cost of goods sold -- external................. 44,902 5,925(b) 50,827
Cost of goods sold -- related party............ 2,989 (1,344)(a) 1,645
------- -------- -------
Total cost of goods sold....................... 47,891 4,581 52,472
------- -------- -------
Gross profit.............................. 50,799 (5,576) 45,223
Operating expenses:
Research and development..................... 14,551 14,551
Selling and marketing........................ 4,572 4,572
General and administrative................... 11,880 --(c) 11,880
Amortization of goodwill and other
intangibles............................... 720 720
------- -------
Total operating expenses.................. 31,723 31,723
------- -------- -------
Operating income............................... 19,076 (5,576) 13,500
Interest expense............................... -- (1,213)(d) (1,213)
------- -------- -------
Income before income taxes..................... 19,076 (6,789) 12,287
Provision for income taxes..................... 6,796 (2,419)(e) 4,377
------- -------- -------
Net income................................ $12,280 $ (4,370) $ 7,910
======= ======== =======
Pro forma net income per share(f).............. $ 0.58 $ 0.38
======= =======
Pro forma weighted average shares
outstanding(f)............................... 21,054 21,054
======= =======
</TABLE>
24
<PAGE> 26
NOTES TO UNAUDITED PRO FORMA COMBINED STATEMENTS OF INCOME
(dollars in thousands, except per share data)
(a) Reflects the reduction in revenue and related cost of goods sold which would
have resulted if our new dispersion services agreement had been in effect
for the year ended September 30, 1999 and the three months ended December
31, 1999. Upon completion of this offering, a new dispersion services
agreement will be in effect under which we will sell various dispersion
products to Cabot at our cost plus an agreed upon margin. We have
historically sold these dispersion products to Cabot at cost. In addition,
we have historically purchased from Cabot the fumed metal oxide raw
materials we use to produce these dispersion products. Under the new
agreement, Cabot will supply us with these fumed metal oxide raw materials
at no cost to us. The pro forma effect of receiving these fumed metal oxide
raw materials at no cost to us decreases related party revenue and related
party cost of goods sold by $1,344 for the year ended September 30, 1999 and
$326 for the three months ended December 31, 1999. The pro forma effect of
selling products at our cost plus an agreed upon margin increases related
party revenue and gross profit by $349 for the year ended September 30, 1999
and $84 for the three months ended December 31, 1999.
(b) Reflects the additional costs that would have been incurred if our new fumed
metal oxide supply agreement with Cabot had been in effect for the year
ended September 30, 1999 and the three months ended December 31, 1999. We
have historically purchased fumed metal oxides, our primary raw materials
for CMP slurries, from Cabot at Cabot's budgeted standard cost. Upon the
completion of this offering, a new fumed metal oxide supply agreement will
be in effect with Cabot under which we will purchase fumed metal oxides at
contractually agreed upon prices, which are higher than prices we
historically paid and which will increase over the term of this agreement.
(c) We have operated as a wholly owned subsidiary of Cabot and as a result have
not incurred all costs necessary to operate on a stand-alone basis. While we
believe that our general and administrative costs could increase as a result
of being a stand-alone entity primarily for incremental legal, audit, risk
management and administrative costs, we are unable to quantify the potential
increase but do not expect it to be material.
(d) Reflects the interest expense associated with $17,000 in borrowings we
expect to incur to finance the dividend to Cabot.
(e) The effective tax rate derived from our income tax expense for the year
ended September 30, 1999 and three months ended December 31, 1999 were
applied to the pro forma adjustments to determine the income tax expense or
benefit associated with pro forma adjustments.
(f) Unaudited pro forma net income per share has been calculated using the
18,989,744 shares that will be owned by Cabot at the completion of this
offering and the number of shares that we would have been required to issue
to fund a dividend to Cabot in an amount equal to Cabot's tax basis in us at
each period end minus the earnings from that period at an issue price per
share equal to $14.30, which is the assumed initial public offering price of
$16.00 per share less the estimated underwriting discounts and offering
expenses.
25
<PAGE> 27
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with
our historical combined financial statements and the notes to those financial
statements and our unaudited pro forma combined statements of income, which are
included in this prospectus. This prospectus contains forward-looking statements
relating to future events and our future financial performance. Actual results
could be significantly different from those discussed in this prospectus.
Factors that could cause or contribute to such differences include those set
forth in the section entitled "Risk Factors".
OVERVIEW
We develop, manufacture and supply CMP slurries to the semiconductor
industry. Our revenue consists of:
- - external sales of CMP slurries; and
- - related party revenue from fumed metal oxide dispersions sold to Cabot.
We derive substantially all of our revenue from external sales of CMP slurries.
These sales accounted for more than 96% of our total revenue in each of the
three years ended September 30, 1999 and for the three months ended December 31,
1999. We recognize revenue and accrue for anticipated warranty costs upon
delivery of products.
The primary factors affecting our revenue are sales volumes, average
selling prices and foreign currency effects. In recent years, sales volumes have
been positively impacted by the growth of the semiconductor industry, increased
demand for smaller, faster and more complex IC devices, pressure on IC device
manufacturers to reduce costs and successful new product introductions.
For 1999, our five largest customers accounted for approximately 58% of our
revenue, with Intel accounting for approximately 22% of our revenue, Marketech
accounting for approximately 15% of our revenue, and Takasago accounting for
approximately 10% of our revenue. Marketech and Takasago are distributors. For
the three months ended December 31, 1999, our five largest customers accounted
for approximately 53% of our revenue, with Intel accounting for approximately
14% of our revenue, Marketech accounting for approximately 15% of our revenue,
and Takasago accounting for approximately 11% of our revenue. The decline in the
percentage of our total revenue attributable to sales to Intel resulted from,
among other things, Intel's decision to significantly reduce purchases of one
type of CMP slurry from us. We believe that in the same year sales of our
products to our five largest end user customers accounted for approximately 45%
of our revenue.
A portion of our revenue is derived from sales in international markets.
Revenue from sales in Europe was 10% of our total revenue for the three months
ended December 31, 1999, 10% of our total revenue in 1999, 8% of our total
revenue in 1998 and 6% of our total revenue in 1997. Revenue from sales in Asia
was 40% of our total revenue for the three months ended December 31, 1999, 35%
of our total revenue in 1999, 23% of our total revenue in 1998 and 17% of our
total revenue in 1997. We expect our sales in Asia to continue to increase
significantly in the future as IC device manufacturers increase production in
Asia and we increase our marketing and distribution capabilities there. We
intend to use our Geino, Japan facility to support these sales.
Our revenue from Cabot was $0.8 million for the three months ended December
31, 1999, $3.0 million in 1999, $2.0 million in 1998 and $1.4 million in 1997.
In the past we sold fumed metal oxide dispersions to Cabot on a cost basis which
included the cost of the fumed metal oxide raw materials we purchased from
Cabot. We have entered into a new dispersion services agreement with Cabot which
will be effective upon the completion of this offering. Under the new agreement
with Cabot, Cabot will supply the fumed metal oxide raw materials for these
dispersions to us at no cost. Because the cost of the fumed metal oxide raw
materials will not be included in our cost of goods sold, it will also not be
included in the price we charge to Cabot for our dispersion services. Conse-
26
<PAGE> 28
quently, we expect our revenue from Cabot and our cost of goods sold
attributable to this revenue to decrease in the future.
Fumed metal oxides are the primary raw materials used in the manufacture of
most of our CMP slurries and account for a significant portion of our cost of
goods sold. We have entered into a fumed metal oxide supply agreement with
Cabot, effective as of the completion of this offering, pursuant to which Cabot
will continue to be our exclusive supplier of fumed metal oxides for our
currently existing CMP slurries. Although the agreement does not require us to
purchase from Cabot fumed metal oxides for CMP slurries that we develop in the
future, we expect that Cabot will be our primary supplier of fumed metal oxides
for these products as well. Under the new agreement, the prices we will pay to
Cabot in the future for fumed metal oxides will be higher than we have paid in
the past and will increase each year. See "Business -- Cabot as Our Raw
Materials Supplier".
We currently pay a royalty to Rippey Corporation in connection with our
acquisition of selected assets from Rippey in July 1995. This royalty is equal
to approximately 2.5% of all revenue derived from the sale of our CMP slurries.
This obligation will expire in the third quarter of 2002.
We have entered into a management services agreement with Cabot, which will
be effective upon the completion of this offering, pursuant to which Cabot will
provide administrative and corporate support services to us on an interim or
transitional basis. These services will be similar in scope to what Cabot
provided to us prior to this offering. Cabot will charge us for these services
at a price that reflects its cost to provide these services. We expect that the
cost to us will be similar to what our corporate charges were prior to this
offering.
We are, and, after this offering but prior to the spin-off, will continue
to be, included in Cabot's consolidated federal income tax group, and our
federal income tax liability will be included in the consolidated federal income
tax liability of Cabot. We have entered into a tax sharing agreement with Cabot,
which will be effective upon the completion of this offering, under which we
will pay Cabot an amount equal to our income tax liability calculated as if we
were an independent company. Under the terms of the tax sharing agreement, Cabot
will not be required to make any payment to us for the use of our tax attributes
that come into existence prior to the spin-off until the time that we would
otherwise be able to utilize those attributes.
We have been a part of Cabot since we began developing CMP slurries in
1985. We were organized as a separate division of Cabot in July 1995. Our
financial statements reflect our historical results of operations, financial
position and cash flows. These financial statements have been carved out from
the financial statements and records of Cabot using the historical results of
operations and cash flows and historical basis of the assets and liabilities of
our business, as adjusted to reflect allocations of certain corporate charges
that our management believes are reasonable. Our historical financial
information may not necessarily reflect the results of our operations, financial
position and cash flows in the future or what the results of operations,
financial position and cash flows would have been had we been a separate,
stand-alone entity during those periods.
27
<PAGE> 29
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, the percentage
of revenue of certain line items included in our combined statement of
operations data and our unaudited pro forma combined statements of income:
<TABLE>
<CAPTION>
YEAR ENDED THREE MONTHS ENDED
SEPTEMBER 30, DECEMBER 31,
-------------------------- -----------------------
PRO PRO
FORMA FORMA
1997 1998 1999 1999 1998 1999 1999
---- ---- ---- ----- ---- ---- -----
<S> <C> <C> <C> <C> <C> <C> <C>
Total revenue......................... 100% 100% 100% 100% 100% 100% 100%
Cost of goods sold.................... 56 50 49 54 48 46 50
--- --- --- --- --- --- ---
Gross profit.......................... 44 50 51 46 52 54 50
Research and development............ 24 17 15 15 17 13 13
Selling and marketing............... 3 6 4 4 5 3 3
General and administrative.......... 13 15 12 12 12 11 11
Amortization of goodwill and other
intangibles...................... 2 1 1 1 1 1 1
--- --- --- --- --- --- ---
Operating income...................... 2 11 19 14 17 26 22
Interest expense...................... 0 0 0 1 0 0 1
--- --- --- --- --- --- ---
Income before income taxes............ 2 11 19 13 17 26 21
Provision for income taxes............ 0 4 7 5 6 10 8
--- --- --- --- --- --- ---
Net income............................ 2% 7% 12% 8% 11% 16% 13%
=== === === === === === ===
</TABLE>
THREE MONTHS ENDED DECEMBER 31, 1999 VERSUS THREE MONTHS ENDED DECEMBER 31, 1998
REVENUE
Total revenue was $35.0 million for the three months ended December 31,
1999, which represented a 68%, or $14.2 million, increase from the three months
ended December 31, 1998. Revenue from external sales was $34.2 million for the
three months ended December 31, 1999, which represented an increase of 68%, or
$13.9 million, from the three months ended December 31, 1998. Of this increase,
$9.8 million was due to a 48% increase in volume and $4.1 million was due to
increased weighted average selling prices. The volume growth was driven by the
increased use of CMP slurries in the manufacture of IC devices, and temporary
inventory build-up by some customers for year 2000 rollover concerns. The growth
was especially strong with respect to sales of CMP slurries for polishing
tungsten, which increased 77% in volume terms. Sales of slurries for hard disk
drives contributed $2.0 million to the growth as compared to the three months
ended December 31, 1998. Weighted average selling prices rose due to the sale of
higher performance products which had higher average selling prices. Also, we
shifted some of our sales in Japan from sales to distributors to sales directly
to customers, which resulted in an increased weighted average selling price.
Related party revenue was $0.8 million for the three months ended December
31, 1999, which represented an increase of 48%, or $0.3 million, from the three
months ended December 31, 1998. This increase was due to higher volumes sold. On
a pro forma basis, for the three months ended December 31, 1999, related party
revenue would have been $0.6 million. This decrease reflects the fact that under
our existing arrangement with Cabot, we purchase from Cabot the fumed metal
oxide raw materials required to make the dispersions that we sell to Cabot and
the cost of these raw materials is included in the price we charge to Cabot,
while under our new dispersion services agreement Cabot will provide these raw
materials to us at no cost. As a result, our revenue and cost of goods
28
<PAGE> 30
sold will decrease as a result of the new arrangements.
COST OF GOODS SOLD
Total cost of goods sold was $16.2 million for the three months ended
December 31, 1999, which represented an increase of 61% or $6.2 million from the
three months ended December 31, 1998. Cost of goods sold related to external
sales was $15.4 million for the three months ended December 31, 1999, which
represented an increase of 62%, or $5.9 million, from the three months ended
December 31, 1998. Of this increase, $4.6 million was due to higher sales volume
and $1.3 million was due to higher weighted average costs per gallon. These
higher costs resulted from higher distribution costs resulting from the shift of
some sales to distributors to sales directly to customers in Japan and for raw
materials shipped to our manufacturing plant in Japan. Higher manufacturing
costs associated with improved quality requirements also contributed to this
increase. Because we sell products to Cabot at cost, our cost of goods sold for
these sales is equal to our related party revenue. On a pro forma basis, total
cost of goods sold would have been $17.3 million, which reflects a $1.4 million
increase for the fumed metal oxides we purchase from Cabot to produce our
slurries, partially offset by a $0.3 million decrease in the cost of goods sold
attributable to our new dispersion services agreement with Cabot, in each case
for the reasons described above.
GROSS PROFIT
Our gross profit as a percentage of net revenue was 54% for the three
months ended December 31, 1999 as compared to 52% for the three months ended
December 31, 1998. Higher weighted average margins for new products, a higher
percentage of direct sales to customers and higher utilization of manufacturing
capacity contributed to the margin improvement. On a pro forma basis, for the
three months ended December 31, 1999, gross profit as a percentage of revenue
was 50%.
RESEARCH AND DEVELOPMENT
Research and development expenses were $4.5 million in the three months
ended December 31, 1999, which represented an increase of 30%, or $1.0 million,
from the three months ended December 31, 1998. Of this increase, $0.6 million
was due to higher laboratory supply costs and other operating expenses
associated with the clean room. Increased staffing in other research and
development activities added $0.4 million to the increase in expenses.
Key activities during the three months ended December 31, 1999 involved the
development of advanced particle technology, new and enhanced slurry products
and new CMP polishing pad technology.
SELLING AND MARKETING
Selling and marketing expenses were $1.3 million in the three months ended
December 31, 1999, which represented an increase of 31%, or $0.3 million, for
the three months ended December 31, 1998. The increase was primarily due to the
hiring of additional customer support personnel in our North America, Japan and
Taiwan offices.
GENERAL AND ADMINISTRATIVE
General and administrative expenses were $3.9 million in the three months
ended December 31, 1999, which represented an increase of 52%, or $1.3 million,
from the three months ended December 31, 1998. The increase was primarily due to
$0.7 million of additional personnel costs needed to support the general growth
of our business and a $0.3 million increase in legal costs incurred in
connection with patent litigation.
AMORTIZATION OF GOODWILL AND OTHER INTANGIBLES
Amortization of goodwill and other intangibles was $0.2 million in the
three months ended December 31, 1999 and the three months ended December 31,
1998 and related to goodwill and other intangible assets associated with the
acquisition of selected distributor assets from a third party in 1995.
29
<PAGE> 31
PROVISION FOR INCOME TAXES
The effective tax rate on income from operations was 36% in the three
months ended December 31, 1999 and the three months ended December 31, 1998.
NET INCOME
Net income was $5.7 million in the three months ended December 31, 1999,
which represented an increase of 142%, or $3.4 million, from the three months
ended December 31, 1998 as a result of the factors discussed above.
YEAR ENDED SEPTEMBER 30, 1999 VERSUS YEAR ENDED SEPTEMBER 30, 1998
REVENUE
Total revenue was $98.7 million in 1999, which represented an increase of
68%, or $39.9 million, over 1998. Revenue from external sales was $95.7 million
in 1999, which represented an increase of 68%, or $38.8 million, from 1998. The
increase in external revenue was primarily due to a 53% increase in volume and,
to a lesser extent, a 10% increase in weighted average selling prices. The
volume growth was driven by the increased use of CMP slurries in the manufacture
of IC devices. This growth was especially strong in Asia, where volumes across
all slurry product lines increased by 114% and we began to recognize revenue
from the sale of CMP slurries used to polish the magnetic heads and the coating
on hard disks in hard disk drives. Weighted average selling prices rose from
1998 to 1999 due to the sale of higher performance products which had higher
weighted average selling prices, particularly our CMP slurries for polishing
tungsten.
Related party revenue was $3.0 million in 1999, which represented an
increase of 52%, or $1.0 million, from 1998. This increase was due to higher
volumes sold. On a pro forma basis, for the fiscal year ended September 30,
1999, related party revenue would have been $2.0 million. This decrease reflects
the fact that under our existing arrangement with Cabot, we purchase from Cabot
the fumed metal oxide raw materials required to make the dispersions that we
sell to Cabot and the cost of these raw materials is included in the price we
charge to Cabot, while under our new dispersion services agreement Cabot will
provide these raw materials to us at no cost. As a result, our revenue and cost
of goods sold will decrease as a result of the new arrangements.
COST OF GOODS SOLD
Total cost of goods sold was $47.9 million in 1999, which represented an
increase of 61%, or $18.2 million, from 1998. Cost of goods sold related to
external sales was $44.9 million in 1999, which represented an increase of 62%,
or $17.2 million, from 1998. Of that increase, $14.6 million was due to higher
sales volume and the remainder was primarily due to higher manufacturing costs
associated with improved quality requirements and start up costs of our Geino,
Japan facility. On a pro forma basis, for the year ended September 30, 1999,
total cost of goods sold would have been $52.5 million, which reflects a $5.9
million increase for the fumed metal oxides we purchase from Cabot to produce
our slurries, partially offset by a $1.3 million decrease in the cost of goods
sold attributable to our new dispersion services agreement with Cabot, in each
case for the reasons described above.
GROSS PROFIT
Our gross profit as a percentage of revenue was 51% for 1999 and 50% for
1998. Higher margins from new products in 1999 were offset by increased spending
for expanded capacity and support capabilities. On a pro forma basis, for the
year ended September 30, 1999, gross profit as a percentage of revenue was 46%.
RESEARCH AND DEVELOPMENT
Research and development expenses were $14.6 million in 1999, which
represented an increase of 44%, or $4.4 million, from 1998. Of this increase,
$2.3 million was due to higher laboratory supply costs and other operating
expenses associated with the clean room. Increased staffing related to other
research and development activities accounted for an additional $1.5 million of
the increase and consumption of supplies in research and development activities
contributed the rest of the increase. Key activities during 1999 involved the
development of advanced particle
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<PAGE> 32
technology, new or enhanced slurry products and new CMP polishing pad products.
SELLING AND MARKETING
Selling and marketing expenses were $4.6 million in 1999, which represented
an increase of 39%, or $1.3 million, from 1998. Of this increase, $0.4 million
was due to the hiring of additional customer support personnel in the United
States, $0.4 million was due to increased selling costs in Japan and the rest
was due to increased production of product literature, costs relating to
industry trade shows and marketing consulting costs.
GENERAL AND ADMINISTRATIVE
General and administrative expenses were $11.9 million in 1999, which
represented an increase of 39%, or $3.3 million, from 1998. Charges for
corporate services provided by Cabot increased $1.8 million from 1998 to 1999 to
keep pace with the growth of our business. Of the remaining increase, $1.2
million was due to additional administrative personnel as a result of general
business growth and $0.3 million was due to outside legal fees incurred in
connection with patent litigation.
AMORTIZATION OF GOODWILL AND OTHER INTANGIBLES
Amortization of goodwill and other intangibles was $0.7 million in 1999 and
1998 and related to goodwill and other intangible assets associated with the
acquisition of selected assets from a third party in 1995.
PROVISION FOR INCOME TAXES
The effective tax rate on income from operations was 36% in 1999 and 34% in
1998.
NET INCOME
Net income was $12.3 million in 1999, which represented an increase of
190%, or $8.0 million, from 1998 as a result of the factors discussed above.
YEAR ENDED SEPTEMBER 30, 1998 VERSUS YEAR ENDED SEPTEMBER 30, 1997
REVENUE
Total revenue was $58.8 million in 1998, which represented an increase of
67%, or $23.6 million, over 1997. Revenue from external sales was $56.9 million
in 1998, which represented an increase of 68%, or $23.0 million, from 1997. The
increase in external revenue was primarily due to a 61% increase in volume and,
to a lesser extent, a 4% increase in weighted average selling prices. The volume
growth was driven by the increased use of CMP slurries in the manufacture of IC
devices. Weighted average selling prices rose due to the sale of higher
performance products which had higher weighted average selling prices,
particularly our CMP slurries for polishing tungsten plugs.
Related party revenue was $2.0 million in 1998, an increase of 45% from
$1.4 million in 1997, and increased due to higher volumes sold.
COST OF GOODS SOLD
Total cost of goods sold was $29.7 million in 1998, which represented an
increase of 49%, or $9.7 million, from 1997. Cost of goods sold related to
external sales was $27.7 million, which represented an increase of 49%, or $9.1
million, from 1997. This increase was primarily due to higher sales volume.
GROSS PROFIT
Our gross profit as a percentage of revenue increased to 50% in 1998 from
44% in 1997. The improvement was primarily the result of higher volumes and
improved operating efficiencies, as well as a greater percentage of higher
margin new products, particularly our CMP slurries for polishing tungsten plugs.
RESEARCH AND DEVELOPMENT
Research and development expenses were $10.1 million in 1998, which
represented an increase of 21%, or $1.7 million, from 1997. The increase was due
to approximately $0.7 million of increased personnel costs, including increased
salary, fringe benefit, travel, recruiting and relocation expenses relating to
our development program teams. Approximately $0.4 million of the increase was
due to higher laboratory supply costs due to the increased size of the
development staff. Key activities during 1998 involved the
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<PAGE> 33
development of new CMP slurry and polishing pad products.
SELLING AND MARKETING
Selling and marketing expenses were $3.3 million in 1998, which represented
an increase of 220%, or $2.3 million, from 1997. Approximately $1.9 million of
the $2.3 million increase was due to increased staffing and travel expenses for
global customer support, including in North America, Asia and Europe. The
increase was also due to increased spending to perform market research and
conduct promotional activities such as participation in trade shows and creation
and distribution of product literature.
GENERAL AND ADMINISTRATIVE
General and administrative expenses were $8.6 million in 1998, which
represented an increase of 92%, or $4.1 million, from 1997. The increase in 1998
was primarily due to $2.0 million of increased legal expenses relating to patent
litigation. Approximately $0.8 million of the increase related to higher charges
for corporate services provided by Cabot and $0.4 million of the increase was
due to increased staffing expenses to support our overall business growth.
AMORTIZATION OF GOODWILL AND OTHER INTANGIBLES
Amortization of goodwill and other intangibles was $0.7 million in 1998 and
1997 related to goodwill and other intangible assets associated with the
acquisition of selected assets from a third party in 1995.
PROVISION FOR INCOME TAXES
The effective tax rate on income from operations was 34% in 1998 as
compared to a tax benefit of 7% in 1997. An income tax benefit was recorded in
1997 as a result of a tax credit for research and development activities that
exceeded our statutory taxes for that period.
NET INCOME
Net income was $4.2 million in 1998, which represented an increase of 498%,
or $3.5 million, from 1997 as a result of the factors discussed above.
SELECTED QUARTERLY OPERATING RESULTS
The following table presents our unaudited financial information for the
eight quarters ended December 31, 1999. This unaudited financial information has
been prepared in accordance with generally accepted accounting principles
applied on a basis consistent with the annual audited financial statements and
in the opinion of management, they include all necessary adjustments, which
consist only of normal recurring adjustments necessary to present fairly the
financial results for the periods. The results for any quarter are not
necessarily indicative of results for any future period.
<TABLE>
<CAPTION>
QUARTER ENDED
-----------------------------------------------------------------------------------------
MARCH 31, JUNE 30, SEPT. 30, DEC. 31, MARCH 31, JUNE 30, SEPT. 30, DEC. 31,
1998 1998 1998 1998 1999 1999 1999 1999
--------- -------- --------- -------- --------- -------- --------- --------
(in thousands, except percentages)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Total revenue......................... $14,001 $15,120 $17,620 $20,875 $21,867 $22,864 $33,084 $35,046
Cost of goods sold.................... 7,343 7,554 8,435 10,036 10,177 11,007 16,671 16,188
------- ------- ------- ------- ------- ------- ------- -------
Gross profit.......................... 6,658 7,566 9,185 10,839 11,690 11,857 16,413 18,858
47.5% 50.0% 52.1% 51.9% 53.5% 51.9% 49.6% 53.8%
Operating expenses:
Research and development............ 2,501 2,455 2,900 3,445 3,067 3,669 4,370 4,484
Selling and marketing............... 1,077 1,013 554 954 1,083 1,108 1,427 1,250
General and administrative.......... 1,869 2,106 2,832 2,570 2,989 3,232 3,089 3,896
Amortization of goodwill and other
intangible assets................. 180 180 180 180 180 180 180 180
------- ------- ------- ------- ------- ------- ------- -------
Total operating expenses.............. 5,627 5,754 6,466 7,149 7,319 8,189 9,066 9,810
------- ------- ------- ------- ------- ------- ------- -------
Income before income taxes............ 1,031 1,812 2,719 3,690 4,371 3,668 7,347 9,048
Provision for income taxes............ 353 622 932 1,313 1,559 1,307 2,617 3,300
------- ------- ------- ------- ------- ------- ------- -------
Net income............................ $ 678 $ 1,190 $ 1,787 $ 2,377 $ 2,812 $ 2,361 $ 4,730 $ 5,748
======= ======= ======= ======= ======= ======= ======= =======
</TABLE>
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<PAGE> 34
LIQUIDITY AND CAPITAL RESOURCES
We had cash flows from operating activities of $0.3 million in the three
months ended December 31, 1999 and $2.1 million in the three months ended
December 31, 1998. We had cash flows from operating activities of $9.0 million
in 1999, $2.3 million in 1998 and $0.4 million in 1997. Our principal capital
requirements have been to fund working capital needs that support the expansion
of our business. For the three months ended December 31, 1999, inventory was
also increased to prepare for any supply chain interruptions that might have
occurred due to the year 2000 date change.
In the three months ended December 31, 1999, cash flows used in investing
activities were $7.2 million, primarily due to the construction of our Aurora,
Illinois manufacturing building, the purchase of land in Korea for a new
distribution facility and the purchase of research and development equipment. In
the three months ended December 31, 1998, cash flows used in investing
activities were $6.8 million due to manufacturing capacity increases, the
acquisition of research and development equipment and land and construction of
our new headquarters building in Aurora, Illinois.
In 1999, cash flows used in investing activities were $17.1 million,
primarily due to the completion of our Geino, Japan facility and construction of
our Aurora, Illinois headquarters building. In 1998, cash flows used in
investing activities were $9.3 million due to manufacturing capacity increases
and the acquisition of research and development equipment. In 1997, cash flows
used in investing activities were $1.7 million, primarily related to additions
for the purchase of machinery and equipment used in production and research and
development.
We had cash flows from financing activities of $6.9 million for the three
months ended December 31, 1999 and $4.8 million for the three months ended
December 31, 1998, resulting from capital contributions from Cabot. We had cash
flows from financing activities of $8.1 million in 1999, $6.8 million in 1998,
and $1.2 million in 1997 resulting from capital contributions from Cabot.
Upon completion of this offering, we will have a $25 million unsecured
revolving credit facility with Fleet National Bank. Loans under this facility
will be used primarily for general corporate purposes, including working capital
and capital expenditures. There is a sublimit for letters of credit of $5
million. We may elect to borrow at either:
- - the higher of Fleet National Bank's base rate as announced from time to time
or the federal funds rate plus a margin of up to 0.50%; or
- - the LIBOR rate plus a margin of between 1.5% and 2.0%, determined quarterly.
Interest on base rate loans will be payable at the end of each calendar
quarter, and on LIBOR loans at the earlier of the end of each interest period or
quarterly.
All borrowings under our revolving credit facility will become due and
payable in April 2003. Borrowings under this credit facility may be prepaid at
any time, subject to payment of normal breakage costs, if any, in the case of
LIBOR loans.
We would breach our revolving credit facility if we were to incur losses
greater than $7.5 million in a single fiscal quarter or greater than $10 million
in two consecutive quarters. In addition to customary covenants, this credit
facility contains certain restrictions on our ability to incur additional
indebtedness, create liens, make certain investments, pay dividends or make
certain distributions on our stock, merge, consolidate, make certain
acquisitions or dispositions and enter into transactions with affiliates.
Upon the completion of this offering, we will also have an unsecured term
credit facility, consisting of a $3.5 million term loan and a $13.5 million term
loan, with LaSalle Bank National Association. We expect that all $17.0 million
of borrowings under this facility will be used to fund a dividend to Cabot.
The $3.5 million term loan will be funded on the basis of the State of
Illinois State Treasurers Economic Program. During the
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<PAGE> 35
period that we remain eligible for this program and the State of Illinois
maintains appropriate funds to cover the $3.5 million term loan, the outstanding
amount will bear interest at a rate equal to 1.75% plus:
- - until the second anniversary of the closing date of the loan, 70% of the two
year treasury rate; and
- - after the second anniversary of the closing date and until the termination
date of this credit facility, which will be five years from the closing date
of the credit facility, 70% of the three year treasury rate.
During any period in which we are ineligible for this program or the State
of Illinois removes funds on deposit with the lender for purposes of funding
this loan, the outstanding amount will bear interest at the rate applicable to
the $13.5 million term loan described below.
With respect to the $13.5 million term loan, we may elect to borrow at
either LaSalle Bank's base rate or the Eurodollar rate plus an applicable
margin, which will vary between 1.5% and 2.0% depending on our ratio of funded
debt to EBITDA.
Interest on the $3.5 million term loan and each base rate loan will be
payable quarterly. Interest on each Eurodollar loan will be payable on the last
day of the applicable interest period, which will be a one, two or three month
period.
During the existence of any event of default under the term credit
facility, the applicable interest rate on each type of loan will be increased
2.0%.
The total principal amount of the $3.5 million term loan will be payable
upon the termination date of the credit facility, which will be five years from
the closing date of this credit facility. Principal on the $13.5 million term
loan will be payable in quarterly installments of $337,500, with the balance
payable upon the termination date. Subject to specified minimum amounts, we can
convert base rate loans and Eurodollar loans into loans of the other type.
During the term of this facility, we will be subject to prepayment
provisions, financial ratios, default provisions and restrictive covenants
similar to those described with respect to our $25 million revolving credit
facility.
Under both our $25.0 million revolving credit facility and our $17.0
million term credit facility, we will be required to maintain the following
financial ratios:
- - a ratio of (A) cash plus short-term investments plus net accounts receivable
to (B) total current liabilities equal or above 1.25 to 1. The actual ratio as
of December 31, 1999 was 3.06 to 1. Assuming the $25.0 million of revolving
loans under our revolving credit facility and the $17.0 million of term loans
under our term credit facility had been outstanding on December 31, 1999, and
we had used all $17.0 million of borrowings under our term credit facility to
fund a dividend to Cabot as of that date, the ratio would have been 1.84 to 1;
- - a leverage ratio of (A) total funded indebtedness to (B) EBITDA below 2.25 to
1. This ratio would have been satisfied as of December 31, 1999 because we had
no funded indebtedness as of that date. Assuming the $25.0 million of
revolving loans under our revolving credit facility and the $17.0 million of
term loans under our term credit facility had been outstanding during the
three month period ended December 31, 1999, the ratio would have been 1.52 to
1; and
- - a minimum coverage ratio of (A) EBIT to (B) interest expense greater than 3.0
to 1. This ratio would have been satisfied as of December 31, 1999 because we
had no interest expense as of that date. Assuming the $25.0 million of
revolving loans under our revolving credit facility and the $17.0 million of
the term loans under our term credit facility had been outstanding during the
three month period ended December 31, 1999, the ratio would have been 7.40 to
1.
EBITDA is our net income before taxes plus interest expense, depreciation
and amortization. EBIT would take into account depreciation and amortization.
We estimate that our total capital expenditures in 2000 will be
approximately $32.5 mil-
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<PAGE> 36
lion, approximately $7.2 million of which we have already spent. Our major
capital expenditures in 2000 are expected to be:
- - approximately $20.4 million to expand our existing North American
manufacturing facilities and build and equip a new slurry manufacturing
facility adjacent to our current facility in Aurora, Illinois;
- - approximately $8.1 million to expand our existing manufacturing facility in
Geino, Japan and establish new distribution facilities in Asia;
- - approximately $0.7 million to expand and improve our Barry, Wales facility;
and
- - approximately $3.4 million for polishing and other equipment used in our
research and development activities.
We believe that cash generated by our operations and borrowings under our
revolving credit facility will be sufficient to fund our operations and expected
capital expenditures for the next 24 months. However, we plan to expand our
business and continue to improve our technology and, to do so, we may be
required to raise additional funds in the future through public or private
equity or debt financing, strategic relationships or other arrangements.
Financing may not be available on acceptable terms, or at all, and our failure
to raise capital when needed could negatively impact our business, financial
condition or results of operations. Because we will agree with Cabot that we
will not issue any securities if doing so would reduce Cabot's ownership of us
to less than 80% prior to the spin-off, our ability to raise capital through
further sales of equity securities is limited until the spin-off occurs.
Additional equity financing could be dilutive to the holders of our common stock
and debt financing, if available, may involve restrictive covenants. See "Risk
Factors -- Risks Relating to Our Business -- Our ability to raise capital in the
future may be limited and this may limit our ability to expand our business and
improve our technology".
Cabot is currently a defendant in two lawsuits involving Rodel. We have
agreed to indemnify Cabot for any liabilities or damages resulting from these
lawsuits. See "Business -- Legal Proceedings".
EFFECT OF CURRENCY EXCHANGE RATES AND EXCHANGE RATE RISK MANAGEMENT
We conduct business operations outside of the United States through our
foreign operations. Our foreign operations maintain their accounting records in
their local currencies. Consequently, period to period comparability of results
of operations is affected by fluctuations in exchange rates. The primary
currencies to which we have exposure are the Japanese Yen and the British Pound.
Our exposure to foreign currency exchange risks has not been significant because
a significant portion of our foreign sales are denominated in U.S. dollars. As
foreign markets become a more significant portion of our business, we may enter
into forward contracts in an effort to manage foreign currency exchange
exposure.
MARKET RISK AND SENSITIVITY ANALYSIS
FOREIGN EXCHANGE RATE RISK
During 1999, less than 10% of our revenue was transacted in currencies
other than the U.S. dollar. We generally do not enter into forward exchange
contracts as a hedge against foreign currency exchange risk on transactions
denominated in foreign currencies or for speculative or trading purposes. We
have performed a sensitivity analysis assuming a hypothetical 10% adverse
movement in foreign exchange rates. As of September 30, 1999, the analysis
demonstrated that such market movements would not have a material adverse effect
on our consolidated financial position, results of operations or cash flows.
Actual gains and losses in the future may differ materially from this analysis
based on changes in the timing and amount of foreign currency rate movements and
our actual exposures. We believe that our exposure to foreign currency exchange
rate risk at September 30, 1999 was not material.
There have been no material changes in market risk exposures through
December 31, 1999.
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NEW ACCOUNTING STANDARDS
In April 1998, the American Institute of Certified Public Accountants
issued Statement of Position 98-1, "Accounting for the Costs of Computer
Software Developed or Obtained for Internal Use". Statement of Position 98-1
provides guidance regarding whether computer software is internal-use software,
the capitalization of costs incurred for computer software developed or obtained
for internal use and accounting for the proceeds of computer software originally
developed or obtained for internal use and then subsequently sold to the public.
We do not expect the impact of adopting Statement of Position 98-1, which will
be effective for us in fiscal 2000, to be material to our financial condition or
results of operations.
In April 1998, the American Institute of Certified Public Accountants
issued Statement of Position 98-5, "Reporting on the Costs of Start-Up
Activities". Statement of Position 98-5 requires companies to expense start-up
and organization costs as incurred. Statement of Position 98-5 broadly defines
start-up activities and provides examples to help entities determine costs that
are and are not within the scope of Statement of Position 98-5. Statement of
Position 98-5 will be effective for us in fiscal 2000, and its initial
application is to be reported as the cumulative effect of a change in accounting
principle. We do not expect the impact of adopting Statement of Position 98-5 to
be material to our financial condition or results of operations.
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities". Statement of Financial Accounting Standards No. 133
establishes new standards of accounting and reporting for derivative instruments
and hedging activities. Statement of Financial Accounting Standards No. 133
requires all derivatives be recognized at fair value in the statement of
financial position, and the corresponding gains or losses be reported either in
the statement of operations or as a component of comprehensive income, depending
on the type of hedging relationship that exists. We do not expect the impact of
adopting Statement of Financial Accounting Standards No. 133, which will apply
to us in 2001, to be material to our financial condition or results of
operations.
In December 1999, the SEC released Staff Accounting Bulletin No. 101, which
provides guidance on the recognition, presentation and disclosure of revenue in
financial statements filed with the SEC. We are required to be in conformity
with the provisions of Staff Accounting Bulletin No. 101 no later than October
1, 2000 and do not expect a material change in our financial condition or
results of operations as a result of Staff Accounting Bulletin 101.
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<PAGE> 38
BUSINESS
OUR COMPANY
We are the leading supplier of slurries used in chemical mechanical
planarization, or CMP. We believe that we have an approximately 80% share of the
slurries sold to IC device manufacturers worldwide. CMP is a polishing process
used by IC device manufacturers to planarize many of the multiple layers of
material that are built upon silicon wafers to produce advanced IC devices.
Planarization is a polishing process that levels and smooths, and removes the
excess material from, the surfaces of these layers. CMP slurries are liquids
containing abrasives and chemicals that facilitate and enhance this polishing
process. CMP assists IC device manufacturers in producing smaller, faster and
more complex IC devices with fewer defects. We believe CMP will become
increasingly important in the future as manufacturers seek to further shrink the
size of these devices and improve their performance. Most of our CMP slurries
are used to polish insulating layers and the tungsten plugs that go through the
insulating layers and connect the multiple wiring layers of IC devices. We have
developed and have begun limited sales of new CMP slurries that our customers
use for polishing the coating on the hard disks and the magnetic heads in hard
disk drives, although in 1999 revenue from sales of these CMP slurries accounted
for less than 2.0% of our total revenue. We continue to develop slurries for
additional new applications. In addition, we have recently begun producing and
selling polishing pads used in the CMP process.
IC DEVICE MANUFACTURING
Today's advanced IC devices are composed of millions of transistors and
other electronic components connected by miles of wiring. The wiring, composed
primarily of aluminum and tungsten, carries electric signals through the
multiple layers of the IC device. Insulating material is used throughout the IC
device to isolate the electronic components and wiring to prevent short
circuiting and to improve the efficiency of electric signal travel within the
device. To increase performance, IC device manufacturers have progressively
increased the number, or density, of transistors and other electronic components
in each IC device.
The manufacturing process for IC devices typically begins with a circular
wafer of pure silicon. A large number of identical IC devices are manufactured
on each wafer at the same time, and at the end of the process, the wafer is cut
into the individual devices. The first step in the manufacturing process is to
build transistors and other electronic components on the silicon wafer. These
components are then wired together in a particular sequence to produce an IC
device with the desired characteristics. Once the transistors and other
electronic components are in place on the silicon wafer, they are usually
covered with a layer of insulating material, most often silicon dioxide.
CMP is used to planarize the insulating layers of an IC device and prepare
them for a process known as metallization. During metallization, wiring is added
to the surface of the insulating layer through a series of steps involving:
- - depositing metal, usually aluminum, onto the surface of the layer;
- - projecting an image of the desired wiring pattern on the layer using a process
known as photolithography; and
- - removing the excess deposited metal from the surface of the insulating layer
using a process known as etching, which leaves behind the desired wiring
pattern.
When the wiring is finished, another layer of insulating material is added and
planarized using CMP. This process of alternating insulating and wiring layers
is repeated until the IC device is completed. The electronic components and
wiring layers are connected by conductive plugs that are formed by making holes
in the insulating layers and filling those holes with metal, usually tungsten.
After these holes have been filled with tungsten, CMP is used to remove all the
excess tungsten above the surface of the insulating layer so that the top of the
plug is level with the surface of the
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<PAGE> 39
insulating layer before the next wiring layer is built. Manufacturing IC devices
requires precision processing in ultra clean, controlled environments.
The semiconductor industry has a generally accepted set of design rules
that describe current and projected feature size and spacing of electronic
components and wiring in IC devices. The feature size and spacing in these
design rules have been progressively decreasing to accommodate the demand for
increased circuit density and miniaturization. As the density of IC devices
increases, the amount of wiring needed to connect the transistors and other
electronic components to each other also increases. As IC devices become
smaller, this increase in wiring requires tighter and more precise spacing of
the wiring and has led to an increase in the layers of IC devices.
According to the Semiconductor Industry Association's National Technology
Roadmap for Semiconductors (1998 and 1999 Editions), the trends toward increased
density and miniaturization of IC devices are expected to continue. While the
number of layers varies by IC device type, an advanced logic device built with
today's common 0.25 micron feature size has approximately seven insulating and
six wiring layers and a typical memory device built with the same feature size
has approximately three insulating and two wiring layers. By 2001, the
Semiconductor Industry Association predicts that advanced IC devices will be
manufactured with a 0.15 micron feature size and that advanced logic devices
will have approximately eight insulating and seven wiring layers and advanced
memory devices will have approximately four insulating and three wiring layers.
CMP is currently used to polish both the insulating layers and the tungsten
plugs in IC devices in separate steps. As a result, even though CMP is not
currently used to polish the wiring layers, the number of CMP steps used to
produce an IC device is typically at least equal to the total number of
insulating and wiring layers in the device. While CMP is currently used more in
the manufacture of logic devices than memory devices, we believe that the use of
CMP in the manufacture of memory devices will increase in the future as the
feature size and spacing of these devices decreases and the number of layers in
the device increases.
The increased density and miniaturization of IC devices has also resulted
in an increased emphasis on reduction of defects and residue remaining after the
CMP process. A defect is any imperfection on a layer of an IC device that causes
a short circuit or other problem with the performance of the device. Residue
from the CMP process consists of particle and chemical residue left on the layer
surface as a result of the CMP process. The likelihood that a defect or residue
of a given size will negatively effect the performance of an IC device increases
as the density and miniaturization of the device increase. IC device
manufacturers are requiring that the number of defects per given area decline
and that the residues from the CMP process be reduced.
CHEMICAL MECHANICAL PLANARIZATION
The CMP process involves both chemical reactions and physical means to
planarize the insulating layers of an IC device that are built upon a silicon
wafer and the conductive tungsten plugs that go through the insulating layers
and connect the multiple wiring layers of IC devices. The wafer is typically
held on a rotating carrier which is spun at high speeds and pressed against a
rotating, polishing table. The portion of the table that comes in contact with
the wafer is covered by a textured, polishing pad. A CMP slurry is continuously
applied to the polishing pad during the CMP process to facilitate and enhance
the polishing process. CMP slurries are liquid compounds composed of high purity
deionized water, chemical additives and abrasive agents that chemically interact
with the surface material of the IC device at an atomic level.
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The following diagram demonstrates the CMP process as applied to the
insulating layers of an IC device:
[CMP OF OXIDE INSULATING LAYER GRAPHIC]
The following diagram demonstrates the CMP process as applied to the
conductive tungsten plugs of an IC device:
[CMP OF OXIDE TUNGSTEN PLUGS GRAPHIC]
BENEFITS OF CMP
CMP provides IC device manufacturers with a number of advantages. CMP
enables IC device manufacturers to produce smaller IC devices with greater
density, both of which improve the performance of the device. As IC devices
shrink and become more dense, they require smaller feature sizes and tighter
spacing between the wiring of the device. If the surface is not level, the
smaller feature size and tighter spacing make it more difficult for the
photolithography equipment to focus accurately and create the desired wiring
pattern. In addition, because today's smaller, denser IC devices have more
layers, any uneveness of a layer at or near the bottom of an IC device will get
magnified in the additional layers that are added to the device. Defects caused
by problems in the photolithography process or uneveness in the layers can lead
to:
- - short circuits;
- - reduced performance; and
- - at worst, failure of the IC device.
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By using CMP, IC device manufacturers can eliminate or minimize these problems.
By enabling IC device manufacturers to make smaller IC devices, CMP allows
them to increase their throughput, or the number of IC devices that they can
manufacture in a given time period. CMP also helps reduce the number of
defective or substandard IC devices produced, which increases the device yield.
Improvements in throughput and yield reduce an IC device manufacturer's total
production costs. Manufacturers can achieve further improvements in throughput
and yield through improvements in the CMP process that reduce defectivity rates
and decrease the amount of time required for the polishing process.
CMP SLURRIES
The characteristics that make an effective CMP slurry include:
- - high polishing rates, which increase productivity and throughput;
- - high selectivity, which means enhancing the polishing of specific materials
while inhibiting polishing of other materials;
- - uniform polishing of different surface materials at the same time, which
avoids problems such as dishing and erosion;
- - low levels of chemical and physical impurities, which reduce defects and
residues on the polished surface that can adversely affect IC device
performance; and
- - colloidal stability, which means the abrasive particles within the slurry do
not settle, which is important for uniform polishing with minimum defects.
Most of the foregoing qualities of CMP slurries affect and enhance not only
the performance of the IC devices but can also positively impact the cost of
ownership of the CMP process. Cost of ownership is a calculation by which IC
device manufacturers evaluate the benefits and costs of each production step by
analyzing the impact of that step on throughput and yield and the costs of the
production inputs of that step. This calculation allows IC device manufacturers
to compare competing production processes and inputs. An input that improves
throughput and yield may reduce the cost of ownership even though it costs more.
Prior to introducing a new or different CMP slurry into its manufacturing
process, an IC device manufacturer generally requires that the slurry be
qualified at each of its plants through a series of tests and evaluations
intended to ensure that the slurry will function properly in the manufacturing
process and to optimize the slurry's application. These tests may require
changes to the CMP process, the CMP slurry and/or the CMP polishing pad. While
this qualification process varies depending on numerous factors, it is not
unusual for this process to be very expensive and take six months or more to
complete. IC device manufacturers must take the cost, time delay and impact on
production into account when they consider switching to a new CMP slurry.
INDUSTRY TRENDS
The rapid growth of the CMP slurry market has been driven in large part by
the significant growth and technological advances the semiconductor industry has
experienced over the past decade. IC devices are critical components in an
increasingly wide variety of products and applications, including computers,
data processing, communications, telecommunications, the Internet, automobiles
and consumer and industrial electronics. As the performance of IC devices has
increased and their size and cost have decreased, the use of IC devices in these
applications has grown significantly. According to industry sources, the
worldwide semiconductor market as measured by total sales grew at an average
annual compound rate of 11% in the period from 1988 through 1998. Dataquest and
other industry sources project continued growth at similar rates in the future.
The rapid growth in the semiconductor industry, increasing demand for
smaller, higher performance and more complex IC devices and pressure on IC
device manufacturers to reduce their costs have led to increased use of CMP and
consumption of CMP slurries and polishing pads. We believe that worldwide
revenues from the sale of
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CMP slurries to IC device manufacturers grew to approximately $120 million in
1999. Industry surveys project that annual worldwide revenues in this market
will grow to between approximately $300 and $400 million by 2003. This projected
growth assumes increases in the number of IC devices produced, the percentage of
IC devices that are produced using CMP and the number of polishing steps used to
produce each device.
Although some sectors of the semiconductor industry have been highly
cyclical, sales of CMP slurries and polishing pads have not been adversely
affected by these trends. We believe this is because sales of CMP slurries and
polishing pads are driven primarily by the number of IC devices sold, which has
been much less cyclical than the prices of IC devices. In addition, we believe
that IC manufacturers have continued to increase their use of CMP because the
CMP process represents only a small percentage of the total production cost of
an IC device and is very important to the continued improvement of IC device
performance.
OTHER APPLICATIONS OF CMP IN THE
IC DEVICE MANUFACTURING PROCESS
CMP is primarily used today for polishing the insulating layers and
tungsten plugs in IC devices. However, we believe there are a number of other
applications for CMP in the IC device manufacturing process. We have undertaken
research, developed and successfully tested slurries for two applications that
we expect to be able to commercialize in the next three years. First, we have
developed and successfully tested CMP slurries for polishing copper because we
believe copper will increasingly be used in the future for both wiring and
conductive plugs because it conducts electricity better than aluminum and
tungsten. However, there are significant technological challenges and operating
issues that must be addressed before IC device manufacturers switch to copper
from aluminum and tungsten. To date, only a very limited number of IC device
manufacturers have switched to copper and their production using copper is very
limited.
Second, we have developed and successfully tested CMP slurries to planarize
the polysilicon material often used to build the electronic components on IC
devices. As the number of these electronic components per IC device increases,
we believe that the use of polysilicon CMP will increase.
We have also successfully tested and commenced limited commercial sales of
CMP slurries for use in connection with an IC device manufacturing process known
as shallow trench isolation, which is currently being used by some of the
leading IC device manufacturers. Shallow trench isolation is a relatively new
method of isolating the electronic components built on silicon wafers of an IC
device to prevent short circuits and other electrical interference. Shallow
trench isolation uses CMP before the first insulating layer is put down on the
wafer. Isolation methods used prior to shallow trench isolation did not use CMP.
By using CMP in conjunction with shallow trench isolation, IC device
manufacturers can achieve greater miniaturization and density of their IC
devices.
STRATEGY
Our objective is to maximize our profitability and stockholder value by
maintaining and leveraging our leading position in the CMP slurry market. Our
proven track record increases the propensity for IC device manufacturers to work
with us in the early stages of product development for their next generation IC
devices. In addition, IC device manufacturers would likely incur significant
evaluation and qualification costs if they switch to a new CMP slurry.
We will pursue the following strategies to achieve our objective:
REMAIN THE TECHNOLOGY LEADER IN CMP SLURRIES
We believe that technology is key to success in the CMP slurry market and
we plan to continue to devote significant resources to research and development.
We need to keep pace with the rapid technological advances in the semiconductor
industry so we can continue to deliver products that
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meet our customers' evolving needs. We intend to use our advanced research and
development, polishing and metrology capabilities to:
- - advance our understanding of our customers' technology, processes, and
performance requirements for qualified products;
- - further improve the chemical and mechanical qualities of our CMP products; and
- - demonstrate and deliver advanced CMP solutions to the semiconductor industry.
BUILD AND MAINTAIN CUSTOMER INTIMACY
We believe that building close relationships with our customers is another
key to success in the CMP slurry market. We work closely with our customers to
research and develop new and better CMP slurries, to integrate our slurries into
their manufacturing processes and to assist them with supply, warehousing,
packaging and inventory management. We plan to continue to devote significant
resources to enhancing our close customer relationships.
EXPAND GLOBALLY
We believe that having production facilities and personnel and other
resources in strategic locations around the world is key to the success of our
business, particularly in light of increased IC device manufacturing in Asia.
Accordingly, we have established a global presence by opening production
facilities in Barry, Wales and Geino, Japan. We also have assembled a team of
account managers and independent distributors strategically located in Europe,
Taiwan, Singapore, Japan and Korea and technical support and sales personnel
throughout the United States and in Europe and Asia. We intend to expand our
production capacity, technical support and sales in many of the locations around
the world where IC device production is concentrated.
ATTRACT AND RETAIN TOP QUALITY PERSONNEL
We have assembled a highly skilled and dedicated workforce that includes a
wide range of scientists and applications specialists, many of whom have
significant experience in the semiconductor industry. We plan to continue to
attract and retain experienced personnel committed to providing high performance
products and strong customer and applications support.
MAINTAIN TOP QUALITY PRODUCTS AND SUPPLY
Our customers demand consistent high quality products and a reliable source
of supply. We will continually advance our strict quality controls to improve
the uniformity and consistency of performance of our CMP products. The capacity
and location of our production facilities throughout the United States and in
Europe and Asia allow us to provide a reliable supply chain to meet our
customers' CMP slurry requirements in a consistent, timely manner.
EXPAND INTO NEW APPLICATIONS AND PRODUCTS
We intend to leverage our CMP experience and technology into new
applications and products. Starting from our core CMP slurries designed for
polishing the insulating layers of IC devices, we have developed and introduced
new slurries for CMP polishing of the tungsten plugs currently used to connect
the wiring between multiple layers of IC devices and for CMP polishing of the
magnetic heads and the coating on hard disks in hard disk drives. We have also
developed CMP slurries for polishing the aluminum and copper wiring layers of IC
devices. Additionally, we are using our knowledge of CMP materials to expand
into the production of CMP polishing pads so that we can provide our customers
with a broader range of applications and materials used in the CMP process.
PRODUCTS
CMP SLURRIES FOR IC DEVICES
We produce CMP slurries of various formulations for polishing a wide
variety of materials. We have developed new, improved generations of each of our
slurries as well as new slurries to keep pace with our customers' evolving
needs. We currently produce more than ten slurries for polishing the oxide
insulating layers of IC devices, which is the
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most common use of CMP in the IC device manufacturing process. We have
introduced new generations of oxide slurries that reduce both defectivity in IC
devices and the required polishing time. While our oxide CMP slurries are also
used to polish poly-silicon material, we have developed a CMP slurry
specifically engineered to polish this material which offers improved
selectivity to poly-silicon and fine poly-silicon surface finish.
We also manufacture more than seven slurry products for polishing tungsten.
As with our oxide slurries, we have introduced new generations of slurries for
polishing tungsten that offer improvements in polishing performance. These
improvements include faster polishing rates, greater polishing uniformity and
reduced defectivity.
The following table shows our primary products and the surfaces polished,
primary features and end uses:
<TABLE>
<CAPTION>
PRODUCT SURFACE POLISHED PRIMARY FEATURES END USES
<S> <C> <C> <C>
SC112 Oxide Original formulation IC devices
SC1 Oxide Concentrate form of SC112 IC devices
Semi-Sperse(R)12 Oxide High polishing rate IC devices
Semi-Sperse(R)25 Oxide High polishing rate IC devices
concentrate
Semi-Sperse(R)AM100 Oxide High purity IC devices
Semi-Sperse(R)AM100C Oxide High purity IC devices
Semi-Sperse(R)D7000 Oxide Low defectivity IC devices
Semi-Sperse(R)P1000 Polysilicon High selectivity IC devices
Semi-Sperse(R)FE400* Tungsten Low erosion IC devices
Semi-Sperse(R)WA400* Tungsten Low erosion IC devices
Semi-Sperse(R)W2000 Tungsten High performance IC devices
Semi-Sperse(R)W2585 Tungsten Low dishing, erosion IC devices
Lustra(TM)2090 Coating on hard disks Low defectivity Hard disk drives
</TABLE>
- ---------------
* These two products are sold together as a package.
CMP SLURRIES FOR HARD DISK DRIVES
In 1998 we introduced CMP slurries for CMP polishing of the magnetic heads
and the coating on hard disks in hard disk drives. We believe this CMP
application can significantly improve the surface finish of these coatings,
resulting in greater storage capacity of the substrates. We also believe that
this CMP application will improve the speed and reliability of information
exchange between the hard disks and the magnetic heads in hard disk drives. In
addition, we believe that, as with IC device manufacturers, CMP can also improve
the production efficiency of manufacturers of hard disk drives by helping them
increase their throughput and yield.
We developed our CMP slurries for hard disk drives by leveraging our core
slurry technology and manufacturing capacity and hiring personnel directly from
the industry who understand the needs of hard disk drive manufacturers. We also
established a dedicated research and development team and an applications
support team who employ a process solution approach similar to what we use for
our other slurry products. We believe that these markets offer significant
potential and that our products in this area offer superior performance over
currently used materials. We began commercial sale of these products in 1999. We
have generated more than $1.5 million of sales from these products during 1999.
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POLISHING PADS
CMP polishing pads are consumable materials used in the CMP process that
work in conjunction with the CMP slurry to facilitate the polishing process.
There are two principal types of CMP polishing pads used with CMP slurries:
- - a round pad that is designed to be affixed to a platform which moves in a
rotary or orbital motion; and
- - a developing technology in which a belt, roll or web polishing pad is affixed
to a platform that moves in a linear motion.
Both types of polishing pads are consumed during the CMP process as their
surface becomes worn by the polishing action.
The CMP polishing pad market is currently led by one principal supplier,
Rodel, which we believe has an approximately 90% share of the CMP polishing pad
market. Based on discussions with our customers as well as our own examination
of the CMP polishing pad market, we identified demand for higher quality, more
reliable and consistent polishing pads and the opportunity to jointly market our
CMP slurries and polishing pads to our existing customers.
Our first series of polishing pads, which was introduced in July 1999, is
designed for tungsten applications. In early 2000, our tungsten pad was
qualified by a major semiconductor manufacturer's process and we made our first
commercial sales of CMP polishing pads to this customer. We expect to introduce
an extended line of polishing pads in 2000. We believe that our CMP polishing
pads, which we manufacture using materials supplied by third parties, offer
advantages over currently available CMP polishing pads. These advantages include
higher removal rates, longer life and more uniform polishing. We also believe
that our new pad production technology provides fundamental improvements over
existing manufacturing methods that will result in increased pad consistency and
reliability. We further believe the compatibility of our CMP polishing pads and
slurries will enhance our ability to jointly market these products to our
existing and future customers.
We have had limited experience in developing and marketing polishing pads,
however. The development and production of polishing pads involve technologies
and production processes that are new to us. In addition, our polishing pads are
based on new pad production technology. We or the suppliers of the raw materials
that we use to make our polishing pads may not be able to solve any
technological or production problems that we or they may encounter. In addition,
if we or these suppliers are unable to keep pace with technological or other
developments in the design and production of polishing pads, we will probably
not be competitive in the polishing pad market. For these reasons, the expansion
of our business into this new product area may not be successful.
CUSTOMERS, SALES AND MARKETING
We primarily market our products directly to IC device manufacturers. For
the three months ended December 31, 1999, our five largest customers accounted
for approximately 53% of our revenue, with Intel accounting for approximately
14% of our revenue, Marketech accounting for approximately 15% of our revenue,
and Takasago accounting for approximately 11% of our revenue. For 1999, our five
largest customers accounted for approximately 58% of our revenue, with Intel
accounting for approximately 22% of our revenue, Marketech accounting for
approximately 15% of our revenue, and Takasago accounting for approximately 10%
of our revenue. Marketech and Takasago are distributors. We believe that in the
same year sales of our products to our five largest end user customers accounted
for approximately 45% of our revenue. We currently have a supply contract with
Intel for the supply of CMP slurry products over the three year period beginning
in January 1999 at specified prices.
Our marketing begins with development teams who work closely with our
customers, using our research and development facilities, to design CMP slurry
products tailored to our
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customers' needs. We then employ our applications teams who work with customers
to integrate our slurry products into customers' manufacturing processes.
Finally, we utilize our logistics and sales personnel to ensure reliable supply,
warehousing, packaging and inventory management. Through our interactive
approach, we build close relationships with our customers across a variety of
areas.
We also market our products through independent distributors and other
industry suppliers. We currently utilize independent distributors in Europe,
Taiwan and Singapore, who add to our global presence by complementing our
support personnel already located in those regions. By using our relationships
with other suppliers in the CMP industry, such as suppliers of polishing
equipment, we obtain client leads and recommendations of our products.
The IC device manufacturing industry is currently experiencing significant
growth in Asia. As a result, we have increased our focus on markets in Asia over
the last few years by increasing the number of account managers and applications
and customer support personnel present in this region. By building this regional
infrastructure, we have demonstrated a commitment to the Asian marketplace and
global expansion generally. We intend to make additional concentrated
investments in this region over the next few years.
CABOT AS OUR RAW MATERIALS SUPPLIER
The base ingredients for most of our CMP slurries are fumed metal oxides,
primarily fumed silica, which is an ultra-fine, high purity silica produced by a
flame process, and, to a much lesser extent, fumed alumina. Sales of CMP
slurries represented approximately 97% of our total revenue in 1999. Cabot is
currently our exclusive supplier of fumed metal oxides. Under our new fumed
metal oxide supply agreement with Cabot, which will become effective upon
completion of this offering, Cabot will continue to be our exclusive supplier of
fumed metal oxides, including fumed silica, for our existing slurry products.
Although the agreement does not require us to purchase fumed metal oxides from
Cabot for slurry products that we develop in the future, we expect that Cabot
will be our primary supplier of fumed metal oxides for these products as well.
Over 90% of the fumed metal oxides that we currently purchase from Cabot are
manufactured at its facility in Tuscola, Illinois.
Our agreement with Cabot contains the following terms with respect to fumed
silica:
- - provisions for a fixed annual increase in the price of fumed silica of
approximately 2% of the initial price and additional increases if Cabot's raw
material costs increase;
- - provisions requiring Cabot to supply us with fumed silica in volumes specified
by us;
- - provisions limiting Cabot's obligation to supply us with fumed metal oxides
from each of its Tuscola, Illinois and Barry, Wales facilities to specified
volumes from each facility;
- - provisions requiring us to supply Cabot with quarterly, six-month, annual and
18-month forecasts of our expected fumed silica purchases and limiting Cabot's
obligations to provide us with fumed silica to specified percentages in excess
of these forecasted volumes;
- - provisions that limit the amount we can forecast for any month to an amount no
greater than 20% of the forecasted amount for the previous month;
- - provisions requiring us to purchase at least 90% of the six-month volume
forecast and to pay specified damages to Cabot if we purchase less than that
amount;
- - provisions obligating us to pay all reasonable costs incurred by Cabot to
provide quality control testing at levels greater than Cabot provides to its
other customers; and
- - provisions that generally prohibit us from reselling any fumed silica
purchased from Cabot.
We estimate that the aggregate payments we will make to Cabot for fumed
metal oxides under our new agreement with Cabot, taking into account the
approximately 2% annual price increases but not possible price in-
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creases for increases in Cabot's raw material costs, will be approximately $16.4
million for the remaining six months in 2000, $42.0 million in 2001 and $53.9
million in 2002. These estimates are based on a number of assumptions, including
assumptions regarding the growth of our business, which may turn out to be
wrong. Our actual aggregate payments to Cabot under our new agreement with Cabot
for these periods may be more or less these estimates.
It is difficult to assess whether the prices we will pay to Cabot for fumed
metal oxides under our new agreement with Cabot are the same as or different
than the prices we could have obtained in arm's-length negotiations with an
unaffiliated third party in light of the long-term nature of the contract, the
volumes provided for under the agreement and our particular quality
requirements.
Under the new agreement, Cabot will also supply us with fumed alumina on
terms generally similar to those described above, except that the forecast
requirements do not apply to fumed alumina. The new agreement prohibits Cabot
from selling fumed metal oxides to third parties for use in CMP applications.
Under the new agreement, Cabot warrants that its products will meet our
agreed upon product specifications. We have no right to any consequential,
special or incidental damages for breach of that warranty or any other provision
of the agreement. Cabot will be obligated to replace noncompliant products with
products that meet the agreed upon specifications. The new agreement also
provides that any change to product specifications for fumed metal oxides must
be by mutual agreement. Any increased costs due to product specification changes
will be paid by us. If we require product specification changes that Cabot
cannot meet, we will have the right to purchase products meeting those
specifications from other suppliers.
Historically, we did not provide detailed product specifications to Cabot
and Cabot permitted us to return some products even if they met our
specifications. Under our new agreement, we will provide detailed specifications
to Cabot and will have no contractual right to return products that meet these
specifications.
The agreement has an initial term that expires in June 2005. Thereafter,
the agreement may be terminated by either party on June 30 or December 31 in any
year with at least 18 months prior written notice.
It may be difficult to secure alternative sources of fumed metal oxides in
the event Cabot encounters supply or production problems or terminates or
breaches its agreement with us. A significant reduction in the amount of fumed
metal oxides supplied by Cabot, a problem with the quality of those fumed metal
oxides or a prolonged interruption in their supply by Cabot could interfere with
our ability to produce our CMP slurries in the quantities and of the quality
required by our customers and in accordance with their delivery schedules.
DISPERSIONS SERVICES AGREEMENT WITH DAVIES
Cabot has assigned to us a dispersions services agreement with Davies
Imperial Coatings, Inc. pursuant to which Davies produces slurries for us. Under
this agreement, we provide raw materials, primarily fumed silica, to Davies and
it performs dispersion services. The price for these services is set at a
negotiated price, subject to increases. We have agreed to purchase minimum
amounts of services for each year of the agreement. If Davies fails to supply us
with required dispersions services, we have the right to provide these services
for ourselves or purchase them from third parties. The agreement provides for
renegotiation of the price paid for dispersions services on each two-year
anniversary of the agreement in order to reflect changes in Davies'
manufacturing costs. We have also agreed to invest during each year $150,000 in
capital improvements, capacity expansions and other expenditures to maintain
capacity at the Davies dispersions facility in Hammond, Indiana. We own most of
the dispersions equipment at the Davies facility.
Under the agreement, we must give Davies the opportunity to bid to provide
dispersion services for some of our products. Davies and its controlling
stockholders agree
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that, during the term of the agreement and for a period after the termination of
the agreement, they will not provide, nor assist any other person or entity in
providing, metal oxide dispersion services to any of our competitors. Under some
circumstances, we must pay these individuals noncompetition payments on the date
of the termination of the agreement and on the first anniversary of the
termination.
The agreement has an initial term that expires in October, 2004, and is
automatically renewed for one-year periods thereafter, unless either party gives
written notice to the other of its intention to terminate the agreement at least
90 days prior to the expiration of the term.
DISPERSIONS SERVICES
AGREEMENT WITH CABOT
Dispersions of fumed metal oxides are used in a variety of applications in
addition to CMP. These applications include paper applications and coatings such
as paints. In the past, Cabot has developed and sold fumed metal oxides
dispersions for these non-CMP applications, and intends to continue this
business after this offering and the expected spin-off. We performed dispersion
services for Cabot prior to our incorporation and Cabot intends to continue to
rely on us for these services in the future. Accordingly, we have entered into a
dispersions services agreement with Cabot, which will become effective upon
completion of this offering, under which we will continue to offer fumed metal
oxide dispersions services to Cabot, including the manufacturing, packaging and
testing of dispersions. Less than 10% of our current dispersions capacity will
be devoted to Cabot. The agreement provides that some dispersion services may be
subcontracted by us to Davies but we will remain liable for these services. The
dispersions services that we will provide to Cabot must be performed at our
facilities in Aurora, Illinois and Barry, Wales or at the Davies facility. Under
the agreement, Cabot will supply us with the fumed metal oxide particles
necessary for the manufacture of the dispersions.
We will charge Cabot for dispersion services that we perform under this
agreement at our dispersion manufacturing cost, as defined in the agreement,
plus 25% of this cost in the case of dispersion services we perform at our
dispersions facilities in Aurora, Illinois and Barry, Wales and 10% of this cost
in the case of dispersion services that we subcontract to Davies and which are
performed by Davies at its dispersions facility in Hammond, Indiana.
Our agreement with Cabot also contains the following terms:
- - provisions limiting our obligation to provide Cabot with dispersions to stated
maximum annual volumes for each of the three facilities;
- - provisions requiring Cabot to supply us with quarterly, six-month, annual and
18-month forecasts of their expected dispersions purchases and limiting our
obligation to provide Cabot with dispersions to specified percentages in
excess of these forecasted volumes;
- - provisions that provide that if we develop any intellectual property in the
course of performing dispersion services for Cabot, that intellectual property
will be jointly owned by us and Cabot;
- - provisions that provide that if we develop any intellectual property outside
of performing dispersion services for Cabot and use that intellectual property
in performing dispersion services for Cabot, then we are obligated to license
Cabot that intellectual property in exchange for a royalty payment;
- - provisions that generally prohibit Cabot from engaging a third party to
provide dispersion services unless we are unable to supply the requested or
agreed upon services, although Cabot retains the right to manufacture fumed
metal oxide dispersions itself or have Davies provide these services; and
- - provisions that generally prohibit us from performing dispersion services for
third parties whose products compete with any Cabot product or from selling
dispersion products in applications, other than CMP, that compete with any
Cabot product.
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The agreement has an initial term that expires in June, 2005. Thereafter,
the agreement may be terminated by either party on June 30 or December 31 in any
year with at least 18 months prior written notice. If Cabot terminates the
agreement, Cabot cannot purchase fumed metal oxides dispersion services from one
of our competitors. If we terminate the agreement, Cabot may purchase fumed
metal oxide dispersions services from any party without restriction.
NEGOTIATIONS WITH CABOT
REGARDING FUMED ALUMINA SUPPLY ARRANGEMENT
We have experienced increased demand for one of our CMP slurries for
polishing tungsten plugs and expect to experience in the future increased demand
for our CMP slurries for polishing copper wiring and conductive plugs. Fumed
alumina is an essential raw material for these slurries. We currently purchase
our fumed alumina from Cabot and expect to continue to do so after this offering
and the spin-off. In order to meet our anticipated future needs for fumed
alumina, Cabot needs to construct a new facility for the manufacture of fumed
alumina. We are currently in negotiations with Cabot regarding changes to our
fumed alumina supply arrangements. We have not reached final agreement with
Cabot on any of the terms of a new arrangement. Based on our negotiations to
date with Cabot, however, we expect that the price Cabot will charge us for
fumed alumina will be based on its fixed and variable costs for producing the
fumed alumina plus its capital costs for constructing the new facility plus an
agreed upon percentage of those costs. The payments in respect of the capital
costs will be amortized over a ten year period. Cabot estimates that the new
facility will cost between $4.5 million and $6.0 million. In addition, based on
our negotiations with Cabot, we would expect that the new plant would be
dedicated to satisfying our fumed alumina requirements and that we would have a
right of first option on all production and capacity at the plant.
RESEARCH AND DEVELOPMENT
We believe our future competitive position depends in part on our ability
to develop CMP applications tailored to our customers' needs. To this end, we
have established a technology center at our Aurora facility to provide
applications and product support to customers and to develop new products to
meet the needs of the semiconductor industry. The technology center is staffed
by a team that includes experts from the semiconductor industry and scientists
from key disciplines required for the development of high-performance CMP
products. The technology center is equipped with an advanced polishing and
metrology lab in a Class 10 clean room, a polishing lab in a Class 1000 clean
room, laboratories for product development and dispersion technology, and a
dispersions pilot plant. In our product development and dispersion technology
laboratory, our skilled technical personnel conduct kinetic studies of the
chemical reactions on the surface of the wafer. These kinetic data allow us to
adjust the composition of our slurries to avoid, among other things, non-uniform
polishing patterns. Understanding the chemical processes on the surface of the
polished wafer allows us to compose slurries specifically tailored to interact
with one element and to slow or essentially stop planarization as soon as this
particular element has been polished. We have also assembled dedicated
development teams that work closely with customers to identify their specific
technology and manufacturing challenges and to translate these challenges into
viable CMP process solutions.
We have historically purchased most of the equipment we use for research
and development. In September 1998, we entered into an agreement with a customer
under which we lease some CMP equipment in exchange for CMP slurries. This
equipment includes five IC polishing machines, one hard disk drive polishing
machine and various metrology equipment. The cost of this equipment can be
significant and we need to upgrade our equipment periodically to keep pace with
equipment developments in the semiconductor industry.
We expensed approximately $14.6 million for research and development in
1999. Investments in research and development equip-
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<PAGE> 50
ment are capitalized over their useful life and depreciated.
INTELLECTUAL PROPERTY
Our intellectual property is important to our success and ability to
compete. We currently have ten U.S. patents and 31 pending U.S. patent
applications covering CMP products and processes. In most cases we file
counterpart foreign patent applications. Many of these patents are important to
our continued development of new and innovative CMP products. We attempt to
protect our intellectual property rights through a combination of patent,
trademark, copyright and trade secret laws, as well as employee and third-party
nondisclosure and assignment agreements. Our failure to obtain or maintain
adequate protection of our intellectual property rights for any reason could
have a material adverse effect on our business, results of operations and
financial condition.
Significant litigation regarding intellectual property rights exists in our
industry. Cabot is currently involved in two separate legal actions brought
against it by Rodel alleging that Cabot is infringing some of Rodel's patents.
Although Cabot is the only named defendant in these lawsuits, we will agree to
indemnify Cabot for any and all losses and expenses arising out of this
litigation. For a further discussion of this litigation, see "-- Legal
Proceedings".
We cannot be certain that other third parties will not make a claim of
infringement against us. Any claims, even those without merit, could be time
consuming to defend, result in costly litigation and/or require us to enter into
royalty or licensing agreements. These royalty or licensing agreements, if
required, may not be available to us on acceptable terms or at all. A successful
claim of infringement against us could adversely affect our business, results of
operations and financial conditions. See "-- Legal Proceedings".
In addition, we have obtained a patent license from a third party covering
a polishing process used in the manufacturing of non-IC devices. Although we
expect to independently develop a new technology which will eliminate our need
for this licensed technology, there is no assurance that we will be successful
in doing so or that we will be able to continue to license this technology
beyond the eight years currently provided for in our license agreement.
COMPETITION
We are aware of only four other manufacturers with significant commercial
sales of CMP slurries for IC devices. We expect the competition to continue to
intensify. These manufacturers include Rodel, Fujimi, ChemFirst and Clariant. We
are aware of only three manufacturers with significant commercial sales of CMP
slurries for polishing the magnetic heads and the coating on the hard disks in
hard disk drives. These manufacturers include Rodel, Fujimi and Praxair. We may
also face competition from:
- - other companies that develop CMP products;
- - customers that currently have, or that may develop, in-house capacity to
produce their own CMP products; and
- - the development of polishing pads containing abrasives or other significant
changes in technology.
We compete primarily on the basis of our product design, level of service
and, to a lesser extent, price. We believe that we presently compete favorably
with respect to each of these factors. CMP products are evolving, however, and
we cannot give you any assurance that we will compete successfully in the
future. For a discussion of our market share of CMP slurries sold to IC device
manufacturers worldwide, see "-- Our Company".
PROPERTIES
Our principal U.S. facilities consist of:
- - our global headquarters in Aurora, Illinois, comprising approximately 65,000
square feet; and
- - a commercial dispersions plant and technical center in Aurora, Illinois,
comprising approximately 44,000 square feet.
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<PAGE> 51
We are in the process of constructing an additional manufacturing and
distribution center in Aurora, Illinois. The initial phase of this construction
is planned to provide a facility of approximately 170,000 square feet that is
scheduled to be in operation by our third fiscal quarter of 2000.
We also have a commercial dispersions plant in Geino, Japan, comprising
approximately 40,000 square feet. In addition, we will lease or sublease from
Cabot the land and building at Cabot's dispersions facility in Barry, Wales. We
are in the process of constructing a distribution center in Ansung, South Korea.
This approximately 16,000 square foot facility is scheduled for completion by
the end of 2000.
We believe that our current facilities are suitable and adequate for their
intended purposes and, together with our facilities under construction, provide
us with sufficient capacity to meet our current and expected demand in the
foreseeable future. However, if we were to encounter delays in the construction
of our new facilities, we may face capacity constraints.
ENVIRONMENTAL MATTERS
Our facilities are subject to various environmental laws and regulations,
including those relating to air emissions, wastewater discharges, the handling
and disposal of solid and hazardous wastes, and occupational safety and health.
We believe that our facilities are in substantial compliance with applicable
environmental laws and regulations. Our facilities have incurred, and will
continue to incur, capital and operating expenditures and other costs in
complying with these laws and regulations in both the United States and abroad.
However, we do not anticipate that the future costs of environmental compliance
will have a material adverse effect on our business, financial condition or
results of operations.
EMPLOYEES
As of April 3, 2000, we employed a total of 280 individuals, including 36
in sales and marketing, 67 in research and development, 31 in administration and
146 in operations. None of our employees are covered by collective bargaining
agreements. We have not experienced any work stoppages and consider our
relations with our employees to be satisfactory.
LEGAL PROCEEDINGS
In June 1998, one of our major competitors, Rodel Inc., filed a lawsuit
against Cabot in the United States District Court for the District of Delaware
entitled Rodel, Inc. v. Cabot Corporation (Civil Action No. 98-352). In this
lawsuit, Rodel has requested a jury trial and is seeking a permanent injunction
and an award of compensatory, punitive, and other damages relating to
allegations that Cabot is infringing United States Patent No. 4,959,113
(entitled "Method and Composition for Polishing Metal Surfaces"), which is owned
by an affiliate of Rodel. We refer to this patent as the Roberts patent and this
lawsuit as the Roberts lawsuit. Cabot filed an answer and counterclaim seeking
dismissal of the Roberts lawsuit with prejudice, a judgment that Cabot is not
infringing the Roberts patent and/or that the Roberts patent is invalid, and
other relief. Cabot subsequently filed a motion for a summary judgment that the
Rodel patent is invalid because all of the claims contained in the patent were
not sufficiently different under applicable patent law from subject matter
contained in previously granted patents, specifically United States Patents Nos.
4,705,566, 4,956,015 and 4,929,257, each of which is owned by a third party not
affiliated with Rodel or us. This motion was denied on September 30, 1999 based
on the court's finding that there were genuine issues of material fact to be
determined at trial. Although the Roberts lawsuit is presently in the discovery
stage and trial is scheduled to begin in November 2000, the trial date has not
yet been scheduled. After the ruling on the summary judgment motion, Rodel filed
a request for reexamination of the Roberts patent with the United States Patent
and Trademark Office, which was granted on November 12, 1999.
In April 1999, Rodel commenced a second lawsuit against Cabot in the United
States District Court for the District of Delaware entitled Rodel, Inc. v. Cabot
Corporation
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<PAGE> 52
(Civil Action No. 99-256). In this lawsuit, Rodel has requested a jury trial and
is seeking a permanent injunction and an award of compensatory, punitive, and
other damages relating to allegations that Cabot is infringing two other patents
owned by an affiliate of Rodel. These two patents are United States Patent No.
5,391,258 (entitled "Compositions and Methods for Polishing") and United States
Patent No. 5,476,606 (entitled "Compositions and Methods for Polishing"). We
refer to these patents as the Brancaleoni patents and this lawsuit as the
Brancaleoni lawsuit. Cabot has filed an answer and counterclaim to the complaint
seeking dismissal of the complaint with prejudice, a judgment that Cabot is not
infringing the Brancaleoni patents and/or that the Brancaleoni patents are
invalid, and other relief. The Brancaleoni lawsuit is presently in the discovery
stage which is currently scheduled to be completed by February 25, 2000. Trial
is presently scheduled to commence on December 4, 2000. The parties have jointly
requested that the court extend these dates.
In the Roberts lawsuit, the only product that Rodel to date has alleged
infringes the Roberts patent is our W2000 slurry, which is used to polish
tungsten and which currently accounts for a significant portion of our total
revenue. In the Brancaleoni lawsuit, Rodel has not alleged that any specific
product infringes the Brancaleoni patents; instead, Rodel alleges that our
United States Patent No. 5,858,813 (entitled "Chemical Mechanical Polishing
Slurry for Metal Layers and Films" and which relates to a CMP polishing slurry
for metal surfaces including, among other things, aluminum and copper) is
evidence that Cabot is infringing the Brancaleoni patents through the
manufacture and sales of unspecified products. At this stage, we cannot predict
whether or to what extent Rodel will make specific infringement claims with
respect to any of our products other than W2000 in these or any future
proceedings. It is possible that Rodel will claim that many of our products
infringe its patents.
Although Cabot is the only named defendant in these lawsuits, we have
agreed to indemnify Cabot for any and all losses and expenses arising out of
this litigation as well as any other litigation arising out of our business.
While we believe there are meritorious defenses to the pending actions and
intend to defend them vigorously, these defenses may not be successful. If Rodel
wins either of these cases, we may have to pay damages and, in the future, may
be prohibited from producing any products found to infringe or required to pay
Rodel royalty and licensing fees with respect to sales of those products.
In addition, we may be subject to future infringement claims by Rodel or
others with respect to our products and processes. Such claims, even if they are
without merit, could be expensive and time consuming to defend and if we were to
lose any future infringement claims we could be subject to injunctions, damages
and/or royalty or licensing agreements. Royalty or licensing agreements, if
required as a result of any pending or future claims, may not be available to
use on acceptable terms or at all. Successful claims of infringement against us
could adversely affect our business, financial condition and results of
operations.
Moreover, we have agreed to indemnify one of our major customers for losses
this customer may incur as a result of claims brought against it arising out of
its purchase or use of our products. Consequently, even if we are not directly
sued for allegedly infringing a third party's intellectual property rights or we
prevail in any such lawsuit brought against us, we may still be obligated to
indemnify this customer for any losses it incurs in actions brought against it
by this third party.
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<PAGE> 53
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The following table contains information regarding our executive officers
and directors.
<TABLE>
<CAPTION>
NAME AGE POSITIONS
------------------------------------- --- -----------------------------------------------
<S> <C> <C>
Kennett F. Burnes 56 Chairman of the Board
Samuel W. Bodman 61 Director
William P. Noglows 41 Director
Juan Enriquez-Cabot 40 Director designee
John P. Frazee, Jr. 55 Director designee
Steven V. Wilkinson 58 Director designee
Ronald L. Skates 58 Director designee
Matthew Neville 46 President and Chief Executive Officer, Director
William C. McCarthy 56 Vice President, Chief Financial Officer,
Treasurer and Secretary
Daniel J. Pike 36 Vice President of Operations
J. Michael Jenkins 46 Vice President of Human Resources
Bruce M. Zwicker 47 Vice President of Sales and Marketing
Chris C. Yu 41 Technology and marketing specialist
</TABLE>
------------------------
KENNETT F. BURNES was elected Chairman of the Board of our company in
December 1999. He has served as Cabot's Chief Operating Officer since 1996 and
Cabot's President since 1995. He was elected a director of Cabot in 1992. Before
joining Cabot in 1987, Mr. Burnes was a partner at Choate, Hall & Stewart, a
Boston-based law firm, where he practiced corporate and business law for nearly
20 years. He received both his bachelor and law degrees from Harvard University.
SAMUEL W. BODMAN was elected a director of our company in December 1999. He
has served as Cabot's Chairman and Chief Executive Officer since 1988. Before
joining Cabot, Mr. Bodman was President, Chief Operating Officer and a director
of FMR Corp., the holding company overseeing all activities of Fidelity
Investments. Mr. Bodman received his Ph.D. in chemical engineering from
Massachusetts Institute of Technology. In addition to serving on Cabot's board,
Mr. Bodman serves on the boards of John Hancock Mutual Life Insurance Company,
Security Capital Group Incorporated, Thermo Electron Corporation and Westvaco
Corporation.
WILLIAM P. NOGLOWS was elected a director of our company in January 2000.
He has served as an Executive Vice President of Cabot since 1998 and serves as
Director of Global Manufacturing and General Manager of Carbon Black. From 1984
to 1998, he held various positions at Cabot, including General Manager of
Cabot's Cab-O-Sil Division and Managing Director of Cabot Australasia. Mr.
Noglows received his BS from Georgia Institute of Technology.
JUAN ENRIQUEZ-CABOT will become a director of our company prior to the
closing of this offering. Since August 1997 Mr. Enriquez-Cabot has been a
researcher at Harvard University's David Rockefeller Center. From August 1996 to
August 1997 he was a senior researcher at Harvard Business School. From June
1996 to August 1997 he was a fellow at Harvard University's Center for
International Affairs. From June 1994 through June 1996 he was a director of
Democracy and Development, a research institution in Mexico City, Mexico. He
received both his bachelor and MBA degrees from Harvard University.
JOHN P. FRAZEE, JR. will become a director of our company prior to the
closing of this offering. Since June 1999 he has served as Chairman and Chief
Executive Officer of Paging Network, Inc., a provider of wireless communications
services. From August 1997 to June 1999 he served as Chairman, Presi-
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<PAGE> 54
dent and Chief Executive Officer of Paging Network. From September 1993 until
August 1997 Mr. Frazee managed investments as a private investor. From March
1993 until September 1993 he was President and Chief Operating Officer of Sprint
Communications. In addition to serving on our board, Mr. Frazee serves on the
boards of Dean Foods Company, Homestead Village, Inc., Paging Network, Security
Capital Group Incorporated and Vast Wireless Solutions. Mr. Frazee received his
bachelor degree in political science from Randolph-Macon College.
STEVEN V. WILKINSON will become a director of our company prior to the
completion of this offering. He has been retired since September 1998. Prior to
retirement, he worked for Arthur Andersen LLP, where he became a partner in
April 1974. Mr. Wilkinson received his BA in economics from DePauw University
and his MBA from the University of Chicago.
RONALD L. SKATES will become a director of our company prior to the
completion of this offering. He has been a private investor since October 1999.
From 1989 to October 1999, Mr. Skates served as President and Chief Executive
Officer and as a director of Data General Corporation, a computer systems
company. He received both his bachelor and MBA degrees from Harvard University.
Mr. Skates is a director of Cabot Industrial Trust, a public real estate
investment trust.
MATTHEW NEVILLE has served as our President and Chief Executive Officer
since December 1999. He was elected a director of our company in December 1999.
Mr. Neville has served as a Vice President of Cabot since 1997 and as General
Manager of our company since 1996. From 1983 to 1996, Mr. Neville held various
positions at Cabot, including Director of Research and Development for the
Cabot's Cab-O-Sil Division. Mr. Neville received his Ph.D. in chemical
engineering from Massachusetts Institute of Technology. Mr. Neville will resign
as a Vice President of Cabot upon the closing of this offering.
WILLIAM C. MCCARTHY has served as our Vice President, Chief Financial
Officer and Treasurer since December 1999 and as our Secretary since February
2000. Mr. McCarthy has served as Chief Financial Officer since February 1999.
From August 1998 to February 1999, Mr. McCarthy was pursuing personal interests
and was not employed. From February 1976 to August 1998, Mr. McCarthy held
various positions at Texas Instruments, including controller of Texas
Instruments' Corporate Services division. Mr. McCarthy received his BS in
business and his MBA from Texas A&M University.
DANIEL J. PIKE has served as our Vice President of Operations since
December 1999. Mr. Pike served as our Director of Global Operations from August
1996 to December 1999. Mr. Pike worked for FMC Corporation's Pharmaceutical
Division as a marketing manager from December 1993 until August 1996 and as a
financial analyst from June 1992 until December 1993. Mr. Pike received his BS
in chemical engineering from the University of Buffalo and his MBA from Wharton
School of Business of University of Pennsylvania.
J. MICHAEL JENKINS has served as our Vice President of Human Resources
since December 1999. Mr. Jenkins has served as our Director of Human Resources
since May 1999. From August 1984 until May 1999, Mr. Jenkins was employed for 15
years by Gas Chromatography Division of Hewlett-Packard holding various
positions, including Human Resources and Quality Manager. Mr. Jenkins received
his MA in human resources from Lincoln University.
BRUCE M. ZWICKER has served as our Vice President of Sales and Marketing
since December 1999. Mr. Zwicker has served as our Director, Global Business and
Sales from 1997 to December 1999. Since February 1988, Mr. Zwicker has held
various positions with Cabot, including Dispersion Products Line Manager. Prior
to joining Cabot, Mr. Zwicker worked for Unocal Corporation. Mr. Zwicker
received his BS in microbiology from Purdue University.
CHRIS C. YU has served as a technology and marketing specialist since
January 2000. From May 1999 until January 2000, Mr. Yu served as our Director of
Research and Technology. After indicating his desire to
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<PAGE> 55
leave our company in January 2000, Mr. Yu decided to resign from that position
but to remain with our company and focus on product development of CMP slurries
for copper-based applications and technology-based applications for customers.
From April 1998 to May 1999, Mr. Yu served as our Director of Interconnect
Technology. From January 1996 to April 1998, Mr. Yu served as our Program
Manager for Tungsten Technology. From August 1994 to January 1996, Mr. Yu was
employed by Rockwell International as Advanced Process Methods principal
engineer leading the development of planarization technologies. Mr. Yu has also
held various positions with Motorola and Micron Technology. Mr. Yu received his
Ph.D. in physics from Pennsylvania State University.
BOARD OF DIRECTORS
Our board of directors is currently composed of four directors. Prior to
the completion of this offering, we will increase our board of directors to
include four independent directors.
We intend to amend our certificate of incorporation to divide the board of
directors into three classes: Class I, whose terms will expire at the annual
meeting of stockholders to be held in 2001, Class II, whose terms will expire at
the annual meeting of stockholders to be held in 2002, and Class III, whose
terms will expire at the annual meeting of stockholders to be held in 2003.
Messrs. Noglows and Enriquez-Cabot are, or upon their appointment will be, in
Class I. Messrs. Wilkinson, Skates and Burnes are, or upon their appointment
will be, in Class II. Messrs. Bodman, Frazee, and Neville are, or upon their
appointment will be, in Class III. At each annual meeting of stockholders
beginning in 2001, the successors to directors whose terms will then expire will
be elected to serve from the time of election and qualification until the third
annual meeting following election.
In addition, our certificate of incorporation will provide that the
authorized number of directors may be changed only by resolution of the board of
directors. Any additional directorships resulting from an increase in the number
of directors will be distributed among the three classes so that, as nearly as
possible, each class will consist of one-third of the total number of directors.
COMMITTEES OF THE BOARD OF DIRECTORS
Prior to the completion of this offering, we will establish an audit
committee and a compensation committee consisting of members of our board of
directors. The audit committee will recommend the annual appointment of our
auditors and review with our auditors the scope of audit and non-audit
assignments and related fees, accounting principles we use in financial
reporting, internal auditing procedures and the adequacy of our internal control
procedures. The audit committee will initially have three members, who will be
Messrs. Enriquez-Cabot, Frazee, and Wilkinson. The compensation committee will
review and approve the compensation and benefits for our employees, directors
and consultants, administer our employee benefit plans, authorize and ratify
stock option grants and other incentive arrangements and authorize employment
and related agreements. The compensation committee will initially have three
members, who will be Messrs. Burnes, Frazee and Wilkinson.
COMPENSATION OF DIRECTORS
Directors who are also our employees receive no additional compensation for
their services as directors. Except as set forth below, each of our directors
who is not an employee of ours will receive:
- - upon his original appointment or election as a director, options to purchase
15,000 shares of our common stock which will vest over a three year period;
- - on an annual basis, options to purchase 5,000 shares of our common stock which
will vest over a four year period;
- - a $10,000 annual fee;
- - a $1,000 fee for attendance at each meeting of our board of directors or a
committee of the board; and
- - reimbursement of travel and other out-of-pocket costs incurred in attending
meetings.
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<PAGE> 56
As long as Cabot controls us, any director who is also an employee of Cabot will
not be entitled to the $10,000 annual fee or the $1,000 fee for attendance at
board and committee meetings.
EXECUTIVE OFFICERS
Our board of directors appoints our executive officers. Our executive
officers serve at the discretion of our board of directors.
COMPENSATION COMMITTEE INTERLOCKS
AND INSIDER PARTICIPATION
In our fiscal year ended September 30, 1999, we did not have a compensation
committee or any other committee serving a similar function. Decisions as to the
compensation of executive officers were made by Cabot.
EXECUTIVE COMPENSATION
The following table sets forth certain compensation information for the
Chief Executive Officer and our four other executive officers who, based on
employment with Cabot, were the most highly compensated for the fiscal year
ended September 30, 1999. All of the information in this table reflects
compensation earned by the listed individuals for services rendered to Cabot. In
connection with this offering, we have established employee benefit plans and
arrangements so that, following this offering, the compensation and employee
benefits of our executive officers and all of our other employees will be
provided primarily by us. See "--Compensation and Employee Benefit Plans" and
"Relationships Between Our Company and Cabot Corporation -- Employee Matters
Agreement".
SUMMARY COMPENSATION TABLE FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 1999
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
ANNUAL COMPENSATION ------------
-------------------------------------- RESTRICTED
OTHER ANNUAL STOCK ALL OTHER
NAME AND COMPENSATION AWARD(S) COMPENSATION
PRINCIPAL POSITIONS YEAR SALARY($) BONUS($) ($) ($)(1) ($)(2)
- ------------------- ---- ---------- --------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Matthew Neville.............. 1999 190,000 100,000 378,000 28,929
President and Chief
Executive Officer
William C. McCarthy.......... 1999 106,250 53,000(3) 82,711(4) 190,350(5) 10,102
Vice President, Chief
Financial Officer,
Treasurer and Secretary
Daniel J. Pike............... 1999 146,250 60,000 170,100 18,453
Vice President of
Operations
Chris C. Yu.................. 1999 162,637 65,000 45,000(6) 344,475(5) 21,078
Former Director of Research
and Technology
Bruce M. Zwicker............. 1999 132,728 48,000 94,500 15,642
Vice President of Sales and
Marketing
</TABLE>
- ---------------
(1) The value of the shares of Cabot restricted stock set forth in the table was
determined by subtracting the amount paid by the named executive officer to
Cabot for the shares from the fair market value of the shares on the date of
grant. The following named executive officers were granted the following
shares of Cabot restricted stock in the fiscal year ended September 30, 1999
under an equity incentive plan of Cabot: Mr. Neville, 20,000 shares; Mr.
McCarthy, 7,500 shares; Mr. Pike, 9,000 shares; Mr. Yu, 15,000 shares; and
Mr. Zwicker, 5,000 shares.
The number of shares and value (calculated at fair market value as of
September 30, 1999 ($23.75 per share), less the amount paid by the named
executive officer for the shares) of all shares of Cabot restricted stock
held by the named executive officers on September 30, 1999 (including the
shares referred to in the column of the Table headed "Restricted Stock
Award(s)"), were as follows:
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<PAGE> 57
Mr. Neville, 44,000 shares ($589,750); Mr. McCarthy, 5,500 shares
($118,475); Mr. Pike, 15,500 shares ($210,275); Mr. Yu, 14,500 shares
($247,600); and Mr. Zwicker, 11,500 shares ($154,538).
Except for a portion of the shares of Cabot restricted stock granted to Mr.
McCarthy and Mr. Yu (see note 5 below), the restricted stock set forth in
the table vests, in whole, three years from the date of grant. In accordance
with Cabot's long-term incentive compensation program under its equity
incentive plans, each of the named individuals paid to Cabot 30-40% of the
fair market value of the shares of stock listed in this footnote on the date
of grant. Some of the funds for the payment for this restricted stock were
borrowed from Merrill Lynch Bank & Trust Co. by all of the named executive
officers under a loan facility available to all recipients of restricted
stock grants under this program. The recipients (including the named
executive officers) borrowing funds from Merrill Lynch Bank & Trust are
obligated to pay interest on the loans at the prime rate and to repay the
funds borrowed. Shares purchased with borrowed funds must be pledged to
Merrill Lynch Bank & Trust as collateral for the loans when the restrictions
lapse. Cabot also guarantees payment of the loans in the event the
recipients fail to honor their obligations. The loans are full recourse.
Dividends are paid on the shares of restricted stock. In 1999, Cabot ceased
using the loan facility, purchased the outstanding loan balance from Merrill
Lynch Bank & Trust, and commenced to make loans under the program bearing
interest at 6% per annum and otherwise on terms substantially identical to
the bank loans.
(2) The information in the column headed "All Other Compensation" includes (a)
matching contributions to Cabot's tax-qualified savings plan and accruals
under a non-qualified supplemental savings plan, or CRISP, for the fiscal
year ended September 30, 1999 and (b) contributions to Cabot's tax-qualified
employee stock ownership plan and accruals under a supplemental employee
stock ownership plan, or ESOP, for the fiscal year ended September 30, 1999
on behalf of the named executive officers in the following amounts:
<TABLE>
<CAPTION>
NAME CRISP ESOP
---- ----- ----
<S> <C> <C>
Mr. Neville.................... $ 15,763 $13,166
Mr. McCarthy................... $ 5,180 $ 4,337
Mr. Pike....................... $ 11,039 $ 6,723
Mr. Yu......................... $ 11,961 $ 8,288
Mr. Zwicker.................... $ 9,435 $ 5,572
</TABLE>
Cabot provides Mr. Neville (but none of our other named executive officers)
with death benefit protection in the amount of three times his salary,
including $50,000 of group life insurance coverage. No amount has been
included in the column headed "All Other Compensation" for this benefit
because Cabot accrued no amount for the benefit and the benefit, other than
the group life insurance (which is available to all Cabot employees in
amounts determined by the level of their salaries), is not funded by
insurance on Mr. Neville's life. Cabot funds the cost of the program
generally by insurance on the lives of various other present and former
Cabot employees. The value of this benefit, based upon the taxable income
it would constitute if it were insurance, does not exceed approximately
$1,500 per year for Mr. Neville. Cabot also provides our other named
executive officers with death benefit protection in the amount of one times
their salary. The value of this benefit to each of our named executive
officers other than Mr. Neville (Mr. McCarthy, $585; Mr. Pike, $691; Mr.
Yu, $829; and Mr. Zwicker, $636) is reflected in the column headed "All
Other Compensation".
(3) This figure reflects a $10,000 sign-on bonus paid to Mr. McCarthy. Mr.
McCarthy's hire date was February 2, 1999.
(4) This figure reflects reimbursement of relocation expenses.
(5) 6,000 of the 7,500 shares of Cabot restricted stock Mr. McCarthy received,
and 6,000 of the 15,000 shares of Cabot restricted stock Mr. Yu received,
were granted for no cash purchase price; Mr. McCarthy's 6,000 shares vest in
equal increments in June, 1999, February, 2000 and February, 2001; Mr. Yu's
6,000 shares vest annually as follows: one-half in November, 1998,
one-quarter on November 15, 1999 and one-quarter on November 15, 2000.
(6) This figure reflects a reimbursement to Mr. Yu for income tax obligations on
shares of restricted stock awarded to him.
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<PAGE> 58
AGGREGATE OPTION EXERCISES FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 1999 AND
FISCAL YEAR-END OPTION VALUES
The following table sets forth information with respect to the exercise of
Cabot stock options by our named executive officers during 1999, the number of
unexercised Cabot stock options held by named executive officers on September
30, 1999, and the value of the unexercised in-the-money Cabot stock options on
that date.
<TABLE>
<CAPTION>
SECURITIES UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS AT
AT FISCAL YEAR-END(#) FISCAL YEAR-END($)(1)
SHARES ACQUIRED VALUE --------------------------- ---------------------------
NAME ON EXERCISE(#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- --------------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Matthew Neville....... 2,400 37,275 5,000 -- 80,031 --
Chris C. Yu........... -- -- -- 7,150 -- --
</TABLE>
- ---------------
(1) We determined the value of unexercised in-the-money options as of September
30, 1999 by taking the difference between the fair market value of a share
of Cabot common stock on September 30, 1999 ($23.75 per share) and the
option exercise price, multiplied by the number of shares underlying the
options as of that date. Options held by Mr. Yu were out of the money on
that date, and we have therefore recorded no value for them.
PENSION PLAN BENEFITS
Prior to this offering, our employees, including our named executive
officers, participated in Cabot's tax-qualified cash balance plan. This plan
provides retirement benefits to plan participants based on their compensation
and years of service, expressed as an account balance. In addition, prior to
this offering, some of our named executive officers participated in Cabot's
non-qualified supplemental cash balance plan, which provides supplemental
retirement benefits not available under the cash balance plan by reason of
limitations set by the Internal Revenue Code and the Employee Retirement Income
Security Act. We do not intend to sponsor a tax-qualified or a supplemental cash
balance plan, and, accordingly, all of our employees will stop accruing benefits
under these plans in connection with this offering.
COMPENSATION AND EMPLOYEE BENEFIT PLANS
We have adopted various employee benefit plans and arrangements for the
purpose of providing compensation and employee benefits to our employees after
this offering, including our executive officers. Some of these plans are
described below. These plans and arrangements include an equity incentive plan,
an employee stock purchase plan, a tax-qualified savings plan and a
non-qualified supplemental savings plan. To the extent necessary or advisable
under applicable law, Cabot, as our sole stockholder, will approve these plans
prior to this offering.
LONG-TERM INCENTIVES
We have adopted the Cabot Microelectronics Corporation 2000 Equity
Incentive Plan, and Cabot, as our sole stockholder, has approved the plan. The
following description of certain features of the plan is qualified in its
entirety by reference to the full text of the plan.
Some of our employees (including our executive officers) hold options to
acquire Cabot common stock granted under Cabot's equity incentive plans. In
connection with the distribution, we and Cabot are considering giving these
employees the choice of retaining these awards or receiving, in consideration
for the cancellation of these awards, replacement awards under our 2000 Equity
Incentive Plan. These replacement awards will be subject to the same terms and
conditions as in effect prior to the cancellation of the prior Cabot awards,
except that (1) our common stock will be substituted for Cabot common stock
subject to the awards, and (2) the replacement awards will be adjusted to
preserve the intrinsic value to the holders immediately prior to cancellation of
the prior Cabot awards. Some of our employees also hold shares of Cabot
restricted stock, and we do not expect that these awards will be cancelled and
replaced with replacement awards.
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General; Shares Available for Issuance under the Plan. The 2000 Equity
Incentive Plan will enable us to make awards of options and restricted stock
(including purchase restricted stock) to eligible employees, directors,
consultants and advisers of our company and our affiliates. We believe that the
plan will also provide us with flexibility in designing and providing incentive
compensation in order to attract and retain individuals who are in a position to
make significant contributions to our success, to reward individuals for past
contributions and to encourage individuals to take into account our long-term
interests through ownership of our common stock. Subject to adjustment for stock
splits and similar events, the maximum number of shares of common stock that may
be issued under the plan is 3.5 million shares. This number does not include
shares which will become available under the plan because of events such as
forfeitures, methods of cashless exercise and open market repurchases. Because
options issued under the plan will not be exercisable until after the spin-off,
the issuance of these options will not require us to issue any of our common
stock until that date. Awards of shares of our common stock, including
restricted stock, may be made by us under the plan. Prior to the spin-off,
however, we cannot issue any shares of our common stock if doing so would reduce
Cabot's percentage ownership in us to less than 80.5%.
Administration; Eligible Grantees. The 2000 Equity Incentive Plan will be
administered by our full board or our compensation committee, consisting of at
least one member of our board of directors. However, if required by law, this
committee will consist of at least two members of our board, neither of whom may
be one of our employees. Officers and other key employees (including employees
of our subsidiaries) who are responsible for or contribute to the management,
growth or profitability of our business and the business of our subsidiaries are
eligible to receive awards under the plan, but no employee may receive awards
under the plan in any calendar year covering more than 300,000 shares of common
stock. Our directors, advisers and consultants, as well as individuals who are
employees of our affiliates, may also receive awards under the plan.
Stock Options. The compensation committee may grant stock options under
the 2000 Equity Incentive Plan. Stock options enable the holder of the option to
purchase shares of our common stock at a price specified by the compensation
committee at the time the award is made. The plan permits the granting of stock
options that qualify as incentive stock options under Section 422 of the
Internal Revenue Code and stock options that do not qualify for incentive stock
option treatment. The compensation committee determines the per share exercise
price of all stock options and, as a general rule, this price may not be less
than the fair market value of a share of common stock at the time of grant.
Options granted in connection with this offering will be granted at the initial
public offering price. Prior to the spin-off, the exercisability of vested stock
options will be limited so that Cabot's percentage ownership in us will not drop
below 80.5%. The compensation committee will determine when an option may be
exercised and its term, but the term may not exceed ten years.
Restricted Stock. The compensation committee may grant restricted stock
under the 2000 Equity Incentive Plan. In general, an award of restricted stock
entitles the recipient to shares of common stock, subject to restrictions
determined by the compensation committee. The compensation committee may require
the recipient to provide consideration for the restricted stock as a condition
to the grant of the restricted stock. Restrictions on restricted stock lapse as
specified by the compensation committee at the time of grant. Until the
restrictions lapse, shares of restricted stock are non-transferable. Recipients
of restricted stock have all rights of a stockholder with respect to the shares,
including voting and dividend rights, subject only to the conditions and
restrictions generally applicable to restricted stock or to other restrictions
and conditions specifically set forth in the award agreement.
Effect of Termination of Employment. As a general rule, the effect that a
termination of employment will have on a holder's awards will be set forth in
his or her award agree-
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ment. We expect that some terminations, such as terminations upon death or for
permanent disability, may result in the accelerated vesting of options and the
lapsing of restrictions on restricted stock. We also expect that other
terminations will result in the forfeiture of unvested options and restricted
stock.
Adjustments for Changes in Capitalization; Change in Control. The
compensation committee will make appropriate adjustments to the maximum number
of shares of common stock that may be delivered under the plan and to
outstanding awards to reflect stock dividends, stock splits, and similar changes
in capitalization. When granting awards under the plan, the compensation
committee may provide for the accelerated vesting of options, and for the
immediate lapsing of restrictions on restricted stock in the event of a "Change
in Control" (as defined in the plan).
Amendment and Termination. The compensation committee may at any time
discontinue granting awards under the plan. Our board of directors may at any
time amend the plan or terminate the plan as to any further grants of awards.
However, none of these actions may, without the approval of our stockholders,
increase the maximum number of shares of common stock available under the plan,
extend the time within which awards may be granted, or amend the provisions of
the plan relating to amendments. Nor may any of these actions adversely affect
the rights of a holder of any previously granted award.
GRANTS UNDER THE 2000 EQUITY INCENTIVE PLAN
In connection with this offering, we intend to grant stock options to all
of our directors and employees, including our executive officers, under the 2000
Equity Incentive Plan. An aggregate of 988,240 shares of common stock are
issuable upon the exercise of these options, and the exercise price of these
options will be the initial public offering price. The following table sets
forth the number of shares of our common stock underlying these options:
<TABLE>
<CAPTION>
NUMBER OF SHARES
NAME AND POSITIONS UNDERLYING OPTIONS
- ------------------ ------------------
<S> <C>
Matthew Neville............................................. 90,000
President and Chief Executive Officer, Director
William C. McCarthy......................................... 36,000
Vice President, Chief Financial Officer, Treasurer and
Secretary
Daniel J. Pike.............................................. 45,000
Vice President of Operations
J. Michael Jenkins.......................................... 30,000
Vice President of Human Resources
Bruce M. Zwicker............................................ 36,000
Vice President of Sales and Marketing
Executive officers as a group (5 persons)................... 237,000
Non-employee directors as a group (7 persons)............... 260,000
All employees as a group (280 persons)...................... 728,240
</TABLE>
In addition, we intend to grant options to acquire 257,300 shares of common
stock under the 2000 Equity Incentive Plan to Cabot employees who are not
directors of our company. The exercise price for these options will be the
initial public offering price.
Up to one-third of the foregoing options to be granted to our employees and
directors will generally vest upon their grant and the balance of these options
will vest over a two to four year period. The foregoing options granted to Cabot
employees in their capacities as Cabot employees vest in their entirety upon
their grant.
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ANNUAL INCENTIVES
We intend to make annual cash bonuses to our employees, including our
executive officers, to provide them with an incentive to carry out our business
plan and to reward them for having done so. We intend to set performance goals
in each fiscal year at the beginning of the fiscal year, and we intend to base
the bonuses on an evaluation of our performance in the light of those goals.
EMPLOYEE STOCK PURCHASE PLAN
We have adopted a 2000 Employee Stock Purchase Plan, under which we have
initially reserved for issuance 475,000 shares of our common stock, and Cabot,
as our sole stockholder, has approved the plan. We intend that the plan will
become effective in connection with this offering and that the first offering
period under the plan will commence in connection with this offering. We also
intend that the plan will qualify as an "employee stock purchase plan" under
Section 423 of the Internal Revenue Code; there may be offering periods under
the plan, however, including the first offering period, that do not qualify
under Section 423.
Administration; Eligible Employees. The compensation committee will
administer the plan. The compensation committee, as plan administrator, will
have full authority to adopt administrative rules and procedures and to
interpret the provisions of the plan. Each of our full-time employees, and each
full-time employee of any future subsidiaries that we designate as eligible to
participate in the plan, will be eligible to participate in the plan. In
addition, the Internal Revenue Code requires us to exclude some employees from
participating in the plan and sets limits on how much common stock a participant
may purchase under the plan, and we will comply with these exclusions and
limitations.
Securities Subject to the Plan. The plan limits the number of shares of
common stock initially reserved for issuance under the plan to 475,000 shares.
The shares issuable under the plan will be made available from authorized but
unissued shares of our common stock or from shares that we purchase on the open
market after this offering. We will prorate the shares to be issued in any
offering to the extent necessary to preserve the tax-free nature of the
spin-off. We cannot issue any shares of our common stock under the plan,
however, if doing so would reduce Cabot's percentage ownership in us to less
than 80.5%.
Adjustments; Change in Control. In the event that any change to the
outstanding common stock occurs (whether by reason of any recapitalization,
stock dividend, stock split, exchange or combination of shares or other change
in corporate structure), we will make appropriate adjustments to:
- - the maximum number and class of securities issuable under the plan;
- - the maximum number and class of securities purchasable per participant during
any plan offering; and
- - the number and class of securities and the price per share in effect under
each outstanding purchase right.
It is intended that any adjustments will prevent any dilution or
enlargement of rights under the plan. In the event of various corporate events
such as our dissolution or liquidation, or a merger, or a sale of all or
substantially all of our assets, the plan offering which would otherwise be in
effect on the date of the event will accelerate and will end on the last payday
before the date of the event. On that date, all outstanding purchase rights will
automatically be exercised.
Plan Offering Periods and Purchase Rights. The plan will offer shares of
common stock from time to time through a series of plan offerings, each with a
duration of approximately six months. (However, the first plan offering may be
slightly longer or shorter than six months, depending on when this offering
occurs.) The plan offerings will commence as designated from time to time by the
compensation committee. Each plan offering will in any event begin and end on a
business day. On the day a plan offering begins, each participant with respect
to that plan offering will receive a right to purchase shares of our common
stock through payroll deductions made during that plan offering. In general,
each participant may authorize periodic pay-
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roll deductions in an amount of between one percent and ten percent of his or
her gross cash compensation for each pay period during the plan offering. A
participant may elect to reduce or increase future payroll deductions. The
purchase date of shares under the plan will occur on the day that the plan
offering ends, and whole and deemed fractional shares will be purchased using
the aggregate payroll deductions withheld from the participant for the plan
offering. We will not issue fractional shares under the plan. In general, a
participant may withdraw from the plan at any time by giving written notice.
Plan Offering Price. The price per share of common stock in any plan
offering will in general be 85% of the lower of:
- - the fair market value per share of common stock on the day the plan offering
begins; and
- - the fair market value per share of common stock on the day the plan offering
ends.
The fair market value on the first day of the first offering period will be
the initial public offering price. Thereafter, the fair market value will be
determined by reference to the closing price of our common stock on the Nasdaq
on the relevant date.
Amendment and Termination. We may, in our sole discretion, terminate or
amend the plan, but the amendment and termination of the plan may not adversely
affect outstanding purchase rights without the consent of the holders of those
rights. If we terminate the plan, we may end a plan offering and accelerate the
exercise date of all outstanding purchase rights. We will refund (without
interest) any remaining payroll deductions after we terminate the plan.
New Plan Benefits. Because the benefits under the plan will depend on
elections to participate and the fair market value of our common stock on
various future dates, we cannot determine the benefits that our executive
officers and other employees may receive under the plan.
RETIREMENT BENEFITS
We have adopted a tax-qualified savings plan for the benefit of our
employees, including our executive officers. Our employees will begin to
participate in this plan as of the first day of the month immediately following
the month in which the offering occurs. The savings plan will provide that we
will make discretionary contributions to participants' accounts, as well as cash
matching contributions in amounts based on participants' deferral elections. In
addition, we have adopted a non-qualified savings plan to provide supplemental
benefits to those employees who are affected by limits on compensation contained
in the Internal Revenue Code.
We do not currently sponsor a tax-qualified or supplemental defined benefit
pension plan, and we do not currently have any intention to adopt such a plan.
EMPLOYMENT CONTRACTS, TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL
ARRANGEMENTS
In connection with this offering and the spin-off, we expect to adopt
change-in-control arrangements covering our executive officers and other key
employees. These arrangements will likely provide for a cash severance payment,
continued medical benefits and other ancillary payments and benefits upon some
terminations of a covered employee's employment following a change in control.
Terminations of employment entitling a covered employee to these payments and
benefits will likely include (1) termination of the employee by us (or a
successor) other than for cause and (2) termination by the covered employee upon
reduction in compensation, duties or responsibilities, or relocation, or other
circumstances constituting constructive termination.
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RELATIONSHIPS BETWEEN OUR COMPANY AND CABOT CORPORATION
CABOT AS OUR CONTROLLING STOCKHOLDER
Immediately prior to this offering, Cabot will be our sole stockholder.
Upon completion of this offering, Cabot will beneficially own 82.6% of the
outstanding shares of our common stock, or 80.5% if the underwriters' over-
allotment option is exercised in full. For as long as Cabot continues to
beneficially own more than 50% of the outstanding shares of common stock, Cabot
will be able to direct the election of all of the members of our board of
directors and exercise a controlling influence over our business and affairs,
including any determinations with respect to:
- - mergers or other business combinations involving our company;
- - the acquisition or disposition of assets by our company;
- - the incurrence of indebtedness by our company;
- - the issuance of any additional common stock or other equity securities;
- - the payment of dividends with respect to the common stock;
- - amendments, waivers and modifications to our fumed metal oxide supply
agreement and dispersions services agreement with Cabot and the other interim
and ongoing agreements we have entered into with Cabot; and
- - some determinations with respect to treatment of items in our tax returns
which are consolidated or combined with Cabot's tax returns.
Similarly, Cabot will have the power to:
- - determine matters submitted to a vote of our stockholders without the consent
of our other stockholders;
- - prevent a change in control of our company; and
- - take other actions that might be favorable to Cabot.
Cabot has announced that after the offering it intends to distribute pro
rata to its stockholders all of the shares of common stock it owns by means of a
tax-free distribution. Cabot's final determination to proceed will require a
declaration of the spin-off by Cabot's board of directors. Such a declaration is
not expected to be made until certain conditions, many of which are beyond the
control of Cabot, are satisfied, including:
- - receipt by Cabot of a ruling from the IRS as to the tax-free nature of the
spin-off; and
- - the absence of any change in future market or economic conditions (including
developments in the capital markets) of Cabot's or our company's business and
financial condition that causes Cabot's board of directors to conclude that
the spin-off is not in the best interest of Cabot's stockholders.
We have been advised by Cabot that it expects the spin-off to occur six to
twelve months after the date of a private letter ruling from the IRS confirming
that the spin-off is tax-free to Cabot. If Cabot completes the spin-off, the
increased number of shares available in the market may have an adverse effect on
the market price of the common stock. See "Risk Factors -- Risks Relating to Our
Separation from Cabot".
For a description of certain provisions of our certificate of incorporation
concerning the allocation of business opportunities that may be suitable for
both us and Cabot, see "Description of Capital Stock -- Corporate
Opportunities".
For the purposes of governing some of the relationships between us and
Cabot following the spin-off and this offering, we and Cabot have entered into
commercial arrangements, principally the fumed metal oxide supply agreement, the
dispersions services agreement and the facilities lease arrangements. In
addition, we have entered into a master separation agreement providing for the
transfer of the assets and liabilities of our business, as operated by Cabot, to
us. We have also entered into a trademark license agreement with Cabot which
will provide for the license to us by Cabot of some of its trademarks and have
entered into a confiden-
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tial disclosure and license agreement with Cabot that will provide for
confidential treatment of specified information, licenses for specified
intellectual property and the transfer of dispersion-related intellectual
property. Furthermore, we have also entered into various agreements with Cabot
regarding certain arrangements between the parties during the interim period
between the closing of this offering and the completion of the spin-off. These
agreements are the management services agreement, the initial public offering
and distribution agreement, the employee matters agreement and the registration
rights agreement. In addition, we and Cabot have entered into a tax sharing
agreement to address the allocation of certain tax liabilities between the
parties.
All of the foregoing agreements will be effective on or prior to the
completion of this offering. Because these agreements were entered into at a
time when we were a wholly owned subsidiary of Cabot, they were not the result
of arm's-length negotiations between the parties. These agreements were made in
the context of an affiliated relationship and negotiated in the overall context
of our separation from Cabot. The prices and other terms under these agreements
may be less favorable to us than what we could have obtained in arm's-length
negotiations with unaffiliated third parties for similar services or under
similar leases. Because we did not negotiate with a third party for any of the
services or raw materials provided for under our agreements with Cabot, however,
it is difficult to determine whether the terms of those agreements are less
favorable to us than those that we could have obtained in arm's length
negotiations with an unaffiliated third party. In addition, because the
quantities and some of the products required to be supplied under the fumed
metal oxide supply agreement, and, to a lesser extent, the dispersion services
agreement, are unique, it is difficult to compare those terms with those that
might have been obtained from an unaffiliated third party.
The agreements summarized below have been filed as exhibits to the
registration statement of which this prospectus forms a part. See "Where You Can
Find More Information".
COMMERCIAL ARRANGEMENTS WITH CABOT
FUMED METAL OXIDE SUPPLY AGREEMENT
We have entered into a fumed metal oxide supply agreement with Cabot, which
will be effective upon the completion of this offering, under which Cabot will
continue to be our exclusive supplier of fumed silica and fumed alumina for
existing products and our primary supplier for future products. For a more
complete description of this agreement, see "Business -- Cabot as Our Raw
Materials Supplier".
DISPERSIONS SERVICES AGREEMENT WITH CABOT
We have entered into a dispersions services agreement with Cabot, which
will be effective upon the completion of this offering, under which we will
continue to offer fumed metal oxide dispersions services to Cabot. For a more
complete description of this agreement, see "Business -- Dispersions Services
Agreement with Cabot".
FACILITIES LEASE ARRANGEMENTS
We have entered into an agreement with Cabot to lease or sublease the land
and, building at its dispersions facility in Barry, Wales. This building space
comprises approximately 62,300 square feet. The lease payments total
approximately $60,000 per year. This lease will expire after ten years, subject
to earlier termination in some circumstances.
MASTER SEPARATION AGREEMENT
To effect our separation from Cabot, Cabot and we have entered into a
master separation agreement. Under this agreement, Cabot and its subsidiaries
have transferred to us substantially all of the assets and liabilities of Cabot
that are used exclusively in, relate exclusively to or arise directly from the
business conducted by us as a division of Cabot at any time on or before the
date of the transfer of these assets and liabilities to us,
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which we refer to as the contribution date, including:
- - all business operations whose financial performance is reflected in our
financial statements for the period ended September 30, 1999 as set forth
elsewhere in this prospectus; and
- - all business operations initiated or acquired by us after the date of those
financial statements.
Cabot will not transfer to us some excluded assets, including the fumed alumina
plant at Cabot's Tuscola, Illinois facility and the land, building and other
improvements and fixtures in Barry, Wales that we sublease from Cabot.
We have assumed and agreed to perform all liabilities and obligations of
Cabot relating to or arising out of these business operations any time on or
before the date of the transfer of these business operations to us, which we
refer to as the contribution date, other than various excluded liabilities.
These assumed liabilities include all liabilities relating to or arising out of
these business operations as conducted through the contribution date that are
unknown to Cabot and/or unrealized as of the contribution date and that become
known to Cabot or are realized or otherwise arise after the contribution date.
Except as expressly set forth in the master separation agreement or any
other agreement entered into between Cabot and us in connection with our
separation from Cabot, neither Cabot nor our company is making any
representation or warranty as to the business, assets or liabilities transferred
or assumed as part of the separation. Except as otherwise expressly set forth in
the separation agreement or in an ancillary agreement, all assets are being
transferred on an as is, where is, basis.
INTELLECTUAL PROPERTY
Under the master separation agreement, Cabot has transferred to us its
intellectual property rights related solely to the business conducted by us as a
division of Cabot. This transferred intellectual property includes:
- - patents;
- - copyrights;
- - trademarks;
- - technology, know-how and trade secrets;
- - licenses and other rights concerning third party technology and intellectual
property; and
- - the right to sue for infringements of these patents, copyrights, trademarks
and other intellectual property.
Cabot has agreed to assign to us various contracts with third parties relating
to our business.
FEES
We have agreed to pay the costs of the transfer of assets from Cabot to us,
including:
- - moving expenses;
- - transfer taxes;
- - expenses related to notices to customers, suppliers and other third parties;
- - fees related to the transfer or issuance of licenses, permits and franchises;
- - fees related to the assignment or transfer of contracts, agreements and
intellectual property;
- - recording and other fees, taxes, charges and assessments related to the
transfer of real property;
- - costs related to the transfer or establishment of any domestic and foreign
branch office; and
- - costs related to the transfer of any employee.
INDEMNIFICATION
Pursuant to the master separation agreement, we have agreed to indemnify,
defend and hold harmless Cabot and each of its subsidiaries and their respective
successors-in-interest against any losses, claims, dam-
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ages, liabilities or actions arising out of or in connection with:
- - the liabilities assumed by us as part of the separation, including any
liabilities arising out of the current litigation with Rodel; and/or
- - our conduct of our business and affairs after the contribution date.
Cabot has agreed to indemnify, defend and hold harmless us and each of our
subsidiaries and their respective successors-in-interest against any losses,
claims, damages, liabilities or actions, resulting from, relating to or arising
out of or in connection with:
- - the excluded assets, meaning assets used or owned in connection with any
businesses and operations of Cabot and its affiliates other than our business;
and/or
- - the excluded liabilities, including liabilities that are not incidental to or
do not arise out of our business and various liabilities in respect of
indebtedness, income taxes, employee or retirement benefit plans and other
liabilities.
Under the terms of the master separation agreement, we and Cabot, as
indemnifying parties, have various rights. The indemnitee may defend and, with
the consent of the indemnifying party, compromise and settle a claim and will be
entitled to reimbursement for its reasonable attorneys' fees and expenses
incurred in defending the claim and indemnification for any liabilities incurred
as a result of the claim.
An indemnifying party may elect to defend, at its own expense and through
counsel chosen by it, any claim by a third party if the claim will, or is likely
to, obligate the indemnifying party to provide indemnification. If an
indemnifying party elects to defend a third-party claim, it will be required to
pay:
- - the indemnitee's reasonable out-of-pocket expenses incurred in connection with
its cooperation in the defense of the claim; and
- - under some circumstances, the reasonable fees and expenses of separate counsel
for the indemnitee, including primary counsel, local counsel and, in patent
litigation, special patent counsel.
If an indemnifying party elects to defend a third-party claim but, in the
reasonable judgment of an indemnitee, the indemnifying party fails to timely,
properly and adequately defend the third-party claim, the indemnitee may do so.
There are restrictions on the ability of the indemnifying party to settle or
compromise a claim if the settlement or compromise would be harmful to the
indemnitee. The master separation agreement specifically provides that until we
notify Cabot that we will assume the defense of the lawsuits instituted by Rodel
against Cabot, Cabot will continue to defend these lawsuits and we will
indemnify Cabot for any losses and expenses, including attorneys' fees, that it
incurs as a result of these actions. For a further discussion of the Rodel
lawsuits, see "Business -- Legal Proceedings".
If an indemnitee recovers amounts from third parties, such as an insurance
company, these amounts will reduce the amount the indemnifying party must pay
unless the indemnitee or its affiliates remain directly or indirectly liable for
those amounts pursuant to self-insurance or re-insurance arrangements. If the
indemnitee incurs a net tax cost from the receipt of an indemnification payment,
the indemnifying party must compensate the indemnitee for the amount of the net
tax cost. If the indemnitee receives a net tax benefit from incurring or paying
for any indemnified loss or liability, the amount the indemnifying party must
pay will be reduced to take account of the net tax benefit.
DISPUTE RESOLUTION
The master separation agreement contains provisions that govern the
resolution of disputes, controversies or claims that may arise between us and
Cabot except to the extent otherwise provided for in any other agreement entered
into between Cabot and us in connection with our separation from Cabot. The
master separation agreement provides that the parties will use all commercially
reasonable efforts to settle all disputes arising in connection with the
agreement without
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resorting to mediation, arbitration or otherwise. If these efforts are not
successful, either party may submit the dispute for non-binding mediation. If
mediation is not successful in resolving any dispute, any party may resort to
any remedies it may have at common law or otherwise, including litigation.
Neither party will be entitled to consequential, special, exemplary or punitive
damages.
FURTHER ASSURANCES
In addition to the actions specifically provided for elsewhere in the
master separation agreement, each of our company and Cabot has agreed to use all
commercially reasonable efforts to cause all actions, agreements and obligations
set forth in the master separation agreement to be performed.
TRADEMARK LICENSE AGREEMENT
We have entered into a trademark license agreement with Cabot that governs
our use of various trademarks used in our business. Under the agreement, Cabot
has granted to us a worldwide royalty-free license to use the trademarks solely
in connection with the manufacture, sale or distribution of products related to
our business. The license includes the right to use the term "Cabot" as a trade
name, either individually or in combination with other terms. This license also
includes the right to grant sublicenses to our wholly-owned subsidiaries, for so
long as they remain wholly-owned subsidiaries. We may not transfer or assign the
license without Cabot's prior written consent.
Under the agreement, we agree to refrain from various actions that could
interfere with Cabot's ownership of the trademarks. The agreement contains
provisions regarding:
- - the creation of quality standards for our products;
- - the ability of Cabot to inspect our products and facilities; and
- - our obligation to cease production of and correct or properly destroy, any
products marketed under the licensed trademarks that fail to meet the quality
standards.
The agreement provides that our license to use the trademarks may be
terminated for various reasons, including our discontinued use of the
trademarks, our breach of the agreement or a change in control of us.
We will indemnify Cabot and its directors, officers and employees from
claims for damage or injury to persons or property or for loss of life or limb
if Cabot is found liable to any third party under any tort or products liability
or similar action in connection with the use by us of the licensed trademarks.
MANAGEMENT SERVICES AGREEMENT
We and Cabot have entered into a management services agreement, which will
be effective upon the completion of this offering, pursuant to which Cabot will
provide administrative and corporate support services to us on an interim or
transitional basis, including human resource, accounting, treasury, tax,
facilities, legal and information services. Cabot will charge us for these
services at cost, including all out-of-pocket, third-party costs and expenses
incurred by Cabot in providing the services. If Cabot incurs third-party
expenses on behalf of us as well as a Cabot entity, Cabot will be required to
allocate these expenses in good faith between us and the Cabot entity, as Cabot
shall determine in the exercise of its reasonable judgment. The agreement
provides for monthly invoicing of service charges. If we do not pay the invoiced
amount within 60 days following receipt of the invoice, we will be required to
pay interest at a specified rate, unless the invoiced amount is in dispute.
Cabot and we will be required to use reasonable efforts to resolve any disputes
promptly.
The management services agreement provides that the services provided by
Cabot will be substantially similar in scope, quality and nature to those
services provided to us prior to the contribution date. Cabot will also be
required to provide the services to us through the same or similarly qualified
personnel, but the selection of personnel to perform the various services will
be within the sole control of Cabot. In addition, Cabot will not be required to
materially increase the volume, scope or quality of the services
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provided beyond the level at which they were performed for us in the past. The
agreement provides that Cabot may cause any third party to provide any service
to us that Cabot is required to provide, but that Cabot will remain responsible
for any services it causes to be provided in this manner. Cabot will not be
required to provide any service to the extent the performance of the service
becomes impracticable due to a cause outside the control of Cabot, such as
natural disasters, governmental actions or similar events of force majeure.
Similarly, Cabot will not be required to provide any service if doing so would
require Cabot to violate any laws, rules or regulations. The agreement also
provides that Cabot and we may agree to additional services to be provided by
Cabot. The terms and costs of these additional services will be mutually agreed
upon by Cabot and us. These additional services may include services that were
not provided to us when we were a division of Cabot prior to the contribution
date.
Pursuant to the management services agreement, we will agree to indemnify
and hold harmless Cabot, each of its subsidiaries and their directors, officers,
agents and employees from any claims, damages and expenses arising out of the
services rendered to us unless resulting from their breach of contract, gross
negligence or willful misconduct on their part. In addition, we will agree that
these same persons shall be liable to us only for any claims, damages or
expenses resulting from breach of contract, gross negligence or willful
misconduct on their part.
The management services agreement will commence on the date of this
offering and will continue until the earlier of the date of the spin-off or two
years from the completion of this offering. Cabot and we may, by mutual
agreement, provide for the continuation of some services after the spin-off. In
addition, either Cabot or our company may terminate the management services
agreement with respect to one or more of the services provided under the
agreement:
- - If the other party has failed to perform any material obligation relating to
the terminated service; and
- - if the failure continues for a period of 30 days after the other party
receives notice of the failure from the terminating party.
CONFIDENTIAL DISCLOSURE AND
LICENSE AGREEMENT
We and Cabot have entered into a confidential disclosure and license
agreement with respect to confidential and proprietary information, intellectual
property and other matters whereby we and Cabot agree to keep confidential and
to cause our affiliates to keep confidential, and not to use for any
unauthorized purpose, confidential information regarding the other party.
Confidential information includes:
- - unpublished technology and know-how;
- - unpublished patent applications; and
- - trade secrets and other confidential or proprietary technical and business
information.
Confidential information does not include any information that:
- - is already known to the other party from a third-party source;
- - is or becomes publicly known;
- - is received from a third party without any obligations of confidentiality;
- - is disclosed to a third party without restrictions;
- - is independently developed by employees or consultants of the party receiving
the information; or
- - is approved for release by the disclosing party.
Cabot has granted to us and our affiliates an ancillary license, which is a
fully paid, world-wide, non-exclusive license to Cabot's copyrights, patents and
technology that:
- - are not included within the assets transferred under the master separation
agreement;
- - are owned by Cabot on the date of the transfer of assets to us;
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- - do not relate to (A) treated or untreated fumed metal oxide particles or the
manufacture or treatment of these particles or (B) cesium chemicals or other
products of Cabot's performance materials division or the manufacture of these
chemicals;
- - would be infringed or misappropriated by the manufacture, treatment,
processing, handling, marketing, sale or use of any of our products, excluding
treated or untreated fumed metal oxide particles and cesium chemicals or other
products of Cabot's performance materials division; and
- - were used by Cabot in connection with our activities, prior to our separation
from Cabot.
Cabot has agreed, on behalf of itself and its affiliates, not to assert any
of the patents and copyrights in published copyrightable material licensed to us
under the ancillary license against our customers with respect to our customers'
use of products manufactured or supplied by us under the ancillary license. The
ancillary license does not include the right to grant sublicenses to others. We
have agreed not to use the ancillary license in connection with any activity
that is competitive with any activity of Cabot.
We have granted to Cabot and its affiliates a fully paid, world-wide,
non-exclusive license to copyrights, patents and technologies that are among the
assets transferred to us under the master separation agreement and that would be
infringed by the manufacture, treatment, processing, handling, marketing, sale
or use of any products or services sold by Cabot for applications other than
CMP. We have agreed, on our own behalf and on behalf of our affiliates, not to
assert any of the patents and copyrights in published copyrightable material
licensed to Cabot under the license to Cabot against Cabot's customers with
respect to their use of non-CMP products manufactured or supplied by Cabot under
the license to Cabot. The license to Cabot does not include the right to grant
sublicenses to others. Cabot has agreed not to use the license in connection
with any activity that is competitive with any of our activities.
We have also agreed, on our own behalf and on behalf of our affiliates, not
to use specific information in our possession as of the date of the transfer of
assets to us for the manufacture of treated or untreated fumed metal oxide
particles and/or cesium chemicals and other products of Cabot's performance
materials division. This specific information is information concerning:
- - Cabot's fumed metal oxide products (treated and untreated) and related
manufacturing or treatment processes;
- - cesium chemicals and other products of Cabot's performance materials division
and related manufacturing processes; and
- - the raw materials, suppliers or equipment used in these products, processes
and chemicals, including product specifications.
Additionally, Cabot has assigned to us an undivided one-half interest in
and to various patents, copyrights and technology that relate to dispersion
technology, which are owned by Cabot and used in Cabot's dispersion business and
our business as of the date of the confidential disclosure and license
agreement. We will generally pay all costs associated with the transfer to us of
this intellectual property. Cabot and we will generally share the costs
associated with the prosecution and maintenance of these patents. Cabot and/or
we, individually or jointly, may bring enforcement proceedings against an
infringer of this dispersion intellectual property. Cabot and we have agreed to
notify the other party of any threat or allegation made by a third party that
any dispersion intellectual property infringes any third-party intellectual
property rights.
Cabot and we have agreed to restrictions on sublicenses and assignments of
the dispersion technology assets. Cabot has agreed not to sublicense or assign
the dispersion technology assets, including related intellectual property
rights, to any party for use in the production or sale of products for use in
CMP applications, without our prior consent. We have agreed not to sublicense or
assign the dispersion technology assets, including related intellectual property
rights, to any party for use in the production or sale of
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products for use in non-CMP applications, without the prior consent of Cabot.
INITIAL PUBLIC OFFERING AND
DISTRIBUTION AGREEMENT
GENERAL
We have entered into an initial public offering and distribution agreement
with Cabot governing our respective rights and duties with respect to this
offering and the spin-off. Cabot has announced that it plans to complete the
spin-off within six to twelve months after the date of a private letter ruling
from the IRS confirming that the spin-off is tax-free to Cabot. However, Cabot
is not obligated to complete the spin-off in this time frame or at all. We have
agreed to cooperate with Cabot in all respects to complete the spin-off. See
"Risk Factors -- Risks Relating to Our Separation from Cabot".
COVENANTS
After this offering, Cabot will continue to own a significant portion of
our common stock. As a result, Cabot will continue to include us as a subsidiary
for various financial reporting, accounting and other purposes. Accordingly, we
have agreed to certain covenants in the initial public offering and distribution
agreement, which will be binding on us as long as Cabot owns at least 50% of our
outstanding common stock. Some of these covenants are described below:
- - Covenants Regarding the Incurrence of Debt. We will not, and will not permit
any of our subsidiaries to create, incur or assume any indebtedness in excess
of an aggregate of $50.0 million outstanding at any time.
- - Other Covenants. We have also agreed that:
- we will not take any action which would have the effect of limiting
Cabot's ability to freely sell, pledge or otherwise dispose of shares of
our common stock or limiting the legal rights of or denying any benefit
to Cabot as our stockholder in a manner not applicable to our
stockholders generally;
- we will not amend our stockholder rights plan, or any successor plan, in
a manner that would result in Cabot's ownership of our common stock
causing the rights to detach or become exercisable as described under
"Description of Capital Stock -- Rights Plan";
- we will not issue any shares of common stock or any rights, warrants or
options to acquire our common stock, if after giving effect to such
issuance Cabot would own less than 80.5% of the then outstanding shares
of our common stock; and
- if Cabot determines that, due to any action on our part, its shareholding
in us has dropped or will drop below 80.5%, it can require us to reverse
or terminate the action or issue additional equity securities to it at no
cost, or purchase additional equity securities of us in the open market
or from other third parties, in which case we would have to reimburse
Cabot for the costs it incurred in making such a purchase. After the
second anniversary of the closing of this offering, these provisions
would terminate with respect to issuances of equity securities by us
under our 2000 Equity Incentive Plan and our 2000 Employee Stock Purchase
Plan, except that in the event of any such issuance we may still be
obligated to issue additional equity securities to Cabot at the per share
fair market value of those securities.
In addition, we have agreed that, for so long as Cabot is required to
consolidate our results of operations and financial position or account for its
investment in our company, we will provide Cabot financial information regarding
our company and our subsidiaries, consult with Cabot regarding the timing and
content of our earnings releases and cooperate fully with Cabot in connection
with its public filings.
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INDEMNIFICATION
We have generally agreed to indemnify Cabot and its affiliates against all
liabilities arising out of:
- - any breach by us or our affiliates of any of the provisions of the initial
public offering and distribution agreement;
- - any incorrect or incomplete financial information provided by us or our
affiliates to Cabot as required by the initial public offering and
distribution agreement; and
- - any material untrue statements or omissions in this prospectus and the
registration statement of which it is a part and in any and all registration
statements, information statements and/or other documents filed with the SEC
in connection with the spin-off.
Cabot has agreed to indemnify us and our affiliates against all liabilities
arising out of:
- - any breach by Cabot or its affiliates of any of the provisions of the initial
public offering and distribution agreement;
- - any incorrect or incomplete financial information provided by Cabot or its
affiliates to us as required by the initial public offering and distribution
agreement; and
- - any material untrue statements or omissions regarding Cabot in this prospectus
and the registration statement of which it is a part and in any and all
registration statements, information statements and/or other documents filed
with the SEC in connection with the spin-off.
Under the terms of the initial public offering and distribution agreement,
Cabot and we, as indemnifying parties, have various rights. The indemnitee may
defend and, with the consent of the indemnifying party, compromise and settle a
claim and will be entitled to reimbursement for its reasonable attorneys' fees
and expenses incurred in defending the claim and indemnification for any
liabilities incurred as a result of the claim.
An indemnifying party may elect to defend, at its own expense and through
counsel chosen by it, any claim by a third party if the claim will obligate the
indemnifying party to provide indemnification. If an indemnifying party elects
to defend a third-party claim, it will be required to pay:
- - the indemnitee's reasonable out-of-pocket expenses incurred in connection with
its cooperation in the defense of the claim; and
- - under some circumstances, the reasonable fees and expenses of separate counsel
for the indemnitee, including primary counsel and local counsel.
There are restrictions on the ability of the indemnifying party to settle
or compromise a claim if the settlement or compromise would be harmful to the
indemnitee.
If Cabot and we both claim to be entitled to indemnification for a
third-party claim, Cabot and we will jointly control the defense of the claim.
If one party fails to defend jointly, the other party will solely defend the
claim, but in no case will one party compromise or settle a third-party claim
without the consent of the other party. All expenses of either party during the
joint defense of a claim will be initially paid by the party incurring the
expenses, with the expenses reallocated and reimbursed in accordance with the
indemnification obligations of the parties at the end of the defense of the
claim.
If an indemnitee recovers amounts from third parties, such as an insurance
company, these amounts will reduce the amount the indemnifying party must pay
unless the indemnitee or its affiliates remain directly or indirectly liable for
those amounts pursuant to self-insurance or re-insurance arrangements. If the
indemnitee incurs a net tax cost from the receipt of an indemnification payment,
the indemnifying party must compensate the indemnitee for the amount of the net
tax cost. If the indemnitee receives a net tax benefit from incurring or paying
for any indemnified loss or liability, the amount the indemnifying party must
pay will be reduced to take account of the net tax benefit.
EXPENSES
We will pay the costs and expenses incurred in connection with our
separation
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from Cabot and this offering including the costs and expenses of financial,
legal, accounting and other advisers, if any. Cabot will pay the costs and
expenses incurred in connection with the spin-off, including the costs and
expenses of financial, legal, accounting and other advisors, if any.
TAX SHARING AGREEMENT
We are, and after this offering but prior to the spin-off will continue to
be, included in Cabot's consolidated federal income tax group, and our federal
income tax liability will be included in the consolidated federal income tax
liability of Cabot. We and Cabot have entered into a tax sharing agreement,
which will be effective upon the completion of this offering, pursuant to which
the amount of taxes to be paid or received by us with respect to consolidated or
combined returns of Cabot in which we are included generally are determined as
though we file separate federal, state, local and foreign income tax returns.
Under the terms of the tax sharing agreement, Cabot will not be required to make
any payment to us for the use of our tax attributes that come into existence
prior to the spin-off until such time as we would otherwise be able to utilize
such attributes.
Under the agreement, until the spin-off, Cabot will:
- - continue to have all the rights of a parent of a consolidated group;
- - have sole and exclusive responsibility for the preparation and filing of
consolidated federal and consolidated or combined state, local and foreign
income tax returns (or amended returns); and
- - have the power, in its sole discretion, to contest or compromise any asserted
tax adjustment or deficiency and to file, litigate or compromise any claim for
refund relating to these returns.
In general, the agreement provides that we will be included in Cabot's
consolidated group for federal income tax purposes for so long as Cabot
beneficially owns at least 80% of the total voting power and value of the
outstanding common stock, which we expect will be the case until the time of the
spin-off. Each member of a consolidated group is jointly and severally liable
for the federal income tax liability of each other member of the consolidated
group. Accordingly, although the tax sharing agreement allocates tax liabilities
between us and Cabot during the period in which we are included in Cabot's
consolidated group, we could be liable in the event that any federal tax
liability is incurred, but not discharged, by any other member of Cabot's
consolidated group. See "Risk Factors -- Risks Relating to Our Separation from
Cabot -- We face risks associated with being a member of Cabot's consolidated
group for federal income tax purposes".
Under the terms of the tax sharing agreement, we have agreed to indemnify
Cabot in the event that the spin-off is not tax free to Cabot as a result of
various actions taken by or with respect to us or our failure to take various
actions, including:
- - any acquisition of us by merger or otherwise, or an acquisition of a majority
of our shares, by any person or persons, within two years of the spin-off;
- - any redemption or repurchase by us of our capital stock, subject to certain
exceptions;
- - any issuance by us of our capital stock which is inconsistent with factual
statements or representations made to the IRS in connection with Cabot's
request for a private letter ruling regarding the tax-free nature of the
spin-off; and
- - any discontinuance of the active conduct of our current trades or businesses,
or the sale or other disposition of any of our assets other than in the
ordinary course of our business.
We may not be able to control some of the foregoing events that could
trigger this indemnification obligation.
REGISTRATION RIGHTS AGREEMENT
Although Cabot has announced its plans to complete the spin-off within six
to twelve months after the date of a private letter ruling from the IRS
confirming that the spin-off is tax-free to Cabot, we cannot assure you that
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the spin-off will occur within this time frame or at all. See "Risk
Factors -- Risk Factors Relating to Our Separation from Cabot". In the event
that Cabot does not complete the spin-off, Cabot could not freely sell all of
our shares that it owns without registration under the Securities Act.
Accordingly, we have entered into a registration rights agreement with
Cabot to provide it with registration rights relating to the shares of our
common stock which it holds. These registration rights generally become
effective at such time as Cabot informs us that it no longer intends to proceed
with or complete the spin-off. Cabot will be able to require us to register
under the Securities Act all or any portion of our shares covered by the
registration rights agreement. In addition, the registration rights agreement
will provide for various piggyback registration rights for Cabot. Whenever we
propose to register any of our securities under the Securities Act for ourselves
or others, subject to certain customary exceptions, we will be required to
provide prompt notice to Cabot and include in that registration all shares of
our stock which Cabot requests to be included.
The registration rights agreement sets forth customary registration
procedures, including a covenant by us to make available our employees and
personnel for road show presentations. All registration expenses incurred in
connection with the registration rights agreement will be paid by us. In
addition, we will be required to reimburse Cabot for the fees and disbursements
of its outside counsel retained in connection with any such registration. The
registration rights agreement also imposes customary indemnification and
contribution obligations on us for the benefit of Cabot and any underwriters
with respect to liabilities resulting from untrue statements or omissions in any
registration statement used in any such registration, although Cabot must
indemnify us for those liabilities resulting from information provided by Cabot.
The registration rights under the registration rights agreement will remain
in effect with respect to the shares covered by the agreement until:
- - those shares have been sold pursuant to an effective registration statement
under the Securities Act;
- - those shares have been sold to the public pursuant to Rule 144 under the
Securities Act;
- - those shares have been transferred and new certificates delivered, where the
new certificates do not bear a legend restricting further transfer and where
subsequent public distribution of those shares does not require registration
under the Securities Act; or
- - those shares cease to be outstanding.
EMPLOYEE MATTERS AGREEMENT
We and Cabot have entered into an employee matters agreement which will be
effective upon the completion of this offering. This agreement sets forth our
mutual understanding with respect to the responsibilities, obligations and
liabilities relating to the compensation and benefits of our employees in
connection with the offering and spin-off. Under this agreement, with certain
exceptions, we will be solely responsible for the compensation and benefits of
our employees on and following the offering. The principal exception to this
rule is retirement benefits for our employees; Cabot's tax-qualified retirement
plans will retain all assets and liabilities relating to our employees on and
after this offering (subject to any distributions from the plans that are
required or permitted by the plans and applicable law). The employee matters
agreement also provides that equity awards granted to our employees under
Cabot's equity incentive plans when they were employees of Cabot may be
converted into equity awards of our company upon agreement between Cabot and us.
OPTION GRANTS TO CABOT EMPLOYEES
We intend to grant options under the 2000 Equity Incentive Plan to Cabot
employees. See "Management -- Grants Under the 2000 Equity Incentive Plan".
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CORPORATE OPPORTUNITIES AND
CONFLICTS OF INTEREST
All of our directors have fiduciary duties to our company and our
stockholders under applicable Delaware law. Specifically, our directors are
charged with a duty of care and a duty of loyalty to our company and our
stockholders. This duty of care generally requires our directors to inform
themselves of all material information relevant to business decisions they make
on behalf of our company. This duty of loyalty generally requires our directors
to act in the best interests of our company and our stockholders and to refrain
from conduct that would injure our company or our stockholders or deprive our
company of an advantage or opportunity to which we are entitled.
Three members of our board of directors are also directors or executive
officers of Cabot. Our directors who are also directors or executive officers of
Cabot will also have fiduciary or similar duties to Cabot. As a result of their
duties and obligations to both companies, these directors may have conflicts of
interest with respect to matters involving or affecting us, such as acquisitions
and other corporate opportunities that may be suitable for both us and Cabot. In
addition, after this offering and the spin-off, a number of our directors and
executive officers will continue to own Cabot stock and options on Cabot stock
they acquired as employees of Cabot. This ownership could create, or appear to
create, potential conflicts of interest when these directors and officers are
faced with decisions that could have different implications for our company and
Cabot. While there are provisions in our certificate of incorporation designed
to resolve these conflicts in a manner that is fair to both us and Cabot, these
conflicts may not ultimately be resolved in a fair manner to both parties. For a
further discussion of these provisions, see "Description of Capital
Stock -- Corporate Opportunities".
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SECURITY OWNERSHIP OF PRINCIPAL
STOCKHOLDER AND MANAGEMENT
PRINCIPAL STOCKHOLDER
The following table sets forth information with respect to beneficial
ownership of common stock by Cabot as of February 29, 2000 and as adjusted to
reflect the sale of the shares of common stock offered by us in this offering.
Cabot is the only person or entity that owns beneficially more than 5% of the
outstanding shares of common stock.
<TABLE>
<CAPTION>
PERCENTAGE OF
OUTSTANDING
SHARES
BENEFICIALLY OWNED
SHARES OF -------------------
NAME AND ADDRESS COMMON STOCK BEFORE AFTER
OF BENEFICIAL OWNER BENEFICIALLY OWNED OFFERING OFFERING
- ------------------- ------------------ -------- --------
<S> <C> <C> <C>
Cabot Corporation....................................... 18,989,744 100% 82.6
75 State Street
Boston, Massachusetts
</TABLE>
MANAGEMENT
The following table sets forth information regarding beneficial ownership
of the outstanding common stock of Cabot as of February 29, 2000 by (a) each of
our directors and each of the executive officers named in the Summary
Compensation Table and (b) all of our directors and executive officers as a
group. The number of shares of common stock shown below includes shares issuable
upon the exercise of stock options and, for each person who is a participant in
Cabot's employee stock plan, shares issuable upon conversion of shares of
Cabot's convertible preferred stock allocated to such participant's account
under Cabot's employee stock plan.
As used in this table, "beneficial ownership" means the sole or shared
power to vote or direct the voting or to dispose or direct the disposition of
any security. A person is deemed to be the beneficial owner of securities that
can be acquired within 60 days from the date of this prospectus through the
exercise of any option, warrant or right. Shares of common stock subject to
options, warrants or rights that are currently exercisable or exercisable within
60 days are deemed outstanding for computing the ownership percentage of the
person holding such options, warrants or rights, but are not deemed outstanding
for computing the ownership percentage of any other person. The amounts and
percentages are based upon 66,909,163 shares of Cabot common stock outstanding
as of February 29, 2000.
<TABLE>
<CAPTION>
PERCENTAGE
OWNERSHIP PERCENTAGE
SHARES OF OF OUR SHARES OF CABOT OWNERSHIP
NAME OUR COMMON STOCK COMPANY COMMON STOCK OF CABOT
- ---- ---------------- ---------- --------------- ----------
<S> <C> <C> <C> <C>
Kennett F. Burnes(1)............. -- -- 548,717 *
Samuel W. Bodman(2).............. -- -- 1,481,464 2.2
William P. Noglows(3)............ -- -- 126,900 *
Matthew Neville(4)............... -- -- 77,830 *
William C. McCarthy.............. -- -- 6,129 *
Daniel J. Pike................... -- -- 17,583 *
Chris C. Yu...................... -- -- 19,948 *
Bruce M. Zwicker................. -- -- 25,288 *
All directors and executive
officers as a group (8
persons)(5).................... -- -- 2,287,753 3.4
</TABLE>
- ---------------
* Denotes less than 1% beneficial ownership.
(1) Includes 148,986 shares of Cabot common stock that Mr. Burnes has the right
to acquire pursuant to stock options.
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(2) Includes 41,725 shares of Cabot common stock that Mr. Bodman has the right
to acquire pursuant to stock options.
(3) Includes 22,186 shares of Cabot common stock that Mr. Noglows has the right
to acquire pursuant to stock options.
(4) Includes 5,000 shares of Cabot common stock that Mr. Neville has the right
to acquire pursuant to stock options.
(5) Excludes shares of Cabot common stock beneficially owned by Mr. Yu, our
former Director of Research and Technology.
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DESCRIPTION OF CAPITAL STOCK
We intend to amend our certificate of incorporation upon the completion of
this offering. The form of our amended certificate of incorporation has been
filed as an exhibit to the registration statement of which this prospectus is a
part. The following summarizes the terms and provisions of our capital stock
upon the closing of this offering. The summary is not complete, and you should
read the form of our certificate of incorporation and our bylaws.
Upon the completion of this offering, our authorized capital stock will
consist of 200 million shares, $0.001 par value per share, of common stock and
20 million shares, $0.001 par value per share, of preferred stock.
COMMON STOCK
Each share of our common stock will be identical in all respects. Each of
these shares will entitle its holder to the same rights and privileges enjoyed
by all other holders of common stock and will subject them to the same
qualifications, limitations and restrictions to which all other holders of
common stock will be subject. Holders of our common stock will be entitled to
one vote per share on all matters to be voted on by our stockholders. Holders of
common stock will not have cumulative rights, so that holders of a majority of
the shares of common stock present at a meeting at which a quorum is present
will be able to elect all of our directors eligible for election in a given
year. The holders of a majority of the voting power of the issued and
outstanding common stock will constitute a quorum. Holders of our common stock
will be entitled to receive ratably the dividends, if any, that are declared by
our board of directors. Our board of directors may declare dividends out of
funds legally available for the declaration of dividends, subject to the
preferential rights of any holder of preferred stock that may from time to time
be outstanding. Upon our liquidation, dissolution or winding up, the holders of
our common stock will be entitled to share pro rata in the distribution of all
of our assets available for distribution after satisfaction of all of our
liabilities and the payment of the liquidation preference of any preferred stock
that may be outstanding. The holders of our common stock will have no preemptive
or other subscription rights to purchase common stock, and there will be no
redemptive rights or sinking fund provisions.
PREFERRED STOCK
Our board of directors will be authorized to cause shares of preferred
stock to be issued in one or more series, to:
- - determine the number of shares of each series;
- - fix the rights, powers, preferences and privileges of each series;
- - fix any qualifications, limitations or restrictions thereon; and
- - increase or decrease the number of shares of each such series.
Among the specific matters that may be determined by the board of directors
are:
- - the annual rate of dividends;
- - the redemption price, if any;
- - the terms of a sinking or purchase fund, if any;
- - the amount payable in the event of any voluntary liquidation, dissolution or
winding up of the affairs of our company;
- - conversion rights, if any; and
- - voting powers, if any.
Depending upon the terms of the preferred stock established by our board of
directors, any or all series of preferred stock could have preferences over the
common stock with respect to dividends and other distributions and upon
liquidation or could have voting or conversion rights that could adversely
affect the holders of the outstanding common stock.
In addition, the preferred stock could delay, defer or prevent a change of
control of our company. We have no present plans to issue shares of preferred
stock. Prior to the completion of this offering, however, our
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board of directors will adopt a rights plan. See "-- Rights Plan".
LIMITATION ON DIRECTORS' LIABILITIES
Our certificate of incorporation will limit the liability of our directors
to us and our stockholders to the fullest extent permitted by Delaware law.
Specifically, our directors will not be personally liable for money damages for
breach of fiduciary duty as a director, except for liability:
- - for any breach of the director's duty of loyalty to us or our stockholders;
- - for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law;
- - under Section 174 of the Delaware General Corporation Law, which concerns
unlawful payments of dividends, stock purchases or redemptions; and
- - for any transaction from which the director derived an improper personal
benefit.
ANTI-TAKEOVER EFFECTS OF OUR CERTIFICATE OF INCORPORATION AND BYLAWS AND
PROVISIONS OF DELAWARE LAW
Our certificate of incorporation our bylaws and Section 203 of the Delaware
General Corporation Law will contain provisions summarized below that may delay,
discourage or prevent the acquisition or control of our company by means of a
tender offer, open market purchase, proxy fight or otherwise, including
acquisitions that might result in a premium being paid over the market price of
the common stock.
STOCKHOLDER ACTION BY WRITTEN CONSENT UNTIL THE SPIN-OFF; SPECIAL MEETINGS
Our certificate of incorporation and our bylaws will permit stockholder
action by written consent until the time that Cabot and its affiliates cease to
beneficially own an aggregate of at least a majority of our then outstanding
shares of common stock. Thereafter, any action required or permitted to be taken
by our stockholders may be effected only at a duly called annual or special
meeting of stockholders and may not be effected by a written consent in lieu of
a meeting of stockholders. Prior to Cabot and its affiliates ceasing to
beneficially own an aggregate of at least a majority of our then outstanding
shares of common stock, we will call a special meeting of stockholders promptly
upon the request of Cabot. After Cabot and its affiliates cease to beneficially
own an aggregate of at least a majority of our then outstanding shares of common
stock, except as otherwise required by law and subject to the rights of the
holders of any preferred stock, special meetings of stockholders for any purpose
may be called only by our board of directors, its chairman or, at the written
request of a majority of our board of directors, our president, and the power of
stockholders to call a special meeting will be specifically denied.
ADVANCE NOTICE PROCEDURES
Our bylaws require advance notice of the nomination, other than by or at
the direction of our board of directors, of candidates for election as
directors, as well as for other stockholder proposals, to be considered at
annual meetings of stockholders. Subject to some exceptions, notice of intent to
nominate a director or raise matters at these meetings will have to be received
in writing by us not less than 90 nor more than 120 days prior to the
anniversary of the previous year's annual meeting of stockholders, and must
contain specific information concerning the person to be nominated or the
matters to be brought before the meeting and concerning the stockholder
submitting the proposal. If the chairman of a meeting determines that an
individual was not nominated, or other business was not brought before the
meeting, in accordance with the advance notice procedures, that individual will
not be eligible for election as a director, or that business will not be
conducted at such meeting, as the case may be.
BOARD OF DIRECTORS
Our certificate of incorporation and our bylaws will provide that the
number of directors shall be determined from time to time by a resolution
adopted by the majority of our directors. Our certificate of incorporation and
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our bylaws will also provide that the board of directors shall be divided into
three classes, as nearly equal in number as possible. Each director will hold
office until that person's successor is duly elected and qualified. Vacancies on
the board of directors shall be filled by a majority of the remaining directors,
or by a sole remaining director, or by our stockholders if the vacancy was
caused by the action of our stockholders.
Subject to the rights of the holders of any series of preferred stock or
any other series or class of stock to elect additional directors under specified
circumstances, prior to the date when Cabot and its affiliates cease to
beneficially own an aggregate of at least a majority of our then outstanding
shares of common stock, any director may be removed from office, with or without
cause, by the affirmative vote of the holders of at least a majority of the
outstanding common stock, voting together as a single class. On and after the
date when Cabot and its affiliates cease to beneficially own an aggregate of at
least a majority of our then outstanding shares of common stock, any director
may be removed from office only for cause upon the affirmative vote of holders
of at least 80% of our outstanding common stock, voting as a single class. A
director may not be removed by the stockholders at a meeting unless the notice
of the meeting states that the purpose, or one of the purposes, of the meeting
is removal of the director.
The provisions of our certificate of incorporation and bylaws described
above would preclude a third party from removing incumbent directors and
simultaneously gaining control of our board of directors by filling the
vacancies created by removal with its own nominees. Under the classified board
provisions described above, it would take at least two elections of directors
for any individual or group to gain control of our board of directors.
ADOPTION, AMENDMENT OR REPEAL OF CERTIFICATE OR BYLAWS
Our certificate of incorporation will provide that the affirmative vote of
holders of at least 80% of our outstanding common stock is required to amend,
repeal or adopt any provision of our certificate of incorporation inconsistent
with the provisions of that certificate regarding amendments to our bylaws,
stockholder action by written consent, special meetings of stockholders, our
board of directors and the election and removal of directors. Our certificate of
incorporation will further provide that our bylaws may be altered, amended or
repealed only by our board of directors or upon the affirmative vote of holders
of at least 80% of our outstanding common stock, voting together as a single
class.
SECTION 203 OF THE DELAWARE GENERAL CORPORATION LAW
We must comply with the provisions of Section 203 of the Delaware General
Corporation Law. In general, Section 203 prohibits a publicly held Delaware
corporation from engaging in a "business combination" with an "interested
stockholder" for a period of three years after the date of the transaction in
which the person became an interested stockholder, unless the business
combination is approved in a prescribed manner.
A "business combination" includes a merger, asset sale or other transaction
resulting in a financial benefit to the interested stockholder. An "interested
stockholder" is a person who, together with affiliates and associates, owns, or,
in some cases, within three years prior, did own, 15% or more of the
corporation's voting stock. Under Section 203, a business combination between
our company and an interested stockholder is prohibited unless it satisfies one
of the following three conditions:
- - our board of directors must have previously approved either the business
combination or the transaction that resulted in the stockholder becoming an
interested stockholder;
- - upon completion of the transaction that resulted in the stockholder becoming
an interested stockholder, the interested stockholder owned at least 85% of
our voting stock outstanding at the time the transaction commenced, excluding,
for purposes of determining the number of shares outstanding, shares owned by
(1) persons who are directors and also officers and
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(2) employee stock plans, in some instances; and
- - the business combination is approved by our board of directors and authorized
at an annual or special meeting of the stockholders by the affirmative vote of
the holders of at least 66 2/3% of the outstanding voting stock that is not
owned by the interested stockholder.
CORPORATE OPPORTUNITIES
Our certificate of incorporation will provide that we and Cabot and our and
their respective subsidiaries may engage in the same or similar business
activities and lines of business and have an interest in the same areas of
corporate opportunities and that we and Cabot will continue to have contractual
and business relations with each other (including service of directors and
officers of Cabot as our directors and officers).
Our certificate of incorporation will provide that, except as Cabot may
otherwise agree in writing, Cabot will have the right to:
- - engage in the same or similar business activities or lines of business as us;
- - do business with any of our potential or actual customers or suppliers; and
- - employ or otherwise engage, or solicit for such purpose, any of our officers,
directors or employees.
Neither Cabot nor any officer, employee or director of Cabot will be liable to
us or our stockholders for breach of any fiduciary or other duty by reason of
these activities.
If Cabot acquires knowledge of a potential transaction or matter that may
be a corporate opportunity for both Cabot and us, Cabot will have no duty to
communicate that opportunity to us and will not be liable to us or our
stockholders because Cabot pursues or acquires that corporate opportunity for
itself, directs that corporate opportunity to another person or entity or does
not present that corporate opportunity to us.
If one of our directors, officers or employees who is also a director,
officer or employee of Cabot acquires knowledge of a potential transaction or
matter that may be a corporate opportunity for both us and Cabot, our
certificate will require that our director, officer or employee act in good
faith in accordance with the following policy:
- - a corporate opportunity offered to any person who is one of our directors but
not one of our officers or employees and who is also an officer or employee
(whether or not a director) of Cabot will belong to Cabot, unless the
opportunity is expressly offered to that person solely in his or her capacity
as our director, in which case the opportunity will belong to us;
- - a corporate opportunity offered to any person who is one of our officers or
employees whether or not a director and who is also a director but not an
officer or employee of Cabot will belong to us, unless the opportunity is
expressly offered to that person solely in his or her capacity as a director
of Cabot, in which case the opportunity will belong to Cabot; and
- - a corporate opportunity offered to any other person who is (1) either one of
our officers or employees and either an officer or employee of Cabot or (2) a
director of both us and Cabot, will belong to Cabot, unless such opportunity
is expressly offered to the person solely in his or her capacity as one of our
officers, directors or employees, in which case the opportunity will belong to
us.
For purposes of these corporate opportunity provisions, any of our
directors who is chairman or vice chairman of our board of directors or a
committee thereof will not be deemed to be one of our officers by reason of
holding the position, unless the person is one of our full-time employees. If a
corporate opportunity is offered to us or Cabot other than through a person who
is an officer, director or employee of both us and Cabot, either we or Cabot can
pursue that opportunity.
Under our certificate of incorporation, any corporate opportunity that
belongs to Cabot or to us pursuant to the policy described above will not be
pursued by the other or directed by the other to another person or
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entity unless and until Cabot or we, as the case may be, determine not to pursue
the opportunity. If the party to whom the corporate opportunity belongs does
not, however, within a reasonable period of time, begin to pursue, or thereafter
continue to pursue, such opportunity diligently and in good faith, the other
party may pursue such opportunity or direct it to another person or entity.
Our directors, officers or employees acting in accordance with the policy
described above:
- - will be deemed fully to have satisfied their fiduciary or other duties to us
and our stockholders with respect to that corporate opportunity;
- - will not be liable to us or our stockholders for any breach of fiduciary duty
by reason of the fact that Cabot pursues or acquires that opportunity for
itself or directs that corporate opportunity to another person or do not
communicate information regarding such opportunity to us;
- - will be deemed to have acted in good faith and in a manner they reasonably
believe to be in our best interests; and
- - will be deemed not to have breached any duty of loyalty or other duty those
persons may have to us or our stockholders and not to have derived an improper
benefit from these actions.
The corporate opportunity provisions in our certificate of incorporation
will expire on the date that Cabot ceases to beneficially own common stock
representing at least 20% of the combined voting power of outstanding shares of
our common stock.
Our certificate of incorporation will provide that any person purchasing or
otherwise acquiring any interest in any shares of our capital stock shall be
deemed to have notice of and to have consented to these provisions.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for our common stock is EquiServe, L.P.
RIGHTS PLAN
Our board of directors has adopted a rights plan. Our rights plan is
designed to make it more costly and thus more difficult to gain control of us
without the consent of our board of directors. Under the rights plan:
- - our board of directors will declare a dividend of one preferred share purchase
right, or a right, for each outstanding share of our common stock; and
- - each right will entitle the registered holder to purchase from us one
one-thousandth of a share of a new Series A Junior Participating Preferred
Stock, par value $.001 per share, at a price of $138 per one thousandth of a
share, with adjustment.
The description and terms of the rights are described in a rights agreement
between us and the designated rights agent. The description presented below is
intended as a summary only and is qualified in its entirety by reference to the
rights agreement, a form of which has been filed as an exhibit to the
registration statement of which this prospectus forms a part. See "Where You Can
Find More Information".
The rights will be attached to all certificates representing outstanding
shares of our common stock, and no separate right certificates will be
distributed. The rights will separate from the shares of our common stock on the
close of business on the tenth day after the earlier to occur of:
- - a public announcement that, without the prior consent of our board of
directors, a person or group, known as an acquiring person, including any
affiliates or associates of that person or group, acquired beneficial
ownership of securities having 15% or more of the voting power of all our
outstanding common stock. Cabot and its subsidiaries (for so long as they own
at least 50% of our outstanding equity securities), employee benefit plans
established by or for the benefit of employees of Cabot or its subsidiaries,
and members of the Godfrey L. Cabot family and various trusts, estates,
corporations and other entities established for the benefit of or directly or
indirectly owned by the members of the
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Godfrey L. Cabot family, are not included in the definition of acquiring
person except in cases where Cabot family members or these trusts, estates,
corporations and other entities are acting with certain third parties; and
- - the close of business on the tenth day following the date of the commencement
of, or announcement of an intention to commence, a tender offer or exchange
offer that would result in any person or group becoming an acquiring person.
We refer to the date on which the rights separate from our common stock as
the distribution date. The first date of public announcement that a person or
group has become an acquiring person is the stock acquisition date.
Until the distribution date, rights will be transferred only with the
shares of our common stock. In addition, until the distribution date, or earlier
redemption or expiration, of the rights:
- - new common stock certificates issued upon transfer or new issuance of shares
of common stock will contain a notation incorporating the rights agreement by
reference; and
- - the surrender for transfer of any certificates for shares of common stock
outstanding, even without a notation, will also constitute the transfer of the
rights associated with the shares of common stock represented by the
certificate.
As soon as practicable following the distribution date, separate
certificates evidencing the rights will be mailed to holders of record of the
shares of common stock as of the close of business on the distribution date, and
to each initial record holder of various shares of common stock issued after the
distribution date. The separate right certificates alone will evidence the
rights.
The rights are not exercisable until the distribution date and will expire
at 5:00 P.M., New York time, on April 7, 2010, unless earlier redeemed by us as
described below.
If any person becomes an acquiring person, except by a permitted offer as
defined below, or in the event that more than 50% of our assets or earning power
is sold or transferred in either case with or to an acquiring person, each
holder of a right will have, under the terms of the rights agreement, a flip-in
right. A flip-in right is the right to receive upon exercise the number of
shares of common stock, or, in the discretion of our board of directors, the
number of one-thousandths of a share of preferred stock, or, in some
circumstances, our other securities, having a value immediately before the
triggering event equal to two times the exercise price. Notwithstanding the
description above, following the occurrence of the event described above, all
rights that are, or generally were, beneficially owned by any acquiring person
or any affiliate or associate of an acquiring person will be null and void.
A permitted offer is a tender or exchange offer for all outstanding shares
of our common stock that is at a price and on terms determined, before the
purchase of shares under the tender or exchange offer, by our board of
directors, to be adequate, taking into account all factors that our board of
directors deems relevant, and otherwise in our best interests and our
stockholders' best interest, other than the person or any affiliate or associate
on whose behalf the offer is being made.
If, at any time following the stock acquisition date:
- - we are acquired in a merger or other business combination transaction in which
the holders of all of the outstanding shares of common stock immediately
before the completion of the transaction are not the holders of all of the
surviving corporation's voting power; or
- - more than 50% of our assets or earning power is sold or transferred with or to
an acquiring person; or
- - if in the transaction all holders of shares of common stock are not offered
the same consideration;
then each holder of a right, except rights which previously have been voided as
described above, shall afterwards have the right, known as a flip-over right, to
receive, upon
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exercise, shares of common stock of the acquiring company having a value equal
to two times the exercise price. The holder of a right will continue to have the
flip-over right whether or not the holder exercises or surrenders the flip-in
right.
The purchase price payable, and the number of thousandths of a share of
preferred stock or other securities issuable, upon exercise of the rights may be
adjusted from time to time to prevent dilution in the event of any one of the
following:
- - a stock dividend on, or a subdivision, combination or reclassification of, the
preferred stock;
- - the grant to holders of the shares of preferred stock of various rights or
warrants to subscribe for or purchase shares of preferred stock at a price, or
securities convertible into shares of preferred stock with a conversion price,
less than the then current market price of the shares of preferred stock; or
- - the distribution to holders of the shares of preferred stock of evidences of
indebtedness or assets, excluding regular quarterly cash dividends, or of
subscription rights or warrants, other than those referred to above.
The purchase price may also be adjusted in the event of:
- - a stock split of the shares of common stock;
- - a stock dividend on the shares of common stock payable in shares of common
stock; or
- - subdivisions, consolidations or combinations of the shares of common stock
occurring, in any case, before the distribution date.
With some exceptions, no adjustment in the purchase price will be required
until cumulative adjustments require an adjustment of at least 1% in the
purchase price. No fractional one-thousandth of a share of preferred stock will
be issued and, instead, an adjustment in cash will be made based on the market
price of the shares of preferred stock on the last trading day before the date
of exercise.
At any time before the earlier to occur of:
- - a person becoming an acquiring person; and
- - the expiration of the rights and various other circumstances,
we may redeem the rights in whole, but not in part, at a price of $0.01 per
right, or the redemption price, which redemption shall be effective upon the
action of our board of directors. Additionally, we may redeem the then
outstanding rights in whole, but not in part, at the redemption price in
connection with a merger or other business combination transaction or series of
transaction is which all holders of common stock are treated alike but not
involving an interested stockholder, as defined below.
The shares of preferred stock purchasable upon exercise of the rights will
be non-redeemable. Each share of preferred stock will have a minimum
preferential quarterly dividend equal to the greater of $10.00 per share and an
amount equal to 1,000 times the aggregate amount of all cash dividends per share
and non-cash dividends and distributions per share other than dividends payable
in the form of common stock. In the event of liquidation, the holders of
preferred stock will be entitled to receive the greater of:
- - $10.00 per share, plus the amount of accrued and unpaid dividends and
distributions on the preferred stock, whether or not declared; and
- - the aggregate amount per share equal to 1,000 times the aggregate amount to be
distributed per share to holders of common stock.
Each share of junior preferred stock will have 1,000 votes, voting together
with the shares of common stock. In the event of any merger, consolidation or
other transaction in which shares of common stock are exchanged, each share of
preferred stock will be entitled to receive 1,000 times the amount and type of
consideration received per share of common stock. The rights of the preferred
stock as to dividends, liquidation and voting,
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and in the event of mergers and consolidations, are protected by customary
anti-dilution provisions. In the event that the amount of accrued and unpaid
dividends on the preferred shares is equivalent to at least six full quarterly
dividends, the holders of the preferred shares shall have the right, voting as a
class, to elect two directors in addition to the directors elected by the
holders of the common shares until all cumulative dividends on the preferred
shares have been paid through the last quarterly dividend payment date or until
non-cumulative dividends have been paid regularly for at least one year.
Until a right is exercised, the holder will have no rights as a stockholder
with respect to the shares covered by that right, including, without limitation,
the right to vote or to receive dividends. While the distribution of the rights
was not taxable to our stockholders, stockholders may, depending upon the
circumstances, recognize taxable income should the rights become exercisable or
upon the occurrence of some subsequent events.
Interested stockholder means any acquiring person or any of their
affiliates or associates, or any other person in which an acquiring person or
their affiliates or associates have in excess of 5% of the total combined
economic or voting power, or any person acting in concert or on behalf of any
acquiring person or their affiliates or associates.
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SHARES ELIGIBLE FOR FUTURE SALE
Upon the completion of this offering, 22,984,744 shares of common stock
will be outstanding, or 23,589,744 shares if the underwriters exercise their
over-allotment option in full. Of these shares, the 4,600,000 shares of common
stock, assuming the underwriters exercise their over-allotment option in full,
sold in this offering will be freely tradable without restriction or further
registration under the Securities Act, unless held by an "affiliate" of our
company as that term is defined in Rule 144 under the Securities Act. All of the
shares of common stock outstanding prior to this offering are "restricted
securities", as defined under Rule 144. These shares are restricted securities
because they were issued in private transactions not involving a public offering
and may not be sold in the absence of registration other than in accordance with
Rule 144 or Rule 701 promulgated under the Securities Act or another exemption
from registration. This prospectus may not be used in connection with any resale
of shares of common stock acquired in this offering by our affiliates.
The shares of our common stock that will continue to be held by Cabot after
the offering constitute "restricted securities" within the meaning of Rule 144,
and will be eligible for sale by Cabot in the open market after the offering,
subject to contractual lockup provisions and the applicable requirements of Rule
144. In connection with this offering, we and Cabot have agreed that, subject to
specified exceptions, for a period of 180 days after the date of this
prospectus, we and they will not, without the prior written consent of Goldman,
Sachs & Co., dispose of or hedge any shares of our common stock or any
securities convertible into or exchangeable for our common stock.
In general, under Rule 144 as currently in effect, if a minimum of one year
has elapsed since the later of the date of acquisition of the restricted
securities from the issuer or from an affiliate of the issuer, a person or
persons whose shares of common stock are aggregated, including persons who may
be deemed our affiliates, would be entitled to sell within any three-month
period a number of shares of common stock that does not exceed the greater of:
- - one percent of the then-outstanding shares of common stock, which equals
approximately 229,847 shares immediately after this offering; and
- - the average weekly trading volume during the four calendar weeks preceding the
date on which notice of the sale is filed with the SEC.
Sales under Rule 144 are also subject to certain restrictions as to the
manner of sale, notice requirements and the availability of current public
information about us. In addition, under Rule 144(k), if a period of at least
two years has elapsed since the later of the date restricted securities were
acquired from us or the date they were acquired from one of our affiliates, a
stockholder who is not our affiliate at the time of sale and who has not been
our affiliate for at least three months prior to the sale would be entitled to
sell shares of common stock in the public market immediately without compliance
with the foregoing requirements under Rule 144. Rule 144 does not require the
same person to have held the securities for the applicable periods. The
foregoing summary of Rule 144 is not intended to be a complete description.
Cabot has announced that it currently plans to complete its divestiture of
us by distributing all of the shares of our common stock which it owns to its
stockholders. See "Relationships Between Our Company and Cabot Corporation" and
"Risk Factors -- Risks Relating to Our Separation from Cabot".
Any shares distributed by Cabot will be eligible for immediate resale in
the public market without restrictions by persons other than our affiliates. Our
affiliates would be subject to the restrictions of Rule 144 described above
other than the one-year holding period requirement.
Immediately following this offering, none of the 18,989,744 "restricted
securities" will be available for immediate sale in the public market pursuant
to Rule 144(k). Shares of
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common stock issued pursuant to the 2000 Equity Incentive Plan generally will be
available for sale in the open market by holders who are not our affiliates and,
subject to the volume and other applicable limitations of Rule 144, by holders
who are our affiliates, unless those shares are subject to vesting restrictions
or the contractual restrictions described above. Following this offering, we
intend to file a registration statement on Form S-8 under the Securities Act to
register 3.5 million shares of common stock reserved or to be available for
issuance pursuant to our 2000 Equity Incentive Plan. Following this offering, we
also intend to file a registration statement on Form S-8 under the Securities
Act to register 475,000 shares of common stock reserved for issuance under our
2000 Employee Stock Purchase Plan.
Prior to this offering, there has been no public market for the common
stock. No information is currently available and we cannot predict the timing or
amount of future sales of shares, or the effect, if any, that future sales of
shares, or the availability of shares for future sale, will have on the market
price of the common stock prevailing from time to time. Sales of substantial
amounts of the common stock (including shares issuable upon the exercise of
stock options) in the public market after the lapse of the restrictions
described above, or the perception that such sales may occur, could materially
adversely affect the prevailing market prices for the common stock and our
ability to raise equity capital in the future. See "Risk Factors -- Risks
Relating to this Offering -- The actual or possible sale of our shares by Cabot,
which will own more than 80% of our outstanding shares, could depress or reduce
the market price of our common stock or cause our shares to trade below the
prices at which they would otherwise trade".
REGISTRATION RIGHTS
Some holders of our common stock are entitled to registration rights, which
are described under "Relationships Between Our Company and Cabot
Corporation -- Registration Rights Agreement".
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LEGAL MATTERS
Fried, Frank, Harris, Shriver & Jacobson (a partnership including
professional corporations), New York, New York will pass upon the validity of
the issuance of the shares of common stock offered hereby. The validity of the
shares being issued in this offering will be passed upon for the underwriters by
Sullivan & Cromwell, New York, New York.
EXPERTS
The financial statements as of September 30, 1998 and 1999 and for each of
the three years in the period ended September 30, 1999 included in this
prospectus have been so included in reliance on the report of
PricewaterhouseCoopers LLP, independent accountants, given on the authority of
said firm as experts in auditing and accounting.
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the SEC a registration statement on Form S-1 with
respect to the common stock being offered by this prospectus. This prospectus
does not contain all of the information set forth in the registration statement
and the exhibits and schedules to the registration statement. For further
information with respect to us and the shares of common stock offered by this
prospectus, reference is made to the registration statement, including its
exhibits and schedules. With respect to statements contained in this prospectus
regarding the contents of any contract or any other document, reference is made
to the copy of that contract or other document filed as an exhibit to the
registration statement. You may review a copy of the registration statement,
including its exhibits and schedules, at the SEC's public reference room,
located at 450 Fifth Street, N.W., Washington, D.C. 20549, or at the SEC's
regional offices located at 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661, and Seven World Trade Center, 13th Floor, New York, New York
10048 or on the Internet at http://www.sec.gov. You may obtain a copy of this
registration statement from the SEC's public reference room upon payment of
prescribed fees. Please call the SEC at (800) SEC-0330 for further information
on the operation of the public reference room.
As a result of this offering, we will become subject to the information and
reporting requirements of the Exchange Act and, in accordance with the Exchange
Act, we will file periodic reports, proxy statements and other information with
the SEC.
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CABOT MICROELECTRONICS MATERIALS DIVISION
INDEX TO COMBINED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE(S)
-------
<S> <C>
Report of Independent Accountants........................... F-2
Combined Balance Sheets at September 30, 1998 and 1999 and
at December 31, 1999 (unaudited).......................... F-3
Combined Statements of Income for the years ended September
30, 1997, 1998 and 1999 and for the three months ended
December 31, 1998 and 1999 (unaudited).................... F-4
Combined Statements of Division Equity for the years ended
September 30, 1997, 1998 and 1999 and for the three months
ended December 31, 1999 (unaudited)....................... F-5
Combined Statements of Cash Flows for the years ended
September 30, 1997, 1998 and 1999 and for the three months
ended December 31, 1998 and 1999 (unaudited).............. F-6
Notes to Combined Financial Statements...................... F-7
</TABLE>
F-1
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REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors of Cabot Corporation:
In our opinion, the accompanying combined balance sheets and the related
combined statements of income, of changes in Division equity and of cash flows
present fairly, in all material respects, the financial position of Cabot
Microelectronics Materials Division (the "Division"), a division of Cabot
Corporation, at September 30, 1998 and 1999, and the results of its operations
and its cash flows for each of the three years in the period ended September 30,
1999 in conformity with accounting principles generally accepted in the United
States. These financial statements are the responsibility of the Division's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these statements in
accordance with auditing standards generally accepted in the United States,
which require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for the opinion expressed above.
/s/ PricewaterhouseCoopers LLP
Boston, Massachusetts
November 5, 1999
F-2
<PAGE> 90
CABOT MICROELECTRONICS MATERIALS DIVISION
COMBINED BALANCE SHEETS
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31,
SEPTEMBER 30, --------------------
------------------ PRO FORMA
1998 1999 1999 1999
---- ---- ---- ---------
(UNAUDITED)
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash.......................................... $ 38 $ 38 $ 103 $ 103
Accounts receivable, less allowance for
doubtful accounts of $50 at September 30,
1998 and 1999 and December 31, 1999
(unaudited)................................ 9,057 19,888 22,563 22,563
Inventories................................... 5,913 5,269 8,617 8,617
Prepaid expenses and other current assets..... 142 285 772 772
Deferred income taxes......................... 431 640 640 640
------- ------- ------- -------
Total current assets.................. 15,581 26,120 32,695 32,695
Property, plant and equipment, net.............. 24,713 40,031 46,400 44,800
Goodwill, net................................... 1,890 1,610 1,540 1,540
Other intangible assets, net.................... 2,878 2,438 2,328 2,328
Deferred income taxes........................... 69 75 23 23
------- ------- ------- -------
Total assets.......................... $45,131 $70,274 $82,986 $81,386
======= ======= ======= =======
LIABILITIES AND DIVISION EQUITY
Current liabilities:
Accounts payable.............................. $ 914 $ 995 1,220 1,220
Accrued expenses and other current
liabilities................................ 3,956 6,780 6,182 6,182
Distribution payable.......................... -- -- -- 71,200
------- ------- ------- -------
Total current liabilities............. 4,870 7,775 7,402 78,602
Deferred compensation........................... 233 422 528 528
------- ------- ------- -------
Total liabilities..................... 5,103 8,197 7,930 79,130
Commitments and contingencies (Note 14)
Division equity................................. 40,028 62,077 75,056 2,256
------- ------- ------- -------
Total liabilities and division equity........... $45,131 $70,274 $82,986 $81,386
======= ======= ======= =======
</TABLE>
The accompanying notes are an integral part of these combined financial
statements.
F-3
<PAGE> 91
CABOT MICROELECTRONICS MATERIALS DIVISION
COMBINED STATEMENTS OF INCOME
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
YEAR ENDED SEPTEMBER 30, DECEMBER 31,
--------------------------- -----------------
1997 1998 1999 1998 1999
---- ---- ---- ---- ----
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenue...................................... $33,851 $56,862 $95,701 $20,325 $34,230
Revenue -- related party..................... 1,360 1,969 2,989 550 816
------- ------- ------- ------- -------
35,211 58,831 98,690 20,875 35,046
------- ------- ------- ------- -------
Cost of goods sold........................... 18,561 27,686 44,902 9,486 15,372
Cost of goods sold -- related party.......... 1,360 1,969 2,989 550 816
------- ------- ------- ------- -------
19,921 29,655 47,891 10,036 16,188
------- ------- ------- ------- -------
Gross profit....................... 15,290 29,176 50,799 10,839 18,858
Operating expenses:
Research and development................... 8,411 10,139 14,551 3,445 4,484
Selling and marketing...................... 1,028 3,293 4,572 954 1,250
General and administrative................. 4,468 8,576 11,880 2,570 3,896
Amortization of goodwill and other
intangibles............................. 720 720 720 180 180
------- ------- ------- ------- -------
Total operating expenses........... 14,627 22,728 31,723 7,149 9,810
------- ------- ------- ------- -------
Income before income taxes................... 663 6,448 19,076 3,690 9,048
Provision for (benefit from) income taxes.... (45) 2,211 6,796 1,313 3,300
------- ------- ------- ------- -------
Net income......................... $ 708 $ 4,237 $12,280 $ 2,377 $ 5,748
======= ======= ======= ======= =======
Unaudited pro forma net income per share..... $ 0.58 $ 0.26
======= =======
Unaudited pro forma shares outstanding....... 21,054 22,378
======= =======
</TABLE>
The accompanying notes are an integral part of these combined financial
statements.
F-4
<PAGE> 92
CABOT MICROELECTRONICS MATERIALS DIVISION
COMBINED STATEMENTS OF CHANGES IN DIVISION EQUITY
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
ACCUMULATED
OTHER TOTAL
PARENT RETAINED COMPREHENSIVE COMPREHENSIVE UNEARNED DIVISION
INVESTMENT EARNINGS INCOME INCOME COMPENSATION EQUITY
---------- -------- ------------- ------------- ------------ --------
<S> <C> <C> <C> <C> <C> <C>
Balance at September 30, 1996................... $27,147 $ (511) $ 25 $ (452) $26,209
Capital contribution from Cabot Corporation..... 1,214 1,214
Issuance of Cabot restricted stock under
employee compensation plans................... 451 (451) --
Amortization of deferred compensation........... 242 242
Net income...................................... 708 $ 708
Foreign currency translation adjustment......... 51 51
-------
Total comprehensive income...................... $ 759 759
------- ------- ------ ======= ------- -------
Balance at September 30, 1997................... 28,812 197 76 (661) 28,424
Capital contribution from Cabot Corporation..... 6,822 6,822
Issuance of Cabot restricted stock under
employee compensation plans................... 878 (878) --
Amortization of deferred compensation........... 449 449
Net income...................................... 4,237 $ 4,237
Foreign currency translation adjustment......... 96 96
-------
Total comprehensive income...................... $ 4,333 4,333
------- ------- ------ ======= ------- -------
Balance at September 30, 1998................... 36,512 4,434 172 (1,090) 40,028
Capital contribution from Cabot Corporation..... 8,067 8,067
Issuance of Cabot restricted stock under
employee compensation plans................... 2,050 (2,050) --
Amortization of deferred compensation........... 900 900
Net income...................................... 12,280 $12,280
Foreign currency translation adjustment......... 802 802
-------
Total comprehensive income...................... $13,082 13,082
------- ------- ------ ======= ------- -------
Balance at September 30, 1999................... 46,629 16,714 974 (2,240) 62,077
Capital contribution from Cabot Corporation
(unaudited)................................... 6,922 6,922
Issuance of Cabot restricted stock under
employee compensation plans (unaudited)....... 57 (57) --
Amortization of deferred compensation
(unaudited)................................... 275 275
Net income (unaudited).......................... 5,748 $ 5,748
Foreign currency translation adjustment
(unaudited)................................... 34 34
-------
Total comprehensive income (unaudited).......... $ 5,782 5,782
------- ------- ------ ======= ======= -------
Balance at December 31, 1999 (unaudited)........ $53,608 $22,462 $1,008 $(2,022) $75,056
======= ======= ====== ======= =======
</TABLE>
The accompanying notes are an integral part of these combined financial
statements.
F-5
<PAGE> 93
CABOT MICROELECTRONICS MATERIALS DIVISION
COMBINED STATEMENTS OF CASH FLOWS
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
YEAR ENDED SEPTEMBER 30, DECEMBER 31,
---------------------------- -----------------
1997 1998 1999 1998 1999
---- ---- ---- ---- ----
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net income............................ $ 708 $ 4,237 $ 12,280 $ 2,377 $ 5,748
Adjustments to reconcile net income to
net cash provided by operating
activities:
Depreciation and amortization...... 1,911 2,208 2,777 585 932
Noncash compensation expense....... 242 449 900 225 275
Provision for inventory
writedown........................ 30 140 130 -- --
Deferred income tax expense........ 91 (143) (215) -- 52
Loss on disposal of property, plant
and equipment.................... -- 30 141 -- (5)
Changes in operating assets and
liabilities:
Accounts receivable.............. (1,829) (3,213) (10,616) (1,775) (2,547)
Inventories...................... (1,201) (3,246) 646 899 (3,353)
Prepaid expenses and other
current assets................ (1) (139) (143) 40 (482)
Accounts payable................. 165 290 74 383 219
Accrued expenses and other
current liabilities........... 166 1,600 2,787 (700) (596)
Deferred compensation............ 79 114 189 47 106
------- ------- -------- ------- -------
Net cash provided by operating
activities............................ 361 2,327 8,950 2,081 349
------- ------- -------- ------- -------
Cash flows from investing activities:
Additions to property, plant and
equipment.......................... (1,692) (9,313) (17,194) (6,810) (7,196)
Proceeds from sale of property, plant
and equipment...................... -- 3 65 -- 6
------- ------- -------- ------- -------
Net cash used by investing activities... (1,692) (9,310) (17,129) (6,810) (7,190)
------- ------- -------- ------- -------
Net capital contributed by Cabot
Corporation........................... 1,214 6,822 8,067 4,706 6,922
------- ------- -------- ------- -------
Effect of exchange rate changes
on cash............................... 107 194 112 (56) (16)
------- ------- -------- ------- -------
Increase (decrease) in cash............. (10) 33 -- 33 65
Cash at beginning of period............. 15 5 38 5 38
------- ------- -------- ------- -------
Cash at end of period................... $ 5 $ 38 $ 38 $ 38 $ 103
======= ======= ======== ======= =======
</TABLE>
The accompanying notes are an integral part of these combined financial
statements.
F-6
<PAGE> 94
CABOT MICROELECTRONICS MATERIALS DIVISION
NOTES TO COMBINED FINANCIAL STATEMENTS
(AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
(INFORMATION SUBSEQUENT TO NOVEMBER 5, 1999 IS UNAUDITED)
1. DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION:
Cabot, Microelectronics Materials Division (the "Division") is a division
of Cabot Corporation ("Cabot"). The Division is a leading supplier to Chemical
Mechanical Planarization ("CMP") slurries to the semiconductor industry
worldwide. The accompanying financial statements are derived from the historical
books and records of Cabot and present the assets and liabilities, results of
operations and cash flows applicable to the Division. The financial statements
of the Division have been prepared for inclusion in a registration statement
relating to the public offering of a portion of the common stock of Cabot
Microelectronics Corporation ("CMC"), a wholly-owned subsidiary of Cabot which
was incorporated in October 1999.
The combined financial statements include the accounts of each subsidiary
or part of each subsidiary which forms Cabot's Microelectronics Materials
Division. Intercompany transactions between entities within the Division have
been eliminated.
The combined balance sheets have been prepared using the historical basis
of accounting and include all of the assets and liabilities specifically
identifiable to the Division. The combined statements of income include all
revenue and costs attributable to the Division, including a corporate allocation
of employee benefits and costs of shared services (including legal, finance,
human resources, information systems, corporate office, and safety, health and
environmental expenses). These costs are allocated to the Division based on
criteria that management believes to be equitable, such as the Division's
revenue, headcount, or actual utilization in proportion to Cabot's revenue,
headcount, or actual utilization. Management believes this provides a reasonable
estimate of the costs attributable to the Division. For the years ended
September 30, 1997, 1998 and 1999, such allocated costs amounted to $2,358,
$3,917, and $5,716, respectively, and are included in operating expenses. For
the three months ended December 31, 1998 and 1999, such allocated costs amounted
to $1,401 and $1,487, respectively. Allocated costs may not necessarily be
indicative of the costs that would have been incurred by the Division on a
stand-alone basis.
Unaudited Interim Financial Statements -- The accompanying financial
information as of December 31, 1999 and for the three-month periods ended
December 31, 1998 and 1999 is unaudited. The unaudited interim financial
information has been prepared on the same basis as the accompanying annual
financial statements. In the opinion of management, such interim financial
information reflects adjustments consisting of normal and recurring adjustments
necessary for a fair presentation of such financial information. The unaudited
results of operations for the interim periods ended December 31, 1998 and 1999
are not necessarily indicative of the results of operations to be expected for
any other interim period or for the full year.
Unaudited Pro Forma Balance Sheet -- The Division intends to distribute to
Cabot, in the form of two dividends, $17,000 expected to be borrowed under a
term loan facility (Note 16) and an amount equal to the lesser of Cabot's tax
basis in the Division upon the initial public offering (after the payment of the
$17,000 dividend) or the net proceeds of the offering. The unaudited pro forma
combined balance sheet has been prepared assuming an estimated $71,200
distribution was payable at December 31, 1999, Cabot's estimated tax basis in
the Division as of that date. In addition, certain assets amounting to
approximately $1,600, which were historically part of the Division, were not
transferred to CMC as discussed in Note 3 -- Arrangements with Cabot, Facilities
Lease Arrangements and Master Separation Agreement. The Division is
F-7
<PAGE> 95
CABOT MICROELECTRONICS MATERIALS DIVISION
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
(INFORMATION SUBSEQUENT TO NOVEMBER 5, 1999 IS UNAUDITED)
expected to lease $780 of these assets from Cabot after the initial public
offering. The removal of these assets is reflected in the pro forma balance
sheet.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
CASH
Cash management for the Division was provided by Cabot and net cash
provided by Cabot was recorded as contributions of capital to the Division.
INVENTORIES
Inventories are stated at the lower of cost, determined on the first-in,
first-out (FIFO) basis, or market. Finished goods and work in process
inventories include material, labor and manufacturing overhead costs.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are recorded at cost. Depreciation is based
on the following estimated useful lives of the assets using the straight-line
method:
<TABLE>
<S> <C>
Buildings................................................... 20-25 years
Machinery and equipment..................................... 5-10 years
Furniture and fixtures...................................... 5-10 years
Information systems......................................... 3-5 years
</TABLE>
Expenditures for repairs and maintenance are charged to expense as
incurred. Expenditures for major renewals and betterments are capitalized and
depreciated over the remaining useful lives. As assets are retired or sold, the
related cost and accumulated depreciation are removed from the accounts and any
resulting gain or loss is included in the results of operations.
GOODWILL AND OTHER INTANGIBLE ASSETS
Goodwill and other intangible assets were acquired in connection with a
July 1995 purchase of selected assets (see Note 4). Other intangible assets
consist of trade secrets and know-how, distribution rights, customer lists and
workforce in place. Goodwill and other intangible assets are amortized on the
straight-line basis over their estimated useful lives.
IMPAIRMENT OF LONG-LIVED ASSETS
The Division reviews long-lived assets, including goodwill, for impairment
whenever events or changes in business circumstances indicate that the carrying
amount of the assets may not be fully recoverable or that the useful lives of
these assets are no longer appropriate. Each impairment test is based on a
comparison of the undiscounted cash flows to the recorded value of the asset. If
an impairment is indicated, the asset is written down to its estimated fair
value on a discounted cash flow basis.
FOREIGN CURRENCY TRANSLATION
The Division's operations in Europe and Asia operate primarily using the
local currency. Accordingly, all assets and liabilities of these operations are
translated using exchange rates in effect at the end of the period, and revenue
and costs are translated using weighted average exchange rates for the period.
The related translation adjustments are reported in Comprehen-
F-8
<PAGE> 96
CABOT MICROELECTRONICS MATERIALS DIVISION
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
(INFORMATION SUBSEQUENT TO NOVEMBER 5, 1999 IS UNAUDITED)
sive Income in division equity. Gains and losses resulting from foreign currency
transactions are immaterial for all periods presented.
FOREIGN EXCHANGE MANAGEMENT
The Division has used forward exchange contracts solely to hedge firm
commitments denominated in Japanese Yen associated with the construction of its
Japan plant. The terms of the currency instrument used to hedge this exposure
were consistent with the timing of the committed hedged transaction. The gains
and losses on the forward exchange contracts that were designated as hedges of
the firm commitment associated with the construction of its Japan plant were
deferred and capitalized as part of the cost of the plant. During fiscal 1998,
the Division had a $699 loss on these forward exchange contracts. Cash flows
from these forward exchange contracts have been included in additions to
property, plant and equipment in the combined statement of cash flows. The
purpose of the Division's foreign currency management activity is to protect the
Division from the risk that eventual cash flow requirements from significant
foreign currency commitments may be adversely affected by changes in exchange
rates. The Division has not entered into any other derivative transactions. The
Division had no forward exchange contracts during 1997 or 1999. The Division
does not use derivative financial instruments for trading or speculative
purposes.
FAIR VALUES OF FINANCIAL INSTRUMENTS
The recorded amounts of cash, accounts receivable, and accounts payable
approximate their fair values.
CONCENTRATION OF CREDIT RISK
Financial instruments that subject the Division to concentrations of credit
risk consist principally of accounts receivable. The Division performs ongoing
credit evaluations of its customers' financial condition and generally does not
require collateral to secure accounts receivable. The Division's exposure to
credit risk associated with nonpayment is affected principally by conditions or
occurrences within the semiconductor industry. The Division historically has not
experienced losses relating to accounts receivables from individual customers or
groups of customers. The Division maintains an allowance for doubtful accounts
based on an assessment of the collectibility of such accounts.
At September 30, 1998, one customer accounted for 40.2% of net accounts
receivable. At September 30, 1999, three customers accounted for 41.0% of net
accounts receivable.
Revenue from customers who represented more than 10% of revenue were as
follows:
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
------------------------
1997 1998 1999
---- ---- ----
<S> <C> <C> <C>
Customer A........................................ 42% 38% 22%
Customer B........................................ 11% 12% 10%
Customer C........................................ -- -- 15%
</TABLE>
Customers B and C in the above table are distributors.
F-9
<PAGE> 97
CABOT MICROELECTRONICS MATERIALS DIVISION
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
(INFORMATION SUBSEQUENT TO NOVEMBER 5, 1999 IS UNAUDITED)
REVENUE RECOGNITION
Revenue is recognized upon completion of delivery obligations, provided
acceptance and collectibility are reasonably assured. A provision for the
estimated warranty cost is recorded at the time revenue is recognized based on
the Division's historical experience.
The Division manufactures certain dispersions which are sold to Cabot at
cost. These sales are disclosed as revenue from related party in the combined
statements of income. Cabot and the Division have entered into a dispersions
services agreement, effective upon the closing date of the planned initial
public offering, which provides for dispersions to be sold to Cabot at cost plus
a margin. Under the new agreement, Cabot will supply the Division with fumed
metal oxide raw materials for these dispersions at no cost. Accordingly, the
cost of these fumed metal oxides will not be included in revenue or cost of
goods sold (see Note 3). Had the dispersions services agreement been effective
for the years ended September 30, 1997, 1998 and 1999 and the three months ended
December 31, 1998 and 1999, pro forma unaudited revenue from related party would
have been $988, $1,360, $1,994, $367 and $574, respectively.
COST OF GOODS SOLD
The Division has historically purchased all of its fumed metal oxides,
critical raw materials used in the manufacturing process, from Cabot at Cabot's
budgeted standard cost. Purchases of fumed metal oxides from Cabot by the
Division totaled $8,812, $16,273, and $20,310 during fiscal 1997, 1998, and
1999, respectively. Purchases of fumed metal oxides from Cabot by the Division
totaled $4,269 and $7,374 for the three months ended December 31, 1998 and 1999,
respectively.
The Division has entered into a new fumed metal oxide supply agreement with
Cabot, effective immediately prior to the closing date of the planned initial
public offering, under which it will purchase fumed metal oxides at a
contractually agreed upon price (see Note 3). Had the purchases of fumed metal
oxides that were recorded in cost of goods sold for the years ended September
30, 1997, 1998 and 1999 been at the price specified in the new supply agreement
rather than at Cabot's budgeted standard cost of manufacturing, pro forma
unaudited cost of goods sold would have been $21,235, $31,880, and $50,827,
respectively. Had the purchases of fumed metal oxides that were recorded in cost
of goods sold for the three months ended December 31, 1998 and 1999 been at the
price specified in the new supply agreement rather than at Cabot's budgeted
standard cost of manufacturing, pro forma unaudited cost of goods sold would
have been $10,738 and $16,760, respectively.
Cost of sales made to Cabot is disclosed as cost of goods sold from related
party in the combined statements of income. Had the dispersions services
agreement discussed above been effective for the years ended September 30, 1997,
1998 and 1999 and the three months ended December 31, 1998 and 1999, pro forma
unaudited cost of goods sold from related party would have been $838, $1,150,
$1,645, $301 and $490, respectively.
RESEARCH AND DEVELOPMENT
Research and development costs are expensed as incurred.
INCOME TAXES
The Division was not a separate taxable entity for federal, state or local
income tax purposes. The Division's operations are included in the consolidated
Cabot tax returns. An
F-10
<PAGE> 98
CABOT MICROELECTRONICS MATERIALS DIVISION
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
(INFORMATION SUBSEQUENT TO NOVEMBER 5, 1999 IS UNAUDITED)
income tax provision has been calculated on a separate return basis. Prior to
the consummation of the offering, the Division intends to enter into a
tax-sharing agreement with Cabot as described in Note 3.
Deferred income taxes are determined based on the estimated future tax
effects or differences between financial statement carrying amounts and the tax
bases of existing assets and liabilities. Provisions are made for the U.S.
income tax liability and additional non-U.S. taxes.
STOCK-BASED COMPENSATION
The Division participates in Cabot's stock-based compensation plans. In
accordance with the provisions of Statement of Financial Accounting Standards
("SFAS") No. 123, "Accounting for Stock-Based Compensation" ("SFAS 123"), the
Division has elected to account for stock-based compensation plans in accordance
with Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees" ("APB 25"), and related interpretations. The Division discloses the
summary of pro forma effects to reported net income for fiscal 1997, 1998 and
1999, as if the Division had elected to recognize compensation cost based on the
fair value of the options and restricted stock granted by Cabot to employees of
the Division as prescribed by SFAS 123.
EARNINGS PER SHARE
Unaudited pro forma net income per share has been calculated using the
18,989,744 shares that will be owned by Cabot at the completion of the planned
initial public offering (the "offering") of a portion of the common stock of CMC
and the number of shares that the Division would have been required to issue to
fund a dividend to Cabot in an amount equal to Cabot's tax basis in the Division
at each period end minus the earnings from that period at an issue price per
share equal to $14.30, which is the assumed initial public offering price of
$16.00 per share less the estimated underwriting discounts and offering
expenses. Historical earnings per share are not presented in the accompanying
financial statements as such amounts are not considered meaningful.
USE OF ESTIMATES
The preparation of the combined financial statements in conformity with
generally accepted accounting principles requires management to make certain
estimates and assumptions that affect the reported amounts of assets and
liabilities and the disclosure of contingent assets and liabilities at the date
of the combined financial statements and the reported amounts of revenue and
expenses during the reported period. Actual results could differ from those
estimates.
COMPREHENSIVE INCOME
The Division implemented SFAS No. 130 "Reporting Comprehensive Income"
("SFAS 130"), effective October 1, 1998. This standard requires the Division to
report the total changes in Division equity that do not result directly from
transactions with stockholders, including those which do not affect retained
earnings. Other comprehensive income recorded by the Division is solely
comprised of accumulated foreign currency translation adjustments, net of
related tax effects. The deferred tax expense associated with foreign currency
translation adjustments was $32, $58, and $492 during fiscal 1997, 1998 and
1999, respectively. The deferred tax expense associated with foreign currency
translation adjustments was $21 for the three months ended December 31, 1999.
F-11
<PAGE> 99
CABOT MICROELECTRONICS MATERIALS DIVISION
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
(INFORMATION SUBSEQUENT TO NOVEMBER 5, 1999 IS UNAUDITED)
RECENT ACCOUNTING PRONOUNCEMENTS
In April 1998, the American Institute of Certified Public Accountants
("AICPA") issued Statement of Position 98-1, "Accounting for the Costs of
Computer Software Developed or Obtained for Internal Use" ("SOP 98-1"). SOP 98-1
provides guidance regarding whether computer software is internal-use software,
the capitalization of costs incurred for computer software developed or obtained
for internal use and accounting for the proceeds of computer software originally
developed or obtained for internal use and then subsequently sold to the public.
The Division does not expect the impact of adopting SOP 98-1, which will be
effective for the Division in fiscal 2000, to be material to its financial
condition or results of operations.
In April 1998, the AICPA issued Statement of Position 98-5, "Reporting on
the Costs of Start-Up Activities" ("SOP 98-5"). SOP 98-5 requires companies to
expense start-up and organization costs as incurred. SOP 98-5 broadly defines
start-up activities and provides examples to help entities determine costs that
are and are not within the scope of SOP 98-5. SOP 98-5 will be effective for the
Division in fiscal 2000, and its initial application is to be reported as the
cumulative effective of a change in accounting principle. The Division does not
expect the impact of adopting SOP 98-5 to be material to its financial condition
or results of operations.
In June 1998, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 133, "Accounting for Derivative Instruments and Hedging Activities" ("SFAS
133"). SFAS 133 establishes new standards of accounting and reporting for
derivative instruments and hedging activities. SFAS 133 requires that all
derivatives be recognized at fair value in the balance sheet, and the
corresponding gains and losses be reported either in the statement of income or
as a component of comprehensive income, depending on the type of hedging
relationship that exists. The Division does not expect the impact of SFAS 133,
which will be effective for fiscal 2001, to be significant given its limited use
of derivatives.
In December 1999, the Securities and Exchange Commission ("SEC") released
Staff Accounting Bulletin No. 101 ("SAB 101"), which provides guidance on the
recognition, presentation and disclosure of revenue in financial statements
filed with the SEC. The Division is required to be in conformity with the
provisions of SAB 101 no later than October 1, 2000 and does not expect a
material change in its financial condition or results of operations as a result
of SAB 101.
3. ARRANGEMENTS WITH CABOT:
These combined financial statements have been prepared for inclusion in a
registration statement relating to the offering of a portion of the common stock
of CMC. Cabot will continue to beneficially own more than 80% of the outstanding
shares of common stock after the offering. In addition, Cabot has announced that
sometime after the offering it intends to distribute, pro rata to its
stockholders, all of the shares that it owns by means of a tax-free distribution
(subject to board of director's approval and other conditions) (the "spin-off").
CMC's relationship with Cabot following the offering and spin-off will be
governed by the following agreements.
F-12
<PAGE> 100
CABOT MICROELECTRONICS MATERIALS DIVISION
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
(INFORMATION SUBSEQUENT TO NOVEMBER 5, 1999 IS UNAUDITED)
FUMED METAL OXIDE SUPPLY AGREEMENT
The Division has entered into a fumed metal oxide supply agreement with
Cabot which will become effective upon the closing of the offering. Cabot will
continue to be the exclusive supplier of fumed metal oxides, including fumed
silica, for the Division's existing slurry products. The agreement provides for
a fixed annual increase in the price of fumed silica of approximately 2% and
additional increases if Cabot's raw material costs increase. The agreement
contains provisions requiring Cabot to supply the Division with fumed silica in
specified volumes. The Division is obligated to purchase at least 90% of the
six-month volume forecast and the Division must pay damages to Cabot if the
Division purchases less than that amount. In addition, the Division is obligated
to pay all reasonable costs incurred by Cabot to provide quality control testing
at levels greater than that which Cabot provides to other customers. Under the
agreement, Cabot will also supply fumed alumina on terms generally similar to
those described above. Cabot is not permitted to sell fumed metal oxides to
third parties for use in CMP applications.
Under the agreement, Cabot warrants that its products will meet the
Division's agreed upon product specifications. Cabot will be obligated to
replace noncompliant products with products that meet the agreed upon
specifications. The agreement also provides that any change to product
specifications for fumed metal oxides must be by mutual agreement. Any increased
costs due to product specification changes will be paid by the Division.
Historically, the Division did not provide detailed product specifications
to Cabot and the Division had the ability to return products that met
specifications. Under the new agreement, the Division will provide detailed
specifications and its ability to return products may be limited.
The agreement has an initial term that expires in June 2005 and may be
terminated thereafter by either party on June 30 or December 31 in any year upon
18 months prior written notice.
DISPERSIONS SERVICES AGREEMENT
The Division has entered into a dispersions services agreement with Cabot
which will become effective upon the closing of the offering. The Division will
continue to offer fumed metal oxide dispersions services to Cabot, including the
manufacturing, packaging and testing of the dispersions. Under the agreement,
Cabot shall supply the Division with the fumed metal oxide particles necessary
for the manufacture of the dispersions. The pricing of the dispersions services
will be determined on a cost-plus basis. The Division's obligation to provide
Cabot with dispersions will be limited to certain maximum volumes and Cabot will
be obligated to supply to the Division certain forecasts of their expected
dispersions purchases. Cabot agrees not to engage any third party other than
Davies to provide dispersion services unless the Division is unable to supply
the requested or agreed-upon services. The agreement has an initial term that
expires in June 2005 and may be terminated by either party on June 30 or
December 31 in any year upon 18 months prior notice.
FACILITIES LEASE ARRANGEMENTS
Beginning in March 2000, the Division will sublease from Cabot the land and
building space located in Barry, Wales that the Division has historically
utilized. These assets, with a carrying value of approximately $827 at September
30, 1999 and approximately $780 at December 31,
F-13
<PAGE> 101
CABOT MICROELECTRONICS MATERIALS DIVISION
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
(INFORMATION SUBSEQUENT TO NOVEMBER 5, 1999 IS UNAUDITED)
1999, have been included in the Division's property, plant and equipment balance
in the financial statements. As noted below under the caption "Master Separation
Agreement", these assets were not transferred to CMC and have been reflected as
a pro forma adjustment in the unaudited pro forma balance sheet. The lease will
expire after ten years, subject to earlier termination under certain
circumstances.
MASTER SEPARATION AGREEMENT
The Division has entered into a master separation agreement with Cabot that
provides for the transfer of the legal ownership of substantially all of the
assets and liabilities of the Division to CMC. The Division's land and building
located in Barry, Wales were not transferred to CMC as discussed above under the
caption "Facilities Lease Arrangements". In addition, assets with an approximate
carrying value of $200 at September 30, 1999 and $820 at December 31, 1999 were
not transferred upon the separation. These assets are included in the historical
balance sheets and the removal of these assets is reflected in the pro forma
balance sheet. CMC has agreed to pay the costs of the transfer of assets from
Cabot including moving expenses, transfer taxes, fees related to the assignment
of contracts and expenses related to notices to customers, suppliers or other
third parties.
The Division has assumed all liabilities and obligations of Cabot relating
to or arising out of the Division's business operations any time on or before
the date of the transfer of the Division's business operations to CMC other than
various excluded liabilities.
Under the master separation agreement, Cabot has transferred intellectual
property rights related solely to the business conducted by the Division,
including patents, copyrights, trademarks, technology and know-how and licenses
and other rights concerning third party technology and intellectual property.
CMC will indemnify Cabot against any losses or actions arising out of or in
connection with the liabilities assumed by CMC as part of the separation,
including any liabilities arising out of the current litigation with Rodel
discussed elsewhere and the conduct of CMC's business and affairs after the
separation date. The Master Separation Agreement also provides that Cabot will
continue to defend the lawsuits instituted by Rodel against Cabot until CMC
notifies Cabot that they will assume defense of the lawsuits.
TRADEMARK LICENSE AGREEMENT
The Division has entered into a trademark license agreement with Cabot that
governs their use of various trademarks used in their core business. Under the
agreement, Cabot has granted a worldwide royalty-free license to use the
trademarks in connection with the manufacture, sale or distribution of products
related to the business. Under the agreement, the Division will refrain from
various actions that could interfere with Cabot's ownership of the trademarks.
The agreement also provides that the Division's license to use the trademarks
may be terminated for various reasons, including discontinued use of the
trademarks, breach of the agreement, or a change in control of CMC.
MANAGEMENT SERVICES AGREEMENT
The Division and Cabot have entered into a management services agreement,
which will become effective upon the closing of this offering, pursuant to which
Cabot will provide certain
F-14
<PAGE> 102
CABOT MICROELECTRONICS MATERIALS DIVISION
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
(INFORMATION SUBSEQUENT TO NOVEMBER 5, 1999 IS UNAUDITED)
administrative and corporate support services to the Division on an interim or
transitional basis. Such services include human resources, accounting, treasury,
tax, facilities, legal and information services. The charges for such services
allow Cabot to recover the fully allocated costs of providing such services plus
all out-of-pocket, third party costs and expenses, but without any profit to
Cabot. The management services agreement commences on the date of the offering
and continues until the earlier of the date of the spin-off or two years from
the completion of the offering. By mutual agreement, Cabot and the Division may
provide for the continuation of some services after the spin-off.
CONFIDENTIAL DISCLOSURE AND LICENSE AGREEMENT
The Division has entered into a confidential disclosure and license
agreement with respect to confidential and proprietary information, intellectual
property and certain other matters. Cabot is expected to grant a fully paid,
world-wide non-exclusive license to the Division for Cabot's copyrights, patents
and technology that were used by Cabot in connection with the Division's
activities prior to their separation from Cabot. The Division has granted to
Cabot a fully paid, world-wide, non-exclusive license to copyrights, patents and
technologies that are among the assets transferred to the Division under the
master separation agreement and that would be infringed by the manufacture,
treatment, processing, handling, marketing, sale or use of any products or
services sold by Cabot for applications other than CMP.
In addition, Cabot has assigned an undivided one-half interest in various
patents, copyrights and technology that relate to dispersion technology, which
are owned by Cabot and used in Cabot's dispersion business and the Division's
business. Any costs, taxes or other fees related to the assignments and
transfers of intellectual property will generally be paid by the Division.
INITIAL PUBLIC OFFERING AND DISTRIBUTION AGREEMENT
The Division has entered into an initial public offering and distribution
agreement with Cabot which governs the respective rights and duties of the
Division and Cabot with respect to the offering and the spin-off. This agreement
will be effective as of the closing of the offering. After the offering, Cabot
will continue to own a significant portion of the common stock of CMC. As a
result, Cabot will continue to include CMC as a "subsidiary" for financial
reporting, accounting and other purposes. Accordingly, the Division has agreed
to certain covenants in the initial public offering and distribution agreement,
which will be binding on CMC as long as Cabot owns at least 50% of the CMC's
outstanding common stock. These covenants include restrictions on incurring debt
in excess of an aggregate of $50,000 outstanding at any time. CMC will not be
allowed to take any action which has the effect of limiting Cabot's ability to
freely sell, pledge or otherwise dispose of shares of CMC's common stock. In
addition, CMC will not be allowed to issue any shares of common stock or any
rights, warrants or options to acquire CMC's common stock, if after giving
effect to such issuance, Cabot would own less than 80.5% of the then outstanding
shares of CMC's common stock. If Cabot's shareholding in CMC has dropped or will
drop below 80.5%, Cabot can require CMC to reverse or terminate the action or
issue additional equity securities to it at no cost or purchase additional
equity securities of CMC in the open market or from other third parties, in
which case CMC would have to reimburse Cabot for the costs it incurred in making
such a purchase. After the second anniversary of the closing of the initial
public offering, these provisions would terminate with respect to issuances of
equity securities by CMC under CMC's 2000 Equity Incentive Plan and 2000
Employee Stock Purchase Plan except that, in the event of any such issuance, CMC
may still be obligated to issue
F-15
<PAGE> 103
CABOT MICROELECTRONICS MATERIALS DIVISION
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
(INFORMATION SUBSEQUENT TO NOVEMBER 5, 1999 IS UNAUDITED)
additional equity securities to Cabot at the per share fair market value of
those securities. Cabot has announced that it plans to complete a spin-off
within six to twelve months after the date of a private letter ruling from the
United States Internal Revenue Service confirming that the spin-off is tax-free
to Cabot. However, Cabot is not obligated to complete the spin-off in this time
frame or at all. The agreement indemnifies Cabot against all liabilities out of
any material untrue statements or omissions in the prospectus and registration
statement related to the offering. The Division is responsible for paying the
costs and expenses incurred in connection with the offering.
TAX-SHARING AGREEMENT
After the offering, the Division will continue to be included in Cabot's
consolidated federal income tax group for as long as Cabot beneficially owns at
least 80% of the total voting power and value of the outstanding common stock.
The Division and Cabot have entered into a tax-sharing agreement pursuant to
which the Division and Cabot will make payments between them to achieve the same
effects as if the Division were to file separate federal, state and local income
tax returns. Under the terms of the tax-sharing agreement, Cabot will not be
required to make any payment to the Division for the use of the Division's tax
attributes that arise prior to the spin-off until such time as the Division
would otherwise be able to utilize such attributes. Each member of a
consolidated group is jointly and severally liable for the federal income tax
liability of each other member of the consolidated group. Accordingly, although
the tax-sharing agreement allocates tax liabilities between the Division and
Cabot, during the period in which the Division is included in Cabot's
consolidated group, the Division could be liable in the event that any federal
tax liability is incurred, but not discharged, by any other member of Cabot's
consolidated group. The Division will indemnify Cabot in the event that the
expected spin-off is not tax free to Cabot as a result of various actions taken
by or with respect to the Division or the Division's failure to take various
actions.
REGISTRATION RIGHTS AGREEMENT
Although Cabot has announced its plans to complete a spin-off within six to
twelve months of the completion of the planned offering, there is no assurance
that the spin-off will occur within this time frame or at all. Accordingly, the
Division has entered into a registration rights agreement with Cabot to provide
it with registration rights relating to the shares of CMC common stock that it
holds. These registration rights will become effective at such time that Cabot
informs the Division that it no longer intends to proceed with or complete the
spin-off.
EMPLOYEE MATTERS AGREEMENT
The Division and Cabot have entered into an employee matters agreement
under which the Division will, with certain exceptions, be solely responsible
for the compensation and benefits of employees of the Division. The principal
exception is the retirement benefits for employees of the Division. Cabot's
tax-qualified retirement plans will retain all assets and liabilities relating
to employees of the Division on and after the offering (subject to any
distributions from the plans that are required or permitted by the plans and
applicable law). The employee matters agreement also provides that equity awards
granted to employees of the Division under Cabot's equity incentive plans may be
converted into equity awards of CMC upon agreement between Cabot and the
Division.
F-16
<PAGE> 104
CABOT MICROELECTRONICS MATERIALS DIVISION
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
(INFORMATION SUBSEQUENT TO NOVEMBER 5, 1999 IS UNAUDITED)
OPTION GRANTS TO CABOT EMPLOYEES
The Division has adopted the Cabot Microelectronics Corporation 2000 Equity
Incentive Plan. The Division intends to grant options under the 2000 Equity
Incentive Plan to Cabot employees.
4. ACQUISITION OF SELECTED ASSETS:
On July 3, 1995, the Division acquired selected assets used or created in
connection with the development and sale of polishing slurries. The acquisition
was accounted for using the purchase method of accounting. Accordingly, the
purchase price of $9,800 was allocated to the net assets acquired based on their
estimated fair values. Identifiable intangible assets, consisting primarily of
trade secrets and know-how, distribution rights, customer lists and workforce in
place, were valued at $4,300 and are being amortized on a straight-line basis
over their estimated useful lives of 7-10 years. The excess of purchase price
over the fair value of the net assets acquired (goodwill) was approximately
$2,800, and is being amortized on a straight-line basis over ten years.
Accumulated amortization of goodwill and other intangible assets as of September
30, 1998 and 1999 was $2,332 and $3,052, respectively. In addition to the
purchase price, the Division also pays a royalty fee in the amount of 2.5% of
total slurry revenue through June 30, 2002. Royalty fees are paid on a monthly
basis and are included in cost of goods sold.
5. INVENTORIES:
Inventories consisted of the following:
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
---------------- ------------
1998 1999 1999
---- ---- ----
(UNAUDITED)
<S> <C> <C> <C>
Raw materials.............................. $3,466 $3,297 $5,065
Work in process............................ 91 73 29
Finished goods............................. 2,356 1,899 3,523
------ ------ ------
Total............................ $5,913 $5,269 $8,617
====== ====== ======
</TABLE>
6. PROPERTY, PLANT AND EQUIPMENT:
Property, plant and equipment consisted of the following:
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
------------------ ------------
1998 1999 1999
---- ---- ----
(UNAUDITED)
<S> <C> <C> <C>
Land..................................... $ 1,889 $ 4,168 $ 5,026
Buildings................................ 9,539 21,448 22,196
Machinery and equipment.................. 10,066 15,350 16,330
Furniture and fixtures................... 271 939 1,471
Information systems...................... 53 374 324
Construction in progress................. 6,285 2,778 6,868
------- ------- -------
Total property, plant and equipment...... 28,103 45,057 52,215
Less: accumulated depreciation........... (3,390) (5,026) (5,815)
------- ------- -------
Net property, plant and equipment........ $24,713 $40,031 $46,400
======= ======= =======
</TABLE>
F-17
<PAGE> 105
CABOT MICROELECTRONICS MATERIALS DIVISION
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
(INFORMATION SUBSEQUENT TO NOVEMBER 5, 1999 IS UNAUDITED)
Depreciation expense was $1,191, $1,488 and $2,057 during fiscal 1997, 1998
and 1999, and $405 and $752 for the three months ended December 31, 1998 and
1999, respectively.
7. ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES:
Accrued expenses and other current liabilities consisted of the following:
<TABLE>
<CAPTION>
SEPTEMBER 30,
----------------
1998 1999
---- ----
<S> <C> <C>
Raw material accruals.................................... $1,043 $1,265
Accrued compensation..................................... 1,177 1,568
Warranty accrual......................................... 348 891
Fixed asset accruals..................................... 280 712
Other.................................................... 1,108 2,344
------ ------
Total.......................................... $3,956 $6,780
====== ======
</TABLE>
8. DEFERRED COMPENSATION:
Under the Cabot Supplemental Employee Retirement Plan, certain officers and
employees of the Division elected to defer certain percentages of their
compensation to future periods. Amounts deferred as of September 30, 1998, 1999
and December 31, 1999 were $233, $422 and $528, respectively.
9. JOINT DEVELOPMENT AGREEMENT:
In September 1998, the Division entered into a three-year joint development
agreement with a customer in the semiconductor industry. Under the agreement,
the Division provides the customer with CMP slurries of up to $3,000 over a
three-year period in exchange for the use of CMP equipment provided by the
customer. The arrangement was accounted for as a nonmonetary transaction in
accordance with APB No. 29 "Accounting for Nonmonetary Transactions." The CMP
equipment was accounted for as an operating lease in accordance with SFAS No.
13, "Accounting for Leases." The cost of leasing the CMP equipment was valued
based upon the slurries that the customer is entitled to receive over the
three-year period. Total revenue and lease expense recognized under this
agreement were $776 and $1,000, respectively, for the year ended September 30,
1999. Deferred revenue of $224 was recorded as of September 30, 1999.
10. PENSION PLANS AND POSTRETIREMENT BENEFITS:
The Division participates in Cabot's noncontributory defined benefit
pension plans which cover substantially all Cabot employees. Those Cabot
employees who accept employment with CMC will terminate employment with Cabot
but will maintain their vested and unvested rights in the pension plans. Pension
benefits accrue under several benefit plans including the Cash Balance Plan
("CBP"), a defined benefit pension plan, and the Employee Stock Ownership Plan
("ESOP"). Cabot's funding policy is to contribute annual amounts based on
actuarial and economic assumptions designed to achieve adequate funding of
projected benefit obligations. The net periodic pension cost allocated to the
Division on behalf of its employees was $26, $96 and $61 during fiscal 1997,
1998 and 1999, respectively. In November 1988, the ESOP was
F-18
<PAGE> 106
CABOT MICROELECTRONICS MATERIALS DIVISION
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
(INFORMATION SUBSEQUENT TO NOVEMBER 5, 1999 IS UNAUDITED)
funded with Cabot's newly issued Series B Convertible Preferred Stock, which was
acquired with $75,000 borrowed by the ESOP. Benefits provided under Cabot's
defined benefit pension plans are primarily based on years of service and the
employee's compensation. ESOP costs incurred on behalf of employees of the
Division were $75, $90, and $99 during fiscal 1997, 1998 and 1999, respectively.
The Division participates in Cabot's defined benefit postretirement plans
that provide certain healthcare and life insurance benefits to retired
employees. Substantially all of Cabot's U.S. employees become eligible for these
benefits if they have met certain age and service requirements at retirement.
Cabot funds the plans as claims or insurance premiums are incurred.
Postretirement benefit expense is recognized as services are rendered by the
employees. Postretirement benefit costs incurred on behalf of employees of the
Division were $80, $81, and $99 during fiscal 1997, 1998 and 1999, respectively.
11. SAVINGS PLAN AND OTHER INCENTIVE COMPENSATION PLANS:
Cabot sponsors a profit sharing and savings plan called the Cabot
Retirement Incentive Savings Plan ("CRISP"). Substantially all of the Division's
domestic employees are eligible to participate in the plan under which Cabot
will make matching contributions of at least 75% of a participant's contribution
up to 7.5% of the participant's eligible compensation, subject to limitations
required by government laws or regulations. Contributions to the CRISP on behalf
of employees of the Division were $199, $258, and $385 during fiscal 1997, 1998
and 1999, respectively.
12. EQUITY INCENTIVE PLANS AND EMPLOYEE LOANS RECEIVABLE:
Cabot sponsors an Equity Incentive Plan for key employees under which
participants may be granted various types of stock-based awards. Awards under
the 1996 plan made as part of Cabot's Long-Term Incentive Program, which
constitutes a significant portion of the awards made under this plan, consist of
restricted stock and non-qualified stock options. Restricted stock could be
purchased at a price equal to 40% of the fair market value on the date of the
award or nonqualified stock options exercisable at the fair market value of
Cabot's common stock on the date of the award. Variations of the restricted
stock awards were made to international employees in order to try to provide
results comparable to U.S. employees. The awards generally vest on the third
anniversary of the grant for employees then employed by Cabot, and the options
generally expire five years from the date of grant. In November 1998, Cabot
Board of Directors adopted the 1999 Equity Incentive Plan. The 1999 plan was
approved by the stockholders of Cabot in March 1999. This plan is similar to the
1996 Equity Incentive Plan with the exception of the purchase price, which was
established at a price equal to 30% of the fair market value on the date of the
award. A limited number of awards are also available for no consideration under
both the 1996 plan and the 1999 plan in lieu of cash compensation.
Certain Cabot employees who will become employees of the Division have been
granted nonqualified stock options and restricted stock under these plans. Stock
options have been granted at the fair market value of Cabot's common stock on
the date of grant, vest ratably over four years, and generally expire ten years
from the date of grant. Restricted stock awards generally enable an employee to
purchase restricted stock at a price equal to 30% or 40% of the fair market
value on the date of the award and such awards generally vest on the third
anniversary date of the award. Compensation expense, equal to the discount on
the restricted
F-19
<PAGE> 107
CABOT MICROELECTRONICS MATERIALS DIVISION
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
(INFORMATION SUBSEQUENT TO NOVEMBER 5, 1999 IS UNAUDITED)
stock, is considered unearned and is deferred and recorded as a charge to income
over the vesting period. Unearned compensation is recorded as a component of
Division equity.
In May 1999, Cabot adopted a stock purchase assistance plan whereby Cabot
may extend credit to its employees to purchase restricted shares of Cabot
Corporation common stock awarded under Cabot's 1999 Equity Incentive Plan. Prior
to this date, loans were made available to employees by a third party financial
institution. On June 30, 1999, Cabot purchased, from the third party financial
institution, all such full recourse loans to Cabot employees outstanding as of
that date. As of September 30, 1999, notes receivable from employees of the
Division totaled approximately $1,383. These notes receivable are not included
in the historical financial statements of the Division. Upon the closing of the
planned initial public offering, any such notes receivables related to
restricted stock held by employees of the Division will remain with Cabot.
RESTRICTED STOCK
Shares of restricted stock awarded to employees of the Division are
summarized as follows:
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
RESTRICTED EXERCISE
STOCK PRICE
---------- --------
<S> <C> <C>
Outstanding at September 30, 1996...................... 46,100 $ 9.67
Granted.............................................. 31,500 19.55
Vested............................................... (8,800) 6.14
Canceled............................................. -- --
-------
Outstanding at September 30, 1997...................... 68,800 14.64
Granted.............................................. 48,200 17.09
Vested............................................... (10,000) 10.00
Canceled............................................. (300) 14.13
-------
Outstanding at September 30, 1998...................... 106,700 16.19
Granted.............................................. 95,300 33.09
Vested............................................... (30,300) 9.62
Canceled............................................. (4,700) 17.70
-------
Outstanding at September 30, 1999...................... 167,000 $26.98
=======
</TABLE>
Total compensation expense recognized by the Division for restricted stock
based awards under APB 25 amounted to $242, $449, and $900 during fiscal 1997,
1998 and 1999, respectively.
F-20
<PAGE> 108
CABOT MICROELECTRONICS MATERIALS DIVISION
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
(INFORMATION SUBSEQUENT TO NOVEMBER 5, 1999 IS UNAUDITED)
STOCK OPTIONS
Cabot stock option activity related to employees of the Division is
summarized as follows:
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
STOCK EXERCISE
OPTIONS PRICE
------- --------
<S> <C> <C>
Balance at September 30, 1996........................... 13,072 $ 9.13
Granted............................................... 1,300 23.88
Exercised............................................. -- --
Canceled.............................................. -- --
------
Balance at September 30, 1997........................... 14,372 10.46
Granted............................................... 17,615 35.31
Exercised............................................. (4,000) 8.72
Canceled.............................................. -- --
------
Balance at September 30, 1998........................... 27,987 26.35
Granted............................................... 63,000 27.00
Exercised............................................. (2,400) 10.47
Canceled.............................................. (5,850) 35.31
------
Balance at September 30, 1999........................... 82,737 $26.67
======
</TABLE>
There were no options granted at prices below the quoted market price of
common stock.
Additional information about outstanding options to purchase Cabot common
stock held by employees of the Division at September 30, 1999 is as follows:
<TABLE>
<CAPTION>
OUTSTANDING EXERCISABLE
---------------------------------------- ---------------------
WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE
NUMBER CONTRACTUAL EXERCISE NUMBER EXERCISE
RANGE OF EXERCISE PRICE OF SHARES LIFE (IN YEARS) PRICE OF SHARES PRICE
- ----------------------- --------- --------------- -------- --------- --------
<S> <C> <C> <C> <C> <C>
$7.59-$10.47............. 6,272 .97 $ 7.75 6,272 $ 7.75
$23.88-$35.31............ 76,465 2.46 28.22 400 26.70
------ ------ ----- ------
82,737 $26.67 6,672 $ 8.89
====== ====== ===== ======
</TABLE>
As permitted by SFAS 123, the Division has chosen to continue to account
for stock options in accordance with the provisions of APB 25 and, accordingly,
no compensation expense related to stock option grants was recorded.
F-21
<PAGE> 109
CABOT MICROELECTRONICS MATERIALS DIVISION
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
(INFORMATION SUBSEQUENT TO NOVEMBER 5, 1999 IS UNAUDITED)
Pro forma information regarding net income is required by SFAS 123 and has
been determined as if the Division had accounted for stock options under the
fair value method using the Black-Scholes option-pricing model and the following
assumptions:
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
-----------------------------
1997 1998 1999
---- ---- ----
<S> <C> <C> <C>
Expected stock price volatility...................... 26% 34% 35%
Risk free interest rate.............................. 6.54% 5.63% 5.42%
Expected life of options............................. 4 years 4 years 4 years
Expected annual dividends............................ $0.40 $0.44 $0.44
</TABLE>
The estimated weighted average fair value of options granted by Cabot to
employees of the Division during fiscal 1997, 1998 and 1999 were $6.37, $11.00,
and $8.24, respectively. Had the fair value based method been adopted, the
Division's pro forma net income for fiscal 1997, 1998 and 1999 would have been
$707, $4,218 and $12,213, respectively.
13. INCOME TAXES:
Income before income taxes was as follows:
<TABLE>
<CAPTION>
SEPTEMBER 30,
-------------------------
1997 1998 1999
---- ---- ----
<S> <C> <C> <C>
Domestic................................................ $293 $6,178 $18,655
Foreign................................................. 370 270 421
---- ------ -------
Total......................................... $663 $6,448 $19,076
==== ====== =======
</TABLE>
Taxes on income consisted of the following:
<TABLE>
<CAPTION>
SEPTEMBER 30,
-------------------------
1997 1998 1999
---- ---- ----
<S> <C> <C> <C>
U.S. federal and state:
Current............................................... $(156) $1,953 $6,522
Deferred.............................................. (17) (182) (234)
----- ------ ------
Total................................................... (173) 1,771 6,288
----- ------ ------
Foreign:
Current............................................... 20 401 489
Deferred.............................................. 108 39 19
----- ------ ------
Total................................................... 128 440 508
----- ------ ------
Total U.S. and foreign.................................. $ (45) $2,211 $6,796
===== ====== ======
</TABLE>
F-22
<PAGE> 110
CABOT MICROELECTRONICS MATERIALS DIVISION
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
(INFORMATION SUBSEQUENT TO NOVEMBER 5, 1999 IS UNAUDITED)
The provision for income taxes at the Divisions effective tax rate differed
from the provision for income taxes at the statutory rate as follows:
<TABLE>
<CAPTION>
SEPTEMBER 30,
-------------------------
1997 1998 1999
---- ---- ----
<S> <C> <C> <C>
Computed tax expense at the federal statutory rate...... $ 232 $2,257 $6,677
U.S. benefits from research and development
activities............................................ (353) (367) (344)
State taxes, net of federal effect...................... 10 58 508
Impact of foreign taxation at different rates,
repatriation and other................................ 62 354 155
Foreign sales corporation............................... (17) (118) (243)
Other, net.............................................. 21 27 43
----- ------ ------
(Benefit) provision for income taxes.................... $ (45) $2,211 $6,796
===== ====== ======
</TABLE>
The Division's effective tax rate differed from the statutory tax rate
during the three months ended December 31, 1998 and 1999 primarily as a result
of tax benefits generated as a result of research and development activities.
Significant components of deferred income taxes were as follows:
<TABLE>
<CAPTION>
SEPTEMBER 30,
----------------
1998 1999
---- ----
<S> <C> <C>
Deferred tax assets:
Amortization.............................................. $ 281 $ 367
Employee benefits......................................... 596 1,118
Inventory................................................. 100 89
Product warranty.......................................... 122 168
Accrued legal fees........................................ 64 105
State and local taxes..................................... 67 144
Other..................................................... 58 133
------ ------
Total deferred tax assets......................... $1,288 $2,124
====== ======
Deferred tax liabilities:
Depreciation and amortization............................. $ 698 $ 827
Translation adjustment.................................... 90 582
------ ------
Total deferred tax liabilities.................... $ 788 $1,409
====== ======
</TABLE>
14. COMMITMENTS AND CONTINGENCIES:
LEASE COMMITMENTS
Cabot, on behalf of the Division, leases certain transportation vehicles,
warehouse facilities, office space, machinery and equipment under cancelable and
noncancelable leases, most of which expire within ten years and may be renewed
by the Division. Rent expense under such arrangements during fiscal 1997, 1998
and 1999 totaled $160, $150 and $1,439, respectively.
F-23
<PAGE> 111
CABOT MICROELECTRONICS MATERIALS DIVISION
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
(INFORMATION SUBSEQUENT TO NOVEMBER 5, 1999 IS UNAUDITED)
Future minimum rental commitments under noncancelable leases as of
September 30, 1999 are as follows:
<TABLE>
<S> <C>
2000................................................ $1,327
2001................................................ 1,092
2002................................................ 69
2003................................................ 26
2004................................................ 11
2005 and thereafter................................. --
------
$2,525
======
</TABLE>
OTHER LONG-TERM COMMITMENTS
The Division has a long term supply agreement with the Division's largest
customer. The agreement was designed to provide this customer with specified
quantities of polishing slurries at agreed-upon prices. This agreement expires
in January 2002.
The Division has an agreement with Davies Imperial Coatings, Inc.
("Davies") pursuant to which Davies will perform certain agreed upon dispersion
services for the Division. The Division has agreed to purchase minimum amounts
of services per year and has also agreed to invest $150 per year in capital
improvements or other expenditures to maintain capacity at the Davies
dispersions facility. The initial term of this agreement expires in October
2004, with automatic one-year renewals, and contains a 90 day cancellation
clause executable by either party.
CONTINGENCIES
In June 1998, a lawsuit was commenced by Rodel, Inc. ("Rodel") against
Cabot seeking injunctive relief and damages relating to allegations that Cabot,
through the Division, is infringing on a United States patent that Rodel owns.
The action is presently in discovery and a trial is scheduled to begin in
November 2000. In April 1999, Rodel commenced a second lawsuit against Cabot
seeking injunctive relief and damages relating to allegations that Cabot is
infringing two other United States patents owned by an affiliate of Rodel. In
the first lawsuit, the only product that is specifically alleged to infringe a
Rodel patent is the Division's W2000 slurry, which is used to polish tungsten
and which currently accounts for a significant portion of the Division's
revenue. The second lawsuit does not allege infringement by any specific
products; instead, it cites one of Cabot's patents (which relates to a CMP
polishing slurry for metal surfaces including, among other things, aluminum and
copper) as evidence of infringement by Cabot through the manufacture and sale of
unspecified products. At this stage, the Division cannot predict whether or to
what extent Rodel will make specific infringement claims with respect to any of
the Division's products other than the Division's W2000 slurry in these or any
future proceedings. It is possible that Rodel will claim that many of the
Division's products infringe its patents.
Although Cabot is the only named defendant in these lawsuits, the Division
has agreed to indemnify Cabot for any and all losses and expenses arising out of
this litigation as well as any other litigation arising out of the Division's
business. Cabot and the Division believe that they have meritorious defenses to
these actions and intend to vigorously defend themselves. However, it is not
possible to predict the ultimate outcome of these lawsuits. These claims, even
if they are without merit, could be expensive and time consuming to defend and
could adversely
F-24
<PAGE> 112
CABOT MICROELECTRONICS MATERIALS DIVISION
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
(INFORMATION SUBSEQUENT TO NOVEMBER 5, 1999 IS UNAUDITED)
affect the Division's business, financial condition and results of operations.
If Cabot or the Division were to lose these lawsuits, they may be liable for
significant damages and legal expenses and may be enjoined from manufacturing
slurry products. It is not possible to estimate the amount of a probable loss,
if any, to the Division that might result from this matter. Accordingly, no
provision has been made in the Division's combined financial statements.
15. FINANCIAL INFORMATION BY INDUSTRY SEGMENT AND GEOGRAPHIC AREA:
The Division has adopted SFAS No. 131, "Disclosure about Segments of an
Enterprise and Related Information" ("SFAS 131"), which was effective for the
fiscal year ended September 30, 1999.
The Division operates predominantly in one industry segment -- the
development, manufacture, and sale of CMP slurries. Although the Division's
products can be categorized into various product lines and periodic financial
information is available by product line, management determined that the
Division's business is considered one reportable segment in accordance with the
aggregation criteria under SFAS 131.
The Division does not classify export sales as foreign sales. Financial
information by geographic area was as follows:
<TABLE>
<CAPTION>
SEPTEMBER 30,
-----------------------------
1997 1998 1999
---- ---- ----
<S> <C> <C> <C>
Revenue:
United States............................................. $33,650 $55,600 $89,666
Europe.................................................... 1,561 3,231 4,789
Asia...................................................... 0 0 4,235
------- ------- -------
Total....................................................... $35,211 $58,831 $98,690
======= ======= =======
Property, plant and equipment, net:
United States............................................. $14,975 $17,376 $25,324
Europe.................................................... 2,220 2,461 3,139
Asia...................................................... 0 4,876 11,568
------- ------- -------
Total....................................................... $17,195 $24,713 $40,031
======= ======= =======
</TABLE>
16. SUBSEQUENT EVENTS:
In December 1999, CMC obtained a letter of commitment from a bank for a
line of credit arrangement whereby CMC will be able to borrow an aggregate
amount of up to $25,000 for working capital, general corporate purposes and
capital expenditures. The term of the credit arrangement is three years. CMC
will be required to pay a fee on the $25,000 commitment amount until the loan
agreement is signed and will be required to pay a fee on unused portion of the
commitment amount after the loan agreement is signed. The line of credit is
subject to the consummation of the initial public offering of CMC's common stock
and certain limits for the aggregate indebtedness of CMC at the time of closing
of this credit arrangement. The credit facility contains certain restrictions
including restricting CMC's ability to incur additional indebtedness, pay
dividends, make certain acquisitions or dispositions and enter into transactions
with affiliates. In addition, CMC will be required to maintain certain financial
ratios.
F-25
<PAGE> 113
CABOT MICROELECTRONICS MATERIALS DIVISION
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
(INFORMATION SUBSEQUENT TO NOVEMBER 5, 1999 IS UNAUDITED)
In March 2000, CMC obtained a letter of commitment from a bank for an
unsecured term credit facility under which the lender would make term loans to
CMC in an aggregate amount of $17,000. The first term loan is in the amount of
$3,500 due in March 2005. The second term loan is in the amount of $13,500 with
quarterly repayments starting on June 30, 2000 and the remaining obligation due
in March 2005. Interest on the outstanding principal balance is due quarterly in
arrears. This term credit facility requires CMC to maintain certain financial
ratios. The proceeds of the loans under this credit facility are expected to be
used to finance the expected dividend to Cabot.
17. VALUATION AND QUALIFYING ACCOUNTS:
The following table sets forth activities in the Division's allowance for
doubtful accounts:
<TABLE>
<CAPTION>
BALANCE AT BALANCE AT
BEGINNING CHARGES TO END OF
OF YEAR EXPENSES DEDUCTIONS YEAR
ACCOUNTS RECEIVABLE ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Year ended:
September 30, 1997........................ $ 50 $ -- $-- $ 50
September 30, 1998........................ 50 -- -- 50
September 30, 1999........................ 50 -- -- 50
</TABLE>
The Division has historically not recorded warranty claims against warranty
reserves but rather provided for them in the period in which they occurred. As
such, charges to expenses represent the net charge required to maintain an
appropriate reserve.
<TABLE>
<S> <C> <C> <C> <C>
WARRANTY RESERVES
Year ended:
September 30, 1997........................ $ 82 $148 $-- $230
September 30, 1998........................ 230 118 -- 348
September 30, 1999........................ 348 543 -- 891
</TABLE>
F-26
<PAGE> 114
UNDERWRITING
Cabot Microelectronics, Cabot Corporation and the underwriters named below
have entered into an underwriting agreement with respect to the shares being
offered. Subject to certain conditions, each underwriter has severally agreed to
purchase the number of shares indicated in the following table. Goldman, Sachs &
Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated and FleetBoston
Robertson Stephens Inc. are the representatives of the underwriters.
<TABLE>
<CAPTION>
UNDERWRITERS NUMBER OF SHARES
------------ ----------------
<S> <C>
Goldman, Sachs & Co. .......................................
Merrill Lynch, Pierce, Fenner & Smith
Incorporated...................................
FleetBoston Robertson Stephens Inc..........................
--------
Total.............................................
========
</TABLE>
------------------------
If the underwriters sell more shares than the total number set forth in the
table above, the underwriters have an option to buy up to an additional 600,000
shares from us to cover such sales. They may exercise that option for 30 days.
If any shares are purchased pursuant to this option, the underwriters will
severally purchase shares in approximately the same proportion as set forth in
the table above.
The following table shows the per share and total underwriting discounts
and commissions to be paid to the underwriters by us. Such amounts are shown
assuming both no exercise and full exercise of the underwriters' option to
purchase additional shares.
<TABLE>
<CAPTION>
PAID BY
CABOT MICROELECTRONICS
---------------------------
NO EXERCISE FULL EXERCISE
----------- -------------
<S> <C> <C>
Per Share............ $ $
Total................ $ $
</TABLE>
Shares sold by the underwriters to the public will initially be offered at
the initial public offering price set forth on the cover of this prospectus. Any
shares sold by the underwriters to securities dealers may be sold at a discount
of up to $ per share from the initial public offering price. Any such
securities dealers may resell any shares purchased from the underwriters to
certain other brokers or dealers at a discount of up to $ per share from the
initial public offering price. If all the shares are not sold at the initial
public offering price, the representatives may change the offering price and the
other selling terms.
We and Cabot have agreed with the underwriters not to sell or otherwise
dispose any of our common stock or securities convertible into or exchangeable
for shares of our common stock during the period from the date of this
prospectus continuing through the date 180 days after the date of this
prospectus, except with the prior written consent of the representatives. This
agreement does not apply to any existing employee benefit plans. See "Shares
Eligible for Future Sale" for a discussion of transfer restrictions.
At our request, the underwriters have reserved for sale, at the initial
public offering price, up to 230,000 shares offered by this prospectus to be
sold to employees and friends of ours. The number of shares of common stock
available for sale to the general public will be reduced to the extent these
persons purchase the reserved shares. Any reserved shares which are not so
purchased will be offered by the Underwriters to the general public on the same
basis as the other shares of common stock offered by this prospectus.
Prior to this offering, there has been no public market for the shares. The
initial public offering price will be negotiated among us and the
representatives. The factors to be considered in determining the initial public
offering price of the shares, in addition to prevailing market conditions, will
be our historical performance, estimates of the business
U-1
<PAGE> 115
potential and earnings prospects of our
company, an assessment of our management and the consideration of the above
factors in relation to market valuation of companies in related businesses.
Our common stock has been approved for listing on Nasdaq under the symbol
"CCMP".
In connection with this offering, the underwriters may purchase and sell
shares of common stock in the open market. These transactions may include short
sales, stabilizing transactions and purchases to cover positions created by
short sales. Short sales involve the sale by the underwriters of a greater
number of shares than they are required to purchase in the offering. Stabilizing
transactions consist of certain bids or purchases made for the purpose of
preventing or retarding a decline in the market price of the common stock while
the offering is in progress.
The underwriters also may impose a penalty bid. This occurs when a
particular underwriter repays to the underwriters a portion of the underwriting
discount received by it because the representatives have repurchased shares sold
by or for the account of such underwriter in stabilizing or short covering
transactions.
These activities by the underwriters may stabilize, maintain or otherwise
affect the market price of the common stock. As a result, the price of the
common stock may be higher than the price that otherwise might exist in the open
market. If these activities are commenced, they may be discontinued by the
underwriters at any time. These transactions may be effected on Nasdaq, in the
over-the-counter market or otherwise.
FleetBoston Robertson Stephens Inc., an underwriter in this offering, is an
affiliate of the lending bank under our credit facility. Merrill Lynch, Pierce,
Fenner & Smith Incorporated, also an underwriter in this offering, is an
affiliate of Merrill Lynch Bank & Trust, the lending bank for the loan facility
available to all recipients of restricted stock grants.
The underwriters do not expect sales to discretionary accounts to exceed
five percent of the total number of shares offered.
We estimate that our share of the total expenses of the offering, excluding
underwriting discounts and commissions, will be approximately $2.3 million.
We have agreed to indemnify the several underwriters against certain
liabilities, including liabilities under the Securities Act.
U-2
<PAGE> 116
INSIDE BACK COVER
[Map of our global headquarters and facilities]
Strategically Positioned for Success
<PAGE> 117
- -------------------------------------------------------
- -------------------------------------------------------
No dealer, salesperson or other person is authorized to give any information
or to represent anything not contained in this prospectus. You must not rely on
any unauthorized information or representations. This prospectus is an offer to
sell only the common units offered hereby, but only under circumstances and in
jurisdictions where it is lawful to do so. The information contained in this
prospectus is current only as of its date.
------------------
TABLE OF CONTENTS
<TABLE>
<S> <C>
Prospectus Summary...................... 3
Risk Factors............................ 7
Use of Proceeds......................... 16
Dividend Policy......................... 16
Capitalization.......................... 17
Dilution................................ 19
Selected Financial Data................. 20
Unaudited Pro Forma Statements of
Income................................ 22
Management's Discussion and Analysis of
Financial Condition and Results of
Operations............................ 26
Business................................ 37
Management.............................. 52
Relationships Between Our Company and
Cabot Corporation..................... 62
Security Ownership of Principal
Stockholder and Management............ 74
Description of Capital Stock............ 76
Shares Eligible for Future Sale......... 84
Legal Matters........................... 86
Experts................................. 86
Where You Can Find More Information..... 86
Index to Financial Statements........... F-1
Underwriting............................ U-1
</TABLE>
------------------
Through and including , 2000 (the 25th day after the date of
this prospectus), all dealers effecting transactions in these securities,
whether or not participating in this offering, may be required to deliver a
prospectus. This is in addition to a dealer's obligation to deliver a prospectus
when acting as an underwriting and with respect to an unsold allotment or
subscription.
- -------------------------------------------------------
- -------------------------------------------------------
- -------------------------------------------------------
- -------------------------------------------------------
4,000,000 Shares
CABOT MICROELECTRONICS
CORPORATION
Common Stock
------------------
[Cobot MicroElectronic logo]
------------------
GOLDMAN, SACHS & CO.
MERRILL LYNCH & CO.
ROBERTSON STEPHENS
Representatives of the Underwriters
- -------------------------------------------------------
- -------------------------------------------------------
<PAGE> 118
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth expenses and costs payable by Cabot
Microelectronics (other than underwriting discounts and commissions) expected to
be incurred in connection with the issuance and distribution of the securities
described in this registration statement. All amounts are estimated except for
the Securities and Exchange Commission's registration fee and the National
Association of Securities Dealers' filing fee.
<TABLE>
<CAPTION>
AMOUNT
------
<S> <C>
Registration fee under Securities Act....................... $ 20,645
NASD filing fee............................................. 8,000
Nasdaq National Market fees................................. 95,000
Legal fees and expenses..................................... 1,175,000
Accounting fees and expenses................................ 759,000
Printing and engraving expenses............................. 200,000
Registrar and transfer agent fees........................... 3,000
Miscellaneous expenses...................................... 39,355
----------
Total............................................. $2,300,000
==========
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the Delaware General Corporation Law (the "DGCL") provides
that a corporation may indemnify directors and officers as well as other
employees and individuals against expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement in connection with specified
actions, suits and proceedings, whether civil, criminal, administrative, or
investigative (other than an action by or in the right of the corporation -- a
"derivative action"), if they acted in good faith and in a manner they
reasonably believed to be in or not opposed to the best interests of the
corporation and, with respect to any criminal action or proceeding, had no
reasonable cause to believe their conduct was unlawful. A similar standard is
applicable in the case of derivative actions, except that indemnification only
extends to expenses (including attorneys' fees) incurred in connection with the
defense or settlement of such action, and the statute requires court approval
before there can be any indemnification where the person seeking indemnification
has been found liable to the corporation. The statute provides that it is not
exclusive of other indemnification that may be granted by a corporation's
certificate of incorporation, bylaws, disinterested director vote, stockholder
vote, agreement, or otherwise.
Our bylaws and our certificate of incorporation require us to indemnify to
the fullest extent authorized by the DGCL any person made or threatened to be
made a party to an action, suit or proceeding, whether criminal, civil,
administrative or investigative, by reason of the fact that he or she is or was
a director or officer of the Company, or is or was serving at the request of the
Company as a director, officer, employee or agent of another corporation or of a
partnership, joint venture, trust or other enterprise.
As permitted by section 102(b)(7) of the DGCL, our certificate of
incorporation eliminates the liability of a director to the corporation or its
stockholders for monetary damages for such breach of fiduciary duty as a
director, except for liabilities arising (a) from any breach of the director's
duty of loyalty to the corporation or its stockholders; (b) from acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law; (c) under section 174 of the DGCL; or (d) from any transaction
from which the director derived an improper personal benefit.
II-1
<PAGE> 119
We intend to obtain primary and excess insurance policies insuring its
directors and officers and those of its subsidiaries against certain liabilities
they may incur in their capacity as directors and officers. Under these
policies, the insurer, on our behalf, may also pay amounts for which we have
granted indemnification to the directors or officers.
Additionally, reference is made to the Underwriting Agreement filed as
Exhibit 1.1 to this registration statement, which provides for indemnification
by our Underwriters, their directors and officers who sign the registration
statement and persons who control us, under certain circumstances.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
None.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(A) Exhibits
The following documents are filed as exhibits to this registration
statement:
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT DESCRIPTION
- ------- ------------------------------------------------------------
<C> <S>
1.1 Form of Underwriting Agreement.
3.1 Certificate of Incorporation of Cabot Microelectronics
Corporation.**
3.2 Amended and Restated By-Laws of Cabot Microelectronics
Corporation.**
3.3 Form of Amended and Restated Certificate of Incorporation of
Cabot Microelectronics Corporation.**
3.4 Form of Certificate of Designation, Preferences and Rights
of Series A Junior Participating Preferred Stock.
4.1 Form of Cabot Microelectronics Corporation common stock
certificate.
4.2 Rights Agreement.
5.1 Opinion of Fried, Frank, Harris, Shriver & Jacobson
regarding the legality of the shares being registered.
10.1 Master Separation Agreement, between Cabot Microelectronics
Corporation and Cabot Corporation.
10.2 IPO and Distribution Agreement, between Cabot
Microelectronics Corporation and Cabot Corporation.
10.3 Tax Sharing Agreement, between Cabot Microelectronics
Corporation and Cabot Corporation.**
10.4 Management Services Agreement, between Cabot
Microelectronics Corporation and Cabot Corporation.**
10.5 Fumed Metal Oxide Supply Agreement, between Cabot
Microelectronics Corporation and Cabot Corporation.**+
10.6 Confidential Disclosure and License Agreement, between Cabot
Microelectronics Corporation and Cabot Corporation.
10.7 Trademark License Agreement, between Cabot Microelectronics
Corporation and Cabot Corporation.
10.8 Dispersion Services Agreement, between Cabot
Microelectronics Corporation and Cabot Corporation.+
10.9 Employee Matters Agreement, between Cabot Microelectronics
Corporation and Cabot Corporation.**
10.10 Registration Rights Agreement, between Cabot
Microelectronics Corporation and Cabot Corporation.**
10.11 Purchase Agreement between Cabot Corporation and Intel
Corporation.+
</TABLE>
II-2
<PAGE> 120
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT DESCRIPTION
- ------- ------------------------------------------------------------
<C> <S>
10.12 Services Agreement by and among Davies -- Imperial Coatings,
Inc., Cabot Corporation, Donn Davies and JoAnn Davies.+
10.13 Sublease for Barry, Wales facility.
10.14 2000 Equity Incentive Plan.**
10.15 2000 Employee Stock Purchase Plan.**
10.16 Revolving Credit Agreement, among Cabot Microelectronics
Corporation, Fleet National Bank and Fleet National Bank.
10.17 Credit Agreement, between Cabot Microelectronics Corporation
and LaSalle Bank National Association.
23.1 Consent of PricewaterhouseCoopers, LLP
23.2 Consent of Fried, Frank, Harris, Shriver & Jacobson
(included in Exhibit 5.1).
23.3 Consent of Juan Cabot Enriquez**
23.4 Consent of John P. Frazee, Jr.**
23.5 Consent of Steven V. Wilkinson**
24.1 Power of Attorney.**
27.1 Financial Data Schedule.**
</TABLE>
- ---------------
* To be filed by amendment.
** Previously filed.
+ Portions of these exhibits have been omitted pursuant to a request for
confidential treatment.
(B) Financial Statement Schedules
Financial statement schedules have been omitted because they are not
applicable or the required information is shown in the combined financial
statements or notes thereto.
ITEM 17. UNDERTAKINGS.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 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 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) 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.
(2) For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act shall be deemed to be part of this registration
statement as of the time it was declared effective.
II-3
<PAGE> 121
(3) For the purpose of determining any liability under the Securities Act
of 1933, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
II-4
<PAGE> 122
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment No. 4 to the Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Aurora, State of Illinois, on April 3, 2000.
CABOT MICROELECTRONICS CORPORATION
By: /s/ MATTHEW NEVILLE
------------------------------------
Matthew Neville
President and Chief Executive
Officer
Pursuant to the requirements of the Securities Act, this Amendment No. 4 to
the Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
Chairman of the Board
*
- ---------------------------------------
Kennett F. Burnes
President and Chief Executive Officer,
Director (Principal Executive Officer)
/s/ MATTHEW NEVILLE April 3, 2000
- ---------------------------------------
Matthew Neville
Vice President, Chief Financial Officer,
Treasurer and Secretary (Principal
Financial and Accounting Officer)
/s/ WILLIAM C. MCCARTHY April 3, 2000
- ---------------------------------------
William C. McCarthy
Director
*
- ---------------------------------------
Samuel W. Bodman
Director
*
- ---------------------------------------
William P. Noglows
*By: /s/ MATTHEW NEVILLE April 3, 2000
----------------------------------
Matthew Neville
Attorney-in-Fact
</TABLE>
II-5
<PAGE> 123
EXHIBITS INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT DESCRIPTION
- ------- ------------------------------------------------------------
<C> <S>
1.1 Form of Underwriting Agreement.
3.1 Certificate of Incorporation of Cabot Microelectronics
Corporation.**
3.2 Amended and Restated By-Laws of Cabot Microelectronics
Corporation.**
3.3 Form of Amended and Restated Certificate of Incorporation of
Cabot Microelectronics Corporation.**
3.4 Form of Certificate of Designation, Preferences and Rights
of Series A Junior Participating Preferred Stock.
4.1 Form of Cabot Microelectronics Corporation common stock
certificate.
4.2 Rights Agreement.
5.1 Opinion of Fried, Frank, Harris, Shriver & Jacobson
regarding the legality of the shares being registered.
10.1 Master Separation Agreement, between Cabot Microelectronics
Corporation and Cabot Corporation.
10.2 IPO and Distribution Agreement, between Cabot
Microelectronics Corporation and Cabot Corporation.
10.3 Tax Sharing Agreement, between Cabot Microelectronics
Corporation and Cabot Corporation.**
10.4 Management Services Agreement, between Cabot
Microelectronics Corporation and Cabot Corporation.**
10.5 Fumed Metal Oxide Supply Agreement, between Cabot
Microelectronics Corporation and Cabot Corporation.**+
10.6 Confidential Disclosure and License Agreement, between Cabot
Microelectronics Corporation and Cabot Corporation.
10.7 Trademark License Agreement, between Cabot Microelectronics
Corporation and Cabot Corporation.
10.8 Dispersion Services Agreement, between Cabot
Microelectronics Corporation and Cabot Corporation.+
10.9 Employee Matters Agreement, between Cabot Microelectronics
Corporation and Cabot Corporation.**
10.10 Registration Rights Agreement, between Cabot
Microelectronics Corporation and Cabot Corporation.**
10.11 Purchase Agreement between Cabot Corporation and Intel
Corporation.+
10.12 Services Agreement by and among Davies--Imperial Coatings,
Inc., Cabot Corporation, Donn Davies and JoAnn Davies.+
10.13 Sublease for Barry, Wales facility.
10.14 2000 Equity Incentive Plan.**
10.15 2000 Employee Stock Purchase Plan.**
10.16 Revolving Credit Agreement, among Cabot Microelectronics
Corporation, Fleet National Bank and Fleet National Bank.
10.17 Credit Agreement, between Cabot Microelectronics Corporation
and LaSalle Bank National Association.
23.1 Consent of PricewaterhouseCoopers, LLP.
23.2 Consent of Fried, Frank, Harris, Shriver & Jacobson
(included in Exhibit 5.1).
23.3 Consent of Juan Cabot Enriquez**
23.4 Consent of John P. Frazee, Jr.**
23.5 Consent of Steven V. Wilkinson**
24.1 Power of Attorney. **
27.1 Financial Data Schedule.**
</TABLE>
- ---------------
* To be filed by amendment.
** Previously filed.
+ Portions of these exhibits have been omitted pursuant to a request for
confidential treatment.
<PAGE> 1
Execution Copy
CABOT MICROELECTRONICS CORPORATION
4,000,000 SHARES
COMMON STOCK
(par value $0.001 per share)
UNDERWRITING AGREEMENT
April __, 2000
Goldman, Sachs & Co.,
Merrill Lynch, Pierce, Fenner & Smith
Incorporated,
FleetBoston Robertson Stephens Inc.,
As representatives of the several Underwriters
named in Schedule I hereto,
c/o Goldman, Sachs & Co.,
85 Broad Street,
New York, New York 10004.
Ladies and Gentlemen:
Cabot Microelectronics Corporation, a Delaware corporation (the
"Company"), and a wholly owned subsidiary of Cabot Corporation ("Cabot
Corporation"), proposes, subject to the terms and conditions stated herein, to
issue and sell to the Underwriters named in Schedule I hereto (the
"Underwriters") an aggregate of 4,000,000 shares (the "Firm Shares") and, at the
election of the Underwriters, up to 600,000 additional shares (the "Optional
Shares") of common stock, par value $0.001 per share (the "Stock"), of the
Company (the Firm Shares and the Optional Shares that the Underwriters elect to
purchase pursuant to Section 2 hereof being collectively called the "Shares").
1. Each of the Company and Cabot Corporation jointly and severally
represents and warrants to, and agrees with, each of the Underwriters that:
(a) A registration statement on Form S-1 (File No. 333-95093)
(the "Initial Registration Statement") in respect of the Shares has
been filed with the Securities and Exchange Commission (the
"Commission"); the Initial Registration Statement and any
post-effective amendment thereto, each in the form heretofore delivered
to you, and, excluding exhibits thereto, to you for each of the other
Underwriters, have been declared effective by the Commission in such
form; other than a registration statement, if any, increasing the size
of the offering (a "Rule 462(b) Registration Statement"), filed
pursuant to Rule 462(b) under the Securities Act of 1933, as amended
(the "Act"), which became effective upon filing, no other
<PAGE> 2
document with respect to the Initial Registration Statement has
heretofore been filed with the Commission; and no stop order suspending
the effectiveness of the Initial Registration Statement, any
post-effective amendment thereto or the Rule 462(b) Registration
Statement, if any, has been issued and no proceeding for that purpose
has been initiated or threatened by the Commission (any preliminary
prospectus included in the Initial Registration Statement or filed with
the Commission pursuant to Rule 424(a) of the rules and regulations of
the Commission under the Act is hereinafter called a "Preliminary
Prospectus"; the various parts of the Initial Registration Statement
and the Rule 462(b) Registration Statement, if any, including all
exhibits thereto and including the information contained in the form of
final prospectus filed with the Commission pursuant to Rule 424(b)
under the Act in accordance with Section 5(a) hereof and deemed by
virtue of Rule 430A under the Act to be part of the Initial
Registration Statement at the time it was declared effective, each as
amended at the time such part of the Initial Registration Statement
became effective or such part of the Rule 462(b) Registration
Statement, if any, became or hereafter becomes effective, are
hereinafter collectively called the "Registration Statement"; and such
final prospectus, in the form first filed pursuant to Rule 424(b) under
the Act, is hereinafter called the "Prospectus");
(b) No order preventing or suspending the use of any
Preliminary Prospectus has been issued by the Commission, and each
Preliminary Prospectus, at the time of filing thereof, conformed in all
material respects to the requirements of the Act and the rules and
regulations of the Commission thereunder, and did not contain an untrue
statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements therein, in
the light of the circumstances under which they were made, not
misleading; provided, however, that this representation and warranty
shall not apply to any statements or omissions made in reliance upon
and in conformity with information furnished in writing to the Company
by an Underwriter through Goldman, Sachs & Co. expressly for use
therein;
(c) The Registration Statement conforms, and the Prospectus
and any further amendments or supplements to the Registration Statement
or the Prospectus will conform, in all material respects to the
requirements of the Act and the rules and regulations of the Commission
thereunder and do not and will not, as of the applicable effective date
as to the Registration Statement and any amendment thereto, and as of
the applicable filing date as to the Prospectus and any amendment or
supplement thereto, contain an untrue statement of a material fact or
omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading; provided,
however, that this representation and warranty shall not apply to any
statements or omissions made in reliance upon and in conformity with
information furnished in writing to the Company by an Underwriter
through Goldman, Sachs & Co. expressly for use therein;
(d) The Company has not sustained since the date of the latest
audited financial statements included in the Prospectus any material
loss or interference with its business from fire, explosion, flood or
other calamity, whether or not covered by insurance, or from any labor
dispute or court or governmental action, order or decree, otherwise
than as set forth or contemplated in the Prospectus; and, since the
respective dates as of which information is given in the Registration
Statement and the Prospectus, there has not been any change in the
capital stock or long-term debt of the Company or any material adverse
change, or any development involving a prospective material adverse
change, in or affecting the general affairs, management, financial
position, stockholders' equity or results of operations of the Company,
otherwise than as set forth or contemplated in the Prospectus;
2
<PAGE> 3
(e) Except for the restrictions arising out of its purchase of
the property underlying its plant in Geino, Japan from the Japanese
government, the Company has (except for the Geino, Japan plant as to
which the Company and Cabot Corporation and its subsidiaries
collectively have) good and marketable title in fee simple to all real
property and good and marketable title to all personal property owned
by it, in each case free and clear of all liens, encumbrances and
defects except such as are described in the Prospectus or such as would
not, individually or in the aggregate, have a materially adverse effect
on the business, condition (financial or otherwise) stockholders'
equity, prospects or results of operations of the Company (a "Material
Adverse Effect"); and any real property and buildings held under lease
by the Company are held by it under valid, subsisting and enforceable
leases with such exceptions as have not had and would not have,
individually or in the aggregate, a Material Adverse Effect;
(f) The Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the State
of Delaware, with power and authority (corporate and other) to own its
properties and conduct its business as described in the Prospectus, and
has been duly qualified as a foreign corporation for the transaction of
business and is in good standing under the laws of each other
jurisdiction in which it owns or leases properties or conducts any
business so as to require such qualification, other than where the
failure to be so qualified or in good standing has not had and would
not have, individually or in the aggregate, a Material Adverse Effect;
(g) The Company has an authorized capitalization as set forth
in the Prospectus, and all of the issued shares of capital stock of the
Company have been duly and validly authorized and issued, are fully
paid and non-assessable and conform in all material respects to the
description of the Stock contained in the Prospectus;
(h) The Shares have been duly and validly authorized and, when
issued and delivered against payment therefor as provided herein, will
be duly and validly issued and fully paid and non-assessable and will
conform to the description of the Stock contained in the Prospectus;
(i) The issue and sale of the Shares by the Company and the
compliance by the Company with all of the provisions of this Agreement
and the consummation of the transactions herein contemplated will not
conflict with or result in a breach or violation of any of the terms or
provisions of, or constitute a default under, any indenture, mortgage,
deed of trust, loan agreement or other agreement or instrument to which
the Company is a party or by which the Company is bound or to which any
of the property or assets of the Company is subject other than any such
conflicts, breaches, violations or defaults that, individually or in
the aggregate, would not be reasonably likely to have a Material
Adverse Effect, nor will such action result in any violation of the
provisions of the Certificate of Incorporation or By-laws of the
Company or any statute or any order, rule or regulation of any court or
governmental agency or body having jurisdiction over the Company or any
of its properties; and no consent, approval, authorization, order,
registration or qualification of or with any such court or governmental
agency or body is required for the issue and sale of the Shares or the
consummation by the Company of the transactions contemplated by this
Agreement, except the registration under the Act of the Shares and such
consents, approvals, authorizations, registrations or qualifications as
may be required under state securities or Blue Sky laws in connection
with the purchase and distribution of the Shares by the Underwriters;
(j) The Company is not (A) in violation of its Certificate of
Incorporation or By-laws or (B) in default in the performance or
observance of any material obligation, agreement,
3
<PAGE> 4
covenant or condition contained in any indenture, mortgage, deed of
trust, loan agreement, lease or other agreement or instrument to which
it is a party or by which it or any of its properties may be bound,
except, in the case of clause (B) only, for any such defaults that,
individually or in the aggregate, have not had and are not likely to
have a Material Adverse Effect;
(k) The statements set forth in the Prospectus under the
caption "Description of Capital Stock", insofar as they purport to
constitute a summary of the terms of the Stock and under the caption
"Underwriting", insofar as they purport to describe the provisions of
the laws and documents referred to therein, are accurate, complete and
fair in all material respects;
(l) Other than as set forth in the Prospectus, there are no
legal or governmental proceedings pending to which the Company is a
party or of which any property of the Company is the subject which, if
determined adversely to the Company, would individually or in the
aggregate have a Material Adverse Effect; and, to the best of the
Company's knowledge, no such proceedings are threatened or contemplated
by governmental authorities or threatened by others;
(m) Other than as set forth in the Prospectus, the Company
owns or possesses, or can acquire on reasonable terms, adequate
patents, patent rights, licenses, inventions, copyrights, know-how
(including trade secrets and other unpatented and/or unpatentable
proprietary or confidential information, systems of procedures),
trademarks, service marks, trade names or other intellectual property
(collectively, "Intellectual Property") necessary to carry on the
business now operated by it, and the Company has not received any
notice or is otherwise aware of any infringement of or conflict with
asserted rights of others with respect to any Intellectual Property or
of any facts or circumstances which would render any Intellectual
Property invalid or inadequate to protect the interest of the Company
therein, and which infringement, conflict, invalidity, individually, or
in the aggregate, is subject of any unfavorable decision, ruling or
finding;
(n) The Company is not, and after giving effect to the
offering and sale of the Shares will not be, an "investment company",
as such term is defined in the Investment Company Act of 1940, as
amended (the "Investment Company Act");
(o) Each of the agreements between the Company and Cabot
Corporation that are referred to in the Prospectus and listed forth in
Schedule I hereto (collectively, the "Inter-Company Agreements") have
been duly and validly authorized by all necessary corporate action on
the part of the Company and Cabot Corporation. The Inter-Company
Agreements have been duly executed and delivered by each of the Company
and Cabot Corporation and constitute valid and binding obligations of
the Company and Cabot Corporation, enforceable against the parties in
accordance with their respective terms;
(p) Prior to the First Time of Delivery (as defined in Section 4
hereof), Cabot Corporation will have transferred to the Company
substantially all of the assets and liabilities previously used by it
to conduct the businesses of its Microelectronics Materials Division as
described in the Registration Statement (except for the fumed alumina
plant at Cabot Corporation's Tuscola, Illinois facility and the land,
building and other improvements and fixtures in Barry, Wales and any
other assets and liabilities that Cabot Corporation requires to provide
the services to the Company pursuant to the Inter-Company Agreements
and which may have been recorded or deemed to have been on the books of
the Microelectronics Materials Division) and as a result of these
transfers and the Inter-Company Agreements the
4
<PAGE> 5
Company will be able to conduct such businesses in substantially the
same manner and to the same extent as they were conducted by the
Microelectronics Materials Division of Cabot Corporation prior to such
transfers (except to the extent that that conduct of such businesses
require the ownership of the assets or assumption of the liabilities
referred to in the previous parenthetical in this paragraph (p)); and
(q) PricewaterhouseCoopers LLP, who have certified certain
financial statements of the Company, are independent public accountants
as required by the Act and the rules and regulations of the Commission
thereunder.
2. Subject to the terms and conditions herein set forth, (a) the
Company agrees to issue and sell to each of the Underwriters, and each of the
Underwriters agrees, severally and not jointly, to purchase from the Company, at
a purchase price per share of $................, the number of Firm Shares set
forth opposite the name of such Underwriter in Schedule II hereto and (b) in the
event and to the extent that the Underwriters shall exercise the election to
purchase Optional Shares as provided below, the Company agrees to issue and sell
to each of the Underwriters, and each of the Underwriters agrees, severally and
not jointly, to purchase from the Company, at the purchase price per share set
forth in clause (a) of this Section 2, that portion of the number of Optional
Shares as to which such election shall have been exercised (to be adjusted by
you so as to eliminate fractional shares) determined by multiplying such number
of Optional Shares by a fraction, the numerator of which is the maximum number
of Optional Shares which such Underwriter is entitled to purchase as set forth
opposite the name of such Underwriter in Schedule II hereto and the denominator
of which is the maximum number of Optional Shares that all of the Underwriters
are entitled to purchase hereunder.
The Company hereby grants to the Underwriters the right to purchase at
their election up to 600,000 Optional Shares, at the purchase price per share
set forth in the paragraph above, for the sole purpose of covering sales of
shares in excess of the number of Firm Shares. Any such election to purchase
Optional Shares may be exercised only by written notice from Goldman, Sachs &
Co. to the Company, given within a period of 30 calendar days after the date of
this Agreement, setting forth the aggregate number of Optional Shares to be
purchased and the date on which such Optional Shares are to be delivered, as
determined by you but in no event earlier than the First Time of Delivery (as
defined in Section 4 hereof) or, unless you and the Company otherwise agree in
writing, earlier than two or later than ten business days after the date of such
notice.
3. Upon the authorization by you of the release of the Firm Shares, the
several Underwriters propose to offer the Firm Shares for sale upon the terms
and conditions set forth in the Prospectus.
4. (a) The Shares to be purchased by each Underwriter hereunder, in
definitive form, and in such authorized denominations and registered in such
names as Goldman, Sachs & Co. may request upon at least forty-eight hours' prior
notice to the Company shall be delivered by or on behalf of the Company to
Goldman, Sachs & Co., through the facilities of the Depository Trust Company
("DTC"), for the account of such Underwriter, against payment by or on behalf of
such Underwriter of the purchase price therefor by wire transfer of Federal
(same-day) funds to the account specified by the Company to Goldman, Sachs & Co.
at least forty-eight hours in advance. The Company will cause the certificates
representing the Shares to be made available for checking and packaging at least
twenty-four hours prior to the Time of Delivery (as defined below) with respect
thereto at the office of DTC or its designated custodian (the "Designated
Office"). The time and date of such delivery and payment shall be, with respect
to the Firm Shares, 9:30 a.m., New York City time, on ............., 2000 or
such other time and date as Goldman, Sachs & Co. and the Company may agree upon
in writing,
5
<PAGE> 6
and, with respect to the Optional Shares, 9:30 a.m., New York time, on the date
specified by Goldman, Sachs & Co. in the written notice given by Goldman, Sachs
& Co. of the Underwriters' election to purchase such Optional Shares, or such
other time and date as Goldman, Sachs & Co. and the Company may agree upon in
writing. Such time and date for delivery of the Firm Shares is herein called the
"First Time of Delivery", such time and date for delivery of the Optional
Shares, if not the First Time of Delivery, is herein called the "Second Time of
Delivery", and each such time and date for delivery is herein called a "Time of
Delivery".
(b) The documents to be delivered at each Time of Delivery by or
on behalf of the parties hereto pursuant to Section 7 hereof, including the
cross receipt for the Shares and any additional documents requested by the
Underwriters pursuant to Section 7(j) hereof, will be delivered at the offices
of Sullivan & Cromwell, 125 Broad Street, New York, New York 10004 (the "Closing
Location"), and the Shares will be delivered at the Designated Office, all at
such Time of Delivery. A meeting will be held at the Closing Location at 2:00
p.m., New York City time, on the New York Business Day next preceding such Time
of Delivery, at which meeting the final drafts of the documents to be delivered
pursuant to the preceding sentence will be available for review by the parties
hereto. For the purposes of this Section 4, "New York Business Day" shall mean
each Monday, Tuesday, Wednesday, Thursday and Friday which is not a day on which
banking institutions in New York are generally authorized or obligated by law or
executive order to close.
5. The Company agrees with each of the Underwriters as follows and
Cabot Corporation agrees with each of the Underwriters as set forth in Section
5(e) and to cause the Company to comply with its obligations under this Section
5:
(a) To prepare the Prospectus in a form approved by you and to
file such Prospectus pursuant to Rule 424(b) under the Act not later
than the Commission's close of business on the second business day
following the execution and delivery of this Agreement, or, if
applicable, such earlier time as may be required by Rule 430A(a)(3)
under the Act; to make no further amendment or any supplement to the
Registration Statement or Prospectus which shall be disapproved by you
promptly after reasonable notice thereof; to advise you, promptly after
it receives notice thereof, of the time when any amendment to the
Registration Statement has been filed or becomes effective or any
supplement to the Prospectus or any amended Prospectus has been filed
and to furnish you with copies thereof; to advise you, promptly after
it receives notice thereof, of the issuance by the Commission of any
stop order or of any order preventing or suspending the use of any
Preliminary Prospectus or prospectus, of the suspension of the
qualification of the Shares for offering or sale in any jurisdiction,
of the initiation or threatening of any proceeding for any such
purpose, or of any request by the Commission for the amending or
supplementing of the Registration Statement or Prospectus or for
additional information; and, in the event of the issuance of any stop
order or of any order preventing or suspending the use of any
Preliminary Prospectus or prospectus or suspending any such
qualification, promptly to use its best efforts to obtain the
withdrawal of such order;
(b) Promptly from time to time to take such action as you may
reasonably request to qualify the Shares for offering and sale under
the securities laws of such jurisdictions as you may request and to
comply with such laws so as to permit the continuance of sales and
dealings therein in such jurisdictions for as long as may be necessary
to complete the distribution of the Shares, provided that in connection
therewith the Company shall not be required to qualify as a foreign
corporation or to file a general consent to service of process in any
jurisdiction;
6
<PAGE> 7
(c) Prior to 10:00 A.M., New York City time, on the New York
Business Day next succeeding the date of this Agreement and from time
to time, to furnish the Underwriters with copies of the Prospectus in
New York City in such quantities as you may reasonably request, and, if
the delivery of a prospectus is required at any time prior to the
expiration of nine months after the time of issue of the Prospectus in
connection with the offering or sale of the Shares and if at such time
any event shall have occurred as a result of which the Prospectus as
then amended or supplemented would include an untrue statement of a
material fact or omit to state any material fact necessary in order to
make the statements therein, in the light of the circumstances under
which they were made when such Prospectus is delivered, not misleading,
or, if for any other reason it shall be necessary during such period to
amend or supplement the Prospectus in order to comply with the Act, to
notify you and upon your request to prepare and furnish without charge
to each Underwriter and to any dealer in securities as many copies as
you may from time to time reasonably request of an amended Prospectus
or a supplement to the Prospectus which will correct such statement or
omission or effect such compliance, and in case any Underwriter is
required to deliver a prospectus in connection with sales of any of the
Shares at any time nine months or more after the time of issue of the
Prospectus, upon your request but at the expense of such Underwriter,
to prepare and deliver to such Underwriter as many copies as you may
request of an amended or supplemented Prospectus complying with Section
10(a)(3) of the Act;
(d) To make generally available to its securityholders as soon as
practicable, but in any event not later than eighteen months after the
effective date of the Registration Statement (as defined in Rule 158(c)
under the Act), an earnings statement of the Company (which need not be
audited) complying with Section 11(a) of the Act and the rules and
regulations thereunder (including, at the option of the Company, Rule
158);
(e) Neither the Company nor Cabot Corporation will, during the
period beginning from the date hereof and continuing to and including
the date 180 days after the date of the Prospectus, offer, sell,
contract to sell or otherwise dispose of, except as provided hereunder
any securities of the Company that are substantially similar to the
Shares, including but not limited to any securities that are
convertible into or exchangeable for, or that represent the right to
receive, Stock or any such substantially similar securities (other than
pursuant to employee stock option plans and other benefits plans
described in the Prospectus and existing on the date of this Agreement
but subject to the limitations contained therein as of such date),
without your prior written consent;
(f) To furnish to its stockholders as soon as practicable after
the end of each fiscal year an annual report (including a balance sheet
and statements of income, stockholders' equity and cash flows of the
Company certified by independent public accountants) and, as soon as
practicable after the end of each of the first three quarters of each
fiscal year (beginning with the fiscal quarter ending after the
effective date of the Registration Statement), to make available to its
stockholders consolidated summary financial information of the Company
for such quarter in reasonable detail;
(g) During a period of three years from the effective date of the
Registration Statement, to furnish to you copies of all reports or
other communications (financial or other) furnished to stockholders,
and to deliver to you (i) as soon as they are available, copies of any
reports and financial statements furnished to or filed with the
Commission or any national securities exchange on which any class of
securities of the Company is listed; and (ii) such additional
information concerning the business and financial condition of the
Company as you may from
7
<PAGE> 8
time to time reasonably request (such financial statements to be on a
consolidated basis to the extent the accounts of the Company are
consolidated in reports furnished to its stockholders generally or to
the Commission);
(h) To use the net proceeds received by it from the sale of the
Shares pursuant to this Agreement in the manner specified in the
Prospectus under the caption "Use of Proceeds";
(i) To use its best efforts to list for quotation the Shares on
the Nasdaq National Market System ("Nasdaq");
(j) To file with the Commission such information on Form 10-Q or
Form 10-K as may be required by Rule 463 under the Act; and
(k) If the Company elects to rely upon Rule 462(b), the Company
shall file a Rule 462(b) Registration Statement with the Commission in
compliance with Rule 462(b) by 10:00 P.M., Washington, D.C. time, on
the date of this Agreement, and the Company shall at the time of filing
either pay to the Commission the filing fee for the Rule 462(b)
Registration Statement or give irrevocable instructions for the payment
of such fee pursuant to Rule 111(b) under the Act.
6. Each of the Company and Cabot Corporation jointly and severally
covenants and agrees with the several Underwriters that the Company will pay or
cause to be paid the following: (i) the fees, disbursements and expenses of the
Company's counsel and accountants in connection with the registration of the
Shares under the Act and all other expenses in connection with the preparation,
printing and filing of the Registration Statement, any Preliminary Prospectus
and the Prospectus and amendments and supplements thereto and the mailing and
delivering of copies thereof to the Underwriters and dealers; (ii) the cost of
printing or producing any Agreement among Underwriters, this Agreement, the Blue
Sky Memorandum, closing documents (including any compilations thereof) and any
other documents in connection with the offering, purchase, sale and delivery of
the Shares; (iii) all expenses in connection with the qualification of the
Shares for offering and sale under state securities laws as provided in Section
5(b) hereof, including the reasonable fees and disbursements of counsel for the
Underwriters in connection with such qualification and in connection with the
Blue Sky survey; (iv) all fees and expenses in connection with listing the
Shares on the Nasdaq; (v) the filing fees incident to, and the reasonable fees
and disbursements of counsel for the Underwriters in connection with, securing
any required review by the National Association of Securities Dealers, Inc. of
the terms of the sale of the Shares; (vi) the cost of preparing stock
certificates; (vii) the cost and charges of any transfer agent or registrar; and
(viii) all other costs and expenses incident to the performance of its
obligations hereunder which are not otherwise specifically provided for in this
Section. It is understood, however, that, except as provided in this Section,
and Sections 8 and 11 hereof, the Underwriters will pay all of their own costs
and expenses, including the fees of their counsel, stock transfer taxes on
resale of any of the Shares by them, and any advertising expenses connected with
any offers they may make.
7. The obligations of the Underwriters hereunder, as to the Shares to
be delivered at each Time of Delivery, shall be subject, in their discretion, to
the condition that all representations and warranties and other statements of
each of the Company and of Cabot Corporation herein are, at and as of such Time
of Delivery, true and correct, the condition that each of the Company and Cabot
Corporation shall have performed all of its obligations hereunder theretofore to
be performed, and the following additional conditions:
(a) The Prospectus shall have been filed with the Commission
pursuant to Rule 424(b) within the applicable time period prescribed
for such filing by the rules and regulations under
8
<PAGE> 9
the Act and in accordance with Section 5(a) hereof; if the Company has
elected to rely upon Rule 462(b), the Rule 462(b) Registration
Statement shall have become effective by 10:00 P.M., Washington, D.C.
time, on the date of this Agreement; no stop order suspending the
effectiveness of the Registration Statement or any part thereof shall
have been issued and no proceeding for that purpose shall have been
initiated or threatened by the Commission; and all requests for
additional information on the part of the Commission shall have been
complied with to your reasonable satisfaction;
(b) Sullivan & Cromwell, counsel for the Underwriters, shall have
furnished to you such written opinion or opinions dated such Time of
Delivery, with respect to such matters as you may reasonably request,
and such counsel shall have received such papers and information as
they may reasonably request to enable them to pass upon such matters;
(c) Fried, Frank, Harris, Shriver & Jacobson, counsel for the
Company, shall have furnished to you their written opinion dated such
Time of Delivery, in form and substance satisfactory to you, to the
effect that:
(i) The Company has been duly incorporated and is an
existing corporation in good standing under the laws of the
State of Delaware, with corporate power and authority to own
its properties and conduct its business as described in the
Prospectus;
(ii) The Company has an authorized capitalization as
set forth in the Prospectus in the second paragraph under
the caption "Description of Capital Stock"; all of the
issued and outstanding shares of Stock have been duly
authorized, validly issued and are fully paid and
non-assessable; and the Shares will, upon issuance and
delivery and payment therefor in the manner described in
this Agreement, be duly authorized, validly issued and fully
paid and non-assessable;
(iii) This Agreement has been duly authorized, executed
and delivered by each of the Company and Cabot Corporation;
(iv) The issue and sale of the Shares being delivered
at such Time of Delivery by the Company and the compliance
by the Company with all of the provisions of this Agreement
and the consummation of the transactions herein contemplated
will not result in any violation of the provisions of the
Certificate of Incorporation or By-laws of the Company or
any statute or any order, rule or regulation known to such
counsel of any court or governmental agency or body having
jurisdiction over the Company or any of its properties;
(v) No consent, approval, authorization or order of,
registration or filing with, any such court or governmental
agency or body of the United States of America or the States
of New York or Delaware (as it relates to the General
Corporation Law of the State of Delaware) applicable to the
Company is required on the part of the Company for the
issuance and sale of the Shares by the Company and the
consummation by the Company of the transaction contemplated
by this Agreement, except for (i) the registration under the
Act of the Shares, (ii) such consents, approvals,
authorizations, registrations or qualifications as may be
required under state securities or Blue Sky laws in
connection with the purchase and distribution of the Shares
by the Underwriters and (iii) the filing with the Secretary
of State of the State of Delaware, and the effectiveness of,
the Company's Amended and Restated
9
<PAGE> 10
Certificate of Incorporation and the Certificate of
Designation, Preferences and Rights in respect of Series A
Junior Participating Preferred Stock;
(vi) The statements set forth in the Prospectus under
the caption "Description of Capital Stock", insofar as they
purport to constitute a summary of the terms of the Stock
and under the caption "Underwriting", insofar as they
purport to describe the provisions of the laws and documents
referred to therein, are accurate, and complete in all
material respects;
(vii) The Company is not an "investment company", as
defined in the Investment Company Act;
(viii)The Registration Statement, at the time it was
declared effective by the Commission, and the Prospectus, as
of its date, (except for the financial statements, notes and
schedules thereto and other financial information and data,
as to which such counsel does not express any opinion)
appeared on their face to be responsive in all material
respects with the requirements of the Act and Rules and
Regulation thereunder; and
(ix) Such counsel shall state that in the course of the
preparation of the Registration Statement and the
Prospectus, such counsel participated in conferences with
certain of the officers and representatives of, and the
independent public accountants for, the Company, at which
the Registration Statement and the Prospectus were
discussed. Such counsel shall state that between the date of
effectiveness of the Registration Statement and the time of
delivery of their opinion, they held additional conferences
with certain officers and representatives of, and the
independent public accountants for, the Company, at which
the contents of the Prospectus were discussed to a limited
extent. Such counsel may state that given the limitations
inherent in the independent verification of factual matters
and the character of determinations involved in the
registration process, they are not passing upon or assuming
any responsibility for the accuracy, completeness or
fairness of the statements contained in the Registration
Statement of the Prospectus except as provided in clause
(vi) above. Such counsel shall state that subject to the
foregoing and on the basis of the information they obtained
in performance of the services referred to above, including
information they obtained from officers and other
representatives of, and the independent public accountants
for, the Company, no facts have come to their attention that
cause them to believe that the Registration Statement, at
the time the Registration Statement became effective,
contained any untrue statement of a material fact or omitted
to state a material fact required to be stated therein or
necessary in order to make the statements therein not
misleading or that the Prospectus, as of its date, contained
any untrue statement of a material fact or omitted to state
a material fact necessary in order to make the statements
therein, in light of the circumstances under which they were
made, not misleading. Also, subject to the foregoing, no
facts have come to their attention in the course of
proceedings described in the second sentence of this
paragraph that cause them to believe that the Prospectus, as
of the date and time of delivery of this opinion, contains
an untrue statement of a material fact or omits to state a
material fact required to be stated therein or necessary in
order to make the statements therein, in light of the
circumstances in which they were made, not misleading. Such
counsel shall also state that they express no view or
belief, however, with respect to the
10
<PAGE> 11
financial statements, notes and schedules thereto and other
financial information and data included in or omitted from the
Registration Statement or Prospectus; and
(x) The Company has been duly qualified as a foreign
corporation for the transaction of business and is in good
standing under the laws of each of state listed in a schedule
to such opinion.
(d) Robert Rothberg, general counsel of Cabot Corporation,
shall have furnished to you his opinion dated such Time of Delivery, in
form and substance satisfactory to you, to the effect that:
(i) To the best of such counsel's knowledge and other
than as set forth in the Prospectus, there are no legal or
governmental proceedings pending to which the Company is a
party or of which any property of the Company is the subject
which, if determined adversely to the Company, would
individually or in the aggregate have a Material Adverse
Effect; and, to the best of such counsel's knowledge, no such
proceedings are threatened or contemplated by governmental
authorities or threatened by others;
(ii) To the best of such counsel's knowledge, the
issue and sale of the Shares being delivered at such Time of
Delivery by the Company and the compliance by the Company with
all of the provisions of this Agreement and the consummation
of the transactions herein contemplated will not conflict with
or result in a breach or violation of any of the terms or
provisions of, or constitute a default under, any indenture,
mortgage, deed of trust, loan agreement or other agreement or
instrument to which the Company is a party or by which the
Company is bound or to which any of the property or assets of
the Company is subject; and
(iii) The Company is not in violation of its
Certificate of Incorporation or By-laws.
(e) On the date of the Prospectus at a time prior to the
execution of this Agreement, at 9:30 a.m., New York City time, on the
effective date of any post-effective amendment to the Registration
Statement filed subsequent to the date of this Agreement and also at
each Time of Delivery, PricewaterhouseCoopers LLP shall have furnished
to you a letter or letters, dated the respective dates of delivery
thereof, in form and substance satisfactory to you, to the effect set
forth in Annex I hereto (the executed copy of the letter delivered
prior to the execution of this Agreement is attached as Annex I(a)
hereto and a draft of the form of letter to be delivered on the
effective date of any post-effective amendment to the Registration
Statement and as of each Time of Delivery is attached as Annex I(b)
hereto);
(f) (i) The Company shall have not sustained since the date of
the latest audited financial statements included in the Prospectus any
loss or interference with its business from fire, explosion, flood or
other calamity, whether or not covered by insurance, or from any labor
dispute or court or governmental action, order or decree, otherwise
than as set forth or contemplated in the Prospectus, and (ii) since the
respective dates as of which information is given in the Prospectus
there shall not have been any change in the capital stock or long-term
debt of the Company or any change, or any development involving a
prospective change, in or affecting the general affairs, management,
financial position, stockholders' equity or results of operations of
the Company, otherwise than as set forth or contemplated in the
Prospectus, the effect of which, in any such case described in clause
(i) or (ii), is in the judgment of the Representatives so material and
adverse as to make it impracticable or inadvisable to proceed
11
<PAGE> 12
with the public offering or the delivery of the Shares being delivered
at such Time of Delivery on the terms and in the manner contemplated in
the Prospectus;
(g) On or after the date hereof there shall not have occurred any
of the following: (i) a suspension or material limitation in trading in
securities generally on the New York Stock Exchange or on Nasdaq; (ii)
a suspension or material limitation in trading in the Company's
securities on Nasdaq; (iii) a general moratorium on commercial banking
activities declared by either Federal or New York State authorities; or
(iv) the outbreak or escalation of hostilities involving the United
States or the declaration by the United States of a national emergency
or war, if the effect of any such event specified in this clause (iv)
in the judgment of the Representatives makes it impracticable or
inadvisable to proceed with the public offering or the delivery of the
Shares being delivered at such Time of Delivery on the terms and in the
manner contemplated in the Prospectus;
(h) The Shares to be sold at such Time of Delivery shall have
been duly listed for quotation on Nasdaq;
(i) The Company shall have complied with the provisions of
Section 5(c) hereof with respect to the furnishing of prospectuses on
the New York Business Day next succeeding the date of this Agreement;
and
(j) The Company and Cabot Corporation shall have furnished or
caused to be furnished to you at such Time of Delivery certificates of
officers of the Company and Cabot Corporation satisfactory to you as to
the accuracy of the representations and warranties of the Company and
Cabot Corporation herein at and as of such Time of Delivery, as to the
performance by the Company and Cabot Corporation of all of their
respective obligations hereunder to be performed at or prior to such
Time of Delivery, as to the matters set forth in subsections (a) and
(e) of this Section and as to such other matters as you may reasonably
request.
8. (a) Each of the Company and Cabot Corporation, jointly and
severally, will indemnify and hold harmless each Underwriter against any losses,
claims, damages or liabilities, joint or several, to which such Underwriter may
become subject, under the Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are based
upon an untrue statement or alleged untrue statement of a material fact
contained in any Preliminary Prospectus, the Registration Statement or the
Prospectus, or any amendment or supplement thereto, or arise out of or are based
upon the omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not misleading,
and will reimburse each Underwriter for any legal or other expenses reasonably
incurred by such Underwriter in connection with investigating or defending any
such action or claim as such expenses are incurred; provided, however, that
neither the Company nor Cabot Corporation shall be liable in any such case to
the extent that any such loss, claim, damage or liability arises out of or is
based upon an untrue statement or alleged untrue statement or omission or
alleged omission made in any Preliminary Prospectus, the Registration Statement
or the Prospectus or any such amendment or supplement in reliance upon and in
conformity with written information furnished to the Company by any Underwriter
through Goldman, Sachs & Co. expressly for use therein.
(b) Each Underwriter will indemnify and hold harmless each of the
Company and Cabot Corporation against any losses, claims, damages or liabilities
to which it may become subject, under the Act or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise out
of or are based upon an untrue statement or alleged untrue statement of a
material fact contained in any Preliminary Prospectus, the Registration
Statement or the Prospectus, or any
12
<PAGE> 13
amendment or supplement thereto, or arise out of or are based upon the omission
or alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, in each case
to the extent, but only to the extent, that such untrue statement or alleged
untrue statement or omission or alleged omission was made in any Preliminary
Prospectus, the Registration Statement or the Prospectus or any such amendment
or supplement in reliance upon and in conformity with written information
furnished to the Company by such Underwriter through Goldman, Sachs & Co.
expressly for use therein; and will reimburse each of the Company and Cabot
Corporation for any legal or other expenses reasonably incurred by it in
connection with investigating or defending any such action or claim as such
expenses are incurred.
(c) Promptly after receipt by an indemnified party under subsection (a)
or (b) above of notice of the commencement of any action, such indemnified party
shall, if a claim in respect thereof is to be made against the indemnifying
party under such subsection, notify the indemnifying party in writing of the
commencement thereof; but the omission so to notify the indemnifying party shall
not relieve it from any liability which it may have to any indemnified party
otherwise than under such subsection. In case any such action shall be brought
against any indemnified party and it shall notify the indemnifying party of the
commencement thereof, the indemnifying party shall be entitled to participate
therein and, to the extent that it shall wish, jointly with any other
indemnifying party similarly notified, to assume the defense thereof, with
counsel satisfactory to such indemnified party (who shall not, except with the
consent of the indemnified party, be counsel to the indemnifying party), and,
after notice from the indemnifying party to such indemnified party of its
election so to assume the defense thereof, the indemnifying party shall not be
liable to such indemnified party under such subsection for any legal expenses of
other counsel or any other expenses, in each case subsequently incurred by such
indemnified party, in connection with the defense thereof other than reasonable
costs of investigation. No indemnifying party shall, without the written consent
of the indemnified party, effect the settlement or compromise of, or consent to
the entry of any judgment with respect to, any pending or threatened action or
claim in respect of which indemnification or contribution may be sought
hereunder (whether or not the indemnified party is an actual or potential party
to such action or claim) unless such settlement, compromise or judgment (i)
includes an unconditional release of the indemnified party from all liability
arising out of such action or claim and (ii) does not include a statement as to
or an admission of fault, culpability or a failure to act, by or on behalf of
any indemnified party.
(d) If the indemnification provided for in this Section 8 is
unavailable to or insufficient to hold harmless an indemnified party under
subsection (a) or (b) above in respect of any losses, claims, damages or
liabilities (or actions in respect thereof) referred to therein, then each
indemnifying party shall contribute to the amount paid or payable by such
indemnified party as a result of such losses, claims, damages or liabilities (or
actions in respect thereof) in such proportion as is appropriate to reflect the
relative benefits received by, in the case of the Company or Cabot Corporation,
the Company on the one hand and by the Underwriters on the other from the
offering of the Shares. If, however, the allocation provided by the immediately
preceding sentence is not permitted by applicable law or if the indemnified
party failed to give the notice required under subsection (c) above, then each
indemnifying party shall contribute to such amount paid or payable by such
indemnified party in such proportion as is appropriate to reflect not only such
relative benefits but also the relative fault of the Company and Cabot
Corporation on the one hand and the Underwriters on the other in connection with
the statements or omissions which resulted in such losses, claims, damages or
liabilities (or actions in respect thereof), as well as any other relevant
equitable considerations. The relative benefits received by the Company on the
one hand and by the Underwriters on the other shall be deemed to be in the same
proportion as the total net proceeds from the offering (before deducting
13
<PAGE> 14
expenses but ignoring the Company's use of such proceeds) received by the
Company bear to the total underwriting discounts and commissions received by the
Underwriters, in each case as set forth in the table on the cover page of the
Prospectus. The relative fault shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by the Company or Cabot Corporation on the one hand or the Underwriters
on the other and the parties' relative intent, knowledge, access to information
and opportunity to correct or prevent such statement or omission. The Company,
Cabot Corporation and the Underwriters agree that it would not be just and
equitable if contributions pursuant to this subsection (d) were determined by
pro rata allocation (even if the Underwriters were treated as one entity for
such purpose) or by any other method of allocation which does not take account
of the equitable considerations referred to above in this subsection (d). The
amount paid or payable by an indemnified party as a result of the losses,
claims, damages or liabilities (or actions in respect thereof) referred to above
in this subsection (d) shall be deemed to include any legal or other expenses
reasonably incurred by such indemnified party in connection with investigating
or defending any such action or claim. Notwithstanding the provisions of this
subsection (d), no Underwriter shall be required to contribute any amount in
excess of the amount by which the total price at which the Shares underwritten
by it and distributed to the public were offered to the public exceeds the
amount of any damages which such Underwriter has otherwise been required to pay
by reason of such untrue or alleged untrue statement or omission or alleged
omission. No person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation. The Underwriters'
obligations in this subsection (d) to contribute are several in proportion to
their respective underwriting obligations and not joint.
(e) The obligations of the Company and Cabot Corporation under this
Section 8 shall be in addition to any liability which the Company and Cabot
Corporation may otherwise have and shall extend, upon the same terms and
conditions, to each person, if any, who controls any Underwriter within the
meaning of the Act; and the obligations of the Underwriters under this Section 8
shall be in addition to any liability which the respective Underwriters may
otherwise have and shall extend, upon the same terms and conditions, to each
officer and director of the Company or of Cabot Corporation and to each person,
if any, who controls the Company or Cabot Corporation within the meaning of the
Act.
9. (a) If any Underwriter shall default in its obligation to purchase
the Shares which it has agreed to purchase hereunder at a Time of Delivery, you
may in your discretion arrange for you or another party or other parties to
purchase such Shares on the terms contained herein. If within thirty-six hours
after such default by any Underwriter you do not arrange for the purchase of
such Shares, then the Company shall be entitled to a further period of
thirty-six hours within which to procure another party or other parties
satisfactory to you to purchase such Shares on such terms. In the event that,
within the respective prescribed periods, you notify the Company that you have
so arranged for the purchase of such Shares, or the Company notifies you that it
has so arranged for the purchase of such Shares, you or the Company shall have
the right to postpone such Time of Delivery for a period of not more than seven
days, in order to effect whatever changes may thereby be made necessary in the
Registration Statement or the Prospectus, or in any other documents or
arrangements, and the Company agrees to file promptly any amendments to the
Registration Statement or the Prospectus which in your opinion may thereby be
made necessary. The term "Underwriter" as used in this Agreement shall include
any person substituted under this Section with like effect as if such person had
originally been a party to this Agreement with respect to such Shares.
14
<PAGE> 15
(b) If, after giving effect to any arrangements for the purchase of the
Shares of a defaulting Underwriter or Underwriters by you and the Company as
provided in subsection (a) above, the aggregate number of such Shares which
remains unpurchased does not exceed one-eleventh of the aggregate number of all
the Shares to be purchased at such Time of Delivery, then the Company shall have
the right to require each non-defaulting Underwriter to purchase the number of
shares which such Underwriter agreed to purchase hereunder at such Time of
Delivery and, in addition, to require each non-defaulting Underwriter to
purchase its pro rata share (based on the number of Shares which such
Underwriter agreed to purchase hereunder) of the Shares of such defaulting
Underwriter or Underwriters for which such arrangements have not been made; but
nothing herein shall relieve a defaulting Underwriter from liability for its
default.
(c) If, after giving effect to any arrangements for the purchase of the
Shares of a defaulting Underwriter or Underwriters by you and the Company as
provided in subsection (a) above, the aggregate number of such Shares which
remains unpurchased exceeds one-eleventh of the aggregate number of all the
Shares to be purchased at such Time of Delivery, or if the Company shall not
exercise the right described in subsection (b) above to require non-defaulting
Underwriters to purchase Shares of a defaulting Underwriter or Underwriters,
then this Agreement (or, with respect to the Second Time of Delivery, the
obligations of the Underwriters to purchase and of the Company to sell the
Optional Shares) shall thereupon terminate, without liability on the part of any
non-defaulting Underwriter or the Company, except for the expenses to be borne
by the Company and the Underwriters as provided in Section 6 hereof and the
indemnity and contribution agreements in Section 8 hereof; but nothing herein
shall relieve a defaulting Underwriter from liability for its default.
10. The respective indemnities, agreements, representations, warranties
and other statements of the Company, Cabot Corporation and the several
Underwriters, as set forth in this Agreement or made by or on behalf of them,
respectively, pursuant to this Agreement, shall remain in full force and effect,
regardless of any investigation (or any statement as to the results thereof)
made by or on behalf of any Underwriter or any controlling person of any
Underwriter, or the Company, Cabot Corporation, or any officer or director or
controlling person of the Company or Cabot Corporation, and shall survive
delivery of and payment for the Shares.
11. If this Agreement shall be terminated pursuant to Section 9 hereof,
neither the Company nor Cabot Corporation shall then be under any liability to
any Underwriter except as provided in Sections 6 and 8 hereof; but, if for any
other reason, any Shares are not delivered by or on behalf of the Company as
provided herein, the Company will reimburse the Underwriters through you for all
out-of-pocket expenses approved in writing by you, including fees and
disbursements of counsel, reasonably incurred by the Underwriters in making
preparations for the purchase, sale and delivery of the Shares not so delivered,
but neither the Company nor Cabot Corporation shall then be under any further
liability to any Underwriter except as provided in Sections 6 and 8 hereof.
12. In all dealings hereunder, you shall act on behalf of each of the
Underwriters, and the parties hereto shall be entitled to act and rely upon any
statement, request, notice or agreement on behalf of any Underwriter made or
given by you jointly or by Goldman, Sachs & Co. on behalf of you as the
representatives.
All statements, requests, notices and agreements hereunder shall be in
writing, and if to the Underwriters shall be delivered or sent by mail, telex or
facsimile transmission to you as the representatives in care of Goldman, Sachs &
Co., 32 Old Slip, 21st Floor, New York, New York 10005, Attention: Registration
Department; and if to the Company shall be delivered or sent by mail to the
address of the Company set forth in the Registration Statement, Attention:
Secretary; provided, however, that any notice to an Underwriter pursuant to
Section 8(c) hereof shall be delivered or sent
15
<PAGE> 16
by mail, telex or facsimile transmission to such Underwriter at its address set
forth in its Underwriters' Questionnaire, or telex constituting such
Questionnaire, which address will be supplied to the Company by you upon
request. Any such statements, requests, notices or agreements shall take effect
upon receipt thereof.
13. This Agreement shall be binding upon, and inure solely to the
benefit of, the Underwriters, the Company, Cabot Corporation and, to the extent
provided in Sections 8 and 10 hereof, the officers and directors of the Company
and Cabot Corporation and each person who controls the Company, Cabot
Corporation or any Underwriter, and their respective heirs, executors,
administrators, successors and assigns, and no other person shall acquire or
have any right under or by virtue of this Agreement. No purchaser of any of the
Shares from any Underwriter shall be deemed a successor or assign by reason
merely of such purchase.
14. Time shall be of the essence of this Agreement. As used herein, the
term "business day" shall mean any day when the Commission's office in
Washington, D.C. is open for business.
15. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF NEW YORK.
16. This Agreement may be executed by any one or more of the parties
hereto in any number of counterparts, each of which shall be deemed to be an
original, but all such counterparts shall together constitute one and the same
instrument.
16
<PAGE> 17
If the foregoing is in accordance with your understanding, please sign
and return to us seven counterparts hereof, and upon the acceptance hereof by
you, on behalf of each of the Underwriters, this letter and such acceptance
hereof shall constitute a binding agreement between each of the Underwriters,
the Company and Cabot Corporation. It is understood that your acceptance of this
letter on behalf of each of the Underwriters is pursuant to the authority set
forth in a form of Agreement among Underwriters, the form of which shall be
submitted to the Company and Cabot Corporation for examination upon request, but
without warranty on your part as to the authority of the signers thereof.
Very truly yours,
CABOT MICROELECTRONICS CORPORATION
By: ....................................
Name:
Title:
CABOT CORPORATION
By: ....................................
Name:
Title:
Accepted as of the date hereof:
GOLDMAN, SACHS & CO.
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
FLEETBOSTON ROBERTSON STEPHENS INC.
By:.........................................
(Goldman, Sachs & Co.)
On behalf of each of the Underwriters
17
<PAGE> 18
SCHEDULE I
Fumed Metal Oxide Supply Agreement
Dispersion Services Agreement
Master Separation Agreement
Trademark License Agreement
Management Services Agreement
Confidential Disclosure and License Agreement
Initial Public Offering and Distribution Agreement
Tax Sharing Agreement
Registration Rights Agreement
Employee Matters Agreement
18
<PAGE> 19
SCHEDULE II
<TABLE>
<CAPTION>
NUMBER OF OPTIONAL
SHARES TO BE
TOTAL NUMBER OF PURCHASED IF
FIRM SHARES MAXIMUM OPTION
UNDERWRITER TO BE PURCHASED EXERCISED
----------- --------------- ---------
<S> <C> <C>
Goldman, Sachs & Co....................
Merrill Lynch, Pierce, Fenner & Smith
Incorporated........
FleetBoston Robertson Stephens Inc.....
Total.........................
</TABLE>
19
<PAGE> 20
ANNEX I
[To come from PricewaterhouseCoopers LLP]
20
<PAGE> 1
Exhibit 3.4
CABOT MICROELECTRONICS CORPORATION
CERTIFICATE OF DESIGNATION, PREFERENCES
AND RIGHTS OF SERIES A JUNIOR PARTICIPATING
PREFERRED STOCK
(Pursuant to Section 151
of the General Corporation Law of the State of Delaware)
We, Matthew Neville, the President and Chief Executive Officer, and
William C. McCarthy, Chief Financial Officer and Secretary of Cabot
Microelectronics Corporation, a corporation organized and existing under the
General Corporation Law of the State of Delaware (the "Corporation"), in
accordance with the provisions of Section 151 thereof, do hereby certify;
The Board of Directors, at a meeting held on March 24, 2000, adopted
the following resolution to create, upon the filing with the Secretary of State
of the State of Delaware, and the effectiveness of (the "Effective Time"), the
Corporation's Amended and Restated Certificate of Incorporation (the
"Certificate of Incorporation"), a series of fifty thousand (50,000) shares of
Preferred Stock designated as Series A Junior Participating Preferred Stock;
WHEREAS, the Certificate of Incorporation will provide that the
Corporation is authorized to issue 20,000,000 shares of Preferred Stock, none of
which are currently issued and outstanding, now therefore it is:
RESOLVED, that pursuant to the authority vested in the Board of
Directors of the Corporation by Article IV of the Certificate of Incorporation
(as defined below), a series of Preferred Stock of the Corporation shall, upon
the Effective Time, be created out of the authorized but unissued shares of the
capital stock of the Corporation, such series to be designated Series A Junior
Participating Preferred Stock (the "Participating Preferred Stock"), to consist
of 50,000 shares, par value $.001 per share, of which the preferences and
relative and other rights, and the qualifications, limitations or restrictions
thereof, shall be as follows:
1. Future Increase or Decrease. Subject to paragraph 4(e) of
this resolution, the number of shares of said series may at any time or from
time to time be increased or decreased by the Board of Directors notwithstanding
that shares of such series may be outstanding at such time of increase or
decrease.
2. Dividend Rate.
(a) The holders of shares of Participating Preferred
Stock shall be entitled to receive, when, as and if declared by the Board of
Directors out of funds legally
<PAGE> 2
available for the purpose, quarterly dividends payable in cash on the first day
of each January, April, July and October in each year (each such date being
referred to herein as a "Quarterly Dividend Payment Date"), commencing on the
first Quarterly Dividend Payment Date after the first issuance (the "First
Issuance") of a share or fraction of a share of Participating Preferred Stock,
in an amount per share (rounded to the nearest cent) equal to the greater of (i)
$10.00 and (ii) 1,000 times the aggregate per share amount of all cash dividends
and 1,000 times the aggregate per share amount (payable in kind) of all non-cash
dividends or other distributions, other than a dividend or distribution payable
in shares of Common Stock, par value $.001 per share, of the Corporation
("Common Stock") or by way of a subdivision of the outstanding shares of Common
Stock (by reclassification or otherwise), declared on the Common Stock, since
the immediately preceding Quarterly Dividend Payment Date, or, with respect to
the first Quarterly Dividend Payment Date, since the first issuance of any share
or fraction of a share of Participating Preferred Stock. In the event the
Corporation shall at any time after the First Issuance declare or pay any
dividend on the Common Stock payable in shares of Common Stock, or effect a
subdivision or combination or consolidation of the outstanding shares of Common
Stock (by reclassification or otherwise than by payment of a dividend in shares
of Common Stock) into a greater or lesser number of shares of Common Stock, then
in each such case the amount to which holders of shares of Participating
Preferred Stock were entitled immediately prior to such event under the
preceding sentence shall be adjusted by multiplying such amount by a fraction,
the numerator of which is the number of shares of Common Stock outstanding
immediately after such event and the denominator of which is the number of
shares of Common Stock that were outstanding immediately prior to such event.
(b) On or after the First Issuance, no dividend on
Common Stock shall be declared unless
concurrently therewith a dividend or distribution is declared on the
Participating Preferred Stock as provided in paragraph (a) above; and the
declaration of any such dividend on the Common Stock shall be expressly
conditioned upon payment or declaration of and provision for a dividend on the
Participating Preferred Stock as above provided. In the event no dividend or
distribution shall have been declared on the Common Stock during the period
between any Quarterly Dividend Payment Date and the next subsequent Quarterly
Dividend Payment Date, a dividend of $10.00 per share on the Participating
Preferred Stock shall nevertheless be payable on such subsequent Quarterly
Dividend Payment Date.
(c) Whenever quarterly dividends or other dividends
payable on the Participating Preferred
Stock as provided in paragraph (a) above are in arrears, thereafter and until
all accrued and unpaid dividends and distributions, whether or not declared, on
shares of Participating Preferred Stock outstanding shall have been paid in
full, the Corporation shall not redeem or purchase or otherwise acquire for
consideration shares of any stock ranking junior (either as to dividends or upon
liquidation, dissolution or winding up) to the Participating Preferred Stock,
provided that the Corporation may at
<PAGE> 3
any time redeem, purchase or otherwise acquire shares of any such junior stock
in exchange for shares of any stock of the Corporation ranking junior (as to
dividends and upon dissolution, liquidation or winding up) to the Participating
Preferred Stock.
(d) Dividends shall begin to accrue and be cumulative
on outstanding shares of Participating Preferred Stock from the Quarterly
Dividend Payment Date next preceding the date of issue of such shares of
Participating Preferred Stock, unless the date of issue of such shares is prior
to the record date for the first Quarterly Dividend Payment Date, in which case
dividends on such shares shall begin to accrue from the date of issue of such
shares, or unless the date of issue is a Quarterly Dividend Payment Date or is a
date after the record date for the determination of holders of shares of
Participating Preferred Stock entitled to receive a quarterly dividend and
before such Quarterly Dividend Payment Date, in either of which events such
dividends shall begin to accrue and be cumulative from such Quarterly Dividend
Payment Date. Accrued but unpaid dividends shall not bear interest. The Board of
Directors may fix a record date for the determination of holders of shares of
Participating Preferred Stock entitled to receive payment of a dividend
distribution declared thereon, which record date shall be no more than 30 days
prior to the date fixed for the payment thereof.
3. Dissolution, Liquidation and Winding Up. In the event of any
voluntary or involuntary dissolution, liquidation or winding up of the affairs
of the Corporation (hereinafter referred to as a "Liquidation"), the holders of
Participating Preferred Stock shall be entitled to receive the greater of (a)
$10.00 per share, plus an amount equal to accrued and unpaid dividends and
distributions thereon, whether or not declared, to the date of such payment and
(b) the aggregate amount per share equal to 1,000 times the aggregate amount to
be distributed per share to holders of Common Stock (the "Participating
Preferred Liquidation Preference"). In the event the Corporation shall at any
time after the First Issuance declare or pay any dividend on the Common Stock
payable in shares of Common Stock, or effect a subdivision or combination or
consolidation of the outstanding shares of Common Stock (by reclassification or
otherwise than by payment of a dividend in shares of Common Stock) into a
greater or lesser number of shares of Common Stock, then in each such case the
aggregate amount to which holders of shares of Participating Preferred Stock
were entitled immediately prior to such event under the preceding sentence shall
be adjusted by multiplying such amount by a fraction the numerator of which is
the number of shares of Common Stock outstanding immediately after such event
and the denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
4. Voting Rights. The holders of shares of Participating Preferred
Stock shall have the following voting rights:
(a) Each share of Participating Preferred Stock shall
entitle the holder thereof to one thousand (1,000) votes on all matters
submitted to a vote of the stockholders of the Corporation. In the event the
Corporation shall at any time after the
<PAGE> 4
First Issuance declare or pay any dividend on the Common Stock payable in shares
of Common Stock, or effect a subdivision or combination or consolidation of the
outstanding shares of Common Stock (by reclassification or otherwise than by
payment of a dividend in shares of Common Stock) into a greater or lesser number
of shares of Common Stock, then in each such case the aggregate number of votes
to which holders of shares of Participating Preferred Stock were entitled
immediately prior to such event under the preceding sentence shall be adjusted
by multiplying such number by a fraction the numerator of which is the number of
shares of Common Stock outstanding immediately after such event and the
denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
(b) Except as otherwise provided herein, or by law,
the Corporation's Restated Certificate
of Incorporation ("Certificate of Incorporation") or the Bylaws of the
Corporation (the "Bylaws"), the holders of shares of Participating Preferred
Stock and the holders of shares of Common Stock shall vote together as one class
on all matters submitted to a vote of stockholders of the Corporation.
(c) If and whenever dividends on the Participating
Preferred Stock shall be in arrears in an amount equal to six quarterly dividend
payments, then and in such event the holders of the Participating Preferred
Stock, voting separately as a class (subject to the provisions of subparagraph
(d) below), shall be entitled at the next annual meeting of the stockholders or
at any special meeting to elect two (2) directors. Each share of Participating
Preferred Stock shall be entitled to one vote, and holders of fractional shares
shall have the right to a fractional vote. Upon election, such directors shall
become additional directors of the Corporation and the authorized number of
directors of the Corporation shall thereupon be automatically increased by such
number of directors. Such right of the holders of Participating Preferred Stock
to elect directors may be exercised until all dividends in default on the
Participating Preferred Stock shall have been paid in full, and when so paid and
set apart, the right of the holders of Participating Preferred Stock to elect
such number of directors shall cease, the term of such directors shall thereupon
terminate, and the authorized number of directors of the Corporation shall
thereupon return to the number of authorized directors otherwise in effect, but
subject always to the same provisions for the vesting of such special voting
rights in the case of any such future dividend default or defaults. The fact
that dividends have been paid and set apart as required by the preceding
sentence shall be evidenced by a certificate executed by the President and the
Chief Financial Officer of the Corporation and delivered to the Board of
Directors. The directors so elected by holders of Participating Preferred Stock
shall serve until the certificate described in the preceding sentence shall have
been delivered to the Board of Directors or until their respective successors
shall be elected or appointed and qualify.
At any time when such special voting rights have been so vested in the
holders of the Participating Preferred Stock, the Secretary of the Corporation
may, and upon the
<PAGE> 5
written request of the holders of record of 10% or more of the number of shares
of the Participating Preferred Stock then outstanding addressed to such
Secretary at the principal office of the Corporation in the State of Illinois,
shall call a special meeting of the holders of the Participating Preferred Stock
for the election of the directors to be elected by them as hereinabove provided,
to be held in the case of such written request within forty (40) days after
delivery of such request, and in either case to be held at the place and upon
the notice provided by law and in the Bylaws of the Corporation for the holding
of meetings of stockholders; provided, however, that the Secretary shall not be
required to call such a special meeting (i) if any such request is received less
than ninety (90) days before the date fixed for the next ensuing annual or
special meeting of stockholders or (ii) if at the time any such request is
received, the holders of Participating Preferred Stock are not entitled to elect
such directors by reason of the occurrence of an event specified in the third
sentence of subparagraph (d) below.
(d) If, at any time when the holders of Participating
Preferred Stock are entitled to elect directors pursuant to the foregoing
provisions of this paragraph 4, the holders of any one or more additional series
of Preferred Stock are entitled to elect directors by reason of any default or
event specified in the Certificate of Incorporation, as in effect at the time of
the certificate of designation for such series, and if the terms for such other
additional series so permit, the voting rights of the two or more series then
entitled to vote shall be combined (with each series having a number of votes
proportional to the aggregate liquidation preference of its outstanding shares).
In such case, the holders of Participating Preferred Stock and of all such other
series then entitled so to vote, voting as a class, shall elect such directors.
If the holders of any such other series (if designated) have elected such
directors prior to the happening of the default or event permitting the holders
of Participating Preferred Stock to elect directors, or prior to a written
request for the holding of a special meeting being received by the Secretary of
the Corporation from the holders of not less than 10% of the then outstanding
shares of Participating Preferred Stock, then such directors so previously
elected will be deemed to have been elected by and on behalf of the holders of
Participating Preferred Stock as well as such other series, without prejudice to
the right of the holders of Participating Preferred Stock to vote for directors
if such previously elected directors shall resign, cease to serve or fail to
stand for reelection while the holders of Participating Preferred Stock are
entitled to vote. If the holders of any such other series are entitled to elect
in excess of two (2) directors, the Participating Preferred Stock shall not
participate in the election of more than two (2) such directors, and those
directors whose terms first expire shall be deemed to be the directors elected
by the holders of Participating Preferred Stock; provided that, if at the
expiration of such terms the holders of Participating Preferred Stock are
entitled to vote in the election of directors pursuant to the provisions of this
paragraph 4, then the Secretary of the Corporation shall call a meeting (which
meeting may be the annual meeting or special meeting of stockholders referred to
in subparagraph (c)) of holders of Participating Preferred Stock for the purpose
of electing replacement directors (in accordance with the provisions of this
paragraph 4) to be held on or prior to the time of
<PAGE> 6
expiration of the expiring terms referred to above.
(e) Except as otherwise set forth herein or required by
law, the Certificate of Incorporation or the Bylaws, holders of Participating
Preferred Stock shall have no special voting rights and their consent shall not
be required (except to the extent they are entitled to vote with holders of
Common Stock as set forth herein) for the taking of any corporate action. No
consent of the holders of outstanding shares of Participating Preferred Stock at
any time outstanding shall be required in order to permit the Board of Directors
to: (i) increase the number of authorized shares of Participating Preferred
Stock or to decrease such number to a number not below the sum of the number of
shares of Participating Preferred Stock then outstanding and the number of
shares with respect to which there are outstanding rights to purchase; or (ii)
issue Preferred Stock which is senior to the Participating Preferred Stock,
junior to the Participating Preferred Stock or on a parity with the
Participating Preferred Stock.
5. Consolidation, Merger, etc. In case the Corporation shall
enter into any consolidation, merger, combination or other transaction in which
the shares of Common Stock are exchanged for or changed into other stock or
securities, cash and/or any other property, then in any such case each share of
Participating Preferred Stock shall at the same time be similarly exchanged or
changed into an amount per share, subject to the provision for adjustment
hereinafter set forth, equal to 1,000 times the aggregate amount of stock,
securities, cash and/or any other property (payable in kind), as the case may
be, into which or for which each share of Common Stock is changed or exchanged.
In the event the Corporation shall at any time after the First Issuance declare
or pay any dividend on the Common Stock payable in shares of Common Stock, or
effect a subdivision or combination or consolidation of the outstanding shares
of Common Stock (by reclassification or otherwise than by payment of a dividend
in shares of Common Stock) into a greater or lesser number of shares of Common
Stock, then in each such case the amount set forth in the preceding sentence
with respect to the exchange or change of shares of Participating Preferred
Stock shall be adjusted by multiplying such amount by a fraction, the numerator
of which is the number of shares of Common Stock outstanding immediately after
such event and the denominator of which is the number of shares of Common Stock
that were outstanding immediately prior to such event.
6. Redemption. The shares of Participating Preferred Stock
shall not be redeemable.
7. Conversion Rights. The Participating Preferred Stock is not
convertible into Common Stock or any other security of the Corporation.
8. Ranking. The Participating Preferred Stock shall rank
junior to all other classes and series of the Corporation's Preferred Stock as
to payment of dividends and the distribution of assets, unless the terms of any
such series shall provide otherwise.
<PAGE> 7
IN WITNESS WHEREOF, the undersigned President and Chief Executive Officer and
Secretary and General Counsel of the Corporation each declares under penalty of
perjury the truth, to the best of his knowledge, of this Certificate of
Designation, Preferences and Rights of Series B Junior Participating Preferred
Stock.
Executed this 29th day of March, 2000.
By: -------------------------
Name: Matthew Neville
Title: President and
Chief Executive Officer
Attest:
- ------------------------
Name: William C. McCarthy
Title:Chief Financial Officer, Secretary
STATE OF ILLINOIS )
) ss.:
COUNTY OF ________ )
This instrument was acknowledged before me on March 29, 2000, by
Matthew Neville, as President and Chief Executive Officer of Cabot
Microelectronics Corporation and by William C. McCarthy, as Chief Financial
Officer and Secretary of Cabot Microelectronics Corporation They are personally
known to me and did not take an oath.
-------------------------------------
Name: -------------------------------
Notary Public - State of Illinois
My Commission Expires:
<PAGE> 1
Exhibit 4.1
[Form of common stock certificate of Cabot Microelectronics Corporation]
[CABOT MICROELECTRONICS LOGO]
Incorporated Under the Laws of the State of Delaware
COMMON STOCK
NUMBER SHARES
THIS CERTIFICATE IS TRANSFERABLE SEE REVERSE FOR
IN BOSTON, MA OR NEW YORK, NY CERTAIN DEFINITIONS
CUSIP 12709P 10 3
THIS CERTIFIES THAT
is the owner of
FULLY PAID AND NONASSESSABLE SHARES OF COMMON STOCK, $.001 PAR VALUE, OF
CABOT MICROELECTRONICS CORPORATION
transferable in person or by duly authorized attorney upon surrender of this
Certificate properly endorsed. The shares represented hereby are issued and
held subject to the laws of the State of Delaware and to the provisions of the
Certificate of Incorporation and the By-Laws of the Corporation as now or
hereafter amended to which the holder of this Certificate asserts by its
acceptance.
This Certificate is not valid until countersigned by the Transfer Agent
and registered by the Registrar.
Witness the facsimile seal of the Corporation and the facsimile signatures
of its duly authorized officers.
Dated:
/s/ William C. McCarthy Cabot Microelectronics /s/ Matthew Neville
VICE PRESIDENT AND Corporation PRESIDENT AND
CHIEF FINANCIAL OFFICER Corporate Seal CHIEF EXECUTIVE OFFICER
1999
Delaware
Countersigned and Registered
EquiServe Trust Company, N.A.
Transfer Agent and Registrar
by [signature]
Authorized Signature
<PAGE> 2
CABOT MICROELECTRONICS CORPORATION
The corporation will furnish without charge to each stockholder who so
requests the powers, designations, preferences and relative, participating,
optional or other special rights of each class of stock or series thereof and
the qualifications, limitations or restrictions of such preferences and/or
rights.
The following abbreviations, when used in the inscription on the face of
this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
<TABLE>
<CAPTION>
<S> <C> <C>
TEN COM -as tenants in common UNIF GIFT MIN ACT- Custodian
TEN ENT -as tenants by the entireties --------- --------
JT TEN -as joint tenants with right of (Cust) (Minor)
survivorship and not as tenants under Uniform Gifts to Minors
in common Act
-----------------------
(State)
UNIP TRF MIN ACT- Custodian (until age )
--------- --------
(Cust) (Minor)
under Uniform Transfers
----------
(Minor)
to Minors Act
-----------
(State)
</TABLE>
Additional abbreviations may also be used though not in the above list.
FOR VALUE RECEIVED, HEREBY SELL, ASSIGN AND TRANSFER UNTO
-----------------
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
- ----------------------------------
[ ]
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE, OF ASSIGNEE)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SHARES
- --------------------------------------------------------------------------
OF THE CAPITAL STOCK REPRESENTED BY THE WITHIN CERTIFICATE, AND DO HEREBY
IRREVOCABLY CONSTITUTE AND APPOINT
ATTORNEY
- ------------------------------------------------------------------------
TO TRANSFER THE SAID STOCK ON THE BOOKS OF THE WITHIN-NAMED CORPORATION
WITH FULL POWER OF SUBSTITUTION IN THE PREMISES.
DATED
------------------
X
------------------------------------------------------------
NOTICE: THE SIGNATURE TO THE ASSIGNMENT MUST CORRESPOND WITH THE
NAME AS WRITTEN UPON THE FACE OF THE CERTIFICATE IN EVERY
PARTICULAR, WITHOUT ALTERATION OR ENLARGEMENT OR ANY CHANGE
WHATEVER.
Signature(s) Guaranteed:
--------------------------------------------------
THE SIGNATURE(S) SHOULD BE GUARANTEED BY AN ELIGIBLE
GUARANTOR INSTITUTION (BANK, STOCKS/OPTIONS, SAVINGS
AND LOAN ASSOCIATION AND CREDIT UNIONS WITH MEMBERSHIP
IN AN APPROVED SIGNATURE GUARANTEE MEDALLION PROGRAM),
PURSUANT TO S.E.C. RULE 17AD-15.
This certificate also evidences and entitles the holder hereof to certain
rights as set forth in a Rights Agreement between Cabot Microelectronics
Corporation and BankBoston, N.A., dated as of March 24, 2000 (the "Rights
Agreement"), the terms of which are hereby incorporated herein by reference and
a copy of which is on file at the principal executive offices of Cabot
Microelectronics Corporation. Under certain circumstances, as set forth in the
Rights Agreement, such Rights will be evidenced by separate certificates and
will no longer be evidenced by this certificate. Cabot Microelectronics
Corporation will mail to the holder of the certificate a copy of the Rights
Agreement without charge after receipt of a written request therefor. Under
certain circumstances set forth in the Rights Agreement, Rights issued to, or
held by, any Person who is, was or becomes an Acquiring Person or an Affiliate
or Associate thereof (as defined in the Rights Agreement) and certain related
persons, whether currently held by or on behalf of such Person or by any
subsequent holder, may become null and void.
<PAGE> 1
Exhibit 4.2
CABOT MICROELECTRONICS CORPORATION
and
EQUISERVE TRUST COMPANY, N.A.,
Rights Agent
RIGHTS AGREEMENT
Dated as of March 24, 2000
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C> <C>
Section 1. Certain Definitions ............................................... 1
Section 2. Appointment of Rights Agent ....................................... 5
Section 3. Issuance of Right Certificates .................................... 5
Section 4. Form of Right Certificate ......................................... 7
Section 5. Countersignature and Registration ................................. 8
Section 6. Transfer, Split-Up, Combination and Exchange of Right
Certificates; Mutilated, Destroyed, Lost or Stolen
Right Certificate ................................................. 9
Section 7. Exercise of Rights; Purchase Price; Expiration Date of Rights...... 10
Section 8. Cancellation and Destruction of Right Certificates ................ 12
Section 9. Reservation and Availability of Preferred Shares .................. 13
Section 10. Preferred Shares Record Date ..................................... 14
Section 11. Adjustment of Purchase Price, Number and Kind of Shares or
Number of Rights ................................................. 14
Section 12. Certificate of Adjusted Purchase Price or Number of Shares........ 22
Section 13. Consolidation, Merger or Sale or Transfer of Assets or
Earning Power .................................................... 23
Section 14. Fractional Rights and Fractional Shares .......................... 25
Section 15. Rights of Action ................................................. 27
Section 16. Agreement of Right Holders ....................................... 27
Section 17. Right Certificate Holder Not Deemed a Stockholder ................ 28
</TABLE>
-i-
<PAGE> 3
<TABLE>
<CAPTION>
<S> <C> <C>
Section 18. Concerning the Rights Agent ..................................... 29
Section 19. Merger or Consolidation or Change of Name of Rights Agent........ 29
Section 20. Duties of Rights Agent .......................................... 30
Section 21. Change of Rights Agent .......................................... 33
Section 22. Issuance of New Right Certificates .............................. 34
Section 23. Redemption and Termination ...................................... 34
Section 24. Exchange ........................................................ 36
Section 25. Notice of Certain Events ........................................ 37
Section 26. Notices ......................................................... 38
Section 27. Supplements and Amendments ...................................... 38
Section 28. Determination and Actions by the Board of Directors, etc ........ 39
Section 29. Successors ...................................................... 40
Section 30. Benefits of this Agreement ...................................... 40
Section 31. Severability .................................................... 40
Section 32. Governing Law ................................................... 40
Section 33. Counterparts .................................................... 41
Section 34. Descriptive Headings ............................................ 41
Signatures ................................................................... 42
</TABLE>
Exhibit A - Certificate of Designation, Preferences and Rights of Series A
Junior Participating Preferred Stock of Cabot Microelectronics
Corporation
Exhibit B - Form of Right Certificate
Exhibit C - Summary of Rights to Purchase Preferred Shares
<PAGE> 4
Defined Term Cross Reference Sheet
<TABLE>
<CAPTION>
Term Location
<S> <C>
Acquiring Person Section 1(a)
Act Section 1(b)
Adjustment Shares Section 11(a)(ii)
Adjusted Number of Shares Section 11(a)(iii)
Adjusted Purchase Price Section 11(a)(iii)
Affiliate Section 1(c)
Agreement Preface
Associate Section 1(c)
Beneficial Owner Section 1(d)
Beneficially Own Section 1(d)
Business Day Section 1(e)
Capital Stock Equivalent Section 11(a)(iii)
Close of Business Section 1(f)
Common Shares Section 1(g)
Corporation Preface
Current Per Share Market Price Section 11(d)(i)
</TABLE>
-iii-
<PAGE> 5
<TABLE>
<CAPTION>
<S> <C>
Distribution Date Section 3(a)
Documents Section 18
Equivalent Preferred Shares Section 11(b)
Exchange Act Section 1(c)
Exchange Ratio Section 24(a)
Final Expiration Date Section 7(a)
Interested Stockholder Section 1(j)
NASDAQ Section 11(d)(i)
Permitted Offer Section 1(k)
Person Section 1(l)
Preferred Shares Section 1(m)
Principal Party Section 13(b)
Proration Factor Section 11(a)(iii)
Purchase Price Section 4(a)
Record Date Preface
Redemption Date Section 7(a)
Redemption Price Section 23(a)(i)
Right Preface
Right Certificate Section 3(a)
Rights Agent Preface
</TABLE>
-iv-
<PAGE> 6
<TABLE>
<CAPTION>
<S> <C>
Rights Agreement Section 3(c)
Section 11(a)(ii) Event Section 1(o)
Section 13 Event Section 13(a)
Security Section 11(d)(i)
Shares Acquisition Date Section 1(q)
Subsidiary Section 1(r)
Summary of Rights Section 3(b)
Then Outstanding Section 1(d)(iii)
Trading Day Section 11(d)(i)
Triggering Event Section 1(s)
Voting Securities Section 13(a)
</TABLE>
-v-
<PAGE> 7
RIGHTS AGREEMENT
RIGHTS AGREEMENT, dated as of March 24, 2000 (this "Agreement"),
between Cabot Microelectronics Corporation, a Delaware corporation (the
"Corporation"), and EquiServe Trust Company, N.A., a national banking
association (the "Rights Agent").
The Board of Directors of the Corporation has authorized and declared a
dividend of one preferred share purchase right (a "Right") for each Common Share
(as hereinafter defined) of the Corporation outstanding at the Close of Business
on April 7, 2000 (the "Record Date"), each Right representing the right to
purchase one one-thousandth of a Preferred Share (as hereinafter defined), upon
the terms and subject to the conditions herein set forth, and has further
authorized and directed the issuance of one Right with respect to each Common
Share that shall become outstanding between the Record Date and the earliest of
the Distribution Date, the Redemption Date or the Final Expiration Date (as such
terms are hereinafter defined); provided, however, that Rights may be issued
with respect to Common Shares that shall become outstanding after the
Distribution Date and prior to the earlier of the Redemption Date and the Final
Expiration Date in accordance with the provisions of Section 22 of this
Agreement.
Accordingly, in consideration of the premises and the mutual agreements
herein set forth, the parties hereby agree as follows:
Section 1. Certain Definitions.
For purposes of this Agreement, the following terms have the meanings
indicated:
(a) "Acquiring Person" shall mean any Person who or which,
together with all Affiliates and Associates of such Person, shall be the
Beneficial Owner of 15% or more of the then outstanding Common Shares (other
than as a result of a Permitted Offer (as hereinafter defined)) or was such a
Beneficial Owner at any time after the date hereof, whether or not such person
continues to be the Beneficial Owner of 15% or more of the then outstanding
Common Shares. Notwithstanding the foregoing, (A) the term "Acquiring Person"
shall not include (i) the Corporation, (ii) any Subsidiary of the Corporation,
(iii) any employee benefit plan of the Corporation or of any Subsidiary of the
Corporation, (iv) any Person or entity organized, appointed or established by
the Corporation for or pursuant to the terms of any such plan, (v) any Person,
who or which together with all Affiliates and Associates of such Person becomes
the Beneficial Owner of 15% or more of the then outstanding Common Shares as a
result of the acquisition of Common Shares directly from the Corporation or (vi)
any Grandfathered Person, and (B) no Person shall be deemed to be an "Acquiring
Person" either (X) as a result of the acquisition of Common Shares by the
Corporation which, by reducing the number of Common Shares outstanding,
increases the proportional number of shares beneficially
1
<PAGE> 8
owned by such Person together with all Affiliates and Associates of such Person;
except that if (i) a Person would become an Acquiring Person (but for the
operation of this subclause X) as a result of the acquisition of Common Shares
by the Corporation, and (ii) after such share acquisition by the Corporation,
such Person, or an Affiliate or Associate of such Person, becomes the Beneficial
Owner of any additional Common Shares, then such Person shall be deemed an
Acquiring Person, or (Y) if such Person became an Acquiring Person
inadvertently, (i) promptly after such Person discovers that such Person would
otherwise have become an Acquiring Person (but for the operation of this
subclause Y), such Person notifies the Board of Directors that such Person did
so inadvertently and (ii) within 2 days after such notification, such Person is
the Beneficial Owner of less than 15% of the outstanding Common Shares.
(b) "Act" shall mean the Securities Act of 1933, as amended
and as in effect on the date of this Agreement.
(c) "Affiliate" and "Associate" shall have the respective
meanings ascribed to such terms in Rule 12b-2 of the General Rules and
Regulations under the Securities Exchange Act of 1934, as amended and in effect
on the date of this Agreement (the "Exchange Act").
(d) A Person shall be deemed the "Beneficial Owner" of and
shall be deemed to "Beneficially Own" any securities:
(i) which such Person or any of such Person's
Affiliates or Associates beneficially owns, directly or indirectly;
(ii) which such Person or any of such Person's
Affiliates or Associates has (A) the right to acquire (whether such right is
exercisable immediately or only after the passage of time) pursuant to any
agreement, arrangement or understanding, or upon the exercise of conversion
rights, exchange rights, rights (other than the Rights), warrants or options, or
otherwise; provided, however, that a Person shall not be deemed the Beneficial
Owner of, or to Beneficially Own, securities tendered pursuant to a tender or
exchange offer made by or on behalf of such Person or any of such Person's
Affiliates or Associates until such tendered securities are accepted for
purchase or exchange; or (B) the right to vote pursuant to any agreement,
arrangement or understanding; provided, however, that a Person shall not be
deemed the Beneficial Owner of, or to Beneficially Own, any security if the
agreement, arrangement or understanding to vote such security (1) arises solely
from a revocable proxy or consent given to such Person in response to a public
proxy or consent solicitation made pursuant to, and in accordance with, the
applicable rules and regulations promulgated under the Exchange Act and (2) is
not also then reportable on Schedule 13D under the Exchange Act (or any
comparable or successor report); or
2
<PAGE> 9
(iii) which are beneficially owned, directly or
indirectly, by any other Person (or any Affiliate or Associate thereof) with
which such Person (or any of such Person's Affiliates or Associates) has any
agreement, arrangement or understanding (other than customary agreements with
and between underwriters and selling group members with respect to a bona fide
public offering of securities) relating to the acquisition, holding, voting
(except to the extent contemplated by the proviso to Section 1(d)(ii)(B)) or
disposing of any securities of the Corporation.
Notwithstanding anything in this definition of Beneficial Ownership to
the contrary, the phrase "then outstanding," when used with reference to a
Person's Beneficial Ownership of securities of the Corporation, shall mean the
number of such securities then issued and outstanding together with the number
of such securities not then actually issued and outstanding which such Person
would be deemed to own beneficially hereunder.
(e) "Business Day" shall mean any day other than a Saturday,
Sunday or U.S. federal holiday.
(f) "Close of Business" on any given date shall mean 5:00
P.M., New York City, New York time, on such date; provided, however, that if
such date is not a Business Day it shall mean 5:00 P.M., New York City, New York
time, on the next succeeding Business Day.
(g) "Common Shares" when used with reference to the
Corporation shall mean the shares of Common Stock, par value $.001 per share, of
the Corporation or, in the event of a subdivision, combination or consolidation
with respect to such shares of Common Stock, the shares of Common Stock
resulting from such subdivision, combination or consolidation. "Common Shares"
when used with reference to any Person other than the Corporation shall mean the
capital stock (or equity interest) with the greatest voting power of such other
Person or, if such other Person is a Subsidiary of another Person, the Person or
Persons which ultimately control such first-mentioned Person.
(h) "Distribution Date" shall have the meaning set forth in
Section 3 hereof.
(i) "Final Expiration Date" shall have the meaning set forth
in Section 7 hereof.
(j) "Grandfathered Person" shall mean any of the following:
(i) Cabot Corporation and any Subsidiary of Cabot
Corporation so long as Cabot Corporation and all Subsidiaries
of Cabot Corporation own 50% or more of the total outstanding
equity securities of the Corporation;
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(ii) any descendant of Godfrey L. Cabot (the deceased
founder of the Corporation), or any spouse, widow or widower
of any such descendant (any such descendants, spouses, widows
and widowers collectively defined as the "Cabot Family
Members");
(iii) any trust (including any voting trust) which is
in existence on the date of this Agreement and which has been
established by Godfrey L. Cabot or one or more Cabot Family
Members, any estate of, or the executor or administrator of
any estate of, or any guardian or custodian for, a Cabot
Family Member who died on or before the date of this Agreement
(such trusts, estates, executors, administrators or guardians
or custodians collectively defined as the "Cabot Family
Entities");
(iv) any estate of, or the executor or administrator
of any estate of, or any guardian or custodian for, a Cabot
Family Member who dies after the date of this Agreement, or
any trust established after the date hereof by one or more
Cabot Family Members or Cabot Family Entities, provided that
one or more Cabot Family Members or Cabot Family Entities,
collectively, are the beneficiaries of at least 80% of the
actuarially-determined beneficial interests in such estate or
trust;
(v) any charitable organization which qualifies as an
exempt organization under Section 501(c) of the Internal
Revenue Code of 1986, as amended ("Charitable Organization")
which is established by one or more Cabot Family Members or
Cabot Family Entities (a "Cabot Family Charitable
Organization");
(vi) any corporation of which at least 80% of the
voting power and at least 80% of the equity interest is held,
directly or indirectly, by or for the benefit of one or more
Cabot Family Members, Cabot Family Entities, estates,
executors, administrators, guardians or custodians or trusts
described in clause (iv) above, or Cabot Family Charitable
Organizations; and
(vii) any general partnership, limited partnership,
organization or other entity or arrangement of which at least
80% of the voting interest and at least 80% of the economic
interest is held, directly or indirectly, by or for the
benefit of one or more Cabot Family Members, Cabot Family
Entities, estates, executors, administrators, guardians or
custodians, or trusts described in clause (iii) above, or
Cabot Family Charitable Organizations;
provided, however, that a Grandfathered Person shall cease to
be a
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Grandfathered Person at the time that all or any part of its
interest in the Common Shares becomes reportable on a Schedule
13D under the Exchange Act (or any comparable or successor
report) as part of a "group" (as such term is defined or used
under Rule 13d-5(b) of the General Rules and Regulations under
the Exchange Act) which beneficially owns, directly or
indirectly, 15% or more of the then outstanding Common Shares
and includes one or more Persons (including any Affiliate or
Associate thereof) who (i) are not Grandfathered Persons and
(ii) individually or in the aggregate beneficially own,
directly or indirectly, in excess of 1% of the then
outstanding Common Shares.
For purposes of the definition of Grandfathered Person, the
term "descendant" shall be deemed to include adopted children and the issue of
such adopted children, including adopted issue, provided that any such adoptee
is adopted before his or her eighteenth birthday.
(k) "Interested Stockholder" shall mean any Acquiring Person
or any Affiliate or Associate of an Acquiring Person or any other Person in
which any such Acquiring Person, Affiliate or Associate has an interest, or any
other Person acting directly or indirectly on behalf of or in concert with any
such Acquiring Person, Affiliate or Associate.
(l) "Permitted Offer" shall mean a tender or exchange offer
which is for all outstanding Common Shares at a price and on terms determined,
prior to the purchase of shares under such tender or exchange offer, by at least
a majority of the members of the Board of Directors who are not officers of the
Corporation and who are not Acquiring Persons or Persons who would become
Acquiring Persons as a result of the offer in question or Affiliates,
Associates, nominees or representatives of any such Person, to be adequate
(taking into account all factors that such Directors deem relevant including,
without limitation, prices that could reasonably be achieved if the Corporation
or its assets were sold on an orderly basis designed to realize maximum value)
and otherwise in the best interests of the Corporation and its stockholders
(other than the Person or any Affiliate or Associate thereof on whose behalf the
offer is being made) taking into account all factors that such directors may
deem relevant.
(m) "Person" shall mean any individual, firm, partnership,
corporation, limited liability company, trust, association, joint venture or
other entity, and shall include any successor (by merger or otherwise) of such
entity.
(n) "Preferred Shares" shall mean shares of Series A Junior
Participating Preferred Stock, par value $.001 per share, of the Corporation,
having the relative rights, preferences and limitations set forth in the
Certificate of Designation, Preferences and
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Rights attached to this Agreement as Exhibit A.
(o) "Redemption Date" shall have the meaning set forth in
Section 7 hereof.
(p) "Section 11(a)(ii) Event" shall mean any event described
in Section 11(a)(ii) hereof.
(q) "Section 13 Event" shall mean any event described in
clause (x), (y) or (z) of Section 13(a) hereof.
(r) "Shares Acquisition Date" shall mean the first date of
public announcement (which, for purposes of this definition, shall include,
without limitation, a report filed pursuant to the Exchange Act) by the
Corporation or an Acquiring Person that an Acquiring Person has become such;
provided, that, if such Person is determined not to have become an Acquiring
Person pursuant to Section 1(a)(B)(Y) hereof, then no Shares Acquisition Date
shall be deemed to have occurred.
(s) "Subsidiary" of any Person shall mean any corporation or
other Person of which a majority of the voting power of the voting equity
securities or equity interest is owned, directly or indirectly, by such Person.
(t) "Triggering Event" shall mean any Section 11(a)(ii) Event
or any Section 13 Event.
Section 2. Appointment of Rights Agent.
The Corporation hereby appoints the Rights Agent to act as agent for
the Corporation in accordance with the terms and conditions hereof, and the
Rights Agent hereby accepts such appointment. The Corporation may from time to
time appoint such co-Rights Agents as it may deem necessary or desirable upon
ten (10) days' prior written notice to the Rights Agent. The Rights Agent shall
have no duty to supervise, and shall in no event be liable for, the acts and
omissions of any such co-Rights Agent.
Section 3. Issuance of Right Certificates.
(a) Until the earlier of (i) the Shares Acquisition Date or
(ii) the Close of Business on the tenth day (or such later date as may be
determined by action of the Board of Directors of the Corporation) after the
date of the commencement by any Person (other than the Corporation, any
Subsidiary of the Corporation, any employee benefit plan of the
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<PAGE> 13
Corporation or of any Subsidiary of the Corporation or any Person or entity
organized, appointed or established by the Corporation for or pursuant to the
terms of any such plan) of, or of the first public announcement of the intention
of any Person (other than the Corporation, any Subsidiary of the Corporation,
any employee benefit plan of the Corporation or of any Subsidiary of the
Corporation or any Person or entity organized, appointed or established by the
Corporation for or pursuant to the terms of any such plan) to commence (which
intention to commence remains in effect for five Business Days after such
announcement), a tender or exchange offer the consummation of which would result
in any Person becoming an Acquiring Person (including, in the case of both (i)
and (ii), any such date which is after the date of this Agreement and prior to
the issuance of the Rights), the earlier of such dates being herein referred to
as the "Distribution Date," (x) the Rights will be evidenced (subject to the
provisions of Section 3(b) hereof) by the certificates for Common Shares
registered in the names of the holders thereof (which certificates shall also be
deemed to be Right Certificates) and not by separate Right Certificates, and (y)
the right to receive Right Certificates will be transferable only in connection
with the transfer of the underlying Common Shares (including a transfer to the
Corporation); provided, however, that if a tender or exchange offer is
terminated prior to the occurrence of a Distribution Date, then no Distribution
Date shall occur as a result of such tender or exchange offer. As soon as
practicable after the Distribution Date, the Corporation will prepare and
execute, the Rights Agent will countersign, and the Corporation will send or
cause to be sent by first- class, postage-prepaid mail, to each record holder of
Common Shares as of the Close of Business on the Distribution Date, at the
address of such holder shown on the records of the Corporation, a Right
Certificate, substantially in the form of Exhibit B hereto (a "Right
Certificate"), evidencing one Right for each Common Share so held. As of and
after the Distribution Date, the Rights will be evidenced solely by such Right
Certificates.
(b) As promptly as practicable following the Record Date, the
Corporation will send a copy of a Summary of Rights to Purchase Preferred
Shares, in substantially the form of Exhibit C hereto (the "Summary of Rights"),
by first-class, postage-prepaid mail, to each record holder of Common Shares as
of the Close of Business on the Record Date, at the address of such holder shown
on the records of the Corporation. With respect to certificates for Common
Shares outstanding as of the Record Date, until the Distribution Date, the
Rights will be evidenced by such certificates registered in the names of the
holders thereof together with a copy of the Summary of Rights attached thereto.
Until the Distribution Date (or the earlier of the Redemption Date or the Final
Expiration Date), the surrender for transfer of any certificate for Common
Shares outstanding on the Record Date, with or without a copy of the Summary of
Rights attached thereto, shall also constitute the transfer of the Rights
associated with such Common Shares. As a result of the execution of this
Agreement, on April 7, 2000, each share of Common Stock outstanding on such date
shall, subject to the terms and conditions of this Agreement, also represent one
Right and shall, subject to the terms and conditions of this Agreement,
represent the right to purchase one one-thousandth of a share of Preferred
Stock.
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<PAGE> 14
(c) Certificates for Common Shares which become outstanding
(including, without limitation, reacquired Common Shares referred to below in
this paragraph (c)) after the Record Date but prior to the earliest of the
Distribution Date, the Redemption Date or the Final Expiration Date, shall be
deemed also to be certificates for Rights, and shall bear the following legend:
"This certificate also evidences and entitles the holder hereof to
certain rights as set forth in a Rights Agreement between Cabot
Microelectronics Corporation and EquiServe Trust Company, N.A., dated as
of March 24, 2000 (the "Rights Agreement"), the terms of which are
hereby incorporated herein by reference and a copy of which is on file
at the principal executive offices of Cabot Microelectronics Corporation
Under certain circumstances, as set forth in the Rights Agreement, such
Rights will be evidenced by separate certificates and will no longer be
evidenced by this certificate. Cabot Microelectronics Corporation will
mail to the holder of this certificate a copy of the Rights Agreement
without charge after receipt of a written request therefor. Under
certain circumstances set forth in the Rights Agreement, Rights issued
to, or held by, any Person who is, was or becomes an Acquiring Person or
an Affiliate or Associate thereof (as defined in the Rights Agreement)
and certain related persons, whether currently held by or on behalf of
such Person or by any subsequent holder, may become null and void."
With respect to such certificates containing the foregoing legend, until the
Distribution Date, the Rights associated with the Common Shares represented by
such certificates shall be evidenced by such certificates alone, and the
surrender for transfer of any such certificate shall also constitute the
transfer of the Rights associated with the Common Shares represented thereby. In
the event that the Corporation purchases or acquires any Common Shares after the
Record Date but prior to the Distribution Date, any Rights associated with such
Common Shares shall be deemed canceled and retired so that the Corporation shall
not be entitled to exercise any Rights associated with the Common Shares which
are no longer outstanding. The failure to print the foregoing legend on any such
Common Shares certificate or any other defect therein shall not affect in any
manner whatsoever the application or interpretation of the provisions of Section
7(e) hereof.
Section 4. Form of Right Certificate.
(a) The Right Certificates (and the forms of election to
purchase and of assignment to be printed on the reverse thereof) shall be
substantially in the form set forth in Exhibit B hereto and may have such marks
of identification or designation and such legends, summaries or endorsements
printed thereon as the Corporation may deem appropriate (which do not affect the
duties or responsibilities of the Rights Agent) and as are not inconsistent with
the provisions of this Agreement, or as may be required to comply with any
applicable law or with any rule or regulation made pursuant thereto or
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<PAGE> 15
with any rule or regulation of any stock exchange on which the Rights may from
time to time be listed, or to conform to usage. Subject to the provisions of
Section 11 and Section 22 hereof, the Right Certificates shall entitle the
holders thereof to purchase such number of one one-thousandths of a Preferred
Share as shall be set forth therein at the price per one one-thousandth of a
Preferred Share set forth therein (the "Purchase Price"), but the amount and
type of securities purchasable upon the exercise of each Right and the Purchase
Price thereof shall be subject to adjustment as provided herein.
(b) Any Right Certificate issued pursuant to Section 3(a) or
Section 22 hereof that represents Rights which are null and void pursuant to
Section 7(e) of this Agreement and any Right Certificate issued pursuant to
Section 6 or Section 11 hereof upon transfer, exchange, replacement or
adjustment of any other Right Certificate referred to in this sentence, shall
contain (to the extent feasible) the following legend:
"The Rights represented by this Right Certificate are or were
Beneficially Owned by a Person who was or became an Acquiring Person or
an Affiliate or Associate of an Acquiring Person (as such terms are
defined in the Rights Agreement). Accordingly, this Right Certificate
and the Rights represented hereby are null and void."
Provisions of Section 7(e) of this Agreement shall be operative whether or not
the foregoing legend is contained on any such Right Certificate. The Corporation
shall notify the Rights Agent to the extent that this Section 4(b) applies.
Section 5. Countersignature and Registration.
The Right Certificates shall be executed on behalf of the Corporation
by its Chairman of the Board, its Chief Executive Officer, its President, any of
its Vice Presidents, or its Treasurer, either manually or by facsimile
signature, shall have affixed thereto the Corporation's seal or a facsimile
thereof, and shall be attested by the Secretary or an Assistant Secretary of the
Corporation, either manually or by facsimile signature. The Right Certificates
shall be countersigned by the Rights Agent and shall not be valid for any
purpose unless so countersigned. In case any officer of the Corporation who
shall have signed any of the Right Certificates shall cease to be such officer
of the Corporation before countersignature by the Rights Agent and issuance and
delivery by the Corporation, such Right Certificates may nevertheless be
countersigned by the Rights Agent and issued and delivered by the Corporation
with the same force and effect as though the person who signed such Right
Certificates had not ceased to be such officer of the Corporation; and any Right
Certificate may be signed on behalf of the Corporation by any Person who, at the
actual date of the execution of such Right Certificate, shall be a proper
officer of the Corporation to sign such Right Certificate, although at the date
of the execution of this Agreement any such Person was not such an officer.
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Following the Distribution Date and receipt by the Rights Agent of a
list of record holders of Rights, the Rights Agent will keep or cause to be
kept, at its office set forth in Section 26 hereof or offices designated as the
appropriate place for surrender of such Right Certificate or transfer, books for
registration and transfer of the Right Certificates issued hereunder. Such books
shall show the names and addresses of the respective holders of the Right
Certificates, the number of Rights evidenced on its face by each of the Right
Certificates and the certificate number and the date of each of the Right
Certificates.
Section 6. Transfer, Split-Up, Combination and Exchange of Right
Certificates; Mutilated, Destroyed, Lost or Stolen Right
Certificate.
Subject to the provisions of Section 4(b), Section 7(e) and Section 14
hereof, at any time after the Close of Business on the Distribution Date, and at
or prior to the Close of Business on the earlier of the Redemption Date or the
Final Expiration Date, any Right Certificate or Right Certificates may be
transferred, split up, combined or exchanged for another Right Certificate or
Right Certificates, entitling the registered holder to purchase a like number of
one one-thousandths of a Preferred Share (or, following a Triggering Event,
other securities, as the case may be) as the Right Certificate or Right
Certificates surrendered then entitled such holder (or former holder in the case
of a transfer) to purchase. Any registered holder desiring to transfer, split
up, combine or exchange any Right Certificate or Right Certificates shall make
such request in writing delivered to the Rights Agent, and shall surrender the
Right Certificate or Right Certificates to be transferred, split up, combined or
exchanged at the office or offices of the Rights Agent designated for such
purpose. Neither the Rights Agent nor the Corporation shall be obligated to take
any action whatsoever with respect to the transfer of any such surrendered Right
Certificate until the registered holder shall have completed and signed the
certificate contained in the form of assignment on the reverse side of such
Right Certificate and shall have provided such additional evidence of the
identity of the Beneficial Owner (or former Beneficial Owner) or Affiliates or
Associates thereof as the Corporation or the Rights Agent shall reasonably
request. Thereupon the Rights Agent shall, subject to Section 4(b), Section 7(e)
and Section 14 hereof, countersign and deliver to the Person entitled thereto a
Right Certificate or Right Certificates, as the case may be, as so requested.
The Corporation may require payment of a sum sufficient to cover any tax or
governmental charge that may be imposed in connection with any transfer, split
up, combination or exchange of Right Certificates. If the Corporation requires
the payment referred to in the immediately preceding sentence, then the Rights
Agent shall not be required to process any transaction until it receives notice
from the Corporation that the Corporation has received such payment.
Upon receipt by the Corporation and the Rights Agent of evidence
satisfactory to them of the loss, theft, destruction or mutilation of a Right
Certificate, and, in case of
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<PAGE> 17
loss, theft or destruction, of indemnity or security reasonably satisfactory to
them, and, at the Corporation's request, reimbursement to the Corporation and
the Rights Agent of all reasonable expenses incidental thereto, and upon
surrender to the Rights Agent and cancellation of the Right Certificate if
mutilated, the Corporation will make and deliver a new Right Certificate of like
tenor to the Rights Agent for countersignature and delivery to the registered
holder in lieu of the Right Certificate so lost, stolen, destroyed or mutilated.
Section 7. Exercise of Rights; Purchase Price; Expiration Date of
Rights.
(a) Subject to Section 7(e) hereof, the registered holder of
any Right Certificate may exercise the Rights evidenced thereby (except as
otherwise provided herein) in whole or in part at any time after the
Distribution Date upon surrender of the Right Certificate, with the form of
election to purchase and the certificate on the reverse side thereof duly
executed, to the Rights Agent at the office or offices of the Rights Agent
designated for such purpose, together with payment of the aggregate Purchase
Price for the total number of one one-thousands of a Preferred Share (or other
securities, as the case may be) as to which such surrendered Rights are
exercised, at or prior to the earliest of (i) the Close of Business on April 7,
2010 (the "Final Expiration Date"), (ii) the time at which the Rights are
redeemed as provided in Section 23 hereof (the "Redemption Date"); (iii) the
time at which the Rights are exchanged as provided in Section 24 hereof, or (iv)
the consummation of a transaction contemplated by Section 13(d) hereof.
(b) The Purchase Price for each one one-thousandth of a
Preferred Share pursuant to the exercise of a Right shall initially be $138.00,
shall be subject to adjustment from time to time as provided in the next
sentence and in Sections 11 and 13(a) hereof and shall be payable in accordance
with paragraph (c) below. Anything in this Agreement to the contrary
notwithstanding, in the event that at any time after the date of this Agreement
and prior to the Distribution Date, the Corporation shall (i) declare or pay any
dividend on the Common Shares payable in Common Shares or (ii) effect a
subdivision, combination or consolidation of the Common Shares (by
reclassification or otherwise than by payment of dividends in Common Shares)
into a greater or lesser number of Common Shares, then in any such case, each
Common Share outstanding following such subdivision, combination or
consolidation shall continue to have one Right associated therewith and the
Purchase Price following any such event shall be proportionately adjusted to
equal the result obtained by multiplying the Purchase Price immediately prior to
such event by a fraction the numerator of which shall be the total number of
Common Shares outstanding immediately prior to the occurrence of the event and
the denominator of which shall be the total number of Common Shares outstanding
immediately following the occurrence of such event. The adjustment provided for
in the preceding sentence shall be made successively whenever such a dividend is
declared or paid or such a subdivision, combination or consolidation is
effected.
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(c) Upon receipt of a Right Certificate representing
exercisable Rights, with the form of election to purchase and the certificate
duly executed, accompanied by payment of the Purchase Price for the Preferred
Shares (or other securities, as the case may be) to be purchased and an amount
equal to any applicable tax or governmental charge required to be paid by the
holder of such Right Certificate in accordance with Section 6 hereof by
certified check, cashier's check or money order payable to the order of the
Corporation, the Rights Agent shall thereupon promptly (i) (A) requisition from
any transfer agent of the Preferred Shares certificates for the number of
Preferred Shares to be purchased and the Corporation hereby irrevocably
authorizes its transfer agent to comply with all such requests, or (B) if the
Corporation, in its sole discretion, shall have elected to deposit the Preferred
Shares issuable upon exercise of the Rights hereunder into a depositary,
requisition from the depositary agent depositary receipts representing such
number of one one-thousandths of a Preferred Share as are to be purchased (in
which case certificates for the Preferred Shares represented by such receipts
shall be deposited by the transfer agent with the depositary agent) and the
Corporation will direct the depositary agent to comply with such requests, (ii)
when appropriate, requisition from the Corporation the amount of cash to be paid
in lieu of issuance of fractional shares in accordance with Section 14 hereof,
(iii) after receipt of such certificates or depositary receipts, cause the same
to be delivered to or upon the order of the registered holder of such Right
Certificate, registered in such name or names as may be designated by such
holder, and (iv) when appropriate, after receipt thereof, deliver such cash to
or upon the order of the registered holder of such Right Certificate. In the
event that the Corporation is obligated to issue other securities (including
Common Shares) of the Corporation pursuant to Section 11(a) hereof, the
Corporation will make all arrangements necessary so that such other securities
are available for distribution by the Rights Agent, if and when necessary to
comply with this Agreement.
In addition, in the case of an exercise of the Rights by a
holder pursuant to Section 11(a)(ii), the Rights Agent shall return such Right
Certificate to the registered holder thereof after imprinting, stamping or
otherwise indicating thereon that the rights represented by such Right
Certificate no longer include the rights provided by Section 11(a)(ii) of this
Agreement and if less than all the Rights represented by such Right Certificate
were so exercised, the Rights Agent shall indicate on the Right Certificate the
number of Rights represented thereby which continue to include the rights
provided by Section 11(a)(ii).
(d) In case the registered holder of any Right Certificate
shall exercise less than all the Rights evidenced thereby, a new Right
Certificate evidencing Rights equivalent to the Rights remaining unexercised
shall be issued by the Rights Agent to the registered holder of such Right
Certificate or to his duly authorized assigns, subject to the provisions of
Section 6 and Section 14 hereof, or the Rights Agent shall place an
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appropriate notation on the Right Certificate with respect to those Rights
exercised.
(e) Notwithstanding anything in this Agreement to the
contrary, from and after the first occurrence of a Section 11(a)(ii) Event, any
Rights Beneficially Owned by (i) an Acquiring Person or an Affiliate or
Associate of an Acquiring Person, (ii) a transferee of an Acquiring Person (or
of any Affiliate or Associate thereof) who becomes a transferee after the
Acquiring Person becomes such, or (iii) a transferee of an Acquiring Person (or
of any Affiliate or Associate thereof) who becomes a transferee prior to or
concurrently with the Acquiring Person becoming such and receives such Rights
pursuant to either (A) a transfer (whether or not for consideration) from the
Acquiring Person to holders of equity interests in such Acquiring Person or to
any Person with whom the Acquiring Person has a continuing agreement,
arrangement or understanding regarding the transferred Rights or (B) a transfer
which the Board of Directors of the Corporation has determined is part of an
agreement, arrangement or understanding which has as a primary purpose or effect
the avoidance of this Section 7(e), shall become null and void without any
further action and no holder of such Rights shall have any rights whatsoever
with respect to such Rights, whether under any provision of this Agreement or
otherwise. The Corporation shall notify the Rights Agent when this Section 7(e)
applies and shall use all reasonable efforts to insure that the provisions of
this Section 7(e) and Section 4(b) hereof are complied with, but neither the
Corporation nor the Rights Agent shall have any liability to any holder of Right
Certificates or other Person as a result of the Corporation's failure to make
any determinations with respect to an Acquiring Person or its Affiliates,
Associates or transferees hereunder.
(f) Notwithstanding anything in this Agreement to the
contrary, neither the Rights Agent nor the Corporation shall be obligated to
undertake any action with respect to a registered holder upon the occurrence of
any purported exercise as set forth in this Section 7 unless such registered
holder shall have (i) properly completed and signed the certificate contained in
the form of election to purchase set forth on the reverse side of the Right
Certificate surrendered for such exercise, and (ii) provided such additional
evidence of the identity of the Beneficial Owner (or former Beneficial Owner) or
Affiliates or Associates thereof as the Corporation or the Rights Agent shall
reasonably request.
Section 8. Cancellation and Destruction of Right Certificates.
All Right Certificates surrendered for the purpose of exercise,
transfer, split up, combination or exchange shall, if surrendered to the
Corporation or to any of its agents, be delivered to the Rights Agent for
cancellation or in canceled form, or, if surrendered to the Rights Agent, shall
be canceled by it, and no Right Certificates shall be issued in lieu thereof
except as expressly permitted by any of the provisions of this Agreement. The
Corporation shall deliver to the Rights Agent for cancellation and retirement,
and the Rights Agent shall so cancel and retire, any other Right Certificate
purchased or acquired
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by the Corporation otherwise than upon the exercise thereof. The Rights Agent
shall deliver all canceled Right Certificates to the Corporation, or shall, at
the written request of the Corporation, destroy such canceled Right
Certificates, and in such case shall deliver a certificate of destruction
thereof to the Corporation.
Section 9. Reservation and Availability of Preferred Shares.
The Corporation covenants and agrees that at all times prior to the
occurrence of a Section 11(a)(ii) Event it will cause to be reserved and kept
available out of its authorized and unissued Preferred Shares, or any authorized
and issued Preferred Shares held in its treasury, the number of Preferred Shares
that will be sufficient to permit the exercise in full of all outstanding Rights
and, after the occurrence of a Section 11(a)(ii) Event, shall, to the extent
reasonably practicable, so reserve and keep available a sufficient number of
Common Shares (and/or other securities) which may be required to permit the
exercise in full of the Rights pursuant to this Agreement.
So long as the Preferred Shares (and, after the occurrence of a Section
11(a)(ii) Event, Common Shares or any other securities) issuable upon the
exercise of the Rights may be listed on any national securities exchange, the
Corporation shall use its best efforts to cause, from and after such time as the
Rights become exercisable, all shares reserved for such issuance to be listed on
such exchange upon official notice of issuance upon such exercise.
The Corporation covenants and agrees that it will take all such action
as may be necessary to ensure that all Preferred Shares (or Common Shares and/or
other securities, as the case may be) delivered upon exercise of Rights shall,
at the time of delivery of the certificates for such shares or other securities
(subject to payment of the Purchase Price), be duly and validly authorized and
issued and fully paid and non-assessable shares or securities.
The Corporation further covenants and agrees that it will pay when due
and payable any and all U.S. federal and state taxes and charges which may be
payable in respect of the issuance or delivery of the Right Certificates or of
any Preferred Shares (or Common Shares and/or other securities, as the case may
be) upon the exercise of Rights. The Corporation shall not, however, be required
to pay any tax or other charge which may be payable in respect of any transfer
or delivery of Right Certificates to a Person other than, or the issuance or
delivery of certificates or depositary receipts for the Preferred Shares (or
Common Shares and/or other securities, as the case may be) in a name other than
that of, the registered holder of the Right Certificate evidencing Rights
surrendered for exercise, or to issue or to deliver any certificates or
depositary receipts for Preferred Shares (or Common Shares and/or other
securities, as the case may be) upon the exercise of any Rights, until any such
tax or other charge shall have been paid (any such
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<PAGE> 21
tax or other charge being payable by the holder of such Right Certificate at the
time of surrender) or until it has been established to the Corporation's
reasonable satisfaction that no such tax or other charge is due.
The Corporation shall use its best efforts to (i) file, as soon as
practicable following the Shares Acquisition Date, a registration statement
under the Act, with respect to the securities purchasable upon exercise of the
Rights on an appropriate form, (ii) cause such registration statement to become
effective as soon as practicable after such filing, and (iii) cause such
registration statement to remain effective (with a prospectus at all times
meeting the requirements of the Act and the rules and regulations thereunder)
until the date of the expiration of the rights provided by Section 11(a)(ii).
The Corporation will also take such action as may be appropriate under the blue
sky laws of the various states.
Section 10. Preferred Shares Record Date.
Each Person in whose name any certificate for Preferred Shares (or
Common Shares and/or other securities, as the case may be) is issued upon the
exercise of Rights shall for all purposes be deemed to have become the holder of
record of the Preferred Shares (or Common Shares and/or other securities, as the
case may be) represented thereby on, and such certificate shall be dated, the
date upon which the Right Certificate evidencing such Rights was duly
surrendered and payment of the Purchase Price (and any applicable taxes and
other governmental charges) was made; provided, however, that, if the date of
such surrender and payment is a date upon which the Preferred Shares (or Common
Shares and/or other securities, as the case may be) transfer books of the
Corporation are closed, such person shall be deemed to have become the record
holder of such shares on, and such certificate shall be dated, the next
succeeding Business Day on which the Preferred Shares (or Common Shares and/or
other securities, as the case may be) transfer books of the Corporation are
open.
Section 11. Adjustment of Purchase Price, Number and Kind of Shares or
Number of Rights.
The Purchase Price, the number and kind of shares covered by each Right
and the number of Rights outstanding are subject to adjustment from time to time
as provided in this Section 11.
(a) (i) In the event the Corporation shall at any time after
the date of this Agreement (A) declare a dividend on the Preferred Shares
payable in Preferred Shares, (B) subdivide the outstanding Preferred Shares, (C)
combine the outstanding Preferred Shares into a smaller number of Preferred
Shares or (D) issue any shares of its capital stock in a reclassification of the
Preferred Shares (including any such reclassification in
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connection with a consolidation or merger in which the Corporation is the
continuing or surviving corporation), except as otherwise provided in this
Section 11(a) and Section 7(e) hereof, the Purchase Price in effect at the time
of the record date for such dividend or of the effective date of such
subdivision, combination or reclassification, and the number and kind of shares
of capital stock issuable on such date, shall be proportionately adjusted so
that the holder of any Right exercised after such time shall be entitled to
receive the aggregate number and kind of shares of capital stock which, if such
Right had been exercised immediately prior to such date and at a time when the
Preferred Shares transfer books of the Corporation were open, such holder would
have owned upon such exercise and been entitled to receive by virtue of such
dividend, subdivision, combination or reclassification; provided, however, that
in no event shall the consideration to be paid upon the exercise of one Right be
less than the aggregate par value of the shares of capital stock of the
Corporation issuable upon exercise of one Right. If an event occurs which would
require an adjustment under both Section 11(a)(i) and Section 11(a)(ii), the
adjustment provided for in this Section 11(a)(i) shall be in addition to, and
shall be made prior to, any adjustment required pursuant to Section 11(a)(ii).
(ii) In the event any Person, alone or together with its
Affiliates and Associates, shall become an Acquiring Person, then proper
provision shall be made so that each holder of a Right (except as provided below
and in Section 7(e) hereof) shall, for a period of 60 days after the later of
the occurrence of any such event or the effective date of an appropriate
registration statement under the Act pursuant to Section 9 hereof, have a right
to receive, upon exercise thereof at a price equal to the then current Purchase
Price, in accordance with the terms of this Agreement, such number of Common
Shares (or, in the discretion of the Board of Directors, one one-thousandths of
a Preferred Share) as shall equal the result obtained by (x) multiplying the
then current Purchase Price by the then number of one one-thousandths of a
Preferred Share for which a Right was exercisable immediately prior to the first
occurrence of a Section 11(a)(ii) Event, and dividing that product by (y) 50% of
the then current per share market price of the Corporation's Common Shares
(determined pursuant to Section 11(d) hereof) on the date of such first
occurrence (such number of shares being referred to as the "Adjustment Shares");
provided, however, that if the transaction that would otherwise give rise to the
foregoing adjustment is also subject to the provisions of Section 13 hereof,
then only the provisions of Section 13 hereof shall apply and no adjustment
shall be made pursuant to this Section 11(a)(ii);
(iii) In the event that there shall not be sufficient
treasury shares or authorized but unissued (and unreserved) Common Shares to
permit the exercise in full of the Rights in accordance with the foregoing
subparagraph (ii) and the Rights become so exercisable (and the Board of
Directors of the Corporation has determined to make the Rights exercisable into
fractions of a Preferred Share), notwithstanding any other
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<PAGE> 23
provision of this Agreement, to the extent necessary and permitted by applicable
law, each Right shall thereafter represent the right to receive, upon exercise
thereof at the then current Purchase Price in accordance with the terms of this
Agreement, (x) a number of (or fractions of) Common Shares (up to the maximum
number of Common Shares which may permissibly be issued) and (y) a number of (or
fractions of) one one-thousandths of a Preferred Share or a number of (or
fractions of) other equity securities of the Corporation (or, in the discretion
of the Board of Directors, debt) which the Board of Directors of the Corporation
has determined to have the same aggregate current market value (determined
pursuant to Section 11(d)(i) and (ii) hereof, to the extent applicable,) as one
Common Share (such number of, or fractions of, Preferred Shares, debt, or other
equity securities or debt of the Corporation being referred to as a "capital
stock equivalent") equal in the aggregate to the number of Adjustment Shares;
provided, however, if sufficient Common Shares and/or capital stock equivalents
are unavailable, then the Corporation shall, to the extent permitted by
applicable law, take all such action as may be necessary to authorize additional
Common Shares or capital stock equivalents for issuance upon exercise of the
Rights, including the calling of a meeting of stockholders; and provided,
further, that if the Corporation is unable to cause sufficient Common Shares
and/or capital stock equivalents to be available for issuance upon exercise in
full of the Rights, then each Right shall thereafter represent the right to
receive the Adjusted Number of Shares upon exercise at the Adjusted Purchase
Price (as such terms are hereinafter defined). As used herein, the term
"Adjusted Number of Shares" shall be equal to that number of (or fractions of)
Common Shares (and/or capital stock equivalents) equal to the product of (x) the
number of Adjustment Shares and (y) a fraction, the numerator of which is the
number of Common Shares (and/or capital stock equivalents) available for
issuance upon exercise of the Rights and the denominator of which is the
aggregate number of Adjustment Shares otherwise issuable upon exercise in full
of all Rights (assuming there were a sufficient number of Common Shares
available) (such fraction being referred to as the "Proration Factor"). The
"Adjusted Purchase Price" shall mean the product of the Purchase Price and the
Proration Factor. The Board of Directors may, but shall not be required to,
establish procedures to allocate the right to receive Common Shares and capital
stock equivalents upon exercise of the Rights among holders of Rights.
(b) In case the Corporation shall fix a record date for the
issuance of rights (other than the Rights), options or warrants to all holders
of Preferred Shares entitling them (for a period expiring within 45 calendar
days after such record date) to subscribe for or purchase Preferred Shares (or
shares having the same rights, privileges and preferences as the Preferred
Shares ("equivalent preferred shares")) or securities convertible into Preferred
Shares or equivalent preferred shares at a price per Preferred Share or
equivalent preferred share (or having a conversion price per share, if a
security convertible into Preferred Shares or equivalent preferred shares) less
than the then current per share market price of the Preferred Shares (as
determined pursuant to Section 11(d)
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hereof) on such record date, the Purchase Price to be in effect after such
record date shall be determined by multiplying the Purchase Price in effect
immediately prior to such record date by a fraction, the numerator of which
shall be the number of Preferred Shares outstanding on such record date plus the
number of Preferred Shares which the aggregate offering price of the total
number of Preferred Shares and/or equivalent preferred shares so to be offered
(and/or the aggregate initial conversion price of the convertible securities so
to be offered) would purchase at such current per share market price, and the
denominator of which shall be the number of Preferred Shares outstanding on such
record date plus the number of additional Preferred Shares and/or equivalent
preferred shares to be offered for subscription or purchase (or into which the
convertible securities so to be offered are initially convertible); provided,
however, that in no event shall the consideration to be paid upon the exercise
of one Right be less than the aggregate par value of the shares of capital stock
of the Corporation issuable upon exercise of one Right. In case such
subscription price may be paid in a consideration part or all of which shall be
in a form other than cash, the value of such consideration shall be determined
in good faith by the Board of Directors of the Corporation, whose determination
shall be described in a statement filed with the Rights Agent and shall be
binding on the Rights Agent and the holders of the Rights. Preferred Shares
owned by or held for the account of the Corporation shall not be deemed
outstanding for the purpose of any such computation. Such adjustment shall be
made successively whenever such a record date is fixed; and in the event that
such rights, options or warrants are not so issued, the Purchase Price shall be
adjusted to be the Purchase Price which would then be in effect if such record
date had not been fixed.
(c) In case the Corporation shall fix a record date for the
making of a distribution to all holders of the Preferred Shares (including any
such distribution made in connection with a consolidation or merger in which the
Corporation is the continuing or surviving corporation) of evidences of
indebtedness or assets (other than a regular quarterly cash dividend or a
dividend payable in Preferred Shares) or subscription rights or warrants
(excluding those referred to in Section 11(b) hereof), the Purchase Price to be
in effect after such record date shall be determined by multiplying the Purchase
Price in effect immediately prior to such record date by a fraction, the
numerator of which shall be the then current per share market price (as
determined pursuant to Section 11(d) hereof) of the Preferred Shares on such
record date, less the fair market value (as determined in good faith by the
Board of Directors of the Corporation, whose determination shall be described in
a statement filed with the Rights Agent and shall be binding on the Rights Agent
and the holders of the Rights) of the portion of the assets or evidences of
indebtedness so to be distributed or of such subscription rights or warrants
applicable to one Preferred Share and the denominator of which shall be such
current per share market price of the Preferred Shares; provided, however, that
in no event shall the consideration to be paid upon the exercise of one Right be
less than the aggregate par value of the
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shares of capital stock of the Corporation to be issued upon exercise of one
Right. Such adjustments shall be made successively whenever such a record date
is fixed; and in the event that such distribution is not so made, the Purchase
Price shall again be adjusted to be the Purchase Price which would then be in
effect if such record date had not been fixed.
(d) (i) For the purpose of any computation hereunder, the
"current per share market price" of any security (a "Security") for the purpose
of this Section 11(d)(i)) on any date shall be deemed to be the average of the
daily closing prices per share of such Security for the thirty (30) consecutive
Trading Days (as such term is hereinafter defined) immediately prior to and not
including such date; provided, however, that in the event that the current per
share market price of the Security is determined during a period following the
announcement by the issuer of such Security of (A) a dividend or distribution on
such Security payable in shares of such Security or securities convertible into
such shares, or (B) any subdivision, combination or reclassification of such
Security and prior to the expiration of thirty (30) Trading Days after and not
including the ex-dividend date for such dividend or distribution, or the record
date for such subdivision, combination or reclassification, then, and in each
such case, the current per share market price shall be appropriately adjusted to
reflect the current market price per share equivalent of such Security. The
closing price for each day shall be the last sale price, regular way, or, in
case no such sale takes place on such day, the average of the closing bid and
asked prices, regular way, in either case as reported in the principal
consolidated transaction reporting system with respect to securities listed or
admitted to trading on the New York Stock Exchange or, if the Security is not
listed or admitted to trading on the New York Stock Exchange, as reported in the
principal consolidated transaction reporting system with respect to securities
listed on the principal national securities exchange on which the Security is
listed or admitted to trading or, if the Security is not listed or admitted to
trading on any national securities exchange, the last quoted price or, if not so
quoted, the average of the high bid and low asked prices as reported on the
Nasdaq Stock Market ("NASDAQ") or such other market or system then in use, or,
if on any such date the Security is not quoted by any such organization, the
average of the closing bid and asked prices as furnished by a professional
market maker making a market in the Security selected by the Board of Directors
of the Corporation. If on any such date no such market maker is making a market
in the Security, the fair value of the Security on such date as determined in
good faith by the Board of Directors of the Corporation shall be used. The term
"Trading Day" shall mean a day on which the principal national securities
exchange on which the Security is listed or admitted to trading is open for the
transaction of business or, if the Security is not listed or admitted to trading
on any national securities exchange, a Business Day. Subject to Section
11(d)(ii), if any Security is not publicly traded, "current per share market
price" of such Security shall mean the fair market value per share as determined
in good faith by the Board of Directors of the Corporation, whose
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determination shall be described in a statement filed with the Rights Agent and
shall be binding on the Rights Agent and the holders of the Rights.
(ii) For the purpose of any computation hereunder, the
"current per share market price" of the Preferred Shares shall be determined in
accordance with the method set forth in Section 11(d)(i). If the Preferred
Shares are not publicly traded, the "current per share market price" of the
Preferred Shares shall be conclusively deemed to be the current per share market
price of the Common Shares as determined pursuant to Section 11(d)(i)
(appropriately adjusted to reflect any stock split, stock dividend or similar
transaction occurring after the date hereof), multiplied by one thousand
(1,000). If neither the Common Shares nor the Preferred Shares are publicly held
or so listed or traded, "current per share market price" shall mean the fair
value per share as determined in good faith by the Board of Directors of the
Corporation, whose determination shall be described in a statement filed with
the Rights Agent and shall be binding on the Rights Agent and the holders of the
Rights.
(e) Anything herein to the contrary notwithstanding, no adjustment in
the Purchase Price shall be required unless such adjustment would require an
increase or decrease of at least 1% in the Purchase Price; provided, however,
that any adjustments which by reason of this Section 11(e) are not required to
be made shall be carried forward and taken into account in any subsequent
adjustment. All calculations under this Section 11 shall be made to the nearest
cent or to the nearest one one-thousandth of a Preferred Share or one one-
thousandth of any other share or security as the case may be. Notwithstanding
the first sentence of this Section 11(e), any adjustment required by this
Section 11 shall be made no later than the earlier of (i) three (3) years from
the date of the transaction which mandates such adjustment or (ii) the Final
Expiration Date.
(f) If as a result of an adjustment made pursuant to Section 11(a)(ii)
or Section 13(a) hereof, the holder of any Right thereafter exercised shall
become entitled to receive any shares of capital stock of the Corporation other
than Preferred Shares, thereafter the number of other shares so receivable upon
exercise of any Right shall be subject to adjustment from time to time in a
manner and on terms as nearly equivalent as practicable to the provisions with
respect to the Preferred Shares contained in Section 11(a) through (c),
inclusive, and the provisions of Sections 7, 9, 10, 13 and 14 with respect to
the Preferred Shares shall apply on like terms to any such other shares.
(g) All Rights originally issued by the Corporation subsequent to any
adjustment made to the Purchase Price hereunder shall evidence the right to
purchase, at the adjusted Purchase Price, the number of one one-thousandths of a
Preferred Share purchasable from time to time hereunder upon exercise of the
Rights, all subject to further adjustment as provided herein.
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(h) Unless the Corporation shall have exercised its election
so provided in Section 11(i) hereof, upon adjustment of the Purchase Price as a
result of the calculations made in Sections 11(b) and 11(c) hereof, each Right
outstanding immediately prior to the making of such adjustment shall thereafter
evidence the right to purchase, at the Adjusted Purchase Price, that number of
one one-thousandths of a Preferred Share calculated to the nearest one
one-thousandth of a Preferred Share) obtained by (i) multiplying (A) the number
of Preferred Shares covered by a Right immediately prior to this adjustment of
the Purchase Price by (B) the Purchase Price in effect immediately prior to such
adjustment of the Purchase Price and (ii) dividing the product so obtained by
the Purchase Price in effect immediately after such adjustment of the Purchase
Price.
(i) The Corporation may elect on or after the date of any
adjustment of the Purchase Price to adjust the number of Rights, in lieu of any
adjustment in the number of one one-thousandths of a Preferred Share purchasable
upon the exercise of a Right. Each of the Rights outstanding after such
adjustment of the number of Rights shall be exercisable for the number of one
one-thousandths of a Preferred Share for which a Right was exercisable
immediately prior to such adjustment. Each Right held of record prior to such
adjustment of the number of Rights shall become that number of Rights
(calculated to the nearest one one-thousandth) obtained by dividing the Purchase
Price in effect immediately prior to adjustment of the Purchase Price by the
Purchase Price in effect immediately after adjustment of the Purchase Price. The
Corporation shall make a public announcement of its election to adjust the
number of Rights, indicating the record date for the adjustment, and, if known
at the time, the amount of the adjustment to be made, a copy of which public
announcement shall promptly be delivered to the Rights Agent. This record date
may be the date on which the Purchase Price is adjusted or any day thereafter,
but, if the Right Certificates have been issued, shall be at least ten (10) days
later than the date of the public announcement. If Right Certificates have been
issued, upon each adjustment of the number of Rights pursuant to this Section
11(i), the Corporation shall, as promptly as practicable, cause to be
distributed to holders of record of Right Certificates on such record date Right
Certificates evidencing, subject to Section 14 hereof, the additional Rights to
which such holders shall be entitled as a result of such adjustment, or, at the
option of the Corporation, shall cause to be distributed to such holders of
record in substitution and replacement for the Right Certificates held by such
holders prior to the date of adjustment, and upon surrender thereof, if required
by the Corporation, new Right Certificates evidencing all the Rights to which
such holders shall be entitled after such adjustment. Right Certificates so to
be distributed shall be issued, executed and countersigned in the manner
provided for herein and shall be registered in the names of the holders of
record of Right Certificates on the record date specified in the public
announcement.
(j) Irrespective of any adjustment or change in the Purchase
Price or the
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number of one one-thousandths of a Preferred Share issuable upon the exercise of
the Rights, the Right Certificates theretofore and thereafter issued may
continue to express the Purchase Price and the number of one one-thousandths of
a Preferred Share which were expressed in the initial Right Certificates issued
hereunder.
(k) Before taking any action that would cause an adjustment
reducing the Purchase Price below the then par value, if any, of the number of
one one-thousandths of a Preferred Share, Common Shares or other securities
issuable upon exercise of the Rights, the Corporation shall take any corporate
action which may, in the opinion of its counsel, be necessary in order that the
Corporation may validly and legally issue such number of fully paid and
non-assessable one one-thousandths of a Preferred Share, Common Shares or other
securities at such adjusted Purchase Price.
(l) In any case in which this Section 11 shall require that an
adjustment in the Purchase Price be made effective as of a record date for a
specified event, the Corporation may elect to defer until the occurrence of such
event the issuance to the holder of any Right exercised after such record date
the Preferred Shares, Common Shares or other securities of the Corporation, if
any, issuable upon such exercise over and above the Preferred Shares, Common
Shares or other securities of the Corporation, if any, issuable upon exercise on
the basis of the Purchase Price in effect prior to such adjustment; provided,
however, that the Corporation shall deliver to such holder a due bill or other
appropriate instrument evidencing such holder's right to receive such additional
shares or other securities, as the case may be, upon the occurrence of the event
requiring such adjustment.
(m) Anything in this Section 11 to the contrary
notwithstanding, the Corporation shall be entitled to make such reductions in
the Purchase Price, in addition to those adjustments expressly required by this
Section 11, as and to the extent that it in its sole discretion shall determine
to be advisable in order that (i) any consolidation or subdivision of the
Preferred Shares, (ii) issuance wholly for cash of Preferred Shares at less than
the current market price, (iii) issuance wholly for cash of Preferred Shares or
securities which by their terms are convertible into or exchangeable for
Preferred Shares, (iv) stock dividends or (v) issuance of rights, options or
warrants referred to in this Section 11, hereafter made by the Corporation to
holders of its Preferred Shares shall not be taxable to such stockholders.
(n) The Corporation covenants and agrees that it shall not, at
any time after the Distribution Date, (i) consolidate with any other Person
(other than a Subsidiary of the Corporation in a transaction which does not
violate Section 11(o) hereof), (ii) merge with or into any other Person (other
than a Subsidiary of the Corporation in a transaction which does not violate
Section 11(o) hereof), or (iii) sell or transfer (or permit any Subsidiary to
sell or transfer), in one transaction, or a series of related transactions,
assets
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or earning power aggregating more than 50% of the assets or earning power of the
Corporation and its Subsidiaries (taken as a whole) to any other Person or
Persons (other than the Corporation and/or any of its Subsidiaries in one or
more transactions each of which does not violate Section 11(o) hereof), if (x)
at the time of or immediately after such consolidation, merger, sale or transfer
there are any charter or bylaw provisions or any rights, warrants or other
instruments or securities outstanding or agreements in effect or other actions
taken, which would materially diminish or otherwise eliminate the benefits
intended to be afforded by the Rights or (y) prior to, simultaneously with or
immediately after such consolidation, merger or sale, the stockholders of the
Person who constitutes, or would constitute, the "Principal Party" for purposes
of Section 13(a) hereof shall have received a distribution of Rights previously
owned by such Person or any of its Affiliates and Associates. The Corporation
shall not consummate any such consolidation, merger, sale or transfer unless
prior thereto the Corporation and such other Person shall have executed and
delivered to the Rights Agent a supplemental agreement evidencing compliance
with this Section 11(n).
(o) The Corporation covenants and agrees that, after the
Distribution Date, it will not, except as permitted by Section 23, Section 24 or
Section 27 hereof, take (or permit any Subsidiary to take) any action the
purpose of which is to, or if at the time such action is taken it is reasonably
foreseeable that the effect of such action is to, materially diminish or
otherwise eliminate the benefits intended to be afforded by the Rights.
(p) The exercise of Rights under Section 11(a)(ii) shall only
result in the loss of rights under Section 11(a)(ii) to the extent so exercised
and shall not otherwise affect the rights represented by the Rights under this
Agreement, including the rights represented by Section 13.
Section 12. Certificate of Adjusted Purchase Price or Number of Shares.
Whenever an adjustment is made as provided in Sections 11 or 13 hereof,
the Corporation shall promptly (a) prepare a certificate setting forth such
adjustment, and a brief reasonably detailed statement of the facts and
computations accounting for such adjustment, (b) file with the Rights Agent and
with each transfer agent for the Common Shares and the Preferred Shares a copy
of such certificate and (c) mail a brief summary thereof to each holder of a
Right Certificate in accordance with Section 25 hereof. The Rights Agent shall
be fully protected in relying on any such certificate and on any adjustment
therein contained and shall have no duty with respect to and shall not be deemed
to have knowledge of such adjustment unless and until it shall have received
such certificate.
Section 13. Consolidation, Merger or Sale or Transfer of Assets or
Earning Power.
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(a) In the event that, on or following the Shares Acquisition
Date, directly or indirectly, (x) the Corporation shall consolidate with, or
merge with and into, any Interested Stockholder or, if in such merger or
consolidation all holders of Common Stock are not treated alike, any other
Person, (y) the Corporation shall consolidate with, or merge with, any
Interested Stockholder or, if in such merger or consolidation all holders of
Common Stock are not treated alike, any other Person, and the Corporation shall
be the continuing or surviving corporation of such consolidation or merger
(other than, in a case of any transaction described in (x) or (y), a merger or
consolidation which would result in all of the securities generally entitled to
vote in the election of directors ("voting securities") of the Corporation
outstanding immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into securities of the surviving
entity) all of the voting securities of the Corporation or such surviving entity
outstanding immediately after such merger or consolidation and the holders of
such securities not having changed as a result of such merger or consolidation),
or (z) the Corporation shall sell or otherwise transfer (or one or more of its
Subsidiaries shall sell or otherwise transfer), in one transaction or a series
of related transactions, assets or earning power aggregating more than 50% of
the assets or earning power of the Corporation and its Subsidiaries (taken as a
whole) to any Interested Stockholder or Stockholders or, if in such transaction
all holders of Common Stock are not treated alike, any other Person (other than
the Corporation or any Subsidiary of the Corporation in one or more transactions
each of which does not violate Section 11(n) hereof), then, and in each such
case (except as provided in Section 13(d) hereof), proper provision shall be
made so that (i) each holder of a Right, except as provided in Section 7(e)
hereof, shall thereafter have the right to receive, upon the exercise thereof at
a price equal to the then current Purchase Price, in accordance with the terms
of this Agreement and in lieu of Preferred Shares, such number of freely
tradable shares of common stock of the Principal Party (as hereinafter defined),
not subject to any liens, encumbrances, rights of first refusal or other adverse
claims, as shall equal the result obtained by (A) multiplying the then current
Purchase Price by the number of one one-thousandths of a Preferred Share for
which a Right is then exercisable (without taking into account any adjustment
previously made pursuant to Section 11(a)(ii)) and dividing that product by (B)
50% of the then current per share market price of the Common Shares of such
Principal Party (determined pursuant to Section 11(d) hereof) on the date of
consummation of such Section 13 Event; (ii) such Principal Party shall
thereafter be liable for, and shall assume, by virtue of such Section 13 Event,
all the obligations and duties of the Corporation pursuant to this Agreement;
(iii) the term "Corporation" shall thereafter be deemed to refer to such
Principal Party, it being specifically intended that the provisions of Section
11 hereof shall apply only to such Principal Party following the first
occurrence of a Section 13 Event; and (iv) such Principal Party shall take such
steps (including, but not limited to, the reservation of a sufficient number of
its Common Shares) in connection with the consummation of any such transaction
as may be necessary to assure that the provisions hereof shall thereafter
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be applicable, as nearly as reasonably may be, in relation to the Common Shares
thereafter deliverable upon the exercise of the Rights.
(b) "Principal Party" shall mean
(i) in the case of any transaction described in
clause (x) or (y) of the first sentence of Section 13(a), the Person that is the
issuer of any securities into which Common Shares of the Corporation are
converted in such merger or consolidation, and if no securities are so issued,
the Person that is the other party to such merger or consolidation (including,
if applicable, the Corporation if it is the surviving corporation); and (ii) in
the case of any transaction described in clause (z) of the first sentence of
Section 13(a), the Person that is the party receiving the greatest portion of
the assets or earning power transferred pursuant to such transaction or
transactions; provided, however, that in any of the foregoing cases, (1) if the
Common Shares of such Person are not at such time and have not been continuously
over the preceding twelve (12) month period registered under Section 12 of the
Exchange Act, and such Person is a direct or indirect Subsidiary of another
Person the Common Shares of which are and have been so registered, "Principal
Party" shall refer to such other Person; (2) in case such Person is a
Subsidiary, directly or indirectly, of more than one Person, the Common Shares
of two or more of which are and have been so registered, "Principal Party" shall
refer to whichever of such Persons is the issuer of the Common Shares having the
greatest aggregate market value; and (3) in case such Person is owned, directly
or indirectly, by a joint venture formed by two or more Persons that are not
owned, directly or indirectly, by the same Person, the rules set forth in (1)
and (2) above shall apply to each of the chains of ownership having an interest
in such joint venture as if such party were a "Subsidiary" of both or all of
such joint venturers and the Principal Parties in each such chain shall bear the
obligations set forth in this Section 13 in the same ratio as their direct or
indirect interests in such Person bear to the total of such interests.
(c) The Corporation shall not consummate any such
consolidation, merger, sale or transfer unless the Principal Party shall have a
sufficient number of its authorized shares of common stock which have not been
issued or reserved for issuance to permit the exercise in full of the Rights in
accordance with this Section 13 and unless prior thereto the Corporation and
such Principal Party shall have executed and delivered to the Rights Agent a
supplemental agreement providing for the terms set forth in paragraphs (a) and
(b) of this Section 13 and further providing that, as soon as practicable after
the date of any consolidation, merger, sale or transfer mentioned in paragraph
(a) of this Section 13, the Principal Party at its own expense shall:
(i) prepare and file a registration statement under
the Act with respect to the Rights and the securities purchasable upon exercise
of the Rights on an appropriate form, and will use its best efforts to cause
such registration statement to (A)
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become effective as soon as practicable after such filing and (B) remain
effective (with a prospectus at all times meeting the requirements of the Act)
until the Final Expiration Date;
(ii) use its best efforts to qualify or register the
Rights and the securities purchasable upon exercise of the Rights under the blue
sky laws of such jurisdictions as may be necessary or appropriate; and
(iii) deliver to holders of the Rights historical
financial statements for the Principal Party which comply in all respects with
the requirements for registration on Form 10 under the Exchange Act.
The provisions of this Section 13 shall similarly apply to successive
mergers or consolidations or sales or other transfers. The rights under this
Section 13 shall be in addition to the rights to exercise Rights and adjustments
under Section 11(a)(ii) and shall survive any exercise thereof.
(d) Notwithstanding anything in this Agreement to the
contrary, Section 13 shall not be applicable to a transaction described in
subparagraphs (x) and (y) of Section 13(a) if: (i) such transaction is
consummated with a Person or Persons who acquired Common Shares pursuant to a
Permitted Offer (or a wholly owned Subsidiary of any such Person or Persons);
(ii) the price per Common Share offered in such transaction is not less than the
price per Common Share paid to all holders of Common Shares whose shares were
purchased pursuant to such Permitted Offer; and (iii) the form of consideration
offered in such transaction is the same as the form of consideration paid
pursuant to such Permitted Offer. Upon consummation of any such transaction
contemplated by this Section 13(d), all Rights hereunder shall expire.
Section 14. Fractional Rights and Fractional Shares.
(a) The Corporation shall not be required to issue fractions
of Rights or to distribute Right Certificates which evidence fractional Rights.
In lieu of such fractional Rights, there shall be paid to the registered holders
of the Right Certificates with regard to which such fractional Rights would
otherwise be issuable, an amount in cash equal to the same fraction of the
current market value of a whole Right. For the purposes of this Section 14(a),
the current market value of a whole Right shall be the closing price of the
Rights for the Trading Day immediately prior to the date on which such
fractional Rights would have been otherwise issuable. The closing price for any
day shall be the last sale price, regular way, or, in case no such sale takes
place on such day, the average of the closing bid and asked prices, regular way,
in either case as reported in the principal consolidated transaction reporting
system with respect to securities listed or admitted to trading on the New York
Stock Exchange or, if the Rights are not listed or admitted to
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trading on the New York Stock Exchange, as reported in the principal
consolidated transaction reporting system with respect to securities listed on
the principal national securities exchange on which the Rights are listed or
admitted to trading or, if the Rights are not listed or admitted to trading on
any national securities exchange, the last quoted price or, if not so quoted,
the average of the high bid and low asked prices as reported on NASDAQ or such
other market or system then in use or, if on any such date the Rights are not
quoted by any such organization, the average of the closing bid and asked prices
as furnished by a professional market maker making a market in the Rights
selected by the Board of Directors of the Corporation. If on any such date no
such market maker is making a market in the Rights, the fair value of the Rights
on such date as determined in good faith by the Board of Directors of the
Corporation shall be used.
(b) The Corporation shall not be required to issue fractions
of Preferred Shares (other than fractions which are one one-thousandth or
integral multiples of one one-thousandth of a Preferred Share) upon exercise of
the Rights or to distribute certificates which evidence fractional Preferred
Shares (other than fractions which are one one-thousandth or integral multiples
of one one-thousandth of a Preferred Share). Fractions of Preferred Shares in
integral multiples of one one-thousandth of a Preferred Share may, at the
election of the Corporation, be evidenced by depositary receipts, pursuant to an
appropriate agreement between the Corporation and a depositary selected by it;
provided that such agreement shall provide that the holders of such depositary
receipts shall have the rights, privileges and preferences to which they are
entitled as beneficial owners of the Preferred Shares represented by such
depositary receipts. In lieu of fractional Preferred Shares that are not one
one-thousandth or integral multiples of one one-thousandth of a Preferred Share,
the Corporation shall pay to the registered holders of Right Certificates at the
time such Rights are exercised as herein provided an amount in cash equal to the
same fraction of the current market value of one Preferred Share. For the
purposes of this Section 14(b), the current market value of a Preferred Share
shall be the closing price of a Preferred Share (as determined pursuant to
Section 11(d)(ii) hereof) for the Trading Day immediately prior to the date of
such exercise.
(c) Following the occurrence of one of the transactions or
events specified in Section 11 giving rise to the right to receive Common
Shares, capital stock equivalents (other than Preferred Shares) or other
securities upon the exercise of a Right, the Corporation shall not be required
to issue fractions of shares or units of such Common Shares, capital stock
equivalents or other securities upon exercise of the Rights or to distribute
certificates which evidence fractions of such Common Shares, capital stock
equivalents or other securities. In lieu of fractional shares or units of such
Common Shares, capital stock equivalents or other securities, the Corporation
may pay to the registered holders of Right Certificates at the time such Rights
are exercised as herein provided an amount in cash equal to the same fraction of
the current market value of a
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share or unit of such Common Shares, capital stock equivalents or other
securities. For purposes of this Section 14(c), the current market value shall
be determined in the manner set forth in Section 11(d) hereof for the Trading
Day immediately prior to the date of such exercise and, if such capital stock
equivalent is not traded, each such capital stock equivalent shall have the
value of one one-thousandth of a Preferred Share.
(d) The holder of a Right by the acceptance of the Right
expressly waives his right to receive any fractional Rights or any fractional
share upon exercise of a Right (except as provided above). The Rights Agent
shall not be deemed to have knowledge of, and shall have no duty in respect of,
the issuance of fractional Rights or fractional shares until it shall have
received instructions from the Corporation concerning the issuance of the
fractional Rights or fractional shares upon which instructions the Rights Agent
may conclusively rely.
Section 15. Rights of Action.
All rights of action in respect of this Agreement, excepting the rights
of action given to the Rights Agent under Section 18 hereof, are vested in the
respective registered holders of the Right Certificates (and, prior to the
Distribution Date, the registered holders of the Common Shares); and any
registered holder of any Right Certificate (or, prior to the Distribution Date,
of the Common Shares), without the consent of the Rights Agent or of the holder
of any other Right Certificate (or, prior to the Distribution Date, of the
Common Shares), may, in his own behalf and for his own benefit, enforce, and may
institute and maintain any suit, action or proceeding against the Corporation to
enforce, or otherwise act in respect of, his right to exercise the Rights
evidenced by such Right Certificate (or, prior to the Distribution Date, of the
Common Shares) in the manner provided in such Right Certificate and in this
Agreement. Without limiting the foregoing or any remedies available to the
holders of Rights, it is specifically acknowledged that the holders of Rights
would not have an adequate remedy at law for any breach of this Agreement and
will be entitled to specific performance of the obligations under, and
injunctive relief against actual or threatened violations of the obligations of
any Person subject to, this Agreement.
Section 16. Agreement of Right Holders.
Every holder of a Right, by accepting the same, consents and agrees
with the Corporation and the Rights Agent and with every other holder of a Right
that:
(a) prior to the Distribution Date, the Rights will be
transferable only in connection with the transfer of the Common Shares;
(b) after the Distribution Date, the Right Certificates are
transferable only
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on the registry books of the Rights Agent if surrendered at the office or
offices of the Rights Agent designated for such purpose, duly endorsed or
accompanied by a proper instrument of transfer and with the appropriate form
fully executed;
(c) subject to Section 7(f) hereof, the Corporation and the
Rights Agent may deem and treat the Person in whose name the Right Certificate
(or, prior to the Distribution Date, the associated Common Shares certificate)
is registered as the absolute owner thereof and of the Rights evidenced thereby
(notwithstanding any notations of ownership or writing on the Right Certificate
or the associated Common Shares certificate made by anyone other than the
Corporation or the Rights Agent) for all purposes whatsoever, and neither the
Corporation nor the Rights Agent, subject to the last sentence of Section 7(e)
hereof, shall be required to be affected by any notice to the contrary; and
(d) notwithstanding anything in this Agreement to the
contrary, neither the Corporation nor the Rights Agent shall have any liability
to any holder of a Right or a beneficial interest in a Right or other Person as
a result of its inability to perform any of its obligations under this Agreement
by reason of any preliminary or permanent injunction or other order, judgment,
decree or ruling (whether interlocutory or final) issued by a court of competent
jurisdiction or by a governmental, regulatory or administrative agency or
commission, or any statute, rule, regulation or executive order promulgated or
enacted by any governmental authority, prohibiting or otherwise restraining
performance of such obligation; provided, however, the Corporation must use its
best efforts to have any such order, decree, judgment, or ruling lifted or
otherwise overturned as soon as possible.
Section 17. Right Certificate Holder Not Deemed a Stockholder.
No holder, as such, of any Right Certificate shall be entitled to vote,
receive dividends or be deemed for any purpose the holder of the Preferred
Shares or any other securities of the Corporation which may at any time be
issuable on the exercise of the Rights represented thereby, nor shall anything
contained herein or in any Right Certificate be construed to confer upon the
holder of any Right Certificate, as such, any of the rights of a stockholder of
the Corporation or any right to vote for the election of directors or upon any
matter submitted to stockholders at any meeting thereof, or to give or withhold
consent to any corporate action, or to receive notice of meetings or other
actions affecting stockholders (except as provided in Section 25 hereof), or to
receive dividends or other distributions or to exercise any preemptive or
subscription rights, or otherwise, until the Right or Rights evidenced by such
Right Certificate shall have been exercised in accordance with the provisions
hereof.
Section 18. Concerning the Rights Agent.
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The Corporation agrees to pay to the Rights Agent reasonable
compensation for all services rendered by it hereunder and, from time to time,
on demand of the Rights Agent, its reasonable expenses and counsel fees and
other disbursements incurred in the preparation, execution, delivery, amendment,
administration and execution of this Agreement and the exercise and performance
of its duties hereunder. The Corporation also agrees to indemnify the Rights
Agent for, and to hold it harmless against, any loss, liability, damage,
judgment, fine, penalty, claim, demand, settlement, cost or expense, incurred
without gross negligence, bad faith or willful misconduct on the part of the
Rights Agent, for any action taken, suffered or omitted by the Rights Agent in
connection with the acceptance and administration of this Agreement, including
without limitation the costs and expenses of defending against any claim of
liability in the premises. The indemnity provided for herein shall survive the
expiration of the Rights and the termination of this Agreement.
The Rights Agent shall be authorized and protected and shall incur no liability
for, or in respect of, any action taken, suffered or omitted by it in connection
with, its acceptance and administration of this Agreement in reliance upon any
Right Certificate or certificate for Common Shares or for other securities of
the Corporation, instrument of assignment or transfer, power of attorney,
endorsement, affidavit, letter, notice, direction, consent, certificate,
statement, or other paper or document (collectively, "Documents") believed by it
to be genuine and to be signed, executed and, where necessary, verified or
acknowledged, by the proper Person or Persons. The Rights Agent shall not be
deemed to have knowledge of, and shall have no duty in respect of, any such
Documents, until it receives notice or instructions in respect thereof. In no
case will the Rights Agent be liable for special, indirect, punitive, incidental
or consequential loss or damage of any kind whatsoever, even if the Rights Agent
has been advised of the likelihood of such loss or damage.
Section 19. Merger or Consolidation or Change of Name of Rights Agent.
Any Person into which the Rights Agent or any successor Rights Agent
may be merged or with which it may be consolidated, or any Person resulting from
any merger or consolidation to which the Rights Agent or any successor Rights
Agent shall be a party, or any Person succeeding to the stock transfer or all or
substantially all of the stockholder services business of the Rights Agent or
any successor Rights Agent, shall be the successor to the Rights Agent under
this Agreement without the execution or filing of any paper or any further act
on the part of any of the parties hereto, provided that such Person would be
eligible for appointment as a successor Rights Agent under the provisions of
Section 21 hereof. In case at the time such successor Rights Agent shall succeed
to the agency created by this Agreement, any of the Right Certificates shall
have been countersigned but not delivered, any such successor Rights Agent may
adopt the countersignature of a predecessor Rights Agent and deliver such Right
Certificates so
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countersigned; and in case at that time any of the Right Certificates shall not
have been countersigned, any successor Rights Agent may countersign such Right
Certificates either in the name of the predecessor or in the name of the
successor Rights Agent; and in all such cases such Right Certificates shall have
the full force provided in the Right Certificates and in this Agreement. In case
at any time the name of the Rights Agent shall be changed and at such time any
of the Right Certificates shall have been countersigned but not delivered, the
Rights Agent may adopt the countersignature under its prior name and deliver
Right Certificates so countersigned; and in case at that time any of the Right
Certificates shall not have been countersigned, the Rights Agent may countersign
such Right Certificates either in its prior name or in its changed name; and in
all such cases such Right Certificates shall have the full force provided in the
Right Certificates and in this Agreement.
Section 20. Duties of Rights Agent.
The Rights Agent undertakes only those duties and obligations expressly
imposed by this Agreement (and no implied duties or obligations) upon the
following terms and conditions, by all of which the Corporation and the holders
of Right Certificates, by their acceptance thereof, shall be bound:
(a) The Rights Agent may consult with legal counsel (who may
be legal counsel for the Corporation), and the advice or opinion of such counsel
shall be full and complete authorization and protection to the Rights Agent and
the Rights Agent shall incur no liability for or in respect of, any action
taken, suffered or omitted by it in good faith and in accordance with such
opinion.
(b) Whenever in the performance of its duties under this
Agreement the Rights Agent shall deem it necessary or desirable that any fact or
matter (including, without limitation, the identity of an Acquiring Person and
the determination of the current market price of any Security) be proved or
established by the Corporation prior to taking, suffering or omitting any action
hereunder, such fact or matter (unless other evidence in respect thereof be
herein specifically prescribed) may be deemed to be conclusively proved and
established by a certificate signed by any one of the Chairman of the Board, the
Chief Executive Officer, the President, any Vice President, the Treasurer or the
Secretary of the Corporation and delivered to the Rights Agent; and such
certificate shall be full authorization and protection to the Rights Agent and
the Rights Agent shall incur no liability in respect of any action taken,
suffered or omitted in good faith by it under the provisions of this Agreement
in reliance upon such certificate.
(c) The Rights Agent shall be liable hereunder only for its
own gross negligence, bad faith or willful misconduct.
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(d) The Rights Agent shall not be liable for, or by reason of
any liability in respect of, the statements of fact or recitals contained in
this Agreement or in the Right Certificates (except its countersignature on such
Right Certificates) or be required to verify the same, but all such statements
and recitals are and shall be deemed to have been made by the Corporation only.
(e) The Rights Agent shall not be under any liability or
responsibility in respect of the validity of this Agreement or the execution and
delivery hereof (except the due execution hereof by the Rights Agent) or in
respect of the validity or execution of any Right Certificate (except its
countersignature thereof); nor shall it be responsible for any breach by the
Corporation of any covenant or condition contained in this Agreement or in any
Rights Certificate; nor shall it be responsible for any change in the
exercisability of the Rights (including the Rights becoming null and void
pursuant to Section 7(e) hereof) or any adjustment required under the provisions
of Section 11 or Section 13 hereof or responsible for the manner, method or
amount of any such adjustment or the ascertaining of the existence of facts that
would require any such adjustment (except with respect to the exercise of Rights
evidenced by Right Certificates after receipt of the certificate described in
Section 12 hereof); nor shall it by any act hereunder be deemed to make any
representation or warranty as to the authorization or reservation of any
Preferred Shares or Common Shares to be issued pursuant to this Agreement or any
Right Certificate or as to whether any Preferred Shares or Common Shares will,
when issued, be validly authorized and issued, fully paid and non-assessable.
(f) The Corporation agrees that it will perform, execute,
acknowledge and deliver or cause to be performed, executed, acknowledged and
delivered all such further and other acts, instruments and assurances as may
reasonably be required by the Rights Agent for the carrying out or performing by
the Rights Agent of the provisions of this Agreement.
(g) The Rights Agent is hereby authorized and directed to
accept instructions with respect to the performance of its duties hereunder from
any one of the Chairman of the Board, the Chief Executive Officer, the
President, any Vice President, the Treasurer or the Secretary of the
Corporation, and to apply to such officers for advice or instructions in
connection with its duties, and such instructions shall be full authorization
and protection to the Rights Agent and the Rights Agent shall incur no liability
for or in respect of any action taken, suffered or omitted by it in good faith
or lack of action in accordance with instructions of any such officer or for any
delay in acting while waiting for those instructions. Any application by the
Rights Agent for written instructions from the Corporation may, at the option of
the Rights Agent, set forth in writing any action proposed to be taken or
omitted by the Rights Agent under this Agreement and the date on or after which
such action shall be taken or suffered or such omission shall be effective. The
Rights Agent shall not be liable or responsible for any
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action taken or suffered by, or omission of, the Rights Agent in accordance with
a proposal included in any such application on or after the date specified in
such application (which date shall not be less than five Business Days after the
date any officer of the Corporation actually receives such application, unless
any such officer shall have consented in writing to an earlier date) unless,
prior to taking any such action (or the effective date in the case of an
omission), the Rights Agent shall have received written instruction from any one
of the Chairman of the Board, the Chief Executive Officer, the President, any
Vice President, the Treasurer or the Secretary of the Corporation in response to
such application specifying the action to be taken, suffered or omitted.
(h) The Rights Agent and any stockholder, affiliate, director,
officer or employee of the Rights Agent may buy, sell or deal in any of the
Rights or other securities of the Corporation or become pecuniarily interested
in any transaction in which the Corporation may be interested, or contract with
or lend money to the Corporation or otherwise act as fully and freely as though
it were not Rights Agent under this Agreement. Nothing herein shall preclude the
Rights Agent from acting in any other capacity for the Corporation or for any
other Person or legal entity.
(i) The Rights Agent may execute and exercise any of the
rights or powers hereby vested in it or perform any duty hereunder either itself
or by or through its attorneys or agents, and the Rights Agent shall not be
answerable or accountable for any act, default, neglect or misconduct of any
such attorneys or agents or for any loss to the Corporation or any other Person
resulting from any such act, default, neglect or misconduct, absent gross
negligence, bad faith or willful misconduct in the selection and continued
employment thereof.
(j) No provision of this Agreement shall require the Rights
Agent to expend or risk its own funds or otherwise incur any financial liability
in the performance of any of its duties hereunder or in the exercise of its
rights if it believes that repayment of such funds or adequate indemnification
against such risk or liability is not reasonably assured to it.
(k) If, with respect to any Rights Certificate surrendered to
the Rights Agent for exercise or transfer, the certificate attached to the form
of assignment or form of election to purchase, as the case may be, has not been
completed, the Rights Agent shall not take any further action with respect to
such requested exercise of transfer without first consulting with the
Corporation.
Section 21. Change of Rights Agent.
The Rights Agent or any successor Rights Agent may resign and be
discharged from its duties under this Agreement upon thirty (30) days' notice in
writing mailed to the
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Corporation and to each transfer agent of the Common Shares or Preferred Shares
by registered or certified mail, and to the holders of the Right Certificates by
first-class mail. The Corporation may remove the Rights Agent or any successor
Rights Agent upon sixty (60) days' notice in writing, mailed to the Rights Agent
or successor Rights Agent, as the case may be, and to each transfer agent of the
Common Shares or Preferred Shares by registered or certified mail, and to
holders of the Right Certificates by first-class mail. If the Rights Agent
shall resign or be removed or shall otherwise become incapable of acting, the
Corporation shall appoint a successor to the Rights Agent. If the Corporation
shall fail to make such appointment within a period of sixty (60) days after
giving notice of such removal or after it has been notified in writing of such
resignation or incapacity by the resigning or incapacitated Rights Agent or by
the holder of a Right Certificate (who shall, with such notice, submit his Right
Certificate for inspection by the Corporation), then the registered holder of
any Right Certificate may apply to any court of competent jurisdiction for the
appointment of a new Rights Agent. Any successor Rights Agent, whether appointed
by the Corporation or by such a court, shall be a Person organized and doing
business under the laws of the United States or of the States of New York or
Illinois (or of any other state of the United States so long as such Person is
authorized to do business in the States of New York and Illinois), in good
standing, having an office in the States of New York or Illinois, which is
subject to supervision or examination by federal or state authority. After
appointment, the successor Rights Agent shall be vested with the same powers,
rights, duties and responsibilities as if it had been originally named as Rights
Agent without further act or deed; but the predecessor Rights Agent shall
deliver and transfer to the successor Rights Agent any property at the time held
by it hereunder, and execute and deliver any further assurance, conveyance, act
or deed necessary for the purpose. Not later than the effective date of any such
appointment the Corporation shall file notice thereof in writing with the
predecessor Rights Agent and each transfer agent of the Common Shares or
Preferred Shares, and mail a notice thereof in writing to the registered holders
of the Right Certificates. Failure to give any notice provided for in this
Section 21, however, or any defect therein, shall not affect the legality or
validity of the resignation or removal of the Rights Agent or the appointment of
the successor Rights Agent, as the case may be.
Section 22. Issuance of New Right Certificates.
Notwithstanding any of the provisions of this Agreement or of the
Rights to the contrary, the Corporation may, at its option, issue new Right
Certificates evidencing Rights in such form as may be approved by its Board of
Directors to reflect any adjustment or change in the Purchase Price and the
number or kind or class of shares or other securities or property purchasable
under the Right Certificates made in accordance with the provisions of this
Agreement.
In addition, in connection with the issuance or sale of Common Shares
following
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the Distribution Date and prior to the earlier of the Redemption Date and the
Final Expiration Date, the Corporation (a) shall with respect to Common Shares
so issued or sold pursuant to the exercise of stock options or under any
employee plan or arrangement, or upon the exercise, conversion or exchange of
securities, notes or debentures issued by the Corporation, and (b) may, in any
other case, if deemed necessary or appropriate by the Board of Directors of the
Corporation, issue Right Certificates representing the appropriate number of
Rights in connection with such issuance or sale; provided, however, that (i) the
Corporation shall not be obligated to issue any such Right Certificates if, and
to the extent that, the Corporation shall be advised by counsel that such
issuance would create a significant risk of material adverse tax consequences to
the Corporation or the Person to whom such Right Certificate would be issued,
and (ii) no Right Certificate shall be issued if, and to the extent that,
appropriate adjustment shall otherwise have been made in lieu of the issuance
thereof.
Section 23. Redemption and Termination.
(a) (i) The Board of Directors of the Corporation may, at its
option, redeem all but not less than all of the then outstanding Rights at a
redemption price of $.01 per Right, as such amount may be appropriately adjusted
to reflect any stock split, stock dividend or similar transaction occurring
after the date hereof (such redemption price being hereinafter referred to as
the "Redemption Price"), at any time prior to the earlier of (x) the occurrence
of a Section 11(a)(ii) Event or (y) the Final Expiration Date.
(ii) In addition, the Board of Directors of the
Corporation may, at its option, at any time following the occurrence of a
Section 11(a)(ii) Event and the expiration of any period during which the holder
of Rights may exercise the rights under Section 11(a)(ii) but prior to any
Section 13 Event redeem all but not less than all of the then outstanding Rights
at the Redemption Price (x) in connection with any merger, consolidation or sale
or other transfer (in one transaction or in a series of related transactions) of
assets or earning power aggregating 50% or more of the earning power of the
Corporation and its subsidiaries (taken as a whole) in which all holders of
Common Shares are treated alike and not involving (other than as a holder of
Common Shares being treated like all other such holders) an Interested
Stockholder or (y)(aa) if and for so long as the Acquiring Person is not
thereafter the Beneficial Owner of 15% of the Common Shares, and (bb) at the
time of redemption no other Persons are Acquiring Persons.
(b) In the case of a redemption permitted under Section
23(a)(i), immediately upon the date for redemption set forth (or determined in
the manner specified) in a resolution of the Board of Directors of the
Corporation ordering the redemption of the Rights, and without any further
action and without any notice, the right to exercise the Rights will terminate
and the only right thereafter of the holders of Rights
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shall be to receive the Redemption Price for each Right so held. In the case of
a redemption permitted only under Section 23(a)(ii), the right to exercise the
Rights will terminate and represent only the right to receive the Redemption
Price upon the later of ten (10) Business Days following the giving of such
notice or the expiration of any period during which the rights under Section
11(a)(ii) may be exercised. The Corporation shall promptly give public notice
and notify the Rights Agent of any such redemption; provided, however, that the
failure to give, or any defect in, any such notice shall not affect the validity
of such redemption. Within ten (10) days after such date for redemption set
forth in a resolution of the Board of Directors ordering the redemption of the
Rights, the Corporation shall mail a notice of redemption to all the holders of
the then outstanding Rights at their last addresses as they appear upon the
registry books of the Rights Agent or, prior to the Distribution Date, on the
registry books of the transfer agent for the Common Shares. Any notice which is
mailed in the manner herein provided shall be deemed given, whether or not the
holder receives the notice. Each such notice of redemption will state the method
by which the payment of the Redemption Price will be made. Neither the
Corporation nor any of its Affiliates or Associates may redeem, acquire or
purchase for value any Rights at any time in any manner other than that
specifically set forth in this Section 23 and other than in connection with the
purchase of Common Shares prior to the Distribution Date.
(c) The Corporation may, at its option, discharge all of its
obligations with respect to the Rights by (i) issuing a press release announcing
the manner of redemption of the Rights in accordance with this Agreement and
(ii) mailing payment of the Redemption Price to the registered holders of the
Rights at their last addresses as they appear on the registry books of the
Rights Agent or, prior to the Distribution Date, on the registry books of the
Transfer Agent of the Common Shares, and upon such action, all outstanding
Rights and Right Certificates shall be null and void without any further action
by the Corporation.
Section 24. Exchange.
(a) The Board of Directors of the Corporation may, at its
option, at any time after the time that any Person becomes an Acquiring Person,
exchange all or part of the then outstanding and exercisable Rights (which shall
not include Rights that have become null and void pursuant to the provisions of
Section 7(e) and Section 11(a)(ii) hereof) for Common Shares of the Corporation
at an exchange ratio of one Common Share per Right, appropriately adjusted to
reflect any stock split, stock dividend or similar transaction occurring after
the date hereof (such exchange ratio being hereinafter referred to as the
"Exchange Ratio"). Notwithstanding the foregoing, the Board of Directors of the
Corporation shall not be empowered to effect such exchange at any time after any
Person (other than the Corporation, any Subsidiary of the Corporation, any
employee benefit plan of the Corporation or any such Subsidiary, any Person
organized, appointed or established
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by the Corporation for or pursuant to the terms of any such plan or any trustee,
administrator or fiduciary of such a plan), together with all Affiliates and
Associates of such Person, becomes the Beneficial Owner of 50% or more of the
Common Shares then outstanding.
(b) Immediately upon the action of the Board of Directors of
the Corporation ordering the exchange of any Rights pursuant to subsection (a)
of this Section 24 and without any further action and without any notice, the
right to exercise such Rights shall terminate and the only right thereafter of
the holders of such Rights shall be to receive that number of Common Shares
equal to the number of such Rights held by such holder multiplied by the
Exchange Ratio. The Corporation shall promptly give public notice and notify the
Rights Agent of any such exchange; provided, however, that the failure to give,
or any defect in, such notice shall not affect the validity of such exchange.
The Corporation promptly shall mail a notice of any such exchange to all of the
holders of such Rights at their last addresses as they appear upon the registry
books of the Rights Agent. Any notice which is mailed in the manner herein
provided shall be deemed given, whether or not the holder receives the notice.
Each such notice of exchange will state the method by which the exchange of the
Common Shares for Rights will be effected and, in the event of any partial
exchange, the number of Rights will be exchanged. Any partial exchange shall be
effected pro rata based on the number of Rights (other than Rights which have
become null and void pursuant to the provisions of Section 7(e) and Section
11(a)(ii) hereof) held by each holder of Rights.
(c) In any exchange pursuant to this Section 24, the
Corporation, at its option, may substitute Preferred Shares (or equivalent
preferred shares, as such term is defined in Section 11(b) hereof) for some or
all of the Common Shares exchangeable for Rights, at the initial rate of one
one-thousandth of a Preferred Share (or equivalent preferred share) for each
Common Share, as appropriately adjusted to reflect adjustments in the voting
rights of the Preferred Shares pursuant to the terms thereof, so that the
fraction of a Preferred Share delivered in lieu of each Common Share shall have
the same voting rights as one Common Share.
(d) The Board of Directors of the Corporation shall not
authorize any exchange transaction referred to in Section 24(a) hereof unless at
the time such exchange is authorized there shall be sufficient Common Shares or
Preferred Shares issued but not outstanding, or authorized but unissued, to
permit the exchange of Rights as contemplated in accordance with this Section
24.
Section 25. Notice of Certain Events.
(a) In case the Corporation shall propose (i) to pay any
dividend payable in stock of any class to the holders of its Preferred Shares or
to make any other distribution
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<PAGE> 44
to the holders of its Preferred Shares (other than a regularly quarterly cash
dividend), (ii) to offer to the holders of its Preferred Shares rights or
warrants to subscribe for or to purchase any additional Preferred Shares or
shares of stock of any class or any other securities, rights or options, (iii)
to effect any reclassification of its Preferred Shares (other than a
reclassification involving only the subdivision of outstanding Preferred
Shares), (iv) to effect any consolidation or merger into or with any other
Person (other than a Subsidiary of the Corporation in a transaction which does
not violate Section 11(n) hereof), or to effect any sale or other transfer (or
to permit one or more of its Subsidiaries to effect any sale or other transfer)
in one or more transactions, of 50% or more of the assets or earning power of
the Corporation and its Subsidiaries (taken as a whole) to any other Person or
Persons (other than the Corporation and/or any of its Subsidiaries in one or
more transactions each of which does not violate Section 11(n) hereof), or (v)
to effect the liquidation, dissolution or winding up of the Corporation, then,
in each such case, the Corporation shall give to the Rights Agent and to each
holder of a Right Certificate, in accordance with Section 26 hereof, a notice of
such proposed action and file a certificate with the Rights Agent to that
effect, which shall specify the record date for the purposes of such stock
dividend, or distribution of rights or warrants, or the date on which such
reclassification, consolidation, merger, sale, transfer, liquidation,
dissolution, or winding up is to take place and the date of participation
therein by the holders of the Preferred Shares, if any such date is to be fixed,
and such notice shall be so given in the case of any action covered by clause
(i) or (ii) above at least twenty (20) days prior to the record date for
determining holders of the Preferred Shares for purposes of such action, and in
the case of any such other action, at least twenty (20) days prior to the date
of the taking of such proposed action or the date of participation therein by
the holders of the Preferred Shares, whichever shall be the earlier.
(b) In case of a Section 11(a)(ii) Event, then (i) the
Corporation shall as soon as practicable thereafter give to each holder of a
Right Certificate, in accordance with Section 26 hereof, a notice of the
occurrence of such event, which notice shall describe such event and the
consequences of such event to holders of Rights under Section 11(a)(ii) hereof,
and (ii) all references in the preceding paragraph (a) to Preferred Shares shall
be deemed thereafter to refer also to Common Shares and/or, if appropriate,
other securities of the Corporation.
Section 26. Notices.
Notices or demands authorized by this Agreement to be given or made by
the Rights Agent or by the holder of any Right Certificate to or on the
Corporation shall be sufficiently given or made if sent by first-class mail,
postage prepaid, addressed (until another address is filed in writing with the
Rights Agent) as follows:
Cabot Microelectronics Corporation
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<PAGE> 45
870 North Commons Drive
Aurora, Illinois 60504
Attention: Matthew Neville, President and
Chief Executive Officer
Subject to the provisions of Section 21 hereof, any notice or demand authorized
by this Agreement to be given or made by the Corporation or by the holder of any
Right Certificate to or on the Rights Agent shall be sufficiently given or made
if sent by first-class mail, postage prepaid, addressed (until another address
is filed in writing with the Corporation) as follows:
EquiServe Trust Company, N.A.
c/o Equiserve Limited Partnership
150 Royall Street
Canton, MA 02021
Attention: Client Administration
Facsimile: 781-575-2549
Notices or demands authorized by this Agreement to be given or made by
the Corporation or the Rights Agent to the holder of any Right Certificate or,
if prior to the Distribution Date, to the holder of certificates representing
Common Shares shall be sufficiently given or made if sent by first-class mail,
postage prepaid, addressed to such holder at the address of such holder as shown
on the registry books of the Corporation.
Section 27. Supplements and Amendments.
Except as set forth in the penultimate sentence of this Section 27,
prior to the Distribution Date, the Corporation may and the Rights Agent shall,
if the Corporation so directs, supplement or amend any provision of this
Agreement without the approval of any holders of certificates representing
Common Shares. From and after the Distribution Date, the Corporation may and the
Rights Agent shall, if the Corporation so directs, supplement or amend this
Agreement without the approval of any holders of Right Certificates in order (i)
to cure any ambiguity, (ii) to correct or supplement any provision contained
herein which may be defective or inconsistent with any other provisions herein,
(iii) to shorten or lengthen any time period hereunder or (iv) to change or
supplement the provisions hereunder in any manner which the Corporation may deem
necessary or desirable and which shall not adversely affect the interests of the
holders of Right Certificates (other than an Acquiring Person or an Affiliate or
Associate of an Acquiring Person); provided, however, that this Agreement may
not be supplemented or amended to lengthen, pursuant to clause (iii) of this
sentence, (A) a time period relating to when the Rights may be redeemed at such
time as the Rights are not then redeemable, or (B) any other time period unless
any such lengthening is for the purpose of protecting, enhancing
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<PAGE> 46
or clarifying the rights of, and/or the benefits to, the holders of Rights. Upon
the delivery of a certificate from an appropriate officer of the Corporation
which states that the proposed supplement or amendment is in compliance with the
terms of this Section 27, and if requested by the Rights Agent an opinion of
counsel, the Rights Agent shall execute such supplement or amendment, provided
that such supplement or amendment does not adversely affect the rights or
obligations of the Rights Agent under Section 18 or Section 20 of this
Agreement. Prior to the Distribution Date, the interests of the holders of
Rights shall be deemed coincident with the interests of the holders of Common
Shares.
Section 28. Determination and Actions by the Board of Directors, etc.
The Board of Directors of the Corporation shall have the exclusive
power and authority to administer this Agreement and to exercise all rights and
powers specifically granted to the Board of Directors of the Corporation, or the
Corporation, or as may be necessary or advisable in the administration of this
Agreement, including, without limitation, the right and power to (i) interpret
the provisions of this Agreement, and (ii) make all determinations deemed
necessary or advisable for the administration of this Agreement (including,
without limitation, a determination to redeem or not redeem the Rights or to
amend the Agreement and whether any proposed amendment adversely affects the
interests of the holders of Right Certificates). For all purposes of this
Agreement, any calculation of the number of Common Shares or other securities
outstanding at any particular time, including for purposes of determining the
particular percentage of such outstanding Common Shares or any other securities
of which any Person is the Beneficial Owner, shall be made in accordance with
the last sentence of Rule 13d-3(d)(1)(i) of the General Rules and Regulations
under the Exchange Act as in effect on the date of this Agreement. All such
actions, calculations, interpretations and determinations (including, for
purposes of clause (y) below, all omissions with respect to the foregoing) which
are done or made by the Board of Directors of the Corporation in good faith (and
the Rights Agent shall be able to assume that the Board of Directors of the
Corporation acted in such good faith), shall (x) be final, conclusive and
binding on the Corporation, the Rights Agent, the holders of the Right
Certificates and all other Persons, and (y) not subject the Board of Directors
of the Corporation to any liability to the holders of the Right Certificates.
Section 29. Successors.
All the covenants and provisions of this Agreement by or for the
benefit of the Corporation or the Rights Agent shall bind and inure to the
benefit of their respective successors and assigns hereunder.
Section 30. Benefits of this Agreement.
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<PAGE> 47
Nothing in this Agreement shall be construed to give to any person or
corporation other than the Corporation, the Rights Agent and the registered
holders of the Right Certificates (and, prior to the Distribution Date, the
Common Shares) any legal or equitable right, remedy or claim under this
Agreement; but this Agreement shall be for the sole and exclusive benefit of the
Corporation, the Rights Agent and the registered holders of the Right
Certificates (and, prior to the Distribution Date, the Common Shares).
Section 31. Severability.
If any term, provision, covenant or restriction of this Agreement is
held by a court of competent jurisdiction or other authority to be invalid, void
or unenforceable, the remainder of the terms, provisions, covenants and
restrictions of this Agreement shall remain in full force and effect and shall
in no way be affected, impaired or invalidated.
Section 32. Governing Law.
This Agreement, each Right and each Right Certificate issued hereunder
shall be deemed to be a contract made under the laws of the State of Delaware
and for all purposes shall be governed by and construed in accordance with the
laws of such State applicable to contracts to be made and performed entirely
within such State; except that all provisions regarding the rights, duties and
obligations of the Rights Agent shall be governed by and construed in accordance
with the laws of the State of New York applicable to contracts made and to be
performed entirely within such State.
Section 33. Counterparts
This Agreement may be executed in any number of counterparts and each
of such counterparts shall for all purposes be deemed to be an original, and all
such counterparts shall together constitute but one and the same instrument.
Section 34. Descriptive Headings.
Descriptive headings of the several Sections of this Agreement are
inserted for convenience only and shall not control or affect the meaning or
construction of any of the provisions hereof.
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<PAGE> 48
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed and attested, all as of the date and year first
above written.
CABOT MICROELECTRONICS
CORPORATION
Attest:
By /s/ William C. McCarthy By: /s/ Matthew Neville
Name: William C. McCarthy, Secretary Name: Matthew Neville, President
EQUISERVE TRUST COMPANY, N.A.
Attest:
By: /s/ Carole A. McHugh By: /s/ Charles V. Rossi
Name: Carole A. McHugh Name: Charles V. Rossi
Title: Account Manager Title: Executive Vice President
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<PAGE> 49
Exhibit A
CABOT MICROELECTRONICS CORPORATION
CERTIFICATE OF DESIGNATION, PREFERENCES
AND RIGHTS OF SERIES A JUNIOR PARTICIPATING
PREFERRED STOCK
(Pursuant to Section 151
of the General Corporation Law of the State of Delaware)
We, Matthew Neville, the President and Chief Executive Officer, and
William C. McCarthy, Chief Financial Officer and Secretary of Cabot
Microelectronics Corporation, a corporation organized and existing under the
General Corporation Law of the State of Delaware (the "Corporation"), in
accordance with the provisions of Section 151 thereof, do hereby certify;
The Board of Directors, at a meeting held on March 24, 2000, adopted
the following resolution to create, upon the filing with the Secretary of State
of the State of Delaware, and the effectiveness of (the "Effective Time"), the
Corporation's Amended and Restated Certificate of Incorporation (the
"Certificate of Incorporation"), a series of fifty thousand (50,000) shares of
Preferred Stock designated as Series A Junior Participating Preferred Stock;
WHEREAS, the Certificate of Incorporation will provide that the
Corporation is authorized to issue 20,000,000 shares of Preferred Stock, none of
which are currently issued and outstanding, now therefore it is:
RESOLVED, that pursuant to the authority vested in the Board of
Directors of the Corporation by Article IV of the Certificate of Incorporation
(as defined below), a series of Preferred Stock of the Corporation shall, upon
the Effective Time, be created out of the authorized but unissued shares of the
capital stock of the Corporation, such series to be designated Series A Junior
Participating Preferred Stock (the "Participating Preferred Stock"), to consist
of 50,000 shares, par value $.001 per share, of which the preferences and
relative and other rights, and the qualifications, limitations or restrictions
thereof, shall be as follows:
1. Future Increase or Decrease. Subject to paragraph 4(e) of
this resolution, the number of shares of said series may at any time or from
time to time be increased or decreased by the Board of Directors notwithstanding
that shares of such series may be outstanding at such time of increase or
decrease.
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<PAGE> 50
2. Dividend Rate.
(a) The holders of shares of Participating Preferred
Stock shall be entitled to receive, when, as and if declared by the Board of
Directors out of funds legally available for the purpose, quarterly dividends
payable in cash on the first day of each January, April, July and October in
each year (each such date being referred to herein as a "Quarterly Dividend
Payment Date"), commencing on the first Quarterly Dividend Payment Date after
the first issuance (the "First Issuance") of a share or fraction of a share of
Participating Preferred Stock, in an amount per share (rounded to the nearest
cent) equal to the greater of (i) $10.00 and (ii) 1,000 times the aggregate per
share amount of all cash dividends and 1,000 times the aggregate per share
amount (payable in kind) of all non-cash dividends or other distributions, other
than a dividend or distribution payable in shares of Common Stock, par value
$.001 per share, of the Corporation ("Common Stock") or by way of a subdivision
of the outstanding shares of Common Stock (by reclassification or otherwise),
declared on the Common Stock, since the immediately preceding Quarterly Dividend
Payment Date, or, with respect to the first Quarterly Dividend Payment Date,
since the first issuance of any share or fraction of a share of Participating
Preferred Stock. In the event the Corporation shall at any time after the First
Issuance declare or pay any dividend on the Common Stock payable in shares of
Common Stock, or effect a subdivision or combination or consolidation of the
outstanding shares of Common Stock (by reclassification or otherwise than by
payment of a dividend in shares of Common Stock) into a greater or lesser number
of shares of Common Stock, then in each such case the amount to which holders of
shares of Participating Preferred Stock were entitled immediately prior to such
event under the preceding sentence shall be adjusted by multiplying such amount
by a fraction, the numerator of which is the number of shares of Common Stock
outstanding immediately after such event and the denominator of which is the
number of shares of Common Stock that were outstanding immediately prior to such
event.
(b) On or after the First Issuance, no dividend on
Common Stock shall be declared unless concurrently therewith a dividend or
distribution is declared on the Participating Preferred Stock as provided in
paragraph (a) above; and the declaration of any such dividend on the Common
Stock shall be expressly conditioned upon payment or declaration of and
provision for a dividend on the Participating Preferred Stock as above provided.
In the event no dividend or distribution shall have been declared on the Common
Stock during the period between any Quarterly Dividend Payment Date and the next
subsequent Quarterly Dividend Payment Date, a dividend of $10.00 per share on
the Participating Preferred Stock shall nevertheless be payable on such
subsequent Quarterly Dividend Payment Date.
(c) Whenever quarterly dividends or other dividends
payable on the Participating Preferred Stock as provided in paragraph (a) above
are in arrears, thereafter
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<PAGE> 51
and until all accrued and unpaid dividends and distributions, whether or not
declared, on shares of Participating Preferred Stock outstanding shall have been
paid in full, the Corporation shall not redeem or purchase or otherwise acquire
for consideration shares of any stock ranking junior (either as to dividends or
upon liquidation, dissolution or winding up) to the Participating Preferred
Stock, provided that the Corporation may at any time redeem, purchase or
otherwise acquire shares of any such junior stock in exchange for shares of any
stock of the Corporation ranking junior (as to dividends and upon dissolution,
liquidation or winding up) to the Participating Preferred Stock.
(d) Dividends shall begin to accrue and be cumulative
on outstanding shares of Participating Preferred Stock from the Quarterly
Dividend Payment Date next preceding the date of issue of such shares of
Participating Preferred Stock, unless the date of issue of such shares is prior
to the record date for the first Quarterly Dividend Payment Date, in which case
dividends on such shares shall begin to accrue from the date of issue of such
shares, or unless the date of issue is a Quarterly Dividend Payment Date or is a
date after the record date for the determination of holders of shares of
Participating Preferred Stock entitled to receive a quarterly dividend and
before such Quarterly Dividend Payment Date, in either of which events such
dividends shall begin to accrue and be cumulative from such Quarterly Dividend
Payment Date. Accrued but unpaid dividends shall not bear interest. The Board of
Directors may fix a record date for the determination of holders of shares of
Participating Preferred Stock entitled to receive payment of a dividend
distribution declared thereon, which record date shall be no more than 30 days
prior to the date fixed for the payment thereof.
3. Dissolution, Liquidation and Winding Up. In the event of
any voluntary or involuntary dissolution, liquidation or winding up of the
affairs of the Corporation (hereinafter referred to as a "Liquidation"), the
holders of Participating Preferred Stock shall be entitled to receive the
greater of (a) $10.00 per share, plus an amount equal to accrued and unpaid
dividends and distributions thereon, whether or not declared, to the date of
such payment and (b) the aggregate amount per share equal to 1,000 times the
aggregate amount to be distributed per share to holders of Common Stock (the
"Participating Preferred Liquidation Preference"). In the event the Corporation
shall at any time after the First Issuance declare or pay any dividend on the
Common Stock payable in shares of Common Stock, or effect a subdivision or
combination or consolidation of the outstanding shares of Common Stock (by
reclassification or otherwise than by payment of a dividend in shares of Common
Stock) into a greater or lesser number of shares of Common Stock, then in each
such case the aggregate amount to which holders of shares of Participating
Preferred Stock were entitled immediately prior to such event under the
preceding sentence shall be adjusted by multiplying such amount by a fraction
the numerator of which is the number of shares of Common Stock outstanding
immediately after such event and the denominator of which is the number of
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<PAGE> 52
shares of Common Stock that were outstanding immediately prior to such event.
4. Voting Rights. The holders of shares of Participating
Preferred Stock shall have the following voting rights:
(a) Each share of Participating Preferred Stock shall
entitle the holder thereof to one thousand (1,000) votes on all matters
submitted to a vote of the stockholders of the Corporation. In the event the
Corporation shall at any time after the First Issuance declare or pay any
dividend on the Common Stock payable in shares of Common Stock, or effect a
subdivision or combination or consolidation of the outstanding shares of Common
Stock (by reclassification or otherwise than by payment of a dividend in shares
of Common Stock) into a greater or lesser number of shares of Common Stock, then
in each such case the aggregate number of votes to which holders of shares of
Participating Preferred Stock were entitled immediately prior to such event
under the preceding sentence shall be adjusted by multiplying such number by a
fraction the numerator of which is the number of shares of Common Stock
outstanding immediately after such event and the denominator of which is the
number of shares of Common Stock that were outstanding immediately prior to such
event.
(b) Except as otherwise provided herein, or by law,
the Corporation's Restated Certificate of Incorporation ("Certificate of
Incorporation") or the Bylaws of the Corporation (the "Bylaws"), the holders of
shares of Participating Preferred Stock and the holders of shares of Common
Stock shall vote together as one class on all matters submitted to a vote of
stockholders of the Corporation.
(c) If and whenever dividends on the Participating
Preferred Stock shall be in arrears in an amount equal to six quarterly dividend
payments, then and in such event the holders of the Participating Preferred
Stock, voting separately as a class (subject to the provisions of subparagraph
(d) below), shall be entitled at the next annual meeting of the stockholders or
at any special meeting to elect two (2) directors. Each share of Participating
Preferred Stock shall be entitled to one vote, and holders of fractional shares
shall have the right to a fractional vote. Upon election, such directors shall
become additional directors of the Corporation and the authorized number of
directors of the Corporation shall thereupon be automatically increased by such
number of directors. Such right of the holders of Participating Preferred Stock
to elect directors may be exercised until all dividends in default on the
Participating Preferred Stock shall have been paid in full, and when so paid and
set apart, the right of the holders of Participating Preferred Stock to elect
such number of directors shall cease, the term of such directors shall thereupon
terminate, and the authorized number of directors of the Corporation shall
thereupon return to the number of authorized directors otherwise in effect, but
subject always to the same provisions for the vesting of such special voting
rights in the case of any such future dividend default or defaults. The fact
that dividends
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<PAGE> 53
have been paid and set apart as required by the preceding sentence shall be
evidenced by a certificate executed by the President and the Chief Financial
Officer of the Corporation and delivered to the Board of Directors. The
directors so elected by holders of Participating Preferred Stock shall serve
until the certificate described in the preceding sentence shall have been
delivered to the Board of Directors or until their respective successors shall
be elected or appointed and qualify.
At any time when such special voting rights have been so vested in the
holders of the Participating Preferred Stock, the Secretary of the Corporation
may, and upon the written request of the holders of record of 10% or more of the
number of shares of the Participating Preferred Stock then outstanding addressed
to such Secretary at the principal office of the Corporation in the State of
Illinois, shall call a special meeting of the holders of the Participating
Preferred Stock for the election of the directors to be elected by them as
hereinabove provided, to be held in the case of such written request within
forty (40) days after delivery of such request, and in either case to be held at
the place and upon the notice provided by law and in the Bylaws of the
Corporation for the holding of meetings of stockholders; provided, however, that
the Secretary shall not be required to call such a special meeting (i) if any
such request is received less than ninety (90) days before the date fixed for
the next ensuing annual or special meeting of stockholders or (ii) if at the
time any such request is received, the holders of Participating Preferred Stock
are not entitled to elect such directors by reason of the occurrence of an event
specified in the third sentence of subparagraph (d) below.
(d) If, at any time when the holders of Participating
Preferred Stock are entitled to elect directors pursuant to the foregoing
provisions of this paragraph 4, the holders of any one or more additional series
of Preferred Stock are entitled to elect directors by reason of any default or
event specified in the Certificate of Incorporation, as in effect at the time of
the certificate of designation for such series, and if the terms for such other
additional series so permit, the voting rights of the two or more series then
entitled to vote shall be combined (with each series having a number of votes
proportional to the aggregate liquidation preference of its outstanding shares).
In such case, the holders of Participating Preferred Stock and of all such other
series then entitled so to vote, voting as a class, shall elect such directors.
If the holders of any such other series (if designated) have elected such
directors prior to the happening of the default or event permitting the holders
of Participating Preferred Stock to elect directors, or prior to a written
request for the holding of a special meeting being received by the Secretary of
the Corporation from the holders of not less than 10% of the then outstanding
shares of Participating Preferred Stock, then such directors so previously
elected will be deemed to have been elected by and on behalf of the holders of
Participating Preferred Stock as well as such other series, without prejudice to
the right of the holders of Participating Preferred Stock to vote for directors
if such previously elected directors shall resign, cease to serve or fail to
stand for
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<PAGE> 54
reelection while the holders of Participating Preferred Stock are entitled to
vote. If the holders of any such other series are entitled to elect in excess of
two (2) directors, the Participating Preferred Stock shall not participate in
the election of more than two (2) such directors, and those directors whose
terms first expire shall be deemed to be the directors elected by the holders of
Participating Preferred Stock; provided that, if at the expiration of such terms
the holders of Participating Preferred Stock are entitled to vote in the
election of directors pursuant to the provisions of this paragraph 4, then the
Secretary of the Corporation shall call a meeting (which meeting may be the
annual meeting or special meeting of stockholders referred to in subparagraph
(c)) of holders of Participating Preferred Stock for the purpose of electing
replacement directors (in accordance with the provisions of this paragraph 4) to
be held on or prior to the time of expiration of the expiring terms referred to
above.
(e) Except as otherwise set forth herein or required
by law, the Certificate of Incorporation or the Bylaws, holders of Participating
Preferred Stock shall have no special voting rights and their consent shall not
be required (except to the extent they are entitled to vote with holders of
Common Stock as set forth herein) for the taking of any corporate action. No
consent of the holders of outstanding shares of Participating Preferred Stock at
any time outstanding shall be required in order to permit the Board of Directors
to: (i) increase the number of authorized shares of Participating Preferred
Stock or to decrease such number to a number not below the sum of the number of
shares of Participating Preferred Stock then outstanding and the number of
shares with respect to which there are outstanding rights to purchase; or (ii)
issue Preferred Stock which is senior to the Participating Preferred Stock,
junior to the Participating Preferred Stock or on a parity with the
Participating Preferred Stock.
5. Consolidation, Merger, etc. In case the Corporation shall
enter into any consolidation, merger, combination or other transaction in which
the shares of Common Stock are exchanged for or changed into other stock or
securities, cash and/or any other property, then in any such case each share of
Participating Preferred Stock shall at the same time be similarly exchanged or
changed into an amount per share, subject to the provision for adjustment
hereinafter set forth, equal to 1,000 times the aggregate amount of stock,
securities, cash and/or any other property (payable in kind), as the case may
be, into which or for which each share of Common Stock is changed or exchanged.
In the event the Corporation shall at any time after the First Issuance declare
or pay any dividend on the Common Stock payable in shares of Common Stock, or
effect a subdivision or combination or consolidation of the outstanding shares
of Common Stock (by reclassification or otherwise than by payment of a dividend
in shares of Common Stock) into a greater or lesser number of shares of Common
Stock, then in each such case the amount set forth in the preceding sentence
with respect to the exchange or change of shares of Participating Preferred
Stock shall be adjusted by multiplying such amount by a
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<PAGE> 55
fraction, the numerator of which is the number of shares of Common Stock
outstanding immediately after such event and the denominator of which is the
number of shares of Common Stock that were outstanding immediately prior to such
event.
6. Redemption. The shares of Participating Preferred Stock
shall not be redeemable.
7. Conversion Rights. The Participating Preferred Stock is not
convertible into Common Stock or any other security of the Corporation.
8. Ranking. The Participating Preferred Stock shall rank
junior to all other classes and series of the Corporation's Preferred Stock as
to payment of dividends and the distribution of assets, unless the terms of any
such series shall provide otherwise.
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<PAGE> 56
IN WITNESS WHEREOF, the undersigned President and Chief Executive Officer and
Secretary and General Counsel of the Corporation each declares under penalty of
perjury the truth, to the best of his knowledge, of this Certificate of
Designation, Preferences and Rights of Series B Junior Participating Preferred
Stock.
Executed this day of April, 2000.
By: ________________________
Name: Matthew Neville
Title: President and
Chief Executive Officer
Attest:
___________________________
Name: William C. McCarthy
Title: Chief Financial Officer, Secretary
STATE OF ILLINOIS )
) ss.:
COUNTY OF ________ )
This instrument was acknowledged before me on April , 2000, by
Matthew Neville, as President and Chief Executive Officer of Cabot
Microelectronics Corporation and by William C. McCarthy, as Chief Financial
Officer and Secretary of Cabot Microelectronics Corporation They are personally
known to me and did not take an oath.
______________________________________
Name: ________________________________
Notary Public - State of Illinois
My Commission Expires:
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<PAGE> 57
Preferred
Exhibit B
Form of Right Certificate
Certificate No. R-_______ _______ Rights
NOT EXERCISABLE AFTER APRIL 7, 2010, OR EARLIER IF REDEEMED BY THE CORPORATION.
THE RIGHTS ARE SUBJECT TO REDEMPTION AT $0.01 PER RIGHT ON THE TERMS SET FORTH
IN THE RIGHTS AGREEMENT.
Right Certificate
Cabot Microelectronics Corporation
This certifies that ________________________, or registered assigns, is
the registered owner of the number of Rights set forth above, each of which
entitles the owner thereof, subject to the terms, provisions and conditions of
the Rights Agreement, dated as of March 24, 2000 (the "Rights Agreement"),
between Cabot Microelectronics Corporation, a Delaware corporation (the
"Corporation"), and Equiserve Trust Company, N.A., a national banking
association (the "Rights Agent"), to purchase from the Corporation at any time
after the Distribution Date (as such term is defined in the Rights Agreement)
and prior to 5:00 P.M., New York City, New York time, on April 7, 2010, unless
the Rights evidenced hereby shall have been previously redeemed by the
Corporation, at the office or offices of the Rights Agent designated for such
purpose, or at the office of its successor as Rights Agent, one one-thousandth
of a fully paid non-assessable share of Series A Junior Participating Preferred
Stock, par value $.001 per share (the "Preferred Shares"), of the Corporation,
at a purchase price of $138.00 per one one-thousandth of Preferred Share (the
"Purchase Price"), upon presentation and surrender of this Right Certificate
with the Form of Election to Purchase duly executed. The number of Rights
evidenced by this Right Certificate (and the number of one one-thousandths of a
Preferred Share which may be purchased upon exercise hereof) set forth above,
and the Purchase Price set forth above, are the number and Purchase Price as of
April 7, 2000 based on the Preferred Shares as constituted at such date.
Upon the occurrence of a Section 11(a)(ii) Event (as such term is
defined in the Rights Agreement), if the Rights evidenced by this Right
Certificate are Beneficially Owned by (i) an Acquiring Person or an Affiliate or
Associate of any such Acquiring Person (as such terms are defined in the Rights
Agreement), (ii) a transferee of any such Acquiring Person, Associate or
Affiliate who becomes a transferee after the Acquiring Person becomes such, or
(iii) under certain circumstances specified in the Rights Agreement, a
transferee of any such Acquiring Person, Associate or Affiliate who
51
<PAGE> 58
becomes a transferee prior to or concurrently with the Acquiring Person becoming
such, such Rights shall become null and void and no holder hereof shall have any
right with respect to such Rights from and after the occurrence of such Section
11(a)(ii) Event.
As provided in the Rights Agreement, the Purchase Price and the number
of one one-thousandths of a Preferred Share or other securities which may be
purchased upon the exercise of the Rights evidenced by this Right Certificate
are subject to modification and adjustment upon the happening of certain events,
including Triggering Events (as such term is defined in the Rights Agreement).
This Right Certificate is subject to all of the terms, covenants and
restrictions of the Rights Agreement, which terms, covenants and restrictions
are hereby incorporated herein by reference and made a part hereof and to which
Rights Agreement reference is hereby made for a full description of the rights,
limitations of rights, obligations, duties and immunities hereunder of the
Rights Agent, the Corporation and the holders of the Right Certificates, which
limitations of rights include the temporary suspension of the exercisability of
such Rights under the specific circumstances set forth in the Rights Agreement.
Copies of the Rights Agreement are on file at the principal executive offices of
the Corporation and the office or offices of the Rights Agent.
This Right Certificate, with or without other Right Certificates, upon
surrender at the principal office of the Rights Agent, may be exchanged for
another Right Certificate or Right Certificates of like tenor and date
evidencing Rights entitling the holder to purchase a like aggregate number of
Preferred Shares or other securities as the Rights evidenced by the Right
Certificate or Right Certificates surrendered shall have entitled such holder to
purchase. If this Right Certificate shall be exercised in part, the holder shall
be entitled to receive upon surrender hereof another Right Certificate or Right
Certificates for the number of whole Rights not exercised.
Subject to the provisions of the Rights Agreement, the Rights evidenced
by this Certificate may be redeemed by the Corporation at a redemption price of
$0.01 per Right (subject to adjustment as provided in the Rights Agreement)
payable in cash.
No fractional Preferred Shares will be issued upon the exercise of any
Right or Rights evidenced hereby (other than fractions which are one
one-thousandth or integral multiples of one one-thousandth of a Preferred Share,
which may, at the election of the Corporation, be evidenced by depositary
receipts), but in lieu thereof a cash payment will be made, as provided in the
Rights Agreement.
No holder of this Right Certificate shall be entitled to vote or
receive dividends or be deemed for any purpose the holder of the Preferred
Shares or of any other securities of the Corporation which may at any time be
issuable on the exercise hereof, nor shall
52
<PAGE> 59
anything contained in the Rights Agreement or herein be construed to confer upon
the holder hereof, as such, any of the rights of a stockholder of the
Corporation or any right to vote for the election of directors or upon any
matter submitted to stockholders at any meeting thereof, or to give or withhold
consent to any corporate action, or to receive notice of meetings or other
actions affecting stockholders (except as provided in the Rights Agreement), or
to receive dividends or other distributions or to exercise any preemptive or
subscription rights, or otherwise, until the Right or Rights evidenced by this
Right Certificate shall have been exercised as provided in the Rights Agreement.
This Right Certificate shall not be valid or obligatory for any purpose
until it shall have been countersigned by the Rights Agent.
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<PAGE> 60
WITNESS the facsimile signature of the proper officers of the
Corporation and its corporate seal.
[SEAL]
ATTEST: CABOT MICROELECTRONICS CORPORATION
By:_____________________________ By:_____________________________
Name: William C. McCarthy Name: Matthew Neville
Title: Secretary Title: President
Countersigned:
EQUISERVE TRUST COMPANY, N.A.,
as Rights Agent
By:_____________________________
Authorized Officer
54
<PAGE> 61
Form of Reverse Side of Right Certificate
FORM OF ASSIGNMENT
(To be executed by the registered holder if such
holder desires to transfer the Right Certificate.)
FOR VALUE RECEIVED_________________ hereby sells, assigns and transfers
unto __________________________________________________________________________
_______________________________________________________________________________
(Please print name and address of transferee)
_______________________________________________________________________________
this Right Certificate, together with all right, title and interest therein, and
does hereby irrevocably constitute and appoint _______________ Attorney, to
transfer the within Right Certificate on the books of the within-named
Corporation, with full power of substitution.
Dated: ____________, ____
_____________________________
Signature
Signature Guaranteed:
_______________________________________________________
The undersigned hereby certifies that (1) the Rights evidenced
by this Right Certificate are not being sold, assigned or transferred by or on
behalf of a Person who is or was an Acquiring Person or an Affiliate or
Associate thereof (as such terms are defined in the Right Agreement) and (2)
after due inquiry and to the best knowledge of the undersigned, the undersigned
did not acquire the Rights evidenced by this Right Certificate from any Person
who is or was an Acquiring Person or an Affiliate or Associate thereof (as such
terms are defined in the Rights Agreement).
____________________________
Signature
55
<PAGE> 62
Form of Reverse Side of Right Certificate -- continued
FORM OF ELECTION TO PURCHASE
(To be executed by the registered holder if such holder
desires to exercise Rights
represented by the Right Certificate.)
To the Rights Agent:
The undersigned hereby irrevocably elects to exercise _________________
Rights represented by this Right Certificate to purchase the Preferred Shares,
Common Shares or other securities issuable upon the exercise of such Rights and
requests that certificates for such Preferred Shares, Common Shares or other
securities be issued in the name of:
Please insert social security
or other identifying number ________________________________________________
_______________________________________________________________________________
(Please print name and address)
_______________________________________________________________________________
If such number of Rights shall not be all the Rights evidenced by this Right
Certificate, a new Right Certificate for the balance remaining of such Rights
shall be registered in the name of and delivered to:
Please insert social security
or other identifying number ________________________________________________
_______________________________________________________________________________
(Please print name and address)
_______________________________________________________________________________
56
<PAGE> 63
Form of Reverse Side of Right Certificate -- continued
Dated: _______________, ____
__________________________
Signature
Signature Guaranteed:
57
<PAGE> 64
Form of Reverse Side of Right Certificate -- continued.
The undersigned hereby certifies that (1) the Rights evidenced
by this Right Certificate are not being exercised by or on behalf of a Person
who is or was an Acquiring Person or an Affiliate or Associate thereof (as such
terms are defined in the Rights Agreement) and (2) after due inquiry and to the
best knowledge of the undersigned, the undersigned did not acquire the Rights
evidenced by this Rights Certificate from any Person who is or was an Acquiring
Person or an Affiliate or Associate thereof (as such terms are defined in the
Rights Agreement).
______________________________
Signature
NOTICE
The signature on the foregoing Forms of Assignment and
Election and certificates must conform to the name as written upon the face of
this Right Certificate in every particular, without alteration or enlargement or
any change whatsoever.
In the event the certification set forth above in the Form of
Assignment or the Form of Election to Purchase, as the case may be, is not
completed, the Corporation and the Rights Agent will deem the Beneficial Owner
of the Rights evidenced by this Right Certificate to be an Acquiring Person or
an Affiliate or Associate thereof (as such terms are defined in the Rights
Agreement) and such Assignment or Election to Purchase will not be honored.
58
<PAGE> 65
Exhibit C
SUMMARY OF RIGHTS TO PURCHASE
PREFERRED SHARES
On March 24, 2000, the Board of Directors of Cabot Microelectronics
Corporation (the "Corporation") declared a dividend distribution of one
preferred share purchase right (a "Right") for each outstanding share of Common
Stock, par value $.001 per share (the "Common Shares"), of the Corporation. The
dividend is payable to the stockholders of record on April 7, 2000 (the "Record
Date"), and with respect to Common Shares issued thereafter until the
Distribution Date (as defined below) and, in certain circumstances, with respect
to Common Shares issued after the Distribution Date. Except as set forth below,
each Right, when it becomes exercisable, entitles the registered holder to
purchase from the Corporation one one-thousandth of a share of Series A Junior
Participating Preferred Stock, $.001 par value per share (the "Preferred
Shares"), of the Corporation at a price of $138.00 per one one-thousandth of a
Preferred Share (the "Purchase Price"), subject to adjustment. The description
and terms of the Rights are set forth in a Rights Agreement (the "Rights
Agreement") between the Corporation and EquiServe Trust Company, N.A., as Rights
Agent (the "Rights Agent"), dated as of March 24, 2000.
Initially, the Rights will be attached to all certificates representing
Common Shares then outstanding, and no separate Right Certificates will be
distributed. The Rights will separate from the Common Shares upon the earliest
to occur of (i) the date of first public announcement that an Acquiring Person
(as hereinafter defined) has become such; or (ii) 10 days (or such later date as
the Board may determine) following the commencement of, or announcement of an
intention to make, a tender offer or exchange offer the consummation of which
would result in a person or group becoming an Acquiring Person (as hereinafter
defined) (the earliest of such dates being called the "Distribution Date").
Subject to certain exceptions, an "Acquiring Person" is any person who or which
together with all affiliated and associates is the beneficial owner of 15% or
more of the outstanding Common Shares (except pursuant to a Permitted Offer (as
hereinafter defined). The date of first public announcement that a person or
group has become an Acquiring Person is the "Shares Acquisition Date." The
Rights Agreement provides that, until the Distribution Date, the Rights will be
transferred with and only with the Common Shares. Until the Distribution Date
(or earlier redemption or expiration of the Rights) new Common Share
certificates issued after the Record Date upon transfer or new issuance of
Common Shares will contain a notation incorporating the Rights Agreement by
reference. Until the Distribution Date (or earlier redemption or expiration of
the Rights), the surrender for transfer of any certificates for Common Shares
outstanding as of the Record Date, even without such notation or a copy of this
Summary of Rights being attached thereto, will also constitute the transfer of
the Rights associated with the Common Shares represented by such certificate. As
soon as practicable following the
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<PAGE> 66
Distribution Date, separate certificates evidencing the Rights ("Right
Certificates") will be mailed to holders of record of the Common Shares as of
the close of business on the Distribution Date (and to each initial record
holder of certain Common Shares issued after the Distribution Date), and such
separate Right Certificates alone will evidence the Rights.
The Rights are not exercisable until the Distribution Date and will
expire at the close of business on April 7, 2010, unless earlier redeemed by the
Corporation as described below.
In the event that any person becomes an Acquiring Person or an
affiliate or associate thereof (except pursuant to a tender or exchange offer
which is for all outstanding Common Shares at a price and on terms which a
majority of certain members of the Board of Directors determines to be adequate
and in the best interests of the Corporation and its stockholders, other than
such Acquiring Person, its affiliates and associates (a "Permitted Offer")),
each holder of a Right will thereafter have the right (the "Flip-In Right") to
receive upon exercise the number of Common Shares or of one one-thousandths of a
share of Preferred Shares (or, in certain circumstances, other securities of the
Corporation) having a value (immediately prior to such triggering event) equal
to two times the exercise price of the Right. Notwithstanding the foregoing,
following the occurrence of the event described above, all Rights that are, or
(under certain circumstances specified in the Rights Agreement) were,
beneficially owned by any Acquiring Person or any affiliate or associate thereof
will be null and void.
In the event that, at any time following the Shares Acquisition Date,
(i) the Corporation is acquired in a merger or other business combination
transaction in which the holders of all of the outstanding Common Shares
immediately prior to the consummation of the transaction are not the holders of
all of the surviving corporation's voting power, or (ii) more than 50% of the
Corporation's assets or earning power is sold or transferred, in either case
with or to an Acquiring Person or any affiliate or associate or any other person
in which such Acquiring Person, affiliate or associate has an interest or any
person acting on behalf of or in concert with such Acquiring Person, affiliate
or associate, or, if in such transaction all holders of Common Shares are not
treated alike, any other person, then each holder of a Right (except Rights
which previously have been voided as set forth above) shall thereafter have the
right (the "Flip-Over Right") to receive, upon exercise, common shares of the
acquiring company (or in certain circumstances, its parent) having a value equal
to two times the exercise price of the Right. The holder of a Right will
continue to have the Flip-Over Right whether or not such holder exercises or
surrenders the Flip-In Right.
The Purchase Price payable, and the number of Preferred Shares, Common
Shares or other securities issuable, upon exercise of the Rights are subject to
adjustment from
60
<PAGE> 67
time to time to prevent dilution (i) in the event of a stock dividend on, or a
subdivision, combination or reclassification of, the Preferred Shares, (ii) upon
the grant to holders of the Preferred Shares of certain rights or warrants to
subscribe for or purchase Preferred Shares at a price, or securities convertible
into Preferred Shares with a conversion price, less than the then current market
price of the Preferred Shares or (iii) upon the distribution to holders of the
Preferred Shares of evidences of indebtedness or assets (excluding regular
quarterly cash dividends) or of subscription rights or warrants (other than
those referred to above).
The number of outstanding Rights and the number of one one-thousandths
of a Preferred Share issuable upon exercise of each Right are also subject to
adjustment in the event of a stock split of the Common Shares or a stock
dividend on the Common Shares payable in Common Shares or subdivisions,
consolidations or combinations of the Common Shares occurring, in any such case,
prior to the Distribution Date.
Preferred Shares purchasable upon exercise of the Rights will not be
redeemable. Each Preferred Share will be entitled to a minimum preferential
quarterly dividend payment of $10.00 per share but, if greater, will be entitled
to an aggregate dividend per share of 1,000 times the dividend declared per
Common Share. In the event of liquidation, the holders of the Preferred Shares
will be entitled to the greater of (i) a minimum preferential liquidation
payment of $10.00 per share and (ii) an aggregate payment per share of 1,000
times the aggregate payment made per Common Share. The Preferred Shares rank
junior to all other classes and series of the Corporation's preferred stock with
respect to dividends and upon liquidation, unless the terms of such other series
provides otherwise. These rights are protected by customary antidilution
provisions. In the event that the amount of accrued and unpaid dividends on the
Preferred Shares is equivalent to six full quarterly dividends or more, the
holders of the Preferred Shares, subject to certain limitations, shall have the
right, voting as a class, to elect two directors in addition to the directors
elected by the holders of the Common Shares until all cumulative dividends on
the Preferred Shares have been paid through the last quarterly dividend payment
date.
With certain exceptions, no adjustment in the Purchase Price will be
required until cumulative adjustments require an adjustment of at least 1% in
such Purchase Price. No fractional Preferred Shares will be issued (other than
fractions which are one one-thousandth or integral multiples of one
one-thousandth of a Preferred Share, which may, at the election of the
Corporation, be evidenced by depositary receipts) and in lieu thereof, an
adjustment in cash will be made based on the market price of the Preferred
Shares on the last trading day prior to the date of exercise.
At any time prior to the earlier to occur of (i) a person becoming an
Acquiring Person or (ii) the expiration of the Rights, and under certain other
circumstances, the
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<PAGE> 68
Corporation may redeem the Rights in whole, but not in part, at a price of $0.01
per Right (the "Redemption Price") which redemption shall be effective upon the
action of the Board of Directors. Additionally, following the time a person
becomes an Acquiring Person and subject to certain other conditions, the
Corporation may redeem the then outstanding Rights in whole, but not in part, at
the Redemption Price, in certain circumstances, including redemption in
connection with a merger or other business combination transaction or series of
transactions involving the Corporation in which all holders of Common Shares are
treated alike but not involving (other than as a holder of Common Shares being
treated like all other holders) an Acquiring Person or its affiliates or
associates. The payment of the Redemption Price may be deferred under certain
circumstances as contemplated in the Rights Agreement.
All of the provisions of the Rights Agreement may be amended by the
Board of Directors of the Corporation prior to the Distribution Date. After the
Distribution Date, the provisions of the Rights Agreement may be amended by the
Board of Directors in order to cure any ambiguity, defect or inconsistency, to
make changes which do not adversely affect the interests of holders of Rights
(excluding the interests of any Acquiring Person), or, subject to certain
limitations, to shorten or lengthen any time period under the Rights Agreement.
Until a Right is exercised, the holder thereof, as such, will have no
rights as a stockholder of the Corporation, including, without limitation, the
right to vote or to receive dividends. While the distribution of the Rights will
not be taxable to stockholders of the Corporation, stockholders may, depending
upon the circumstances, recognize taxable income should the Rights become
exercisable or upon the occurrence of certain events thereafter.
A copy of the Rights Agreement has been filed with the Securities and
Exchange Commission as an Exhibit to a Registration Statement on Form 8-A dated
April 3, 2000. A copy of the Rights Agreement is available free of charge from
the Corporation. This summary description of the Rights does not purport to be
complete and is qualified in its entirety by reference to the Rights Agreement,
which is hereby incorporated herein by reference.
62
<PAGE> 1
Exhibit 5.1
[Letterhead of Fried, Frank, Harris, Shriver & Jacobson]
212-859-8831
(FAX: 212-859-8589)
April 3, 2000
Cabot Microelectronics Corporation
870 North Commons Drive
Aurora, Illinois 60504
RE: Registration Statement on Form S-1 (No. 333-95093)
Ladies and Gentlemen:
We have acted as special counsel for Cabot Microelectronics Corporation, a
Delaware corporation (the "Company"), in connection with the underwritten
initial public offering (the "Offering") by the Company of shares (the
"Shares") of common stock, par value $0.001 per share (the "Common Stock"), of
the Company, including Shares which may be offered and sold upon the exercise
of an over-allotment option granted to the underwriters. The Shares are to be
offered to the public pursuant to an underwriting agreement to be entered into
among the Company, Goldman, Sachs & Co., Merrill Lynch, Pierce, Fenner & Smith
Incorporated, and BancBoston Robertson Stephens Inc., as representatives of the
underwriters (the "Underwriting Agreement"). The opinion set forth below is
based on the assumption that, prior to the sale of the Shares pursuant to the
Underwriting Agreement, the Company's Amended and Restated Certificate of
Incorporation will have become effective substantially in the form filed as
Exhibit 3.3 to the Registration Statement, as amended, of the Company on Form
S-1 (No. 333-95093) (the "Registration Statement"), and that at least par value
will be paid for the Shares.
With your permission, all assumptions and statements of reliance herein
have been made without any independent investigation or verification on our
part except to the extent otherwise expressly stated, and we express no opinion
with respect to the subject matter or accuracy of such assumptions or items
relied upon.
In connection with this opinion, we have (i) investigated such questions
of law, (ii) examined originals or certified, conformed or reproduction copies
of such agreements, instruments, documents and records of the Company, such
certificates of public officials and such other documents and (iii) received
such information from officers and representatives of the Company as we have
deemed necessary or appropriate for the purposes of this opinion. In all such
examinations, we have assumed the legal capacity of all natural persons, the
genuineness of all signatures, the authenticity of original and certified
documents and the conformity to original or certified copies of all copies
submitted to us as
<PAGE> 2
March , 2000
Cabot Microelectronics Corporation
conformed or reproduction copies. As to various questions of fact relevant to
the opinions expressed herein, we have relied upon, and assume the accuracy of,
representations and warranties contained in the Underwriting Agreement and
certificates and oral or written statements and other information of or from
representatives of the Company and others and assume compliance on the part of
all parties to the Underwriting Agreement with their covenants and agreements
contained therein.
Based upon the foregoing and subject to the limitations, qualifications and
assumptions set forth herein, we are of the opinion that the Shares registered
pursuant to the Registration Statement (when issued, delivered and paid for in
accordance with the terms of the Underwriting Agreement) will be duly
authorized, validly issued, fully paid and non-assessable.
The opinion expressed herein is limited to the General Corporation Law of
the State of Delaware, (the "GCLD") and applicable provisions of the Delaware
Constitution, in each case as currently in effect, and reported judicial
decisions interpreting the GCLD and the Delaware Constitution.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to this firm under the caption
"Legal Matters" in the Prospectus forming part of the Registration Statement. In
giving such consent, we do not hereby admit that we are in the category of such
persons whose consent is required under Section 7 of the Securities Act of 1933,
as amended.
Very truly yours,
FRIED, FRANK, HARRIS, SHRIVER & JACOBSON
By: /s/ Thomas W. Christopher
-------------------------------------
Thomas W. Christopher
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<PAGE> 1
Exhibit 10.1
MASTER SEPARATION AGREEMENT
DATED AS OF MARCH 28, 2000
BY AND AMONG
CABOT CORPORATION
AND CERTAIN SUBSIDIARIES OF CABOT CORPORATION
AND
CABOT MICROELECTRONICS CORPORATION
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
ARTICLE 1
DEFINITIONS
<S> <C>
SECTION 1.01. DEFINED TERMS.................................................. 2
ARTICLE 2
TRANSFER AND CONTRIBUTION OF MMD ASSETS;
ASSUMPTION OF CERTAIN LIABILITIES
SECTION 2.01. TRANSFER OF ASSETS............................................. 8
SECTION 2.02. ASSUMPTION OF LIABILITIES...................................... 11
SECTION 2.03. METHODS OF TRANSFER AND ASSUMPTION............................. 12
SECTION 2.04. NONASSIGNABLE ASSETS AND ASSUMED LIABILITIES................... 13
SECTION 2.05. COSTS OF TRANSFER............................................. 15
</TABLE>
<TABLE>
<CAPTION>
ARTICLE 3
ANCILLARY AGREEMENTS
ARTICLE 4
COVENANTS
<S> <C>
SECTION 4.01. IPO AND DISTRIBUTION AGREEMENT................................. 16
SECTION 4.02. REGISTRATION RIGHTS AGREEMENT.................................. 16
SECTION 4.03. JOINT AND SEVERAL LIABILITY.................................... 16
ARTICLE 5
INDEMNIFICATION
SECTION 5.01. INDEMNIFICATION BY PARTIES..................................... 17
SECTION 5.02. INDEMNIFICATION PROCEDURES..................................... 17
SECTION 5.03. CERTAIN LIMITATIONS............................................ 19
SECTION 5.04. EXISTING LITIGATION TO BE TRANSFERRED TO CMC; COOPERATION...... 20
ARTICLE 6
ACCESS TO INFORMATION
SECTION 6.01. ACCESS TO INFORMATION.......................................... 20
SECTION 6.02. RECORD RETENTION............................................... 22
SECTION 6.03. PRODUCTION OF WITNESSES........................................ 22
SECTION 6.04. REIMBURSEMENT.................................................. 23
</TABLE>
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<PAGE> 3
<TABLE>
<CAPTION>
ARTICLE 7
MISCELLANEOUS
<S> <C>
SECTION 7.01. ENTIRE AGREEMENT............................................... 23
SECTION 7.02. GOVERNING LAW.................................................. 23
SECTION 7.03. PERFORMANCE.................................................... 23
SECTION 7.04. NOTICES........................................................ 24
SECTION 7.05. THIRD PARTY BENEFICIARIES...................................... 25
SECTION 7.06. COUNTERPARTS................................................... 25
SECTION 7.07. BINDING EFFECT; ASSIGNMENT..................................... 25
SECTION 7.08. DISPUTE RESOLUTION............................................. 25
SECTION 7.09. SEVERABILITY................................................... 26
SECTION 7.10. WAIVER......................................................... 26
SECTION 7.11. AMENDMENT...................................................... 27
SECTION 7.12. AUTHORITY...................................................... 27
SECTION 7.13. INTERPRETATION................................................. 27
</TABLE>
Schedule A Ancillary Agreements
Schedule 2.01(a)(i)(A) Contracts and Agreements
Schedule 2.01(a)(i)(B) Leasehold Interests in Real Property
Schedule 2.01(a)(i)(C) Real Property
Schedule 2.01(a)(i)(D) Management Information Systems and Software
Schedule 2.01(a)(i)(E) Licenses, Permits and Franchises
Schedule 2.01(a)(i)(F) Intellectual Property
Schedule 2.01(e)(ii) Excluded Management Information Systems and Software
Schedule 2.01(e)(iii)(A) Excluded Trademarks and Service Marks
Schedule 2.01(e)(iii)(B) Excluded Patents
Schedule 2.01(e)(iii)(C) Other Excluded Intellectual Property
Schedule 2.01(e)(v) Other Excluded Assets
Schedule 5.04 Legal Claims
-ii-
<PAGE> 4
MASTER SEPARATION AGREEMENT
This Master Separation Agreement (this "Agreement") is entered into on
March 28, 2000 among Cabot Corporation, a Delaware corporation ("Cabot"), Cabot
Carbon Ltd., a United Kingdom corporation ("Cabot Carbon"), Cabot Specialty
Chemicals, Inc., a Delaware corporation ("Cabot Specialty"),
and together with Cabot Carbon, the "Relevant Cabot Subsidiaries"), and Cabot
Microelectronics Corporation, a Delaware corporation ("CMC"). Unless expressly
provided otherwise, all references to Cabot shall include all of the Relevant
Cabot Subsidiaries. Capitalized terms used and not otherwise defined herein
shall have the meanings ascribed to such terms in Article 1 hereof.
RECITALS
WHEREAS, the Board of Directors of Cabot has determined that it would
be in the best interests of Cabot and its stockholders to completely separate
the MMD Business (as defined below) from Cabot;
WHEREAS, Cabot has caused CMC to be incorporated in order to effect
such separation, Cabot currently owns all of the issued and outstanding common
stock of CMC, and CMC currently conducts no business operations and has no
significant assets or liabilities;
WHEREAS, the Boards of Directors of Cabot and CMC have each determined
that it would be appropriate and desirable for Cabot to contribute and transfer
to CMC, and for CMC to receive and assume, directly or indirectly, substantially
all of the assets and liabilities currently associated with the MMD Business,
including certain of the assets and liabilities currently held by the Relevant
Cabot Subsidiaries;
WHEREAS, Cabot and CMC intend that the contribution and assumption of
assets and liabilities will qualify either as a tax-free reorganization under
Section 368 (a) (1) (D) of the Code or will be a tax-free transfer of assets
under Section 351 of the Code;
WHEREAS, Cabot and CMC currently contemplate that, following the
contribution and assumption of assets and liabilities, CMC will make an initial
public offering of an amount of CMC's common stock that will reduce Cabot's
ownership of CMC, but not below 80%;
WHEREAS, Cabot currently contemplates that, following such initial
public offering, Cabot will distribute to the holders of its stock by means of a
pro rata distribution all of the shares of CMC common stock owned by Cabot (the
"Distribution");
WHEREAS, Cabot and CMC intend that the Distribution will be tax-free to
Cabot and its stockholders under the Code; and
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<PAGE> 5
WHEREAS, the parties intend in this Agreement, including the Annexes
and Schedules hereto, to set forth the arrangements between them regarding the
separation of the MMD Business from Cabot.
NOW, THEREFORE, in consideration of the foregoing and the covenants and
agreements set forth below, the parties hereto agree as follows:
ARTICLE 1
DEFINITIONS
SECTION 1.01. Defined Terms.
The following terms, as used herein, shall have the following meanings:
"AFFILIATE" of any specified Person means any other Person directly or
indirectly Controlling, Controlled by, or under common Control with, such
specified Person; provided, however, that for purposes of this Agreement, (i)
Cabot and its subsidiaries (other than CMC and its subsidiaries) shall not be
considered Affiliates of CMC and (ii) CMC and its subsidiaries shall not be
considered Affiliates of Cabot.
"ANCILLARY AGREEMENTS" means each of the agreements which are listed on
Schedule A hereto, including any exhibits, schedules, attachments, tables or
other appendices thereto, and each agreement and other instrument contemplated
therein.
"ANSUNG, KOREA ASSETS" means the MMD Assets located in Ansung, Korea.
"ASSETS" means and includes all property and rights of every kind,
nature, character and description, tangible and intangible, real, personal or
mixed, wherever located, including, without limitation, the following:
(A) contracts and agreements (whether or not entered into in the
ordinary course of business), including without limitation
purchase orders issued or received;
(B) real property and the leasehold interests in real property;
(C) licenses, permits or franchises;
(D) Intellectual Property;
(E) Receivables;
(F) Equipment and all existing warranties and guarantees, if any,
express
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<PAGE> 6
or implied, with respect to the Equipment for the benefit of
the owner thereof;
(G) Inventory;
(H) books and records, customer lists, vendor lists, catalogs,
research material, technical information, technology,
specifications, designs, drawings, processes, and quality
control data;
(I) sales promotion and selling literature and promotional and
advertising materials;
(J) security (including cash) deposited with third parties and
security bonds;
(K) goodwill and going concern value;
(L) prepaid expenses;
(M) claims against other parties; and
(N) tax returns.
"ASSUMED LIABILITIES" has the meaning set forth in Section 2.02(a) of
this Agreement.
"BARRY, WALES ASSETS" means the MMD Assets located in Barry, Wales.
"BUSINESS DAY" means a day other than a Saturday, a Sunday or a day on
which banking institutions located in the States of Illinois and Massachusetts
are authorized or obligated by law or executive order to close.
"CABOT INDEMNITEES" has the meaning set forth in Section 5.01(a) of
this Agreement.
"CMC CAPITAL CONTRIBUTION" has the meaning set forth in Section 2.01(b)
of this Agreement.
"CMC COMMON STOCK" means the Common stock, $.001 par value per share,
of CMC.
"CMC FINANCIAL STATEMENTS" means the financial statements (including
the notes thereto) of CMC for the period ended September 30, 1999 as set forth
in the IPO Registration Statement.
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"CMC INDEMNITEES" has the meaning set forth in Section 5.01(b) of this
Agreement.
"CODE" means the Internal Revenue Code of 1986, as amended from time to
time, together with the rules and regulations promulgated thereunder.
"COMMISSION" means the Securities and Exchange Commission.
"CONTRIBUTION DATE" means March 28, 2000.
"CONTROL" means the possession, direct or indirect, of the power to
direct or cause the direction of the management of the policies of a Person,
whether through the ownership of voting securities, by contract or otherwise.
"CONTROLLING" and "CONTROLLED" have the corollary meanings ascribed thereto.
"DEMAND" has the meaning set forth in Section 7.08 of this Agreement.
"DISPUTES" has the meaning set forth in Section 7.08 of this Agreement.
"DISTRIBUTION" has the meaning set forth in the recitals to this
Agreement.
"DISTRIBUTION DATE" means the date to be determined by Cabot in its
sole and absolute discretion when the Distribution is completed.
"EQUIPMENT" means equipment, furniture, furnishings, fixtures,
machinery, vehicles, telephones and other tangible personal property.
"EXCLUDED ASSETS" has the meaning set forth in Section 2.01(e) of this
Agreement.
"EXCLUDED LIABILITIES" has the meaning set forth in Section 2.02(b) of
this Agreement.
"FOREIGN ASSETS" means the Ansung, Korea Assets, the Barry, Wales
Assets and the Geino, Japan Assets.
"FUMED METAL OXIDE SUPPLY AGREEMENT" means the Fumed Metal Oxide Supply
Agreement, dated as of January 20, 2000, between Cabot and CMC.
"GEINO, JAPAN ASSETS" means the MMD Assets located in Geino, Japan.
"INCOME TAX" has the meaning set forth in the Tax Sharing Agreement.
"INFORMATION" means all records, books, contracts, instruments,
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computer data and other data.
"INDEBTEDNESS" has the meaning set forth in Section 2.02(b) of this
Agreement.
"INDEMNIFYING PARTY" has the meaning set forth in Section 5.02(a) of
this Agreement.
"INDEMNITEE" has the meaning set forth in Section 5.02(a) of this
Agreement.
"INTELLECTUAL PROPERTY" means the following types of property and all
rights to sue for past infringement thereof:
(1) United States and foreign registered and unregistered
trademarks and service marks, trademark and service mark
registrations, trademark and service mark applications for
registrations, trade names, trade dress and the like together
with the goodwill associated with such marks, names,
registrations and applications for registration;
(2) United States and foreign patents, patent applications, and
all other patent rights (including any divisions,
continuations, continuations-in-part, reexaminations,
extensions, renewals or reissues thereof);
(3) registered and unregistered copyrights, applications for
copyright registration and common law copyrights;
(4) technology, information, know-how and trade secrets, including
without limitation, recorded knowledge, surveys, engineering
reports, manuals, catalogues, research data, proprietary
information, photos, art work, editorial materials, formats,
syndicated market research data, sales data and other similar
information; and
(5) non-governmental licenses, sublicenses, covenants or
agreements which relate in whole or in part to any items of
the categories mentioned above in any of the foregoing clauses
(1), (2), (3) and (4).
"INTENDED TRANSFEREE" has the meaning set forth in Section 2.04 of this
Agreement.
"INTENDED TRANSFEROR" has the meaning set forth in Section 2.04 of this
Agreement.
"INVENTORY" means inventories of raw materials, work in progress and
finished goods and other supplies on hand, in transit or on order, including,
without
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limitation, packaging material, stationery, forms, labels, directories and
promotional materials
"IPO AND DISTRIBUTION AGREEMENT" means the Initial Public Offering and
Distribution Agreement to be entered into between Cabot and CMC on or before the
IPO Effective Date.
"IPO EFFECTIVE DATE" means the date on which the IPO Registration
Statement is declared effective by the Commission.
"IPO REGISTRATION STATEMENT" means the registration statement on Form
S-1, Registration No. 333-95093 filed by CMC with the Commission in connection
with the initial public offering of CMC Common Stock, as it may be amended.
"LOCAL COUNSEL" has the meaning set forth in Section 5.02(b) of this
Agreement.
"MMD ASSETS" has the meaning set forth in Section 2.01(a) of this
Agreement.
"MMD BUSINESS" means the business conducted by the Microelectronics
Materials Division of Cabot at any time on or before the Contribution Date,
either directly or indirectly, through the Relevant Cabot Subsidiaries,
including, but not limited to, (i) all business operations whose financial
performance is reflected in the CMC Financial Statements and (ii) all business
operations initiated or acquired by the Microelectronics Materials Division of
Cabot after the date of the CMC Financial Statements.
"OTHER TAXES" has the meaning set forth in the Tax Sharing Agreement.
"PERSON" means an individual, partnership, limited liability company,
joint venture, corporation, trust, unincorporated association, any other entity,
or any government or any department or agency or other unit thereof.
"POSSESSOR" has the meaning set forth in Section 6.01 of this
Agreement.
"PRIMARY COUNSEL" has the meaning set forth in Section 5.02(b) of this
Agreement.
"PRIOR RELATIONSHIP" means the ownership relationship between Cabot and
CMC at any time prior to the Contribution Date.
"RECEIVABLES" means all accounts and notes receivable and other
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receivables (whether or not billed).
"REGISTRATION RIGHTS AGREEMENT" means the Registration Rights
Agreement, dated as of March 28, 2000, between Cabot and CMC.
"RELATED PARTIES" has the meaning set forth in Section 6.01 of this
Agreement.
"REPRESENTATIVES" means directors, officers, employees, agents,
consultants, advisors, accountants, attorneys and representatives.
"REQUESTOR" has the meaning set forth in Section 6.01 of this
Agreement.
"REQUIRED TRANSFER CONSENT" has the meaning set forth in Section 2.04
of this Agreement.
"RETENTION PERIOD" has the meaning set forth in Section 6.02(a) of this
Agreement.
"SEPARATE COUNSEL" has the meaning set forth in Section 5.02(b) of this
Agreement.
"SPECIAL PATENT COUNSEL" has the meaning set forth in Section 5.02(b)
of this Agreement.
"SUBSIDIARY" means with respect to any specified Person, any
corporation, any limited liability company, any partnership or other legal
entity of which such Person or any of its Subsidiaries Controls or owns,
directly or indirectly, a majority of the equity interest.
"TAX" or "TAXES" have the meaning set forth in the Tax Sharing
Agreement.
"TAX SHARING AGREEMENT" means the Tax Sharing Agreement, between Cabot
and CMC, dated March 28, 2000.
"THIRD-PARTY CLAIM" means any claim, suit, arbitration, inquiry,
proceeding or investigation by or before any court, governmental or other
regulatory or administrative agency or commission or any arbitration tribunal
asserted by a Person other than any party hereto or their respective Affiliates
which gives rise to a right of indemnification hereunder.
"TRANSFER OBSTACLE" has the meaning set forth on Section 2.04 of this
Agreement.
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ARTICLE 2
TRANSFER AND CONTRIBUTION OF MMD ASSETS;
ASSUMPTION OF CERTAIN LIABILITIES
SECTION 2.01. Transfer of Assets.
(a) Transfer of MMD Assets. On the Contribution Date, Cabot
shall convey, assign, transfer and deliver to CMC all (or in the case of Section
2.01(a)(iii) below, the interest therein specified in such Section 2.01(a)(iii))
of its right, title and interest in and to the MMD Assets, other than the
Foreign Assets.
For the purposes of this Agreement, the term "MMD Assets" shall mean:
(i) except for the Excluded Assets, all Assets that are (x) owned by
Cabot or with respect to which Cabot has the right to transfer after making the
commercially reasonable efforts referred to in Section 2.04(a), and (y) used
exclusively in, relate exclusively to or arise directly from the MMD Business;
for avoidance of doubt, but not by way of limitation of the foregoing, the
following specifically enumerated assets are included within MMD Assets:
(A) contracts and agreements set forth on Schedule
2.01(a)(i)(A);
(B) leasehold interests in real property listed on Schedule
2.01(a)(i)(B), including all buildings, structures and other improvements
situated thereon;
(C) real property listed on Schedule 2.01(a)(i)(C), including
all buildings, structures and other improvements situated thereon;
(D) management information systems and software listed on
Schedule 2.01(a)(i)(D);
(E) licenses, permits or franchises listed on Schedule
2.01(a)(i)(E);
(F) Intellectual Property listed on Schedule 2.01(a)(i)(F) and
all right, title and interest in and to all monetary and other awards and
judgments arising out of Cabot Corporation v. Solution Technology, Inc., Civil
Action No.: 3.96CV505-McK (WD NC) (the "STI Litigation");
(G) the tax returns of Cabot relating to Other Taxes relating
to or arising out of the MMD Business as conducted through the Contribution
Date; and
(H) the intercompany accounts owing from Cabot and its
Affiliates to the MMD Business.
(ii) the Assets, other than Intellectual Property and Excluded
Assets set forth in 2.01(e)(ii) through (viii) below, located in Aurora,
Illinois,
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Hammond, Indiana and Barry, Wales that are used by the MMD Business in the
manufacture and production of fumed metal oxide dispersions.
(b) Purchase of Barry, Wales Assets, Geino, Japan Assets and
Ansung, Korea Assets. In addition to the transfer of MMD Assets pursuant to the
foregoing paragraph (a) of this Agreement, Cabot and the Relevant Cabot
Subsidiaries hereby also agree to sell to CMC on the Contribution Date the
Foreign Assets in exchange for a total aggregate consideration equal to the fair
market value of such Foreign Assets, determined using the net book value of such
assets, which shall constitute the total purchase price for the assets.
(c) CMC ACKNOWLEDGES AND AGREES THAT THE FOREGOING TRANSFERS
AND SALES ARE BEING MADE "AS IS WHERE IS" AND THAT NEITHER CABOT NOR ANY
SUBSIDIARY OF CABOT HAS MADE OR WILL MAKE ANY WARRANTY, EXPRESSED OR IMPLIED,
INCLUDING WITHOUT LIMITATION ANY WARRANTY OF MERCHANTABILITY OR FITNESS FOR A
PARTICULAR PURPOSE, WITH RESPECT TO ANY ASSET OR ANY FOREIGN ASSET.
(d) Cabot and CMC shall have the rights in and to the
Dispersions Technology as defined in the Confidential Disclosure and License
Agreement, dated as of March 28, 2000, between them (the "CD&L Agreement").
(e) Excluded Assets. Notwithstanding anything to the contrary
in paragraph (a) above, it is expressly understood and agreed that the Assets
shall not include the following assets (the "Excluded Assets"):
(i) assets (including, without limitation, Assets of
the type listed in the definition of Assets) used (partially or entirely) or
owned in connection with any businesses and operations of Cabot and its
Affiliates other than the MMD Business unless specifically enumerated in Section
2.01(a) and the related schedules;
(ii) management information systems and software listed
on Schedule 2.01(e)(ii);
(iii) Cabot's right, title and interest in and to the
following Intellectual Property:
(A) all United States and foreign registered
and unregistered trademarks and service marks, trademark and
service mark registrations, trademark and service mark
applications for registrations, trade names, trade dress and
the like listed on Schedule 2.01(e)(iii)(A), together with the
goodwill associated with such marks, names, registrations and
applications for registration;
(B) all United States and foreign patents,
patent
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applications, and all other patent rights (including any
divisions, continuations, continuations-in-part,
reexaminations, extensions, renewals or reissues thereof)
listed on Schedule 2.01(e)(iii)(B);
(C) all technology, information, know-how
and trade secrets, including without limitation, recorded
knowledge, surveys, engineering reports, manuals, catalogues,
research data, proprietary information, photos, art work,
editorial materials, formats, syndicated market research data,
sales data and other similar information listed on Schedule
2.01(e)(iii)(C), and
(D) all non-governmental licenses,
sublicenses, covenants or agreements to which Cabot is a
party, which relate in whole or in part to any items of the
categories mentioned above in clauses (A), (B) and (C),
including all trademark licenses;
(iv) all of the Assets located at Cabot's facility in
Tuscola, Illinois;
(v) any assets listed on Schedule 2.01(e)(v);
(vi) the tax returns, corporate minute books and stock
ledgers of Cabot, except those specifically included in the definition of MMD
Assets;
(vii) all cash and cash equivalents or similar type
investments, such as certificates of deposit, Treasury bills and other
marketable securities, of Cabot (even if otherwise used in the MMD Business);
and
(viii) the real property, structures, other
improvements and fixtures located in Barry, Wales.
(f) Instruments of Conveyance and Transfer. On or about the
Contribution Date, Cabot shall (i) deliver or cause to be delivered to CMC such
deeds, bills of sale, endorsements, consents, assignment, and other good and
sufficient instruments of conveyance and assignment, all in recordable form,
where applicable, as are required under local custom and practice to vest in CMC
all right, title and interest of Cabot in and to the MMD Assets, and as will
otherwise be in form and substance reasonably satisfactory to CMC and CMC's
counsel; and (ii) transfer to CMC all contracts, agreements, commitments, books,
records, files, certificates, licenses, permits, plans and specifications and
other data included in the MMD Assets, including, without limitation, computer
tapes and computer-generated records. Notwithstanding the foregoing clause (i),
with respect to the Intellectual Property, Cabot shall deliver to CMC on the
Contribution Date documents for the transfer and assignment of the Intellectual
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Property included in the MMD Assets and shall thereafter deliver to CMC good and
sufficient instruments of conveyance and assignment, all in recordable form, for
all registered trademarks, patents, registered copyrights and pending
applications with respect to any of the foregoing.
(g) Further Assurances. From time to time after the
Contribution Date, Cabot and any Affiliate of Cabot shall execute, acknowledge
and deliver, or cause to be executed, acknowledged and delivered, such other
instruments of conveyance, assignment, transfer and delivery and will take or
cause to be taken such other actions as CMC may reasonably request in order more
effectively to sell, convey, assign, transfer, and deliver to CMC any of the MMD
Assets, or to enable CMC to protect, exercise and enjoy all rights and benefits
of Cabot with respect thereto, and as otherwise may be appropriate to carry out
the transactions herein contemplated.
SECTION 2.02. Assumption of Liabilities.
(a) Assumed Liabilities. On the Contribution Date, CMC shall
assume and agree to pay, perform and discharge when due, all liabilities and
obligations of Cabot (other than the Excluded Liabilities) relating to or
arising out of the MMD Business, whether direct or indirect, absolute or
contingent, contractual, tortious or otherwise, known or unknown, including,
without limitation, all liabilities relating to or arising out of the MMD
Business as conducted through the Contribution Date that are unknown to Cabot
and/or unrealized as of the Contribution Date and that become known to Cabot or
are realized or otherwise arise after the Contribution Date. Without limiting
the generality of the foregoing, the Assumed Liabilities shall include all
duties, obligations and liabilities (actual, contingent and other) of Cabot to
the Rippey Corporation and Rodel Inc. The liabilities and obligations assumed by
CMC in accordance with this Section 2.02 (other than the Excluded Liabilities
described below) are sometimes hereinafter referred to as the "Assumed
Liabilities." Assumed Liabilities include intercompany accounts owing from the
MMD Business to Cabot and its Affiliates.
(b) Excluded Liabilities. Notwithstanding the foregoing, CMC
shall not assume any of the following liabilities (the "Excluded Liabilities"):
(i) any liability or obligation in respect of any
Indebtedness of Cabot and all Affiliates of Cabot (for the purposes hereof,
"Indebtedness" shall mean (i) all indebtedness for borrowed money, other than
capitalized leases and similar purchase money obligations, (ii) any other
Indebtedness evidenced by a note, bond, debenture or similar instrument, (iii)
all obligations in respect of banker's acceptances and (iv) any guarantee or
other contingent obligation in respect of any of the foregoing);
(ii) any liability for or obligation in respect of
Income Tax or any
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liability for the payment of any "excess parachute payment," as defined in
Section 280G of the Code;
(iii) except as specifically provided in the
Ancillary Agreements or related to accrued reimbursement, welfare, vacation and
similar benefit obligations incurred in the ordinary course of business and
reflected in the CMC Financial Statements, any liabilities or obligations
relating to or arising under any employee or retirement benefit plan, program,
arrangement or agreement maintained or contributed by Cabot or its Affiliates;
(iv) any liabilities or obligations of Cabot that are
not incidental to or do not arise out of or were not incurred with respect to
the MMD Business; and
(v) any liability or obligation arising from or
related to Cabot's fumed metal oxide business.
SECTION 2.03. Methods of Transfer and Assumption.
(a) The parties shall enter into the Ancillary Agreements,
other than the IPO and Distribution Agreement and the Registration Rights
Agreement, on or about the date of this Agreement. To the extent that the
transfer of any Asset or the assumption of any Liability is expressly provided
for by the terms of any Ancillary Agreement, the terms of such Ancillary
Agreement shall determine the manner of the transfer or assumption. It is the
intent of the parties that pursuant to Section 2.01, the transfer and assumption
of all other MMD Assets and Assumed Liabilities shall be made effective as of
the Contribution Date, provided, however, that circumstances may require the
transfer of certain MMD Assets and the assumption of certain Liabilities to
occur in such other manner and at such other time as the parties shall agree.
(b) The parties intend to complete the assignment and transfer
of all MMD Assets and the transfer and assumption of all Assumed Liabilities
effective on or prior to the Contribution Date. If any MMD Asset cannot be
assigned or transferred by Cabot or a Relevant Cabot Subsidiary, or any Assumed
Liability cannot be transferred by Cabot or a Relevant Cabot Subsidiary or
assumed by MMD on or prior to the Contribution Date for a reason set forth in
Section 2.04(d), Section 2.4(d) shall govern the parties rights and obligations
with respect to such MMD Asset or such Assumed Liability. In addition to those
transfers and assumptions accurately identified and designated by the parties to
take place but which the parties are not able to effect prior to the
Contribution Date, there may exist (i) assets (including Assets) that the
parties discover were, contrary to the agreements between the parties, by
mistake or omission, transferred to CMC or retained by Cabot or (ii) liabilities
(including Liabilities) that the parties discover were, contrary to the
agreements between the parties, by mistake or omission, assumed by CMC
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or not assumed by CMC. The parties shall cooperate in good faith to effect the
transfer or re-transfer of such assets, and/or the assumption or re-assumption
of such liabilities, in any case as soon as reasonably practicable, to or by the
appropriate party and shall not use the determination of remedial actions
contemplated herein to alter the original intent of the parties hereto with
respect to the MMD Assets to be transferred to or Assumed Liabilities to be
assumed by CMC. Each party shall reimburse the other or make other financial
adjustments (e.g., without limitation, cash reserves) or other adjustments to
remedy any mistakes or omissions relating to any of the Assets transferred
hereby or any of the Assumed Liabilities assumed hereby.
(c) Each party hereto shall execute and deliver to
each other party all such documents, instruments, certificates and agreements in
appropriate form, and shall make all filings and recordings and take all such
other actions, as shall be necessary or reasonably requested by such other
party, whether before or after the Contribution Date, in order to give full
effect to and to evidence and perfect the transfer and contribution of the MMD
Assets and the assumption of the Assumed Liabilities as contemplated hereby.
However, CMC acknowledges and agrees that neither Cabot nor any Subsidiary of
Cabot will comply with the provisions of any bulk transfer law or similar laws
of any jurisdiction giving creditors of a transferor rights against the
transferee in connection with the transfer of any Asset.
SECTION 2.04. Nonassignable Assets and Assumed Liabilities.
Anything contained herein to the contrary notwithstanding, this Agreement
shall not constitute an agreement to assign or transfer any Asset or to transfer
and assume any Assumed Liability if an assignment or attempted assignment or
transfer or attempted transfer and assumption of the same without the consent of
another Person would constitute a breach of any contract or agreement or in any
way impair the rights of a party thereunder or give to any third party any
rights with respect thereto. If any such consent (a "Required Transfer Consent")
is not obtained and/or if for any other reason (a "Transfer Obstacle") an
attempted assignment or attempted transfer and assumption would otherwise be
ineffective or would impair the rights of the party attempting to make such
assignment or transfer (the "Intended Transferee") under any such contract or
agreement so that the party entitled to the benefits and responsibilities of
such attempted assignment or attempted transfer and assumption (the "Intended
Transferee") would not receive all such rights and responsibilities, then:
(a) the Intended Transferor shall use commercially reasonable efforts
(without any obligation to expend any funds or incur any losses or liabilities)
to obtain the Required Transfer Consent and/or eliminate the Transfer Obstacle.
(b) until the Required Transfer Consent is obtained and/or the Transfer
Obstacle is eliminated in accordance with subsection (a) above and the
assignment and transfer of the applicable Asset or the transfer and assumption
of the Assumed Liability
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has been effected in accordance with subsection (c) below and the other
provisions of this Agreement:
(i) the Intended Transferor shall use commercially reasonable efforts
to provide or cause to be provided to the Intended Transferee, to the extent
permitted by law, the benefits or liabilities of any such Asset or Assumed
Liability and the Intended Transferor shall promptly pay or cause to be paid to
the Intended Transferee when received all moneys received by the Intended
Transferor with respect to any such Asset,
(ii) in consideration thereof the Intended Transferee shall pay,
perform and discharge on behalf of the Intended Transferor all of the Intended
Transferor's liabilities thereunder in a timely manner and in accordance with
the terms thereof which it may do without breach, and
(iii) the Intended Transferor shall take such other actions as may
reasonably be requested by the Intended Transferee in order to place the
Intended Transferee, insofar as reasonably possible, in the same position as if
such Asset or Assumed Liability had been assigned or transferred as contemplated
hereby and so all the benefits and burdens relating thereto, including
possession, use, risk of loss, potential for gain and dominion, control and
command, shall inure to the Intended Transferee.
(c) If and when any Required Transfer Consent is obtained or any
Transfer Obstacle is eliminated, the assignment of the applicable Asset or the
transfer and assumption of the Assumed Liability shall be effected as soon as
practicable in accordance with the terms of this Agreement.
SECTION 2.05. Costs of Transfer.
CMC shall bear the total costs of the transfer of the MMD Assets from
Cabot and the Relevant Cabot Subsidiaries to CMC and the assumption by CMC of
all Assumed Liabilities, including, without limitation, any and all (i) moving
expenses, (ii) transfer taxes, (iii) expenses incurred in connection with any
notices to customers, suppliers or other third parties regarding such transfer
of MMD Assets or such assumption of Assumed Liabilities, (iv) fees incurred in
connection with the transfer of any licenses, permits or franchises from Cabot
or any Relevant Cabot Subsidiary to CMC or the obtaining of any new (or the
re-issuance of any existing) licenses, permits or franchises in the name or CMC,
(v) fees and expenses incurred in connection with the assignment or transfer of
any contracts, agreements or Intellectual Property from Cabot or any Relevant
Cabot Subsidiary to CMC, (vi) any recording or other fees, taxes, charges or
assessments incurred in connection with the transfer of any real property from
Cabot or any Relevant Cabot Subsidiary to CMC, (vii) the transfer from Cabot or
any Relevant Cabot Subsidiary to CMC, or the establishment by CMC of any
domestic or foreign branch office and (viii) the transfer of any employee of
Cabot or any Relevant Cabot Subsidiary to CMC. CMC hereby agrees to reimburse
Cabot or any Relevant Cabot
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Subsidiary, as applicable, promptly upon request, for any cost, including,
without limitation, any of the foregoing costs (including any applicable taxes,
fees and penalties assessed in connection with any of the foregoing), incurred
by Cabot in connection with the transfer of MMD Assets from Cabot or any
Relevant Cabot Subsidiary to CMC or the assumption by CMC of any Assumed
Liability.
ARTICLE 3
ANCILLARY AGREEMENTS
(a) General. Cabot and CMC acknowledge and agree that the Ancillary
Agreements have been or will be entered into prior to, and each of the Ancillary
Agreements will provide that the rights, interests, duties, liabilities and
obligations of the parties to such agreements will be effective on and as of,
the IPO Effective Date. Cabot and CMC shall take all steps reasonably necessary
to cause their respective Subsidiaries and Affiliates to enter into and perform
such Ancillary Agreements in accordance with their terms.
(b) Priority. To the extent that any Ancillary Agreement conflicts with
the terms of this Agreement, including, without limitation, matters covered by
Article 2 and Article 5 hereof, the terms and conditions of such Ancillary
Agreement shall govern the rights and obligations of the parties with respect to
such matters.
ARTICLE 4
COVENANTS
SECTION 4.01. IPO and Distribution Agreement.
Cabot and CMC hereby agree to execute and deliver, on or before the IPO
Effective Date, the IPO and Distribution Agreement, in substantially the form
agreed upon between the parties on or prior to the date hereof, with such
modifications to such form as the parties shall mutually deem reasonably
necessary and desirable; provided, that Cabot shall be entitled in its sole and
absolute discretion at any time and from time to time to make any modifications
to the provisions thereof relating to the preservation of the tax-free nature of
the Distribution or the tax-free nature of the transactions contemplated hereby
as it shall reasonably deem necessary or desirable.
SECTION 4.02. Registration Rights Agreement.
Cabot and CMC hereby agree to execute and deliver, on or before the IPO
Effective Date, the Registration Rights Agreement, in substantially the form
agreed upon between the parties on or prior to the date hereof, with such
modifications to such form as the parties shall mutually deem reasonably
necessary and desirable; provided, that Cabot
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shall be entitled in its sole and absolute discretion at any time and from time
to time to make any modifications to the provisions thereof relating to the
preservation of the tax-free nature of the Distribution or the tax-free nature
of the transactions contemplated hereby as it shall reasonably deem necessary or
desirable.
SECTION 4.03. Joint and Several Liability.
Cabot shall be liable for the duties, liabilities and obligations of
each Relevant Cabot Subsidiary under and pursuant to this Agreement.
ARTICLE 5
INDEMNIFICATION
SECTION 5.01. Indemnification by Parties.
(a) CMC shall indemnify, defend and hold harmless Cabot and each of its
Subsidiaries and their respective successors-in-interest, and each of their
respective past and present Representatives (the "Cabot Indemnitees") against
any losses, claims, damages, liabilities or actions, resulting from, relating to
or arising, whether prior to or following the Contribution Date, out of or in
connection with (a) the Assumed Liabilities and/or (b) CMC's conduct of its
business and affairs after the Contribution Date, and CMC shall reimburse each
Cabot Indemnitee for any reasonable attorneys' fees or any other expenses
reasonably incurred by any of them in connection with investigating and/or
defending any such loss, claim, damage, liability or action, other than legal
fees incurred prior to the Contribution Date.
(b) Cabot (the "Cabot Indemnifying Party") shall indemnify, defend and
hold harmless CMC and each of its Subsidiaries and their respective
successors-in-interest, and each of their past and present Representatives (the
"CMC Indemnitees") against any losses, claims, damages, liabilities or actions,
resulting from, relating to or arising, whether prior to or following the
Contribution Date, out of or in connection with (a) the Excluded Assets and/or
(b) the Excluded Liabilities, and Cabot shall reimburse each CMC indemnitee for
any reasonable attorneys' fees or any other expenses reasonably incurred by any
of them in connection with investigating and/or defending any such loss, claim,
damage, liability or action, other than legal fees incurred prior to the
Contribution Date.
SECTION 5.02. Indemnification Procedures.
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(a) If a Cabot Indemnitee or CMC Indemnitee (collectively, an
"Indemnitee") receives notice of the assertion of any Third-Party Claim with
respect to which a CMC Indemnifying Party or Cabot Indemnifying Party
(collectively, an "Indemnifying Party") is, or is likely to be, obligated under
this Agreement to provide indemnification, such Indemnitee shall promptly give
such Indemnifying Party notice thereof (together with a copy of such Third-Party
Claim, process or other legal pleading) promptly after becoming aware of such
Third-Party Claim; provided, however, that the failure of any Indemnitee to give
notice as provided in this Section 5.02 shall not relieve any Indemnifying Party
of its obligations under this Section 5.02, except to the extent that such
Indemnifying Party is actually prejudiced by such failure to give notice. Such
notice shall describe such Third-Party Claim in reasonable detail.
(b) An Indemnifying Party, at such Indemnifying Party's own expense and
through counsel chosen by such Indemnifying Party (which counsel shall be
reasonably acceptable to the Indemnitee), may elect to defend any Third-Party
Claim. If an Indemnifying Party elects to defend a Third-Party Claim in
accordance with the foregoing, then, within ten Business Days after receiving
notice of such Third-Party Claim (or sooner, if the nature of such Third Party
claim so requires), such Indemnifying Party shall notify the Indemnitee of its
intent to do so, and such Indemnitee shall cooperate in the defense of such
Third-Party Claim. Such Indemnifying Party shall pay such Indemnitee's
reasonable out-of-pocket expenses incurred in connection with such cooperation.
Such Indemnifying Party shall keep the Indemnitee reasonably informed as to the
status of the defense of such Third-Party Claim. After notice from an
Indemnifying Party to an Indemnitee of its election to assume the defense of a
Third-Party Claim, such Indemnifying Party shall not be liable to such
Indemnitee under this Section 5.02 for any attorneys' fees or other expenses
subsequently incurred by such Indemnitee in connection with the defense thereof
other than those expenses referred to in the preceding sentence; provided,
however, that such Indemnitee shall have the right to employ one law firm as
counsel ("Primary Counsel"), together with a local law firm in each applicable
jurisdiction (collectively, "Local Counsel") and, in the case of patent
litigation, special patent counsel ("Special Patent Counsel", and together with
Primary Counsel and Local Counsel, "Separate Counsel"), to represent such
Indemnitee in any action or group of related actions (which firm or firms shall
be reasonably acceptable to the Indemnifying Party) if, in such Indemnitee's
reasonable judgment at any time, either a conflict of interest between such
Indemnitee and such Indemnifying Party exists in respect of such claim, or there
may be defenses available to such Indemnitee which are significantly different
from or in addition to those available to such Indemnifying Party and the
representation of both parties by the same counsel would, in the reasonable
judgment of the Indemnitee, be inappropriate, and in that event (i) the
reasonable fees and expenses of such Separate Counsel shall be paid by such
Indemnifying Party (it being understood, however, that the Indemnifying Party
shall not be liable for the expenses of more than one Primary Counsel, one Local
Counsel in any one jurisdiction and one Special Patent Counsel with respect to
any Third-Party Claim (even if against multiple Indemnitees))
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and (ii) each of such Indemnifying Party and such Indemnitee shall have the
right to conduct its own defense in respect of such claim. If an Indemnifying
Party (i) elects not to defend against a Third-Party Claim, (ii) fails to notify
an Indemnitee of its election as provided in this Section 5.02 within the period
of ten Business Days described above or (iii) elects to defend a Third Party
Claim but, in the reasonable judgment of the Indemnitee, fails to timely,
properly and adequately defend such claim, the Indemnitee may defend,
compromise, and settle such Third-Party Claim and shall be entitled to
indemnification hereunder (to the extent permitted hereunder); provided,
however, that no such Indemnitee may compromise or settle any such Third-Party
claim without the prior written consent of the Indemnifying Party, which consent
shall not be unreasonably withheld or delayed. Notwithstanding the foregoing,
the Indemnifying Party shall not, without the prior written consent of the
Indemnitee, (i) settle or compromise any Third-Party Claim or consent to the
entry of any judgment which does not include as an unconditional term thereof
the dismissal without prejudice of such Third Party Claim or delivery by the
claimant or plaintiff to the Indemnitee of a written release from all liability
in respect of such Third-Party Claim or (ii) settle or compromise any
Third-Party Claim in any manner that would be reasonably likely to have a
material adverse effect on the Indemnitee.
SECTION 5.03. Certain Limitations.
(a) The amount of any indemnifiable losses or other liability for which
indemnification is provided under this Agreement shall be net of any amounts
actually recovered by the Indemnitee from third parties (including, without
limitation, amounts actually recovered under insurance policies) with respect to
such indemnifiable losses or other liability. Any Indemnifying Party hereunder
shall be subrogated to the rights of the Indemnitee upon payment in full of the
amount of the relevant indemnifiable loss. An insurer who would otherwise be
obligated to pay any claim shall not be relieved of the responsibility with
respect thereto or, solely by virtue of the indemnification provision hereof,
have any subrogation rights with respect thereto. If any Indemnitee recovers an
amount from a third party in respect of an indemnifiable loss for which
indemnification is provided in this Agreement after the full amount of such
indemnifiable loss has been paid by an Indemnifying Party or after an
Indemnifying Party has made a partial payment of such indemnifiable loss and the
amount received from the third party exceeds the remaining unpaid balance of
such indemnifiable loss, then the Indemnitee shall promptly remit to the
Indemnifying Party the excess (if any) of (A) the sum of the amount theretofore
paid by such Indemnifying Party in respect of such indemnifiable loss plus the
amount received from the third party in respect thereof, less (B) the full
amount of such indemnifiable loss or other liability. Nothing in this Section
5.03(b) shall obligate any Indemnifying Party to seek to recover any amounts
from any third party (including, without limitation, amounts recoverable under
insurance policies) prior to, or as a
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condition to, seeking indemnification under this Article Five.
(b) The amount of any loss or other liability for which indemnification
is provided under this Agreement shall be (i) increased to take account of any
net tax cost incurred by the Indemnitee arising from the receipt or accrual of
an indemnification payment hereunder (grossed up for such increase) and (ii)
reduced to take account of any net tax benefit realized by the Indemnitee
arising from incurring or paying such loss or other liability. In computing the
amount of any such tax cost or tax benefit, the Indemnitee shall be deemed to
recognize all other items of income, gain, loss, deduction or credit before
recognizing any item arising from the receipt or accrual of any indemnification
payment hereunder or incurring or paying any indemnified loss. Any
indemnification payment hereunder shall initially be made without regard to this
Section 5.03(b) and shall be increased or reduced to reflect any such net tax
cost (including gross-up) or net tax benefit only after the Indemnitee has
actually realized such cost or benefit. For purposes of this Agreement, an
Indemnitee shall be deemed to have "actually realized" a net tax cost or a net
tax benefit to the extent that, and at such time as, the amount of taxes payable
by such Indemnitee is increased above or reduced below, as the case may be, the
amount of taxes that such Indemnitee would be required to pay but for the
receipt or accrual of the indemnification payment or the incurrence or payment
of such loss, as the case may be. The amount of any increase or reduction
hereunder shall be adjusted to reflect any final determination with respect to
the Indemnitee's liability for taxes, and payments between such indemnified
parties to reflect such adjustment shall be made if necessary.
(c) Any indemnification payment made under this Agreement relating to
Assumed Liabilities, Excluded Assets and Excluded Liabilities shall be
characterized for tax purposes as if such payment were made immediately prior to
the Contribution Date.
SECTION 5.04. Existing Litigation to be Transferred to CMC;
Cooperation.
On the Contribution Date, all liabilities and legal responsibilities
for the claims identified on Schedule 5.04 shall be transferred in their
entirety from Cabot to CMC. As of the Contribution Date and until CMC shall
notify Cabot that CMC will assume the defense of such claims, Cabot shall
continue to defend such claims and shall be indemnified by CMC as provided in
Section 5.02.
ARTICLE 6
ACCESS TO INFORMATION
SECTION 6.01. Access to Information.
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During the Retention Period (as defined in Section 6.02 below), each of
the parties hereto shall cooperate with and afford, and shall cause their
respective Affiliates, Representatives, Subsidiaries, successors and/or
assignees, and shall use reasonable efforts to cause joint ventures that are not
Affiliates (collectively, "Related Parties") to cooperate with and afford, to
the other party reasonable access upon reasonable advance written request to all
Information (other than Information which is (i) protected from disclosure by
the attorney client privilege or work product doctrine, (ii) proprietary in
nature or (iii) the subject of a confidentiality agreement between such party
and a third party which prohibits disclosure to the other party) within such
party's or any Related Party's possession which was created prior to the
Contribution Date or, with respect to any information which would be relevant to
the provision of a transitional service pursuant to this Agreement or any
Ancillary Agreement, information created during the period in which one party is
providing the other party with such transition service. Access to the requested
information shall be provided so long as it relates to the requesting party's
(the "Requestor") business, assets or liabilities, and access is reasonably
required by the Requestor as a result of the parties' Prior Relationship for
purposes of auditing, accounting, claims or litigation (except for claims or
litigation between the parties hereto), employee benefits, regulatory or tax
purposes or fulfilling disclosure or reporting obligations including, without
limitation, Information reasonably necessary for the preparation of reports
required by or filed under the Securities Exchange Act of 1934, as amended, with
respect to any period entirely or partially prior to the Contribution Date.
Access as used in this paragraph shall mean the obligation of a party
in possession of Information (the "Possessor") requested by the Requestor to
exert its reasonable best efforts to locate all requested Information that is
owned and possessed by Possessor or any Related Party. The Possessor, at its own
expense, shall conduct a diligent search designed to identify all requested
Information and shall collect all such Information for inspection by the
Requestor during normal business hours at the Possessor's place of business.
Subject to confidentiality and/or security provisions as the Possessor may
reasonably deem necessary, the Requestor may have all requested Information
duplicated at Requestor's expense. Alternatively, the Possessor may choose to
deliver, at its own expense, all requested Information to the Requestor in the
form it was requested by the Requestor. If so, the Possessor shall notify the
Requestor in writing at the time of delivery if such Information is to be
returned to the Possessor. In such case, the Requestor shall return such
Information when no longer needed to the Possessor at the Possessor's expense.
In connection with providing Information pursuant to this Section 6.01,
each of the parties hereto shall upon the request of the other party make
available its respective employees (and those of their respective Related
Parties, as applicable) to the extent that they are reasonably necessary to
discuss and explain all requested Information with and to the requesting party.
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SECTION 6.02. Record Retention.
(a) Books and Records. CMC shall preserve and keep all books and
records included in the MMD Assets or otherwise in the possession of CMC or its
Related Parties, whether in electronic form or otherwise, for not less than ten
years from the Contribution Date, or for any longer period as may be required
(i) by any government agency, or (ii) in connection with any litigation, law,
regulation, audit or appeal of taxes, tax examination or the expiration of the
periods described in Section 7 of the Tax Sharing Agreement, where applicable
(the "Retention Period") at CMC's sole cost and expense. If CMC wishes to
dispose of any books and records or other documents which it is obligated to
retain under this Section 6.02 after the Retention Period, then CMC shall first
provide 90 days' written notice to Cabot and Cabot shall have the right, at its
option and expense, upon prior written notice within such 90-day period, to take
possession of such books or records or other documents within 180 days after the
date of CMC's notice to Cabot hereunder. Written notice of intent to dispose of
such books and records shall include a description of the books and records in
detail sufficient to allow Cabot to reasonably assess its potential need to
retain such materials. In the event CMC enters into an agreement with a third
party to sell a portion of its business, together with the books and records
related thereto, Cabot shall have the right to duplicate such books and records
prior to any such disposition and, should the purchaser of the CMC business be a
competitor of Cabot, Cabot shall have the right to prohibit the transfer or
disclosure to such party of that portion of the former books and records of
Cabot which Cabot notifies CMC contain confidential and proprietary information.
To the extent that books and records of Cabot or any of its Affiliates which
contain information relating to the MMD Business are not included in the MMD
Assets, Cabot agrees to cooperate with CMC in providing CMC with any such
information upon CMC's reasonable request to the extent that any such
information exists and is reasonably separable from Cabot information unrelated
to the MMD Business. CMC shall reimburse Cabot for all of its reasonable
out-of-pocket costs incurred in connection with any such request.
(b) Access to Personnel. Cabot shall, from time to time, at the
reasonable request of CMC, cooperate fully with CMC in providing CMC, to the
extent reasonably possible through applicable Cabot employees, with technical
assistance and information in respect to any claims brought against CMC
involving the conduct of the MMD Business prior to the Contribution Date,
including consultation and/or the appearance(s) of such persons on a reasonable
basis as expert or fact witnesses in trials or administrative proceedings.
SECTION 6.03. Production of Witnesses.
Until the six-year anniversary of the Contribution Date, each of the
parties hereto shall use all commercially reasonable efforts, and shall cause
each of their
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respective Affiliates to use all commercially reasonable efforts, to make
available to each other, upon written request, its directors, officers,
employees and other Representatives as witnesses to the extent that any such
Person may reasonably be required (giving consideration to the business demands
upon such Persons) in connection with any legal, administrative or other
proceedings in which the requesting party may from time to time be involved;
provided, however, that with respect to any legal or administrative proceedings
relating to the tax liability of any of the parties hereto or any of their
respective Affiliates, each of the parties hereto shall, and shall cause each of
their respective Affiliates to, make their directors, officers, employees and
other Representatives available as witnesses until such time as the statute of
limitations have expired with respect to all tax years prior to and including
the year in which the asset transfers contemplated by this Agreement are
consummated.
SECTION 6.04. Reimbursement.
Unless otherwise provided in Article 5 or this Article 6, each party to
this Agreement providing access, information or witnesses to another party
pursuant to Sections 6.01, 6.02 or 6.03 shall be entitled to receive from the
recipient, upon the presentation of invoices therefor, payment for all
reasonable out-of-pocket costs and expenses (excluding allocated compensation,
salary and overhead expense) as may be reasonably incurred in providing such
information or witnesses.
ARTICLE 7
MISCELLANEOUS
SECTION 7.01. Entire Agreement.
Except as otherwise set forth in this Agreement, this Agreement, the
Ancillary Agreements and the schedules hereto shall constitute the entire
agreement between the parties hereto with respect to the subject matter hereof
and shall supersede all prior agreements and understandings, whether written or
oral, between the parties with respect to such subject matter.
SECTION 7.02. Governing Law.
This Agreement shall be governed by and construed in accordance with
the laws of the State of Delaware (other than the laws regarding conflicts of
laws) as to all matters, including matters of validity, construction, effect,
performance and remedies.
SECTION 7.03. Performance.
Each of the parties hereto shall use all commercially reasonable
efforts to cause to be performed all actions, agreements and obligations set
forth herein to be
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performed by any Affiliate of such party.
SECTION 7.04. Notices.
All notices and other communications hereunder shall be in writing and
shall be delivered in person, by telecopy, by express or overnight mail
delivered by a nationally recognized air courier (delivery charges prepaid), or
by registered or certified mail (postage prepaid, return receipt requested) to
the respective parties as follows:
(a) If to Cabot, to:
Cabot Corporation
75 State Street
Boston, Massachusetts 02109
Attention: Chief Financial Officer
Telecopy No.: (617) 342-6281
With a copy to:
Law Department
Cabot Corporation
75 State Street
Boston, Massachusetts 02109
Attention: General Counsel
Telecopy No.: (617) 342-6039
(b) If to CMC, to:
Cabot Microelectronics Corporation
870 North Commons Drive
Aurora, Illinois 60504
Attention: President
Telecopy No.: (630) 375-5593
or to such other address as the party to whom notice is given may have
previously furnished to the others in writing in the manner set forth above. Any
notice or communication delivered in person shall be deemed effective on
delivery or when delivery is refused. Any notice or communication sent by
telecopy or by air courier shall be deemed effective on the first Business Day
at the place at which such notice or communication is received following the day
on which such notice or communication
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was sent.
SECTION 7.05. Third Party Beneficiaries.
The Indemnitees and their respective successors shall be third party
beneficiaries of the indemnification provisions of Section 5, as applicable, and
shall be entitled to enforce those provisions, in each such case as fully and to
the same extent as if they were parties to this Agreement. Except as provided in
the previous sentence, nothing in this Agreement, express or implied, is
intended to or shall confer upon any Person (other than the Parties and their
successors and assigns) any legal or equitable right, benefit or remedy of any
nature whatsoever under or by reason of this Agreement, and no Person (other
than as provided in the previous sentence) shall be deemed a third party
beneficiary under or by reason of this Agreement.
SECTION 7.06. Counterparts.
This Agreement may be executed in two or more counterparts, each of
which shall be deemed to be an original, but all of which together shall
constitute one and the same agreement. The Agreement may be delivered by
facsimile transmission of a signed copy thereof.
SECTION 7.07. Binding Effect; Assignment.
This Agreement and all of the provisions hereof shall be binding upon
the parties hereto and inure to the benefit of the parties hereto and their
respective successors and permitted assigns. Except with respect to a merger of
either party with another Person, neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by either party hereto
without the prior written consent of the other party, which consent shall not be
unreasonably withheld or delayed; provided, however, that Cabot and CMC may
assign their respective rights, interests, duties, liabilities and obligations
under this Agreement to any of their respective Subsidiaries, but such
assignment shall not relieve Cabot or CMC, as the assignee, of its obligations
hereunder. The Schedules attached hereto or referred to herein are an integral
part of this Agreement and are hereby incorporated into this Agreement and made
a part hereof as if set forth in full herein.
SECTION 7.08. Dispute Resolution.
Except as otherwise set forth in the Ancillary Agreements, resolution
of any and all disputes arising from or in connection with this Agreement,
whether based on contract, tort, or otherwise (collectively, "Disputes"), shall
be exclusively governed by and settled in accordance with the provisions of this
Section 7.08. The parties hereto shall use all commercially reasonable efforts
to settle all Disputes without resorting to mediation, arbitration, litigation
or other third party dispute resolution mechanisms. If
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any Dispute remains unsettled, the parties hereby agree to mediate such Dispute
using a mediator reasonably acceptable to all parties involved in such Dispute.
If the Parties are unable to resolve such dispute through mediation, each Party
will be free to commence proceedings for the resolution thereof. No Party shall
be entitled to consequential, special, exemplary or punitive damages.
SECTION 7.09. Remedies.
Each of Cabot, the Relevant Cabot Subsidiaries and CMC shall be
entitled to enforce its rights under this Agreement specifically, to recover
damages and costs (including reasonable attorneys' fees) caused by any breach of
any provision of this Agreement and to exercise all other rights existing in its
favor. Each of Cabot, the Relevant Cabot Subsidiaries and CMC acknowledges and
agrees that under certain circumstances the breach by Cabot or any of its
Subsidiaries (including without limitation the Relevant Cabot Subsidiaries, but
excluding CMC and its Subsidiaries), on the one hand, and CMC or any of its
Subsidiaries, on the other hand, of a term or provision of this Agreement will
materially and irreparably harm the other party, that money damages will
accordingly not be an adequate remedy for such breach and that the
non-defaulting party, in its sole discretion and in addition to its rights under
this Agreement and any other remedies it may have at law or in equity, may apply
to any court of law or equity of competent jurisdiction (without posting any
bond or deposit) for specific performance and/or other injunctive relief in
order to enforce or prevent any breach of the provisions of this Agreement.
SECTION 7.10. Severability.
Any provision of this Agreement which is prohibited or unenforceable in
any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions hereof. Any such prohibition or unenforceability in any jurisdiction
shall not invalidate or render unenforceable such provision in any other
jurisdiction.
SECTION 7.11. Waiver.
The observance of any term of this Agreement may be waived (either
generally or in a particular instance and either retroactively or prospectively)
by the party entitled to enforce such term, but such waiver shall be effective
only if it is in writing signed by the party against which such waiver is to be
asserted. Unless otherwise expressly provided in this Agreement, no delay or
omission on the part of any party in exercising any right or privilege under
this Agreement shall operate as a waiver thereof, nor shall any waiver on the
part of any party of any right or privilege under this Agreement operate as a
waiver of any other right or privilege under this Agreement nor shall any single
or partial exercise of any right or privilege preclude any other or further
exercise thereof or the exercise of any other right or privilege under this
Agreement. No
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failure by either party to take any action or assert any right or privilege
hereunder shall be deemed to be a waiver of such right or privilege in the event
of the continuation or repetition of the circumstances giving rise to such right
unless expressly waived in writing by the party against whom the existence of
such waiver is asserted.
SECTION 7.12. Amendment.
This Agreement or the Ancillary Agreements may not be amended or
modified in any respect except by a written agreement signed by both of the
parties hereto.
SECTION 7.13. Authority.
Each of the parties hereto represents to the other that (a) it has the
corporate power and authority to execute, deliver and perform this Agreement,
(b) the execution, delivery and performance of this Agreement by it has been
duly authorized by all necessary corporate action, (c) it has duly and validly
executed and delivered this Agreement, and (d) this Agreement is a legal, valid
and binding obligation, enforceable against it in accordance with its terms
subject to applicable bankruptcy, insolvency, reorganization, moratorium or
other similar laws affecting creditors' rights generally and general equity
principles.
SECTION 7.14. Interpretation.
The headings contained in this Agreement, in any Schedule hereto and in
the table or contents to this Agreement are for reference purposes only and
shall not affect in any way the meaning or interpretation of this Agreement. Any
capitalized term used in any Schedule but not otherwise defined therein, shall
have the meaning assigned to such term in this Agreement. When a reference is
made in this Agreement to an Article or a Section or Schedule, such reference
shall be to an Article or Section of, or a Schedule to, this Agreement unless
otherwise indicated. After the Contribution Date, the MMD Business shall be
deemed to no longer exist and all references made herein to CMC as a party which
operate as of a time following the Contribution Date, shall be deemed to refer
to CMC and its subsidiaries as a single party.
* * * * * * * *
[SIGNATURES ON FOLLOWING PAGE]
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IN WITNESS WHEREOF, each of the parties has caused this Agreement to be executed
on its behalf by its officers thereunto duly authorized on the day and year
first above written.
CABOT CORPORATION
By: /s/ Samuel W. Bodman
---------------------------------
Name: Samuel W. Bodman
Title: Chairman and CEO
CABOT CARBON LTD.
By: /s/ David Jayne
---------------------------------
Name: David Jayne
Title: Director
CABOT SPECIALTY CHEMICALS, INC.
By: /s/ Samuel W. Bodman
---------------------------------
Name: Samuel W. Bodman
Title: Vice President
CABOT MICROELECTRONICS CORPORATION
By: /s/ Matthew Neville
---------------------------------
Name: Matthew Neville
Title: President and CEO
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Schedule A
Ancillary Agreements
IPO and Distribution Agreement
Tax Sharing Agreement
Registration Rights Agreement
Fumed Metal Oxide Supply Agreement
Management Services Agreement
Dispersion Services Agreement
Confidential Disclosure and License Agreement
Trademark License Agreement
Barry, Wales Sublease Agreement
Employee Matters Agreement
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Schedule 2.01(a)(i)(A)
Contracts and Agreements
1. Services Agreement between Cabot Corporation and Davies Imperial
Coatings, dated October 27, 1998, assigned in accordance with Amendment No. 1.
2. Asset Purchase and Termination Agreement by and among Cabot
Corporation, Rippey Corporation and David Rippey, dated June 30, 1995.
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Schedule 2.01(a)(i)(B)
Leasehold Interests in Real Property
1. 881 Embarcadero Drive, Suite # 4
El Dorado Hills, CA 95762
2. 801 Frontenac Road
Naperville, IL 60563
3. 1818 E. Southern Avenue, Suite # 15C
Mesa, AZ 85204
4. Heung-kuk Bldg.(7F), 6-7 Soo-nae Dong, Bundang-Gu
Sungnam-Si, Kyongki-Do, Korea
5. No. 14, Lane 268, Kuang-Fu Road,
Section 1, Hsin-Chu City,
Taiwan, ROC
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Schedule 2.01(a)(i)(C)
Real Property
1. 870 Commons Drive
Aurora, IL 60504
2. 500 Commons Drive
Aurora, IL 60504
3. 845 Enterprise Street
Aurora, IL 60504
4. 1287-19 Oazo-Kitakoyama
Geino-Cho, Age-Gun, Mie-Ken, Japan
5. Ansung Industrial Park
267-4 Kyeluk-ri, Miyang-Myun, Ansung-City, Korea
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<PAGE> 35
Schedule 2.01(a)(i)(D)
Management Information Systems and Software
1. The following hardware located at CMC's facilities in Aurora,
Illinois and Geino, Japan:
- personal computers
servers
computer wiring
networking equipment (including hubs, routers and switches)
phones, PBX's and voice mail systems, excluding leased equipment
fax machines
facility security systems
2. The following software resident on personal computers located at CMC's
facilities:
- Microsoft Windows and Office
Lotus Notes
ADP
Anstat
3. The personal computers (other than control room hardware) and fax
machines located in the dispersions building in Barry, Wales, as well as the
license to any of the software set forth in 2 above which is on such personal
computers, which may be assigned.
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Schedule 2.01(a)(i)(E)
Licenses, Permits and Franchises
[Intentionally left blank]
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Schedule 2.01(a)(i)(F)
Intellectual Property
1. The patents set forth in the Worldwide Patent Assignment, Schedule
A, between Cabot Corporation and CMC, executed in conjunction with this Master
Separation Agreement.
2. The trademarks set forth in the Worldwide Trademark Assignment,
Schedule A, between Cabot Corporation and CMC, executed in conjunction with this
Master Separation Agreement.
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Schedule 2.01(e)(ii)
Excluded Management Information Systems and Software
1. Any software and information system hardware, other than as specifically set
forth in Schedule 2.01(a)(i)(D) above, which is licensed to or owned by Cabot.
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Schedule 2.01(e)(iii)(A)
Excluded Trademarks and Service Marks
CABOT with or without a logo or design, block letters
or stylized, as such may be used as a trademark,
service mark or trade name, individually or in
combination with other names or marks of CABOT.
CABOT & DEVICE with or without a logo or design, block letters
or stylized, as such may be used as a trademark,
service mark or trade name, individually or in
combination with other names or marks of CABOT,
as depicted in U.S. Reg. Nos. 613,329, 615,516,
615,689, 1,619,285, 1,827,952, and 1,833,580.
CAB AND CABO formatives and derivatives, with or without a
logo or design, block letters or stylized, as
such may be used in combination with one or more
prefixes, suffixes or combinations thereof.
CABOT
MICROELECTRONICS with or without a logo or design, block letters
or stylized, as such may be used as a trademark,
service mark or trade name, individually or in
combination with other names or marks of CABOT.
CAB-O-SPERSE with or without a logo or design, block letters
or stylized, as such may be used as a trademark,
service mark or trade name, individually or in
combination with other names or marks of CABOT.
-36-
<PAGE> 40
Schedule 2.01(e)(iii)(B)
Excluded Patents
The following patents are specifically excluded, as they are addressed in the
Confidential Disclosure and License Agreement:
<TABLE>
<CAPTION>
Country Applic. No. Filing Date Patent No. Grant Date
<S> <C> <C> <C> <C>
ASTL 52010/90 21MR1990 625980 21MR1990
BELG 9000319 21MR1990 BR266/90 02JL1991
BRAZ PI9001302 21MR1990 PI9001302 25NO1997
CANA 2012719-8 21MR1990 2012719 08JE1999
CHIN 90101525 21MR1990 28833 16OC1994
FRAN 9003557 20MR1990 9003557 11FE1994
GBRI 9006122.7 19MR1990 2229432 19MR1990
GERW P4006392.5 01MR1990
INDI 869/MAS/89 29NO1989 175167 01DE1995
ITAL 19748A90 21MR1990 01239546 05NO1993
JAPA 2-68568 20MR1990 2949633 09JL1999
KORS 3705/1990 20MR1990 148692 29MY1998
MAYS PI9000449 21MR1990
MEXI 19969 20MR1990 176811 05DE1994
TAIW 79100101 08JA1990 NI-43287 02AP1991
THAI 010174 26JA1990 7128 11SE1997
USA 07/829609 30JA1992 5246624 21SE1993
USA 07/326891 1MR1989 5116535 26MY1992
ASTL 52009/90 21MR1990 631847 21MR1990
BELG 9000320 21MR1990 9000320 27AU1991
BRAZ PI9001239 15MR1990 PI9001239 25NO1997
CANA 2012718-0 21MR1990 2012718 03DE1996
CHIN 90101086 28FE1990 29805 22JA1995
FRAN 9003558 20MR1990 9003558 04FE1994
GBRI 9006121.9 19MR1990 2229715 14OC1992
GERW P4006393.3-41 01MR1990
INDI 912/MAS/89 11DE1989 175056 03NO1995
ITAL 19747A90 21MR1990 01241073 29DE1993
JAPA 2-68569 20MR1990 2935125 04JE1999
KORS 3706/1990 20MR1990 145729 06MY1998
MAYS PI9000448 21MR1990
MEXI 19968 20MR1990 176602 14NO1994
TAIW 79102182 20MR1990 NI-44248 10MY1991
THAI 010175 26JA1990
</TABLE>
-37-
<PAGE> 41
Schedule 2.01(e)(iii)(C)
Other Excluded Intellectual Property
1. Dispersion Intellectual Property (as defined in the Confidential
Disclosure and License Agreement) is excluded, as it is addressed in the
Confidential Disclosure and License Agreement.
2. Any Intellectual Property related to (i) treated or untreated fumed
metal oxide particles or the manufacture or treatment of fumed metal oxide
particles; or (ii) cesium chemicals or other products of Cabot's Performance
Materials Division or the manufacture thereof; or (iii) treated or untreated
aerogels, xerogels and other gel based materials or the manufacture or treatment
of such particles.
-38-
<PAGE> 42
Schedule 2.01(e)(v)
Other Excluded Assets
1. Any specifications, procedures and other documentation related to
the manufacture of fumed metal oxide dispersions for non-chemical mechanical
planarization applications which are located in Aurora, Illinois, Barry Wales or
any other facilities operated by the MMD Business.
2. All employee confidentiality and non-disclosure agreements entered
into between Cabot and employees of the MMD Business.
3. Non-disclosure agreements entered into by Cabot Corporation with
parties who work with Cabot Corporation outside of the MMD Business.
4. The air compressor, filter and air receiver located adjacent to the
leased dispersions facility in Barry, Wales.
-39-
<PAGE> 43
Schedule 5.04
Litigation
1. Rodel, Inc. v. Cabot Corporation, Civil Action No. 98-352 (D. Del.)
2. Rodel, Inc. v. Cabot Corporation, Civil Action No. 99-256 (D. Del.)
3. Cabot Corporation v. Solution Technology, Inc., Civil Action No.:
3.96CV505-McK(WD NC).
- 40-
<PAGE> 1
EXHIBIT 10.2
INITIAL PUBLIC OFFERING AND DISTRIBUTION AGREEMENT,
DATED AS OF MARCH 28, 2000,
BY AND BETWEEN
CABOT CORPORATION
AND
CABOT MICROELECTRONICS CORPORATION
<PAGE> 2
Exhibit 10.2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
1. DEFINITIONS 2
2. THE INITIAL PUBLIC OFFERING AND THE DISTRIBUTION 9
2.1. THE INITIAL PUBLIC OFFERING 9
2.2. THE DISTRIBUTION 9
2.3. CERTAIN STOCKHOLDER MATTERS 9
2.4. PRIOR RELATIONSHIP 10
2.5. FURTHER ASSURANCES REGARDING THE DISTRIBUTION 10
2.6. ABANDONMENT OF THE DISTRIBUTION 11
3. EXPENSES 11
3.1. GENERAL 11
3.2. CERTAIN EXPENSES RELATING TO THE INITIAL PUBLIC OFFERING AND THE SEPARATION 11
3.3. CERTAIN EXPENSES RELATING TO THE DISTRIBUTION 11
4. CERTAIN COVENANTS 12
4.1. FINANCIAL AND OTHER INFORMATION 12
4.2. OTHER COVENANTS 19
4.3. COVENANTS REGARDING THE INCURRENCE OF INDEBTEDNESS 21
5. INDEMNIFICATION 22
5.1. INDEMNIFICATION BY CMC 22
5.2. INDEMNIFICATION BY CABOT 23
5.3. OTHER LIABILITIES 24
5.4. TAX EFFECTS OF INDEMNIFICATION 24
5.5. EFFECT OF INSURANCE UPON INDEMNIFICATION 25
5.6. PROCEDURE FOR INDEMNIFICATION INVOLVING THIRD-PARTY CLAIMS 25
5.7. PROCEDURE FOR INDEMNIFICATION NOT INVOLVING THIRD-PARTY CLAIMS 27
5.8. EXCLUSIVE REMEDIES 27
6. MISCELLANEOUS 28
6.1. DISPUTE RESOLUTION 28
6.2. SURVIVAL 28
6.3. COMPLETE AGREEMENT 28
</TABLE>
- i -
<PAGE> 3
<TABLE>
<S> <C>
6.4. AUTHORITY 28
6.5. GOVERNING LAW 28
6.6. CONSENT TO EXCLUSIVE JURISDICTION 29
6.7. NOTICES 29
6.8. AMENDMENT AND MODIFICATION 30
6.9. BINDING EFFECT; ASSIGNMENT 30
6.10. THIRD PARTY BENEFICIARIES 31
6.11. COUNTERPARTS 31
6.12. WAIVER 31
6.13. SEVERABILITY 31
6.14. REMEDIES 32
6.15. PERFORMANCE 32
6.16. REFERENCES; CONSTRUCTION 32
EXHIBITS
Agreements Subject to Section 4.2(e) Exhibit A
</TABLE>
- ii -
<PAGE> 4
INITIAL PUBLIC OFFERING AND DISTRIBUTION AGREEMENT
This INITIAL PUBLIC OFFERING AND DISTRIBUTION AGREEMENT (the
"Agreement") is made and entered into as of March 28, 2000, by and between Cabot
Corporation, a Delaware corporation ("Cabot"), and Cabot Microelectronics
Corporation, a Delaware corporation and a wholly owned subsidiary of Cabot
("CMC"). Certain capitalized terms used herein are defined in Section 1 of this
Agreement.
RECITALS
WHEREAS, the Board of Directors of Cabot has determined that
it would be in the best interests of Cabot and its stockholders to completely
separate the MMD Business from Cabot;
WHEREAS, Cabot has caused CMC to be incorporated in order to
effect such separation;
WHEREAS, Cabot and CMC have previously entered into the Master
Separation Agreement and the Ancillary Agreements (other than this Agreement),
each effective as of March 28, 2000, pursuant to which Cabot has contributed and
transferred to CMC, and CMC has received and assumed, the assets and liabilities
then associated with the MMD Business as described therein;
WHEREAS, Cabot and CMC intend that the Contribution qualify
either as a tax-free reorganization under Section 368(a)(1)(D) of the Code or as
a tax-free transfer of assets under Section 351 of the Code;
WHEREAS, Cabot currently owns all of the issued and
outstanding CMC Common Stock;
WHEREAS, CMC has previously filed the IPO Registration
Statement with the SEC but it has not yet become effective;
WHEREAS, the parties currently contemplate that, reasonably
promptly following the execution of this Agreement, CMC shall consummate the
Initial Public Offering;
WHEREAS, immediately following the consummation of the Initial
Public Offering, Cabot shall own approximately 82.6%of the outstanding shares of
CMC Common Stock (or approximately 80.5% if the underwriters exercise their
over-allotment option in full in accordance with the Underwriting Agreement);
WHEREAS, Cabot currently intends to divest itself of its
entire ownership of CMC within twelve months following the closing of the
Initial Public Offering by
- 1 -
<PAGE> 5
distributing in the Distribution all of its shares of CMC Common Stock to the
holders of Cabot Common Stock;
WHEREAS, Cabot currently expects to accomplish the
Distribution by means of a spin-off;
WHEREAS, Cabot and CMC intend that the Distribution will be
tax-free to Cabot and its stockholders under Section 355 of the Code;
WHEREAS, the parties intend in this Agreement to set forth the
principal arrangements between them regarding the Initial Public Offering and
the Distribution; and
WHEREAS, the parties hereto have determined that in order to
accomplish the objectives of the Initial Public Offering and the Distribution
and to facilitate the consummation thereof, it is necessary and desirable to
restructure certain intercompany relationships, allocate certain liabilities and
provide for certain indemnification, all as set forth herein;
NOW, THEREFORE, in consideration of the premises and the
representations, warranties, covenants and agreements herein contained, and for
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, and intending to be legally bound hereby, the parties
hereby agree as follows:
1. DEFINITIONS.
"Abandonment Notice" has the meaning set forth in Section 2.6.
"Active Trade or Business" means the active conduct of the
trade or business (as defined in Section 355(b)(2) of the Code and the
regulations thereunder) conducted by CMC immediately prior to the applicable
Distribution Date.
"Affiliate" means a CMC Affiliate or a Cabot Affiliate, as the
case may be.
"Agreement" has the meaning set forth in the Preamble.
"Ancillary Agreements" has the meaning ascribed to such term
in the Master Separation Agreement.
"Annual Financial Statements" has the meaning set forth in
Section 4.1(a)(vi).
- 2 -
<PAGE> 6
"Below the Threshold Action" has the meaning set forth in
Section 4.2(c).
"Business" means the CMC Business or the Cabot Business, as
the case may be.
"Business Day" means any day other than a Saturday, a Sunday,
or a day on which banking institutions located in the State of Illinois are
authorized or obligated by law or executive order to close.
"Cabot Affiliate" means a Person that, after giving effect to
the Distribution, directly or indirectly through one or more intermediaries, is
Controlled by Cabot.
"Cabot Annual Statements" has the meaning set forth in Section
4.1(b)(ii).
"Cabot Business" means any business or operations of Cabot or
any Cabot Affiliates other than the CMC Business.
"Cabot Common Stock" means the Common Stock, par value $1.00
per share, of Cabot.
"Cabot Disclosure Portions" means all material set forth in,
or incorporated by reference into, either the IPO Registration Statement or the
Distribution Registration Statement, as applicable, to the extent relating
exclusively to (i) Cabot and the Cabot Affiliates (excluding CMC and the CMC
Affiliates), (ii) the Cabot Business, (iii) Cabot's intentions with respect to
the Distribution or (iv) the terms of the Distribution, including, without
limitation, the form, structure and terms of any transaction(s) and/or
offering(s) to effect the Distribution and the timing of and conditions to the
consummation of the Distribution.
"Cabot Public Filings" has the meaning set forth in Section
4.1(a)(xiii).
"Cabot Transfer Agent" means Boston EquiServe, L.P., in its
capacity as the transfer agent and registrar for the Cabot Common Stock.
"Cabot's Auditors" has the meaning set forth in Section
4.1(c)(ii).
"Claim" has the meaning set forth in Section 5.7.
"CMC Affiliate" means a Person that, after giving effect to
the Distribution, directly or indirectly through one or more intermediaries, is
Controlled by, or is under common Control with CMC.
"CMC Business" means any business or operations of CMC or any
CMC Affiliates, including, in all cases, any predecessor entities (including,
without limitation,
- 3 -
<PAGE> 7
the MMD Business).
"CMC Capital Stock" means all classes or series of capital
stock of CMC.
"CMC Common Stock" means the Common Stock, par value $.001 per
share, of CMC.
"CMC Indebtedness" has the meaning set forth in Section 4.3.
"CMC Public Filings" has the meaning set forth in Section
4.1(a)(ix).
"CMC Transfer Agent" means Boston EquiServe, L.P., in its
capacity as the transfer agent and registrar for the CMC Common Stock.
"CMC's Auditors" has the meaning set forth in Section
4.1(b)(i).
"Code" means the Internal Revenue Code of 1986, as amended
from time to time, together with the rules and regulations promulgated
thereunder.
"Contribution" means the transfer of certain assets by Cabot
to CMC (and the assumption by CMC of certain liabilities) as contemplated by the
Master Separation Agreement.
"Control" means the possession, direct or indirect, of the
power to direct or cause the direction of the management and policies of a
Person, whether through the ownership of voting securities, by contract or
otherwise.
"D Reorganization" means a transaction qualifying as a
reorganization under Section 368(a)(1)(D) of the Code.
"Disputes" has the meaning set forth in Section 7.1.
"Dispute Notice" means written notice of any dispute between
Cabot and CMC arising out of or relating to this Agreement, which shall set
forth, in reasonable detail, the nature of the dispute.
"Distribution" means the distribution of CMC Common Stock by
Cabot in one or more transactions occurring after the Initial Public Offering
that collectively have the effect that all shares of CMC Common Stock held by
Cabot are distributed to Cabot stockholders, whenever such transaction(s) shall
occur.
"Distribution Date" means any date or dates, as the case may
be, determined by Cabot, in its sole and absolute discretion, to be a date on
which shares of CMC Common Stock held by Cabot are distributed in connection
with the Distribution.
"Distribution Registration Statement" means any and all
registration
- 4 -
<PAGE> 8
statements, information statements or other documents filed by any party with
the SEC in connection with any transaction constituting part of the
Distribution, in each case as supplemented or amended from time to time.
"Employee Benefit Plan Issuance" shall have the meaning set
forth in Section 4.2(d).
"Exchange Act" means the Securities Exchange Act of 1934, as
amended from time to time, together with the rules and regulations promulgated
thereunder.
"GAAP" means generally accepted accounting principles,
consistently applied.
"Indemnifying Party" means a Person that is obligated to
provide indemnification under this Agreement.
"Indemnitee" means a Person that is entitled to seek
indemnification under this Agreement.
"Indemnity Payment" means an amount that an Indemnifying Party
is required to pay to an Indemnitee under this Agreement.
"Initial Public Offering" means the initial public offering by
CMC of shares of CMC Common Stock as contemplated by the IPO Registration
Statement.
"Insurance Proceeds" means the payment received by an insured
from an insurance carrier or paid by an insurance carrier on behalf of the
insured, net of any applicable premium adjustment and tax effect.
"IPO Registration Statement" means the Registration Statement
on Form S-1, Registration No. 333-95093, of CMC, as supplemented and amended
from time to time.
"IRS" means Internal Revenue Service of the U.S. Department of
Treasury or any successor agency.
"Losses" means all losses, liabilities, claims, obligations,
demands, judgments, damages, dues, penalties, assessments, fines (civil or
criminal), costs, liens, expenses, forfeitures, settlements, or fees, reasonable
attorneys' fees and court costs, of any nature or kind, whether or not the same
would properly be reflected on a balance sheet, and "Loss" means any of these.
"Master Separation Agreement" means the Master Separation
Agreement by and between Cabot and CMC, dated as of March 28, 2000, as amended
from time to time.
- 5 -
<PAGE> 9
"MMD Business" has the meaning ascribed to such term in the
Master Separation Agreement.
"Notice" means any notice, request, claim, demand, or other
communication under this Agreement.
"Person" means an individual, a partnership, a corporation, a
limited liability company, an association, a joint stock company, a trust, a
joint venture, an unincorporated organization and a governmental entity or any
department, agency or political subdivision thereof.
"Pre-Distribution Period" means the period of time from the
date hereof until the completion of the Distribution.
"Quarterly Financial Statements" has the meaning set forth in
Section 4.1(a)(v).
"Regulation S-K" means Regulation S-K of the General Rules and
Regulations promulgated by the SEC.
"Regulation S-X" means Regulation S-X of the General Rules and
Regulations promulgated by the SEC.
"Representative" means, with respect to any Person, any of
such Person's directors, officers, employees, agents, consultants, advisors,
accountants or attorneys.
"Request" has the meaning set forth in Section 5.7.
"Rights Plan" means the Agreement by and between CMC and
BankBoston N.A., as Rights Agent, as amended from time to time.
"SEC" means the United States Securities and Exchange
Commission or any successor agency.
"Section 4.2(d) Per Share Fair Market Value" means, as of any
date of determination, (i) with respect to any share of CMC Common Stock or any
other share of CMC Capital Stock quoted on the Nasdaq National Market or any
other stock exchange or inter-dealer or other quotation system, the average of
the closing prices of CMC Common Stock or such other CMC Capital stock on the
Nasdaq National Market or such other stock exchange or inter-dealer or other
quotation system during the sixty (60) trading days immediately preceding such
date of determination (it being understood and agreed that if any class of CMC
Common Stock or CMC Capital Stock is traded and/or quoted on more than one stock
exchange or inter-dealer or other quotation system, the calculation to be made
pursuant to this clause (i) shall be based upon the closing prices of such class
of CMC Common Stock or CMC Capital Stock on the stock exchange or inter-
- 6 -
<PAGE> 10
dealer or other quotation system which had the greatest average daily trading
volume in shares of such class during the relevant sixty (60) trading day
period), and (ii) with respect to any share of CMC Capital Stock that is not
publicly traded, the per share fair market value as determined by a nationally
recognized investment banking firm mutually agreed by CMC and Cabot in their
reasonable discretion.
"Securities Act" means the Securities Act of 1933, as amended
from time to time, together with the rules and regulations promulgated
thereunder.
"Separate Counsel" has the meaning set forth in Section
5.6(b).
"Service Agent" means (i) for Cabot, The Corporation Trust
Company, with offices on the date hereof at 1209 Orange Street, Wilmington,
County of New Castle, Delaware 19801; and (ii) for CMC, The Corporation Trust
Company, with offices on the date hereof at 1209 Orange Street, Wilmington,
County of New Castle, Delaware 19801.
"Subsequent Tax Opinion/Ruling" means either (i) an opinion of
counsel selected by Cabot, in its sole and absolute discretion, confirming, in
form and substance reasonably satisfactory to Cabot, that, as a consequence of
the consummation of a subsequent transaction, no income, gain or loss for U.S.
federal income tax purposes will be recognized by Cabot, the stockholders or
former stockholders of Cabot, or any Cabot Affiliate with respect to the
Distribution, or (ii) an IRS private letter ruling to the same effect.
"Subsidiary" means with respect to any specified Person, any
corporation or other legal entity of which such Person or any of its
Subsidiaries Controls or owns, directly or indirectly, more than 50% of the
stock or other equity interest entitled to vote with respect to the election of
members to the board of directors or similar governing body; provided, however,
that for the purposes of this Agreement, neither CMC nor any of the Subsidiaries
of CMC shall be deemed to be Subsidiaries of Cabot or of any of the Subsidiaries
of Cabot.
"Tax" or "Taxes" has the meaning set forth in the Tax Sharing
Agreement.
"Tax Control" means, with respect to CMC, ownership of CMC
Capital Stock which constitutes at least 80% of both (i) the total combined
voting power of all outstanding shares of Voting Stock of CMC and (ii) each
class and series of CMC Capital Stock other than Voting Stock of CMC.
"Tax Counsel" means the law firm of Fried, Frank, Harris,
Shriver & Jacobson.
"Tax-Free Status of the Distribution" means the nonrecognition
of taxable gain or loss for U.S. federal income tax purposes to Cabot, Cabot
Affiliates and Cabot's stockholders in connection with the Distribution.
- 7 -
<PAGE> 11
"Tax Opinions/Rulings" means the opinions of Tax Counsel and
the rulings by the IRS deliverable to Cabot in connection with the Contribution
and the Distribution.
"Tax-Related Losses" means (i) all federal, state and local
Taxes (including interest and penalties thereon) imposed pursuant to any
settlement, final determination, judgment or otherwise; (ii) all accounting,
legal and other professional fees, and court costs incurred in connection with
such taxes; and (iii) all costs and expenses that may result from adverse tax
consequences to Cabot payable by Cabot or Cabot Affiliates.
"Tax Sharing Agreement" means the Tax Sharing Agreement
between Cabot and CMC, dated March 28, 2000.
"Third-Party Claim" means any claim, suit, arbitration,
inquiry, proceeding or investigation by or before any court, governmental or
other regulatory or administrative agency or commission or any arbitration
tribunal asserted by a Person other than Cabot or any Cabot Affiliate or CMC or
any CMC Affiliate which gives rise to a right of indemnification hereunder.
"Underwriting Agreement" means the Underwriting Agreement
between CMC and the underwriters relating to the Initial Public Offering, as
amended from time to time.
"Value" means with respect to any trade or business (or
portion thereof), the fair market value of the assets constituting such trade or
business, less the current liabilities associated with such trade or business,
in each case determined as of the applicable Distribution Date.
"Voting Stock" means with respect to any Person, all classes
and series of the capital stock of such Person entitled to vote generally in the
election of directors.
2. THE INITIAL PUBLIC OFFERING AND THE DISTRIBUTION.
2.1. THE INITIAL PUBLIC OFFERING. CMC shall consult with, and
cooperate in all respects with, Cabot in connection with the pricing of the CMC
Common Stock to be offered in the Initial Public Offering and shall, at Cabot's
direction, promptly take any and all actions necessary or desirable to
consummate the Initial Public Offering as contemplated by the IPO Registration
Statement and the Underwriting Agreement.
2.2. THE DISTRIBUTION. Cabot currently intends, following the
consummation of the Initial Public
- 8 -
<PAGE> 12
Offering, to complete the Distribution within six to twelve months of the date
of a letter ruling from the IRS confirming that the Distribution is tax-free to
Cabot. Cabot intends to complete the Distribution through means of a spin-off.
Cabot shall, in its sole and absolute discretion, determine whether to proceed
with all or part of the Distribution and all terms of the Distribution,
including, without limitation, the form, structure and terms of any
transaction(s) and/or offering(s) to effect the Distribution and the timing of
and conditions to the consummation of the Distribution. In addition, Cabot may
at any time and from time to time until the completion of the Distribution
modify or change the terms of the Distribution, including, without limitation,
by accelerating or delaying the timing of the consummation of all or part of the
Distribution. CMC shall cooperate with Cabot in all respects to accomplish the
Distribution and shall, at Cabot's direction, promptly take any and all actions
necessary or desirable to effect the Distribution, including, without
limitation, the registration under the Securities Act of CMC Common Stock on an
appropriate registration form or forms to be designated by Cabot. Cabot shall
select any investment banker(s) and manager(s) in connection with the
Distribution, as well as any financial printer, solicitation and/or exchange
agent and outside counsel for Cabot; provided that nothing herein shall prohibit
CMC from engaging (at its own expense) its own financial, legal, accounting and
other advisors in connection with the Distribution.
2.3. CERTAIN STOCKHOLDER MATTERS. From and after the
distribution of CMC Common Stock in connection with any transaction(s) included
as part of the Distribution and until such CMC Common Stock is duly transferred
in accordance with applicable law, CMC shall regard the Persons receiving CMC
Common Stock in such transaction(s) as record holders of CMC Common Stock in
accordance with the terms of such transaction(s) without requiring any action on
the part of such Persons. CMC agrees that, subject to any transfers of such
stock, (a) each such holder shall be entitled to receive all dividends payable
on, and exercise voting rights and all other rights and privileges with respect
to, the shares of CMC Common Stock then held by such holder and (b) each such
holder shall be entitled, without any action on the part of such holder, to
receive one or more certificates representing, or other evidence of ownership
of, the shares of CMC Common Stock then held by such holder. Cabot shall
cooperate, and shall instruct the Cabot Transfer Agent to cooperate, with CMC
and the CMC Transfer Agent, and CMC shall cooperate, and shall instruct the CMC
Transfer Agent to cooperate, with Cabot and the Cabot Transfer Agent, in
connection with all aspects of the Distribution and all other matters relating
to the issuance and delivery of certificates representing, or other evidence of
ownership of, the shares of CMC Common Stock distributed to the holders of Cabot
Common Stock in connection with any transaction(s) included as part of the
Distribution. Following the Distribution, Cabot shall instruct the Cabot
Transfer Agent to deliver to the CMC Transfer Agent true, correct and complete
copies of the stock and transfer records reflecting the holders of Cabot Common
Stock receiving shares of CMC Common Stock in connection with any transaction(s)
included as part of the Distribution.
- 9 -
<PAGE> 13
2.4. PRIOR RELATIONSHIP. CMC, with respect to CMC and all of
the CMC Affiliates, and Cabot, with respect to Cabot and all of the Cabot
Affiliates, agree to take all commercially reasonable action to discontinue
their respective uses as promptly as is commercially reasonable of any printed
material that indicates an ownership or other relationship between or among
Cabot and CMC or any of their respective Affiliates that has changed as a result
of the Initial Public Offering, the Distribution or any other transactions
contemplated hereby; provided that this Section 2.4 shall not prohibit the use
of printed material containing appropriate and accurate references to such
relationship.
2.5. FURTHER ASSURANCES REGARDING THE DISTRIBUTION. In
addition to the actions specifically provided for elsewhere in this Agreement,
CMC shall, at Cabot's direction, use all commercially reasonable efforts to
take, or cause to be taken, all actions, and to do, or cause to be done, all
things commercially reasonably necessary, proper or expeditious under applicable
laws, regulations and agreements in order to consummate and make effective the
Distribution as promptly as reasonably practicable. Without limiting the
generality of the foregoing, CMC shall, at Cabot's direction, cooperate with
Cabot, and execute and deliver, or use all commercially reasonable efforts to
cause to have executed and delivered, all instruments, including instruments of
conveyance, assignment and transfer, and to make all filings with, and to obtain
all consents, approvals or authorizations of, any domestic or foreign
governmental or regulatory authority requested by Cabot in order to consummate
and make effective the Distribution.
2.6. ABANDONMENT OF THE DISTRIBUTION. The parties expressly
acknowledge and agree that Cabot is not obligated in any respect to proceed with
or complete the Distribution and that Cabot may, in its sole and absolute
discretion, at any time abandon its plans to proceed with or complete the
Distribution. In the event that Cabot so determines that it no longer intends to
proceed with or complete the Distribution, Cabot shall provide to CMC a written
notification of such determination (an "Abandonment Notice"). Effective as of
the date of the Abandonment Notice, (a) provided that no Distribution Date has
yet occurred, Sections 4.2 and 4.3 of this Agreement shall terminate, become
null and void and have no further force and effect (it being expressly
understood and agreed by the parties that such Sections shall remain in full
force and effect in the event that a Distribution Date has occurred on or prior
to the date of the Abandonment Notice) and (b) Cabot's rights, and CMC's
obligations, set forth in the Registration Rights Agreement shall immediately
become effective.
3. EXPENSES.
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<PAGE> 14
3.1. GENERAL. Except as otherwise provided in this Agreement,
the Master Separation Agreement, any of the other Ancillary Agreements or any
other agreement between the parties relating to the Contribution, the Initial
Public Offering or the Distribution, all costs and expenses of either party
hereto in connection with the Contribution, the Initial Public Offering and the
Distribution shall be paid by the party that incurs such costs and expenses.
3.2. CERTAIN EXPENSES RELATING TO THE INITIAL PUBLIC OFFERING
AND THE SEPARATION. CMC shall be liable for all costs, fees and expenses
relating to the Initial Public Offering. CMC shall also be liable for all costs,
fees and expenses relating to the transfer of Assets from Cabot and the Relevant
Cabot Subsidiaries to CMC and the assumption by CMC of the Assumed Liabilities,
all in accordance with the Master Separation Agreement (as all such capitalized
terms (except for the Master Separation Agreement, are defined in the Master
Separation Agreement)).
3.3. CERTAIN EXPENSES RELATING TO THE DISTRIBUTION. Cabot
shall liable for all costs, fees and expenses relating to the Distribution;
provided that CMC shall be responsible for the payment of (a) the costs, fees
and expenses of all of CMC's financial, legal, accounting and other advisors
incurred in connection with the Distribution and (b) any internal fees, costs
and expenses incurred by CMC or any CMC Affiliate in connection with the
Distribution.
4. CERTAIN COVENANTS.
4.1. FINANCIAL AND OTHER INFORMATION.
(a) CMC Financial Information. CMC agrees that, for so long as
Cabot is required to consolidate CMC's results of operations and financial
position or to account for its investment in CMC under the equity method of
accounting (determined in accordance with generally accepted accounting
principles consistently applied):
(i) CMC shall, and shall cause each of its
Subsidiaries to, maintain a system of internal accounting
controls that will provide reasonable assurance that: (A)
CMC's and such Subsidiaries' books, records
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and accounts fairly reflect all transactions and dispositions
of assets and (B) the specific objectives of accounting
control are achieved.
(ii) CMC shall, and shall cause each of its
Subsidiaries to, maintain a fiscal year which commences on
October 1 and ends on September 30 of each calendar year.
(iii) CMC shall deliver to Cabot all schedules
consistent with Cabot's corporate closing requirements and in
a time consistent with Cabot's corporate closing schedule.
(iv) As soon as practicable, and in any event within
35 days after the end of each of the first three fiscal
quarters in each fiscal year of CMC and no later than five
days before CMC intends to file its Quarterly Financial
Statements (as defined below) with the SEC, CMC shall deliver
to Cabot drafts of (A) the consolidated financial statements
of CMC and its Subsidiaries (and notes thereto) for such
periods and for the period from the beginning of the current
fiscal year to the end of such quarter, setting forth in each
case in comparative form for each such fiscal quarter of CMC
the consolidated figures (and notes thereto) for the
corresponding quarter and periods of the previous fiscal year
and all in reasonable detail and prepared in accordance with
Article 10 of Regulation S-X, and (B) a discussion and
analysis by management of CMC's and its Subsidiaries'
financial condition and results of operations for such fiscal
period, including, without limitation, an explanation of any
material adverse change, all in reasonable detail and prepared
in accordance with Item 303(b) of Regulation S-K. The
information set forth in (A) and (B) above is herein referred
to as the "Quarterly Financial Statements." No later than the
earlier of (x) two Business Days prior to the date CMC
publicly files the Quarterly Financial Statements with the SEC
or otherwise makes such Quarterly Financial Statements
publicly available or (y) two Business Days prior to the date
on which Cabot has notified CMC that it intends to file its
quarterly financial statements with the SEC, CMC shall deliver
to Cabot the final form of the Quarterly Financial Statements
certified by the chief financial officer of CMC as presenting
fairly, in all material respects, the financial condition and
results of operations of CMC and its Subsidiaries; provided
that CMC may continue to revise such Quarterly Financial
Statements prior to the filing thereof in order to make
corrections and changes which corrections and changes shall be
delivered by CMC to Cabot as soon as practicable, and in any
event within eight hours thereafter; and, provided, further,
that Cabot and CMC financial representatives shall actively
consult with each other regarding any changes (whether or not
substantive) which CMC may consider making to its Quarterly
Financial Statements and related
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disclosures during the three Business Days immediately prior
to any anticipated filing with the SEC, and CMC shall obtain
Cabot's consent prior to making any change to CMC's Quarterly
Financial Statements or related disclosures which would have
an effect upon Cabot's financial statements or related
disclosures. In addition to the foregoing, no Quarterly
Financial Statement or any other document which refers, or
contains information with respect, to the ownership of CMC by
Cabot, the separation of CMC from Cabot or the Distribution
shall be filed with the SEC or otherwise made public by CMC or
any of its Subsidiaries without the prior written consent of
Cabot.
(v) CMC shall deliver to Cabot as soon as
practicable, and in any event within 45 days after the end of
each fiscal year of CMC and no later than 10 days before CMC
intends to file its Annual Financial Statements (as defined
below) with the SEC, (A) drafts of the consolidated financial
statements of CMC (and notes thereto) for such year, setting
forth in each case in comparative form the consolidated
figures (and notes thereto) for the previous fiscal year and
all in reasonable detail and prepared in accordance with
Regulation S-X and (B) a discussion and analysis by management
of CMC's and its Subsidiaries' financial condition and results
of operations for such year, including, without limitation, an
explanation of any material adverse change, all in reasonable
detail and prepared in accordance with Item 303(a) of
Regulation S-K. The information set forth in (A) and (B) above
is herein referred to as the "Annual Financial Statements."
CMC shall deliver to Cabot all revisions to such drafts as
soon as any such revisions are prepared or made. No later than
the earlier of (1) five Business Days prior to the date CMC
publicly files the Annual Financial Statements with the SEC or
otherwise makes such Annual Financial Statements publicly
available or (2) five Business Days prior to the date on which
Cabot has notified CMC that it intends to file its annual
financial statements with the SEC, CMC shall deliver to Cabot
the final form of the Annual Financial Statements certified by
the chief financial officer of CMC as presenting fairly, in
all material respects, the financial condition and results of
operations of CMC and its Subsidiaries; provided that CMC may
continue to revise such Annual Financial Statements prior to
the filing thereof in order to make corrections and changes
which corrections and changes shall be delivered by CMC to
Cabot as soon as practicable, and in any event within eight
hours thereafter; and, provided, further, that Cabot and CMC
financial representatives shall actively consult with each
other regarding any changes (whether or not substantive) which
CMC may consider making to its Annual Financial Statements and
related disclosures during the three Business Days immediately
prior to any anticipated filing with the SEC, and CMC shall
obtain Cabot's consent prior
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to making any change to CMC's Annual Financial Statements or
related disclosures which would have an effect upon Cabot's
financial statements or related disclosures. In addition to
the foregoing, no Annual Financial Statement or any other
document which refers, or contains information with respect,
to the ownership of CMC by Cabot, the separation of CMC from
Cabot or the Distribution shall be filed with the SEC or
otherwise made public by CMC or any of its Subsidiaries
without the prior written consent of Cabot. In any event, CMC
shall deliver to Cabot, no later than 70 days after the end of
each fiscal year of CMC, the final form of the Annual
Financial Statements accompanied by an opinion thereon by
CMC's independent certified public accountants.
(vi) CMC shall deliver to Cabot all Quarterly and
Annual Financial Statements of each Subsidiary of CMC which is
itself required to file financial statements with the SEC or
otherwise make such financial statements publicly available,
with such financial statements to be provided in the same
manner and detail and on the same time schedule as those
financial statements of CMC required to be delivered to Cabot
pursuant to this Section 4.1.
(vii) All information provided by CMC or any of its
Subsidiaries to Cabot pursuant to Sections 4.1(a)(iii) through
(vii) inclusive shall be consistent in terms of format and
detail and otherwise with the procedures in effect on the date
hereof with respect to the provision of such financial
information by the CMC Business and/or CMC and its
Subsidiaries, as applicable, to Cabot (and, where appropriate,
as presently presented in financial reports to Cabot's Board
of Directors), with such changes therein as may be requested
by Cabot from time to time consistent with changes in
reporting by sectors and Subsidiaries of Cabot.
(viii) CMC and each of its Subsidiaries which files
information with the SEC shall deliver to Cabot: (A) as soon
as the same are prepared, substantially final drafts of: (x)
all reports, notices and proxy and information statements to
be sent or made available by CMC or any of its Subsidiaries to
their security holders, (y) all regular, periodic and other
reports to be filed under Sections 13, 14 and 15 of the
Exchange Act (including Reports on Forms 10-K, 10-Q and 8-K
and Annual Reports to Shareholders), and (z) all registration
statements and prospectuses to be filed by CMC or any of its
Subsidiaries with the SEC or any securities exchange pursuant
to the listed company manual (or similar requirements) of such
exchange (collectively, the documents identified in clauses
(x), (y) and (z) are referred to herein as "CMC Public
Filings"), and (B) as soon as practicable, but in no event
later than five Business Days prior to the date
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the same are printed, sent or filed, whichever is earliest,
final copies of all such CMC Public Filings; provided that CMC
may continue to revise such CMC Public Filings prior to the
filing thereof in order to make corrections and changes which
corrections and changes shall be delivered by CMC to Cabot as
soon as practicable, and in any event within four hours
thereafter; and, provided, further, that Cabot and CMC
financial representatives shall actively consult with each
other regarding any changes (whether or not substantive) which
CMC may consider making to any of its CMC Public Filings and
related disclosures prior to any anticipated filing with the
SEC, and CMC shall obtain Cabot's consent prior to making any
change to its CMC Public Filings or related disclosures which
would have an effect upon Cabot's financial statements or
related disclosures. In addition to the foregoing, no CMC
Public Filings or any other document which refers, or contains
information with respect, to the ownership of CMC by Cabot,
the separation of CMC from Cabot or the Distribution shall be
filed with the SEC or otherwise made public by CMC or any of
its Subsidiaries without the prior written consent of Cabot.
(ix) CMC shall, as promptly as practicable, deliver
to Cabot copies of all annual and other budgets and financial
projections (consistent in terms of format and detail and
otherwise with the procedures in effect on the date hereof)
relating to CMC or any of its Subsidiaries and shall provide
Cabot an opportunity to meet with management of CMC to discuss
such budgets and projections.
(x) With reasonable promptness, CMC shall deliver to
Cabot such additional financial and other information and data
with respect to CMC and its Subsidiaries and their business,
properties, financial positions, results of operations and
prospects as from time to time may be reasonably requested by
Cabot.
(xi) Prior to issuance, CMC shall deliver to Cabot
copies of substantially final drafts of all press releases and
other statements to be made available by CMC or any of its
Subsidiaries to employees of CMC or any of its Subsidiaries or
to the public concerning material developments in the
business, properties, earnings, results of operations,
financial condition or prospects of CMC or any of its
Subsidiaries or the relationship between (A) CMC or any of its
Subsidiaries and (B) Cabot or any of its Affiliates. In
addition, prior to the issuance of any such press release or
public statement, CMC shall consult with Cabot regarding any
changes (other than typographical or other similar minor
changes) to such substantially final drafts. Immediately
following the issuance thereof, CMC shall deliver to Cabot
copies of final drafts of all press releases and other public
statements.
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<PAGE> 19
CMC and Cabot will consult with each other as to the timing of
their annual and quarterly earnings releases and will give
each other an opportunity to review the information therein
relating to CMC and its Subsidiaries and to comment thereon.
(xii) CMC shall cooperate fully, and cause its
accountants to cooperate, with Cabot to the extent reasonably
requested by Cabot in the preparation of Cabot's public
earnings releases, quarterly reports on Form 10-Q, Annual
Reports to Shareholders, Annual Reports on Form 10-K, any
Current Reports on Form 8-K and any other proxy, information
and registration statements, reports, notices, prospectuses
and any other filings made by Cabot with the SEC, any national
securities exchange or otherwise made publicly available
(collectively, "Cabot Public Filings"). CMC agrees to provide
to Cabot all information that Cabot reasonably requests in
connection with any Cabot Public Filings or that, in the
judgment of Cabot's legal staff, is required to be disclosed
or incorporated by reference therein under any law, rule or
regulation. Such information shall be provided by CMC in a
timely manner on the dates reasonably requested by Cabot
(which may be earlier than the dates on which CMC otherwise
would be required hereunder to have such information
available) to enable Cabot to prepare, print and release all
Cabot Public Filings on such dates as Cabot shall determine.
CMC shall cause its accountants to consent to any reference to
them as experts in any Cabot Public Filings required under any
law, rule or regulation. If and to the extent reasonably
requested by Cabot, CMC shall diligently and promptly review
all drafts of such Cabot Public Filings and prepare in a
diligent and timely fashion any portion of such Cabot Public
Filing pertaining to CMC. Prior to any printing or public
release of any Cabot Public Filing, an appropriate executive
officer of CMC shall, if requested by Cabot, certify that the
information relating to CMC, any CMC Affiliate or the CMC
Business in such Cabot Public Filing is accurate, true and
correct in all material respects. Unless required by law, rule
or regulation, CMC shall not publicly release any financial or
other information which conflicts with the information with
respect to CMC, any CMC Affiliate or the CMC Business that is
included in any Cabot Public Filing without Cabot's prior
written consent. Prior to the release or filing thereof, Cabot
shall provide CMC with a draft of any portion of a Cabot
Public Filing containing information relating to CMC and its
Subsidiaries and shall give CMC an opportunity to review such
information and comment thereon; provided that Cabot shall
determine in its sole discretion the final form and content of
all Cabot Public Filings.
(b) Cabot shall cooperate fully, and cause its accountants to
cooperate fully, with CMC to the extent reasonably requested by CMC in the
preparation of any
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CMC Public Filings. Cabot agrees to provide to CMC all
information that CMC reasonably requests in connection with any CMC Public
Filings or that, in the judgment of CMC's legal staff, is required to be
disclosed or incorporated by reference therein under any law, rule or
regulation. Such information shall be provided by Cabot in a timely manner on
the dates reasonably requested by CMC (which may be earlier than the dates on
which Cabot otherwise would be required hereunder to have such information
available) to enable CMC to prepare, print and release all CMC Public Filings on
such dates as CMC shall determine. Cabot shall cause its accountants to consent
to any reference to them as experts in any CMC Public Filings required under any
law, rule or regulation. If and to the extent reasonably requested by CMC, Cabot
shall diligently and promptly review all drafts of such CMC Public Filings and
prepare in a diligent and timely fashion any portion of such CMC Public Filing
pertaining to Cabot. Prior to any printing or public release of any CMC Public
Filing, an appropriate executive officer of Cabot shall, if requested by CMC,
certify that the information relating to Cabot, any Cabot Affiliate or any of
their respective businesses in such CMC Public Filing is accurate, true and
correct in all material respects. Unless required by law, rule or regulation,
Cabot shall not publicly release any financial or other information which
conflicts with the information with respect to Cabot, any Cabot Affiliate or any
of their respective businesses that is included in any CMC Public Filing without
CMC's prior written consent. Prior to the release or filing thereof, CMC shall
provide Cabot with a draft of any portion of a CMC Public Filing containing
information relating to Cabot and its Subsidiaries and shall give Cabot an
opportunity to review such information and comment thereon; provided that CMC
shall determine in its sole discretion the final form and content of all CMC
Public Filings.
(c) Auditors and Audits; Annual Statements and Accounting. CMC
agrees that, for so long as Cabot is required to consolidate CMC's results of
operations and financial position or to account for its investment in CMC under
the equity method of accounting (in accordance with generally accepted
accounting principles):
(i) CMC shall not select a different accounting firm
than PricewaterhouseCoopers, LLP to serve as its (and its
Subsidiaries') independent certified public accountants
("CMC's Auditors") without Cabot's prior written consent
(which shall not be unreasonably withheld).
(ii) CMC shall use its reasonable best efforts to
enable the CMC's Auditors to complete their audit such that
they will date their opinion on CMC's audited annual financial
statements on the same date that Cabot's independent certified
public accountants ("Cabot's Auditors") date their opinion on
Cabot's audited annual financial statements (the "Cabot Annual
Statements"), and to enable Cabot to meet its timetable for
the printing, filing and public dissemination of the Cabot
Annual Statements.
(iii) CMC shall provide to Cabot on a timely basis
all information
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that Cabot reasonably requires to meet its schedule for the
preparation, printing, filing, and public dissemination of the
Cabot Annual Statements. Without limiting the generality of
the foregoing, CMC will provide all required financial
information with respect to CMC and its Subsidiaries to CMC's
Auditors in a sufficient and reasonable time and in sufficient
detail to permit CMC's Auditors to take all steps and perform
all reviews necessary to provide sufficient assistance to
Cabot's Auditors with respect to information to be included or
contained in the Cabot Annual Statements.
(iv) CMC shall authorize CMC's Auditors to make
available to Cabot's Auditors both the personnel who performed
or are performing the annual audit of CMC and work papers
related to the annual audit of CMC, in all cases within a
reasonable time prior to CMC's Auditors' opinion date, so that
Cabot's Auditors are able to perform the procedures they
consider necessary to take responsibility for the work of
CMC's Auditors as it relates to Cabot's Auditors' report on
Cabot's statements, all within sufficient time to enable Cabot
to meet its timetable for the printing, filing and public
dissemination of the Cabot Annual Statements.
(v) CMC shall provide Cabot's internal auditors
access to CMC's and its Subsidiaries, books and records so
that Cabot may conduct reasonable audits relating to the
financial statements provided by CMC pursuant hereto as well
as to the internal accounting controls and operations of CMC
and its Subsidiaries.
(vi) CMC shall give Cabot as much prior notice as
reasonably practical of any proposed determination of, or any
significant changes in, its accounting estimates or accounting
principles from those in effect on the date hereof. CMC will
consult with Cabot and, if requested by Cabot, CMC will
consult with Cabot's independent public accountants with
respect thereto. CMC will not make any such determination or
changes without Cabot's prior written consent if such a
determination or a change would be sufficiently material to be
required to be disclosed in CMC's financial statements as
filed with the SEC or otherwise publicly disclosed therein.
(vii) Notwithstanding clause (vi) above, CMC shall
make any changes in its accounting estimates or accounting
principles that are requested by Cabot in order for CMC's
accounting estimates and principles to be consistent with
those of Cabot.
Nothing in this Section 4.1 shall require CMC to violate any agreement with any
of its customers regarding the confidentiality of commercially sensitive
information relating to that customer or its business; provided that in the
event that CMC is required under this Section 4.1 to disclose any such
information, CMC shall use all commercially reasonable
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<PAGE> 22
efforts to seek to obtain such customer's consent to the disclosure of such
information.
4.2. OTHER COVENANTS. CMC hereby covenants and agrees that,
for so long as Cabot beneficially owns at least 50% of the outstanding shares of
CMC Common Stock:
(a) CMC shall not, without the prior written consent of Cabot
(which it may withhold in its sole and absolute discretion), take, or cause to
be taken, directly or indirectly, any action, including making or failing to
make any election under the law of any state, which has the effect, directly or
indirectly, of restricting or limiting the ability of Cabot to freely sell,
transfer, assign, pledge or otherwise dispose of shares of CMC Common Stock or,
other than as provided in the Rights Plan, would restrict or limit the rights of
any transferee of Cabot as a holder of CMC Common Stock. Without limiting the
generality of the foregoing, CMC shall not, without the prior written consent of
Cabot (which it may withhold in its sole and absolute discretion), (i) amend,
supplement, restate, modify or alter the Rights Plan or any successor
stockholder rights plan in any manner that would result in (A) the ownership of
CMC Common Stock by Cabot causing the rights thereunder to detach or become
exercisable and/or (B) Cabot and its transferees not being entitled to the same
rights thereunder as other holders of CMC Common Stock or (ii) take any action,
or take any action to recommend to its stockholders any action, which would
among other things, limit the legal rights of, or deny any benefit to, Cabot as
a CMC stockholder in a manner not applicable to CMC stockholders generally.
(b) CMC shall not, without the prior written consent of Cabot
(which it may withhold in its sole and absolute discretion), issue any shares of
CMC Capital Stock or any rights, warrants or options to acquire CMC Capital
Stock (including, without limitation, securities convertible or exchangeable for
CMC Capital Stock), if after giving effect to such issuances and considering all
of the shares of CMC Capital Stock acquirable pursuant to such rights, warrants
and options to be outstanding on the date of such issuance (whether or not then
exercisable), Cabot would own less than 80.5% of the then outstanding shares of
CMC Common Stock.
(c) Subject to Section 4.2(d), if Cabot determines in its sole
discretion that CMC has taken, is taking or will or will likely undertake any
action, including, without limitation, the issuance or distribution of any
equity securities, that has or will or will likely result in Cabot owning less
than 80.5% of the then outstanding shares of CMC Capital Stock (a "Below the
Threshold Action"), (i) CMC shall, at Cabot's option, (x) upon notice from Cabot
immediately seek to reverse any such action already taken, cease any such action
being taken or not take any future action, as the case may be, in each case to
the satisfaction of Cabot or (y) issue or otherwise distribute to Cabot, at no
cost to Cabot, additional equity securities such that, after the consummation of
any such action Cabot will again or will continue to (as the case may be) own
not less than 80.5% of the then outstanding shares of CMC Capital Stock, or (ii)
Cabot shall have the right to
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purchase shares of CMC Capital Stock on the open market or from third parties
sufficient to ensure that after the consummation of any such action Cabot will
again or will continue to (as the case may be) own not less than 80.5% of the
then outstanding shares of CMC Capital Stock, and CMC shall promptly reimburse
Cabot for the purchase price of such shares of CMC Capital Stock, together with
all fees, commissions and other expenses incurred by Cabot in making such
purchase.
(d) If Cabot determines in its sole discretion that CMC has
taken, is taking or will or will likely undertake a Below the Threshold Action
after the second anniversary of the closing date of the Initial Public Offering
consisting solely of, or solely as a result of, the issuance of CMC Common Stock
under CMC's 2000 Equity Incentive Plan or CMC's Employee Stock Purchase Plan as
such plans are in effect on such closing date (an "Employee Benefit Plan
Issuance"), (i) CMC shall have no obligation to comply with Section
4.2(c)(i)(x), (ii) any additional equity securities of CMC required to be issued
or otherwise distributed by CMC to Cabot in accordance with Section 4.2(c)(i)(y)
shall be issued to Cabot at a price per share equal to the Section 4.2(d) Per
Share Fair Market Value and (iii) CMC shall have no obligation to reimburse
Cabot for purchases by Cabot of CMC Capital Stock on the open market or from
third parties in accordance with Section 4.2(c)(ii), provided that this Section
4.2(d) shall be of no force and effect and Section 4.2(c) shall continue to
apply to any Below the Threshold Action if Cabot determines, in its reasonable
discretion, that (x) the Below the Threshold Action is not solely attributable
to an Employee Benefit Plan Issuance or (y) it cannot in good faith determine
whether the Below the Threshold Action is solely attributable to an Employee
Benefit Plan Issuance.
(e) To the extent that Cabot is a party to any contracts or
agreements that provide that certain actions of Cabot's Subsidiaries may result
in Cabot being in breach of or in default under such agreements and Cabot has
advised CMC of the existence, and has furnished CMC with copies, of such
contracts or agreements (or the relevant portions thereof), CMC shall not take
any actions that reasonably could result in Cabot being in breach of or in
default under any such contract or agreement. As of the date hereof, the
contracts and agreements (or relevant portions thereof) applicable to this
covenant are set forth on Exhibit A attached hereto. CMC hereby acknowledges and
agrees that Cabot has furnished it with copies of each contract or agreement (or
the relevant portion thereof) listed on Exhibit A. The parties acknowledge and
agree that, after the date hereof, Cabot may in good faith (and not solely with
the intention of imposing restrictions on CMC pursuant to this covenant) enter
into additional contracts or agreements that provide that certain actions of
Cabot's Subsidiaries may result in Cabot being in breach of or in default under
such agreements. In such event, Exhibit A shall be deemed to be automatically
amended to reflect the addition of any other contracts or agreements (or
relevant portions thereof) of which Cabot advises CMC after the date hereof in
accordance with this Section 4.2(e). CMC agrees to keep confidential and not to
disclose any information provided to it pursuant to this Section 4.2(e).
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4.3. COVENANTS REGARDING THE INCURRENCE OF INDEBTEDNESS.
(a) CMC hereby covenants and agrees that, for so long as Cabot
continues to beneficially own at least 50% of the outstanding shares of CMC
Common Stock, CMC shall not, and shall not permit any of its Subsidiaries to,
without Cabot's prior written consent (which it may withhold in its sole and
absolute discretion), create, incur, assume or suffer to exist any CMC
Indebtedness in excess of an aggregate of $50,000,000 outstanding at any time.
(b) In order to implement this Section 4.3, CMC shall notify
Cabot in writing at least 15 Business Days prior to the time it or any of its
Subsidiaries contemplates incurring any CMC Indebtedness or agreeing to acquire
Control of an Acquisition Target of its intention to do so and shall either (i)
demonstrate to Cabot's satisfaction that this Section 4.3 shall not be violated
by such proposed additional CMC Indebtedness or acquisition or (ii) obtain
Cabot's prior written consent to such proposed additional CMC Indebtedness or
acquisition. Any such written notification from CMC to Cabot shall include
documentation of any existing CMC Indebtedness and estimated CMC Indebtedness
after giving effect to such proposed incurrence of additional CMC Indebtedness
or acquisition and, if delivered in connection with any transaction(s) involving
an Acquisition Target, (A) documentation of the Acquisition Target's Target
Indebtedness, (B) calculations of the Acquisition Target's FFO to Debt Ratio and
(C) calculations of compliance with this Section 4.3, including the Adjusted CMC
Indebtedness, if applicable. Cabot shall have the right to verify the accuracy
of such information and CMC shall cooperate fully with Cabot in such effort
(including, without limitation, by providing Cabot with access to the working
papers and underlying documentation related to any calculations used in
determining such information).
(c) For purposes of this Section 4.3, the following terms
shall have the following meanings:
"CMC Indebtedness" means the sum of (i) the aggregate
principal amount of total liabilities (whether long-term or short-term) for
borrowed money (including capitalized leases) of CMC and its Subsidiaries, as
determined for purposes of its consolidated financial statements prepared in
accordance with GAAP, and (ii) the aggregate amount attributable to all
factoring or securitization of receivables and other financial assets by CMC and
its Subsidiaries.
5. INDEMNIFICATION.
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5.1. INDEMNIFICATION BY CMC. Subject to Section 5.3, CMC shall
indemnify, defend and hold harmless Cabot, all Cabot Affiliates and each of
their respective directors, officers and employees (in their capacities as
such), from and against:
(a) all Losses relating to, arising out of, or due to,
directly or indirectly, any breach by CMC or any CMC Affiliate of any of the
provisions of this Agreement;
(b) all Losses relating to, arising out of, or due to,
directly or indirectly, any incorrect, inaccurate or incomplete financial and
other information provided by CMC or any CMC Affiliate to Cabot pursuant to
Section 4.1 of this Agreement;
(c) all Losses relating to, arising out of, or due to any
untrue statement or alleged untrue statement of a material fact contained in, or
incorporated by reference into, the IPO Registration Statement or the omission
or alleged omission to state (whether pursuant to direct statement or
incorporation by reference) in the IPO Registration Statement a material fact
required to be stated therein or necessary to make the statements therein not
misleading other than with respect to the Cabot Disclosure Portions; and
(d) all Losses relating to, arising out of, or due to any
untrue statement or alleged untrue statement of a material fact contained in, or
incorporated by reference into, the Distribution Registration Statement or the
omission or alleged omission to state (whether pursuant to direct statement or
incorporation by reference) in the Distribution Registration Statement a
material fact required to be stated therein or necessary to make the statements
therein not misleading other than with respect to the Cabot Disclosure Portions.
5.2. INDEMNIFICATION BY CABOT. Subject to Section 5.3, Cabot
shall indemnify, defend, and hold harmless CMC, all CMC Affiliates, and each of
their respective directors, officers and employees (in their capacities as
such), from and against:
(a) all Losses relating to, arising out of, or due to,
directly or indirectly, any breach by Cabot or any Cabot Affiliate of any of the
provisions of this Agreement;
(b) all Losses relating to, arising out of, or due to,
directly or indirectly, any incorrect, inaccurate or incomplete financial and
other information provided by Cabot or any Cabot Affiliate to CMC pursuant to
Section 4.1 of this Agreement;
(c) all Losses relating to, arising out of, or due to any
untrue statement or alleged untrue statement of a material fact contained in, or
incorporated by reference into, the Cabot Disclosure Portions of the IPO
Registration Statement or the omission or alleged omission to state (whether
pursuant to direct statement or incorporation by
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<PAGE> 26
reference) in the Cabot Disclosure Portions of the IPO Registration Statement a
material fact required to be stated therein or necessary to make the statements
therein not misleading; and
(d) all Losses relating to, arising out of, or due to any
untrue statement or alleged untrue statement of a material fact contained in, or
incorporated by reference into, the Cabot Disclosure Portions of the
Distribution Registration Statement or the omission or alleged omission to state
(whether pursuant to direct statement or incorporation by reference) in the
Cabot Disclosure Portions of the Distribution Registration Statement a material
fact required to be stated therein or necessary to make the statements therein
not misleading.
5.3. OTHER LIABILITIES.
(a) Except as provided in Section 5.4, this Section 5 shall
not be applicable to any Tax-Related Losses, which shall be governed by the Tax
Sharing Agreement.
(b) This Section 5 shall not be applicable to any Losses
relating to, arising out of, or due to any breach of the provisions of any other
contract, agreement or understanding between Cabot or any Cabot Affiliate and
CMC or any CMC Affiliate, including, without limitation, the Master Separation
Agreement, the Tax Sharing Agreement and any of the other Ancillary Agreements,
which Losses shall be governed by the terms of such contract, agreement or
understanding.
5.4. TAX EFFECTS OF INDEMNIFICATION.
(a) Any indemnification payment made under this Agreement
shall be characterized for tax purposes as if such payment were made immediately
prior to the latest Distribution Date, and shall therefore be treated, to the
extent permitted by law, as either (i) a distribution from CMC to Cabot or (ii)
a capital contribution from Cabot to CMC.
(b) The amount of any Loss for which indemnification is
provided under this Agreement shall be (i) increased to take account of net Tax
cost, if any, incurred by the Indemnitee arising from the receipt or accrual of
an Indemnity Payment hereunder (grossed up for such increase) and (ii) reduced
to take account of net Tax benefit, if any, realized by the Indemnitee arising
from incurring or paying such Loss. In computing the amount of any such Tax cost
or Tax benefit, the Indemnitee shall be deemed to recognize all other items of
income, gain, loss, deduction or credit before recognizing any item arising from
the receipt or accrual of any Indemnity Payment hereunder or incurring or
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<PAGE> 27
paying any indemnified Loss. Any Indemnity Payment hereunder shall initially be
made without regard to this Section 5.4 and shall be increased or reduced to
reflect any such net Tax cost (including gross-up) or net Tax benefit only after
the Indemnitee has actually realized such cost or benefit. For purposes of this
Agreement, an Indemnitee shall be deemed to have "actually realized" a net Tax
cost or a net Tax benefit to the extent that, and at such time as, the amount of
Taxes payable by such Indemnitee is increased above or reduced below, as the
case may be, the amount of Taxes that such Indemnitee would be required to pay
but for the receipt or accrual of the Indemnity Payment or the incurrence or
payment of such Loss, as the case may be. The amount of any increase or
reduction hereunder shall be adjusted to reflect any final determination (which
shall include the execution of Form 870-AD or successor form) with respect to
the Indemnity's liability for Taxes, and payments between Cabot and CMC to
reflect such adjustment shall be made if necessary.
5.5. EFFECT OF INSURANCE UPON INDEMNIFICATION. The amount
which an Indemnifying Party is required to pay to any Indemnitee pursuant to
this Section 5 shall be reduced (including retroactively) by any Insurance
Proceeds and other amounts actually recovered by such Indemnitee in reduction of
the related Loss, it being understood and agreed that each of CMC and Cabot
shall use commercially reasonable efforts to collect any such proceeds or other
amounts to which it or any of its Affiliates is entitled, without regard to
whether it is the Indemnifying Party hereunder. No Indemnitee shall be required,
however, to collect any such proceeds or other amounts prior to being entitled
to indemnification from an Indemnifying Party hereunder. If an Indemnitee
receives an Indemnity Payment in respect of a Loss and subsequently receives
Insurance Proceeds or other amounts in respect of such Loss, then such
Indemnitee shall pay to such Indemnifying Party an amount equal to the
difference between (a) the sum of the amount of such Indemnity Payment and the
amount of such Insurance Proceeds or other amounts actually received and (b) the
amount of such Loss, in each case adjusted (at such time as appropriate
adjustment can be determined) to reflect any premium adjustment attributable to
such claim.
5.6. PROCEDURE FOR INDEMNIFICATION INVOLVING THIRD-PARTY
CLAIMS.
(a) Notice of Claim. If any Indemnitee receives notice of the
assertion of any Third-Party Claim with respect to which an Indemnifying Party
is obligated under this Agreement to provide indemnification, such Indemnitee
shall give such Indemnifying Party notice thereof (together with a copy of such
Third-Party Claim, process or other legal pleading) promptly after becoming
aware of such Third-Party Claim; provided, however, that the failure of any
Indemnitee to give notice as provided in this Section shall
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<PAGE> 28
not relieve any Indemnifying Party of its obligations under this Section 5,
except to the extent that such Indemnifying Party is actually prejudiced by such
failure to give notice. Such notice shall describe such Third-Party Claim in
reasonable detail.
(b) Obligation of Indemnifying Party. An Indemnifying Party,
at such Indemnifying Party's own expense and through counsel chosen by such
Indemnifying Party (which counsel shall be reasonably acceptable to the
Indemnitee), may elect to defend any Third-Party Claim. If an Indemnifying Party
elects to defend a Third-Party Claim, then, within ten Business Days after
receiving notice of such Third-Party Claim (or sooner, if the nature of such
Third-Party Claim so requires), such Indemnifying Party shall notify the
Indemnitee of its intent to do so, and such Indemnitee shall cooperate in the
defense of such Third-Party Claim. Such Indemnifying Party shall pay such
Indemnitee's reasonable out-of-pocket expenses incurred in connection with such
cooperation. Such Indemnifying Party shall keep the Indemnitee reasonably
informed as to the status of the defense of such Third-Party Claim. After notice
from an Indemnifying Party to an Indemnitee of its election to assume the
defense of a Third-Party Claim, such Indemnifying Party shall not be liable to
such Indemnitee under this Section 5 for any legal or other expenses
subsequently incurred by such Indemnitee in connection with the defense thereof
other than those expenses referred to in the preceding sentence; provided,
however, that such Indemnitee shall have the right to employ one law firm as
counsel, together with a separate local law firm in each applicable jurisdiction
("Separate Counsel"), to represent such Indemnitee in any action or group of
related actions (which firm or firms shall be reasonably acceptable to the
Indemnifying Party) if, in such Indemnitee's reasonable judgment at any time,
either a conflict of interest between such Indemnitee and such Indemnifying
Party exists in respect of such claim, or there may be defenses available to
such Indemnitee which are different from or in addition to those available to
such Indemnifying Party and the representation of both parties by the same
counsel would be inappropriate, and in that event (i) the reasonable fees and
expenses of such Separate Counsel shall be paid by such Indemnifying Party (it
being understood, however, that the Indemnifying Party shall not be liable for
the expenses of more than one Separate Counsel (excluding local counsel) with
respect to any Third-Party Claim (even if against multiple Indemnitees)) and
(ii) each of such Indemnifying Party and such Indemnitee shall have the right to
conduct its own defense in respect of such claim. If an Indemnifying Party
elects not to defend against a Third-Party Claim, or fails to notify an
Indemnitee of its election as provided in this Section 5 within the period of
ten Business Days described above, the Indemnitee may defend, compromise, and
settle such Third-Party Claim and shall be entitled to indemnification hereunder
(to the extent permitted hereunder); provided, however, that no such Indemnitee
may compromise or settle any such Third-Party Claim without the prior written
consent of the Indemnifying Party, which consent shall not be unreasonably
withheld or delayed. Notwithstanding the foregoing, the Indemnifying Party shall
not, without the prior written consent of the Indemnitee, (i) settle or
compromise any Third-Party Claim or consent to the entry of any judgment which
does not include as an unconditional term thereof the delivery by the
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<PAGE> 29
claimant or plaintiff to the Indemnitee of a written release from all liability
in respect of such Third-Party Claim or (ii) settle or compromise any
Third-Party Claim in any manner that would be reasonably likely to have a
material adverse effect on the Indemnitee.
(c) Joint Defense of Certain Claims. Notwithstanding the
provisions of Section 5.6(b), Cabot and CMC shall jointly control the defense
of, and cooperate with each other with respect to defending, any Third-Party
Claim with respect to which each party is claiming that it is entitled to
indemnification under Section 5.1 or 5.2. If either Cabot or CMC fails to defend
jointly any such Third-Party Claim, the other party shall solely defend such
Third-Party Claim and the party failing to defend jointly shall use all
commercially reasonable efforts to cooperate with the other party in its defense
of such Third-Party Claim; provided, however, that neither party may compromise
or settle any such Third-Party Claim without the prior written consent of the
other party, which consent shall not be unreasonably withheld or delayed. All
costs and expenses of either party in connection with, and during the course of,
the joint control of the defense of any such Third-Party Claim shall be
initially paid by the party that incurs such costs and expenses. Such costs and
expenses shall be reallocated and reimbursed in accordance with the respective
indemnification obligations of the parties at the conclusion of the defense of
such Third-Party Claim.
5.7. PROCEDURE FOR INDEMNIFICATION NOT INVOLVING THIRD-PARTY
CLAIMS. If any Indemnitee desires to assert against an Indemnifying Party any
claim for indemnification under this Section 5 other than a Third-Party Claim (a
"Claim"), the Indemnitee shall deliver to the Indemnifying Party notice of its
demand for satisfaction of such Claim (a "Request"), specifying in reasonable
detail the amount of such Claim and the basis for asserting such Claim. Within
30 days after the Indemnifying Party has been given a Request, the Indemnifying
Party shall either (i) satisfy the Claim requested to be satisfied in such
Request by delivering to the Indemnitee payment by wire transfer or a certified
or bank cashier's check payable to the Indemnified Party in immediately
available funds in an amount equal to the amount of such Claim, or (ii) notify
the Indemnitee that the Indemnifying Party contests such Claim by delivering to
the Indemnitee a Dispute Notice, stating that the Indemnifying Party objects to
such Claim and specifying in reasonable detail the basis for contesting such
Claim. Any dispute described in clause (ii) of this Section 5.7 shall be subject
to the provisions of Section 6.1.
5.8. EXCLUSIVE REMEDIES. Except for the right to pursue
equitable remedies, the remedies provided in this Section 5 shall be deemed the
sole and exclusive remedies of the parties with respect to the subject matters
of the indemnification provisions of this Section 5.
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<PAGE> 30
6. MISCELLANEOUS.
6.1. DISPUTE RESOLUTION. Except as otherwise set forth in the
Ancillary Agreements, resolution of any and all disputes arising from or in
connection with this Agreement, whether based on contract, tort, or otherwise
(collectively, "Disputes"), shall be exclusively governed by and settled in
accordance with the provisions of this Section 6.1. The parties hereto shall use
all commercially reasonable efforts to settle all Disputes without resorting to
mediation, arbitration, litigation or other third party dispute resolution
mechanisms. If any Dispute remains unsettled, the parties hereby agree to
mediate such Dispute using a mediator reasonably acceptable to all parties
involved in such Dispute. If the Parties are unable to resolve such dispute
through mediation, each Party will be free to commence proceedings for the
resolution thereof. No Party shall be entitled to consequential, special,
exemplary or punitive damages.
6.2. SURVIVAL. The representations and warranties contained in
this Agreement shall survive the execution and delivery hereof and all
Distribution Dates until the expiration of all applicable statutes of
limitations.
6.3. COMPLETE AGREEMENT. Except as otherwise set forth in this
Agreement, this Agreement and the exhibits hereto shall constitute the entire
agreement between the parties hereto with respect to the subject matter hereof
and shall supersede all prior agreements and understandings, whether written or
oral, between the parties with respect to such subject matter.
6.4. AUTHORITY. Each of the parties hereto represents to the
other that (a) it has the corporate power and authority to execute, deliver and
perform this Agreement, (b) the execution, delivery and performance of this
Agreement by it has been duly authorized by all necessary corporate action, (c)
it has duly and validly executed and delivered this Agreement, and (d) this
Agreement is a legal, valid and binding obligation, enforceable against it in
accordance with its terms subject to applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting creditors' rights
generally and general equity principles.
6.5. GOVERNING LAW.
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<PAGE> 31
This Agreement shall be governed by and construed in accordance with the laws of
the State of Delaware (other than the laws regarding conflicts of laws) as to
all matters, including matters of validity, construction, effect, performance
and remedies.
6.6. CONSENT TO EXCLUSIVE JURISDICTION. Any action, suit or
proceeding arising out of any claim that the parties cannot settle through good
faith negotiations shall be litigated exclusively in the state courts of
Delaware. Each of the parties hereto hereby irrevocably and unconditionally (a)
submits to the jurisdiction of the state courts of Delaware for any such action,
suit or proceeding, (b) agrees not to commence any such action, suit or
proceeding except in the state courts of Delaware, (c) waives, and agrees not to
plead or to make, any objection to the venue of any such action, suit or
proceeding in the state courts of Delaware, (d) waives, and agrees not to plead
or to make, any claim that any such action, suit or proceeding brought in the
state courts of Delaware has been brought in an improper or otherwise
inconvenient forum, (e) waives, and agrees not to plead or to make, any claim
that the state courts of Delaware lack personal jurisdiction over it, and (f)
waives its right to remove any such action, suit or proceeding to the federal
courts except when such courts are vested with sole and exclusive jurisdiction
by statute. Cabot and CMC shall cooperate with each other in connection with any
such action, suit or proceeding to obtain reliable assurances that confidential
treatment will be accorded any information that either party shall reasonably
deem to be confidential or proprietary. Each of the parties hereto irrevocably
designates and appoints its respective Service Agent as its agent to receive
service of process in any such action, suit or proceeding. Each of the parties
hereto further covenants and agrees that, until the expiration of all applicable
statutes of limitations relating to potential claims under this Agreement, each
such party shall maintain a duly appointed agent for the service of summonses
and other legal process in the State of Delaware, and shall promptly notify the
other party hereto of any change in the name or address of its Service Agent and
the name and address of any replacement for its Service Agent, if such agent is
no longer the Service Agent named herein. Notwithstanding anything contained in
this Section 6.6, all claims for indemnification under Section 5 shall be
governed by the provisions thereof.
6.7. NOTICES. All Notices and other communications hereunder
shall be in writing and shall be delivered in person, by telecopy, by express or
overnight mail delivered by a nationally recognized air courier (delivery
charges prepaid), or by registered or certified mail (postage prepaid, return
receipt requested) to the respective parties as follows:
(a) If to Cabot, to:
Cabot Corporation
75 State Street
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<PAGE> 32
Boston, Massachusetts 02109
Attention: Chief Financial Officer
Telecopy No.: (617) 342-6281
With a copy to:
Law Department
Cabot Corporation
75 State Street
Boston, Massachusetts 02109
Attention: General Counsel
Telecopy No.: (617) 342-6039
(b) If to CMC, to:
Cabot Microelectronics Corporation
870 North Commons Drive
Aurora, Illinois 60504
Attention: President
Telecopy No.: (630) 375-5593
or to such other address as the party to whom notice is given may have
previously furnished to the others in writing in the manner set forth above. Any
notice or communication delivered in person shall be deemed effective on
delivery or when delivery is refused. Any notice or communication sent by
telecopy or by air courier shall be deemed effective on the first Business Day
at the place at which such notice or communication is received following the day
on which such notice or communication was sent.
6.8. AMENDMENT AND MODIFICATION. This Agreement may not be
amended or modified in any respect except by a written agreement signed by both
of the parties hereto.
6.9. BINDING EFFECT; ASSIGNMENT. This Agreement and all of the
provisions hereof shall be binding upon the parties hereto and inure to the
benefit of the parties hereto and their respective successors and permitted
assigns. Except with respect to a merger of either party with another Person,
neither this Agreement nor any of the rights, interests or obligations hereunder
shall be assigned by either party hereto without the prior written consent of
the other
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<PAGE> 33
party, which consent shall not be unreasonably withheld or delayed.
6.10. THIRD PARTY BENEFICIARIES. The Indemnitees and their
respective successors shall be third party beneficiaries of the indemnification
provisions of Section 6, as applicable, and shall be entitled to enforce those
provisions and in connection with such enforcement shall be subject to Section
6.6, in each such case as fully and to the same extent as if they were parties
to this Agreement. Except as provided in the previous sentence, nothing in this
Agreement, express or implied, is intended to or shall confer upon any Person
any legal or equitable right, benefit or remedy of any nature whatsoever under
or by reason of this Agreement, and no Person (other than as provided in the
previous sentence) shall be deemed a third party beneficiary under or by reason
of this Agreement.
6.11. COUNTERPARTS. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument. The Agreement may be
executed by facsimile signature.
6.12. WAIVER. The observance of any term of this Agreement may
be waived (either generally or in a particular instance and either retroactively
or prospectively) by the party entitled to enforce such term, but such waiver
shall be effective only if it is in writing signed by the party against which
such waiver is to be asserted. Unless otherwise expressly provided in this
Agreement, no delay or omission on the part of any party in exercising any right
or privilege under this Agreement shall operate as a waiver thereof, nor shall
any waiver on the part of any party of any right or privilege under this
Agreement operate as a waiver of any other right or privilege under this
Agreement nor shall any single or partial exercise of any right or privilege
preclude any other or further exercise thereof or the exercise of any other
right or privilege under this Agreement. No failure by either party to take any
action or assert any right or privilege hereunder shall be deemed to be a waiver
of such right or privilege in the event of the continuation or repetition of the
circumstances giving rise to such right unless expressly waived in writing by
the party against whom the existence of such waiver is asserted.
6.13. SEVERABILITY. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof. Any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
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<PAGE> 34
6.14. REMEDIES. Each of Cabot and CMC shall be entitled to
enforce its rights under this Agreement specifically, to recover damages and
costs (including reasonable attorneys' fees) caused by any breach of any
provision of this Agreement and to exercise all other rights existing in its
favor. Each of Cabot and CMC acknowledges and agrees that under certain
circumstances the breach by Cabot or any of its Affiliates or CMC or any of its
Affiliates of a term or provision of this Agreement will materially and
irreparably harm the other party, that money damages will accordingly not be an
adequate remedy for such breach and that the non-defaulting party, in its sole
discretion and in addition to its rights under this Agreement and any other
remedies it may have at law or in equity, may apply to any court of law or
equity of competent jurisdiction (without posting any bond or deposit) for
specific performance and/or other injunctive relief in order to enforce or
prevent any breach of the provisions of this Agreement.
6.15. PERFORMANCE. Each of the parties hereto shall use all
commercially reasonable efforts to cause to be performed all actions, agreements
and obligations set forth herein to be performed by any Affiliate of such party.
6.16. REFERENCES; CONSTRUCTION. The table of contents and the
section and other headings and subheadings contained in this Agreement and the
exhibits hereto are solely for the purpose of reference, are not part of the
agreement of the parties hereto, and shall not in any way affect the meaning or
interpretation of this Agreement or any exhibit hereto. All references to days
or months shall be deemed references to calendar days or months. All references
to "$" shall be deemed references to United States dollars. Unless the context
otherwise requires, any reference to a "Section" or an "Exhibit" shall be deemed
to refer to a section of this Agreement or an exhibit to this Agreement, as
applicable. The words "hereof," "herein" and "hereunder" and words of similar
import referring to this Agreement refer to this Agreement as a whole and not to
any particular provision of this Agreement. Whenever the words "include,"
"includes" or "including" are used in this Agreement, unless otherwise
specifically provided, they shall be deemed to be followed by the words "without
limitation." This Agreement shall be construed without regard to any presumption
or rule requiring construction or interpretation against the party drafting or
causing the document to be drafted.
* * * * *
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<PAGE> 35
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed and delivered as of the date and year first
written above.
CABOT CORPORATION
By: /s/ Samuel W. Bodman
--------------------
Name: Samuel W. Bodman
Title: Chairman and
Chief Executive Officer
CABOT MICROELECTRONICS CORPORATION
By: /s/ Matthew Neville
--------------------
Name: Matthew Neville
Title: President and
Chief Executive Officer
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<PAGE> 36
EXHIBIT A
AGREEMENTS SUBJECT TO SECTION 4.2(e)
Cabot is a party to the following agreements, the covenants of which shall be
subject to Section 4.2(e) of the IPO and Distribution Agreement:
1. Indenture, dated as of December 1, 1987, between Cabot Corporation and
the First National Bank of Boston, Trustee.
2. First Supplemental Indenture dated as of June 17, 1992, to Indenture,
dated as of December 1, 1987, between Cabot Corporation and the First
National Bank of Boston, Trustee.
3. Second Supplemental Indenture, dated as of January 31, 1997, between
Cabot Corporation and State Street Bank and Trust Company, Trustee.
4. Third Supplemental Indenture, dated as of November 20, 1998, between
Cabot Corporation and State Street Bank and Trust Company, Trustee.
5. Credit Agreement, dated as of January 3, 1997, among Cabot Corporation,
the banks listed therein and Morgan Guaranty Trust Company of New York,
as Agent.
6. Note Purchase Agreement between John Hancock Mutual Life Insurance
Company, State Street Bank and Trust Company, as trustee for the Cabot
Corporation Employee Stock Ownership Plan, and Cabot Corporation.,
dated as of November 15, 1988.
7. Various confidentiality and secrecy agreements between Cabot
Corporation and third parties with respect to which employees of CMC
have knowledge as a result of their employment with Cabot Corporation.
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<PAGE> 1
Exhibit 10.6
CONFIDENTIAL DISCLOSURE & LICENSE AGREEMENT
This Confidential Disclosure & License Agreement (as such
agreement may be amended from time to time, the "CDL Agreement") is entered into
as of March 28, 2000 by and between Cabot Corporation, a Delaware corporation
("Cabot") and Cabot Microelectronics Corporation, a Delaware corporation
("CMC"). Capitalized terms used and not otherwise defined herein shall have the
meanings ascribed to such terms in Article 1 hereof.
WHEREAS, in connection with the contribution of substantially all of
the assets and liabilities of the MMD BUSINESS (as hereinafter defined) by Cabot
to its subsidiary, CMC, and the separation of such MMD BUSINESS from Cabot's
other businesses, Cabot and CMC desire to enter into this CDL Agreement
concerning the obligations of the parties with respect to confidential or
proprietary information, intellectual property, and other matters that are set
forth below.
NOW, THEREFORE, in consideration of the mutual promises contained
herein, and intending to be legally bound, the parties agree as follows:
DEFINITIONS:
For all purposes of this CDL Agreement, and except as otherwise
expressly provided, capitalized terms used herein shall have the following
meanings:
"AFFILIATE" of any specified Person means any other Person directly or
indirectly Controlling, Controlled by, or under common Control with, such
specified Person; provided, however, that for purposes of this CDL Agreement,
(i) Cabot and its subsidiaries (other than CMC and its subsidiaries) shall not
be considered Affiliates of CMC and (ii) CMC and its subsidiaries shall not be
considered Affiliates of Cabot.
"ANCILLARY AGREEMENTS" shall have the same meaning as set forth in the
Master Separation Agreement, by and among the parties hereto, dated the date
hereof (the "Master Separation Agreement").
"MMD ASSETS" shall have the same meaning as set forth in the Master
Separation Agreement.
"CABOT BUSINESSES" means the businesses conducted by Cabot and/or any
of its Affiliates at any time on or before the Contribution Date, but excluding
the MMD Business.
"CABOT CONFIDENTIAL INFORMATION" means confidential or proprietary
information relating to the Cabot Businesses, including, but not limited to, any
unpublished Technology, unpublished patent applications, and other confidential
or proprietary technical and business information relating to the Cabot
Businesses. Examples of Cabot Confidential Information include, without
limitation: trade secrets and other proprietary or confidential information of
Cabot relating to the Cabot Businesses; trade secrets and other proprietary or
confidential information of any other person entrusted to Cabot in connection
with the Cabot
<PAGE> 2
Businesses; and trade secrets and other proprietary or confidential information
relating to the Cabot Businesses developed by any employee of the MMD Business
prior to the Contribution Date or to which any employee of the MMD Business was
provided access on or prior to the Contribution Date.
"CMP" means chemical mechanical polishing consumables for use in the
semiconductor, electronic, rigid disk and magnetic head, and flat panel display
industries, such as polishing slurries, polishing pads, cleaning compositions,
precursor compositions, and related consumables.
"CONTRIBUTION DATE" means March 28, 2000.
"CONTROL" means the possession, direct or indirect, of the power to
direct or cause the direction of the management of the policies of a Person,
whether through the ownership of voting securities, by contract or otherwise.
"CONTROLLING" and "CONTROLLED" have the corollary meanings ascribed thereto.
"COPYRIGHTS" means all registered and unregistered copyrights and
applications therefor.
"MMD BUSINESS" means the business conducted by the Microelectronics
Materials Division of Cabot at any time on or before the Contribution Date,
either directly or indirectly through Cabot Carbon Ltd. and Cabot Specialty
Chemicals International Corporation, including, but not limited to, (i) all
business operations whose financial performance is reflected in the financial
statement (including the notes thereto) for the period ended September 30, 1999,
as set forth in the Registration Statement on form S-1, Reg. No. 333-95093, as
it may be amended (the "CMC Financial Statements") and (ii) all business
operations initiated or acquired by the Microelectronics Materials Division of
Cabot after the date of the CMC Financial Statements.
"MMD CONFIDENTIAL INFORMATION" means confidential or proprietary
information relating exclusively to the MMD Business, including, but not limited
to, any unpublished Technology, unpublished patent applications, and other
confidential or proprietary technical and business information relating
exclusively to the MMD Business. Examples of MMD Confidential Information
include, without limitation: trade secrets and other proprietary or confidential
information transferred to CMC as part of the Assets; and trade secrets and
other proprietary or confidential information of any other person entrusted to
Cabot solely in connection with the MMD Business on or prior to the Contribution
Date.
"PATENTS" means all patents and patent applications (including any
divisions, continuations, continuations-in-part, reexaminations, extensions,
renewals or reissues thereof), design registrations, utility models and similar
rights and applications therefor.
"PERSON" means an individual, partnership, limited liability company,
joint venture, corporation, trust, unincorporated association, any other entity,
or any government or any department or agency or other unit thereof.
"TECHNOLOGY" means all technology and know-how, including without
limitation,
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<PAGE> 3
technical information, trade secrets and knowledge, design rights (other than
statutory registrations), whether included in or derived from specifications,
manuals, notebooks, reports, documents, blue prints, inventions, drawings,
formulae, procedures, processes, devices, software and source code and
documentation therefor, flow charts, recording media, and other intangible,
tangible and electronic embodiments of information.
1. CONFIDENTIALITY
1.1 Cabot agrees to keep confidential and not disclose, and shall cause its
Affiliates to keep confidential and not disclose, to any third party and not to
use for any purpose not authorized by CMC, in whole or in part, any MMD
Confidential Information.
1.2 CMC agrees to keep confidential and not disclose, and to cause its
Affiliates to keep confidential and not disclose, to any third party and not to
use for any purpose not authorized by Cabot, in whole or in part, any Cabot
Confidential Information.
1.3 For purposes of this CDL Agreement, Cabot Confidential Information and MMD
Confidential Information do not include, and a party and a party's Affiliates (a
party and Affiliates of the party being referred to as the "receiving party")
will have no obligations under this CDL Agreement, with respect to any
information of the other party or any Affiliate of the other party (the other
party and Affiliates of the other party being referred to as the "disclosing
party") which:
(i) in the case of Cabot, is known to Cabot from a source other than
the MMD Business or CMC, as evidenced by competent proof thereof; or
(ii) in the case of CMC, is known to CMC from a source other than Cabot
Businesses, as evidenced by competent proof thereof; or
(iii) is or becomes publicly known through no wrongful act of the
receiving party (in which event the receiving party's obligations under this CDL
Agreement in respect thereto shall terminate on the date such information enters
the public domain); or
(iv) is or was rightfully received by the receiving party from a third
party without violation of any obligations of confidentiality and/or use
restrictions owed by the third party to the disclosing party or any other party;
or
(v) is disclosed by the disclosing party to a third party without
restrictions on the third party's right to use or disclose such information; or
(vi) is independently developed by employees or consultants of the
receiving party without use of or reference to the disclosing party's
proprietary information; or
(vii) is approved for release by the prior written authorization of the
disclosing party.
-3-
<PAGE> 4
In addition, if the receiving party is requested or required (by oral questions,
interrogatories, request for information or documents, subpoena, civil
investigative demand, similar process or otherwise) to disclose any Confidential
Information of the disclosing party, such receiving party will provide prompt
notice to the disclosing party on such request(s) so that such disclosing party
may seek any appropriate protective order and/or waive compliance with the
provisions of this CDL Agreement. Failing the entry of a protective order or the
receipt of a waiver hereunder, if the receiving party is in the written opinion
of its attorneys legally required to disclose any of the disclosing party's
Confidential Information under pain of liability for contempt or other material
censure or material penalty, the receiving party may disclose such Confidential
Information without liability hereunder upon notice to the disclosing party.
Notwithstanding the foregoing, Cabot is permitted to disclose MMD Confidential
Information as required in litigation that is pending as of the Contribution
Date.
2. ANCILLARY LICENSE GRANT BY CABOT
2.1 As of the Contribution Date, Cabot hereby grants to CMC and its Affiliates
(but only so long as an Affiliate of CMC) for CMP a fully paid-up, world-wide,
non-exclusive license to only such Copyrights, Patents, and Technology of Cabot
that:
(x) are not included within the MMD Assets, AND,
(y) (a) are owned by Cabot on the Contribution Date,
(b) do NOT relate to (i) treated or untreated fumed metal
oxide particles or the manufacture or treatment of
fumed metal oxide particles; or (ii) cesium chemicals
or other products of Cabot's Performance Materials
Division or the manufacture thereof;
(c) would be infringed in the case of Copyrights and
Patents, or misappropriated in the case of
Technology, by the manufacture, treatment,
processing, handling, marketing, sale, or use of any
products (excluding treated or untreated fumed metal
oxide particles and cesium chemicals or other
products of Cabot's Performance Materials Division)
of the type sold or offered for sale by the MMD
Business as of the Contribution Date, and
(d) were used by Cabot in connection with activities
undertaken by the MMD Business on or prior to the
Contribution Date.
(The license granted in this Subsection 2.1 is hereinafter also referred to as
the "Ancillary License").
2.2 All trade secrets and other confidential or proprietary Technology,
unpublished Copyrights, and unpublished patent applications licensed to CMC and
its Affiliates pursuant to the Ancillary License that fall within the definition
of Cabot Confidential Information shall
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<PAGE> 5
remain subject to the provisions of Article 1 of this CDL Agreement.
2.3 Cabot shall not assert, and shall cause its Affiliates not to assert, any of
the Patents or copyrights in published copyrightable works licensed to CMC and
its Affiliates under the Ancillary License against their respective customers
with respect to their customers' use of CMP products manufactured and/or
supplied by CMC or any of its Affiliates pursuant to the Ancillary License.
2.4 The Ancillary License does not include the right to grant sublicenses to
others without the prior written authorization of Cabot. Any sublicense(s)
granted by CMC or any of its Affiliates in violation of this provision shall be
void, and the granting or any attempted grant by CMC or any of its Affiliates of
any sublicense(s) in violation of this provision shall in particular constitute
a material breach of this CDL Agreement by CMC.
2.5 Notwithstanding Section 8.6 herein, the rights of CMC and its Affiliates
pursuant to this Ancillary License are personal to CMC and its Affiliates and
shall not be assignable without the prior written authorization of Cabot.
2.6 In no event shall the Ancillary License be used in connection with or
support of any activity that is competitive with any activity of Cabot.
3. LICENSE GRANT TO CABOT BY CMC
3.1 As of the Effective Date of this CDL Agreement, CMC hereby grants to Cabot
and its Affiliates (but only so long as an Affiliate of Cabot) a fully paid-up,
worldwide, non-exclusive license to Copyrights, Patents, and Technology that are
among the MMD Assets, that would be infringed by the manufacture, treatment,
processing, handling, marketing, sale, or use of any products or services sold
or offered for sale by Cabot or any of its Affiliates for applications other
than CMP.
(The license granted in this Subsection 3.1 is hereinafter also referred to as
the "Cabot License").
3.2 All trade secrets and other confidential or proprietary Technology,
unpublished Copyrights, and unpublished patent applications licensed to Cabot
and its Affiliates pursuant to the Cabot License that fall within the definition
of MMD Confidential Information shall remain subject to the provisions of
Article 1 of this CDL Agreement.
3.3 CMC shall not assert, and shall cause its Affiliates not to assert, any of
the Patents or copyrights in published copyrightable works licensed to Cabot
under the Cabot License against Cabot's customers with respect to their
customers' use of non-CMP products manufactured and/or supplied by Cabot or its
Affiliates pursuant to the Cabot License.
3.4 The Cabot License does not include the right to grant sublicenses to others
without the prior written authorization of CMC. Any sublicense(s) granted by
Cabot or any of its Affiliates in violation of this provision shall be void, and
the granting or any attempted grant by Cabot or
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<PAGE> 6
any Affiliate of Cabot of any sublicense(s) in violation of this provision shall
in particular constitute a material breach of this CDL Agreement by CABOT.
3.5 Notwithstanding Section 8.6 herein, the rights of Cabot and its Affiliates
pursuant to this Cabot License are personal to Cabot and its Affiliates and
shall not be assignable without the prior written authorization of CMC.
3.6 In no event shall the Cabot License be used in connection with or support of
any activity that is competitive with any activity of CMC.
4. COOPERATION
4.1 The parties will do everything that is necessary or appropriate to conform
to the purpose and spirit of this CDL Agreement, including, without limitation,
cooperating with the other party in connection with the maintenance, enforcement
and protection of the Copyrights, Patents and Technology, and executing any and
all documents or instruments, or obtaining any consents, in order to assign,
transfer, perfect, record, maintain, enforce or otherwise carry out the intent
of the terms of this CDL Agreement.
4.2 Each party will take appropriate measures to assure the confidentiality and
non-use obligations and other applicable obligations of a party pursuant to this
CDL Agreement are met by its legal representatives, members of supervisory
bodies, management, employees or other agents.
5. CABOT PARTICLE AND PERFORMANCE MATERIALS TECHNOLOGY
In addition to its obligations pursuant to Section 1 above, CMC agrees, and
shall cause its Affiliates to agree, not to use any information in its
possession as of the Contribution Date concerning (i) Cabot's fumed metal oxide
products (treated and untreated) and related manufacturing or treatment
processes; (ii) cesium chemicals and other products of Cabot's Performance
Materials Division and related manufacturing processes; and (iii) any
information concerning the raw materials, suppliers, and/or equipment used in
any such processes, including product specifications, to manufacture or have
manufactured (a) treated or untreated fumed metal oxide particles and/or (b)
cesium chemicals and other products of Cabot's Performance Materials Division.
CMC further agrees, and shall further cause its Affiliates to agree, not to
disclose same to any third party. The obligations of CMC and its Affiliates
pursuant to this Section 5 shall apply to the foregoing information without
regard to whether or not it falls within the exceptions set forth in Subsection
1.3 above.
6. DISPERSION INTELLECTUAL PROPERTY
6.1 Cabot hereby agrees to assign to CMC an undivided one-half joint interest in
and to Cabot's rights in the Patents listed in Schedule 6.1 hereto ("Dispersion
Patents") (including the
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<PAGE> 7
right, subject to Section 6.10 below, to enforce Dispersion Patents, including
the right to sue for past, present, and future violations thereof, and to seek
and obtain relief and judgment therefor and/or to settle any such claims and to
collect monies owed in connection with such judgments or settlements). Subject
to the parties' respective undertakings of Sections 6.9 and 6.10, each of Cabot
and CMC shall enjoy its rights as a joint owner of the Dispersion Patents in
each applicable country without the consent of, and without accounting to, the
other joint owner.
6.2 Cabot hereby agrees to assign to CMC an undivided one-half joint interest in
and to Cabot's rights in the Technology owned by Cabot which relates to fumed
metal oxide dispersions, the preparation of fumed metal oxide dispersions,
quality control procedures and other testing and analytical procedures
associated therewith, handling and packaging processes and procedures for such
dispersions and raw materials, ISO documentation, and other information,
processes, specifications, data, formulae and formulations (including, e.g., the
identity and amounts of the dispersion medium, fumed metal oxide(s), other
ingredients included for the purpose of preparing stable, clean, fumed metal
oxide dispersions (e.g., stabilizers, surfactants, acid, base, biocide, etc.))
used in or relating to fumed metal oxide dispersions made by Cabot (including
those made by the MMD Division thereof) on or prior to the Contribution Date
("Dispersion Technology"). As used herein, "Dispersion Technology" does not
include ingredients and process information, the sole purpose and function of
which is specific to a particular end-use application for the fumed metal oxide
dispersion. Subject to the parties' respective undertakings of Sections 6.9 and
6.10, each of Cabot and CMC shall enjoy its rights as a joint owner of
Dispersion Technology without the consent of, and without accounting to, the
other joint owner.
6.3 As soon as reasonably practicable after the date of this CDL Agreement, CMC
will deliver to Cabot, and Cabot will deliver to CMC, copies of all tangible and
electronic documentation of Dispersion Technology within its possession or
control (including, without limitation, that within the possession of Davies)
that is reasonably required to use, and/or to develop and commercialize fumed
metal oxide dispersions made with, the Dispersion Technology. Cabot and CMC, as
the case may be, will further provide copies of tangible and/or electronic
documentation not previously provided in response to reasonable requests from
the other.
6.4 Cabot hereby agrees to assign to CMC an undivided one-half joint interest in
and to Cabot's rights in the registered copyrights and pending applications for
copyright registration listed in Schedule 6.4 hereto and the unpublished
copyrighted works included within the Dispersion Technology ("Dispersion
Copyrights"). Subject to the parties' respective undertakings of Sections 6.9
and 6.10, each of Cabot and CMC shall enjoy its rights as a joint owner of the
Dispersion Copyrights in each applicable country without the consent of, and
without accounting to, the other joint owner.
6.5 With respect to Dispersion Patents, Dispersion Copyrights, and Dispersion
Technology (hereinafter collectively referred to as the "Dispersion Intellectual
Property"), Cabot shall deliver to CMC on the Contribution Date an omnibus
transfer and assignment of an undivided one-half joint interest in and to the
Dispersion Intellectual Property "AS IS" and shall thereafter deliver to CMC
good and sufficient instruments of conveyance and assignment, all in recordable
form, for all patents, pending patent applications, registered copyrights and
pending copyright applications
-7-
<PAGE> 8
with respect to any of the foregoing.
6.6 All transfer costs, taxes, and other related fees and expenses (except for
Cabot's internal costs) associated with the assignment, transfer, and
recordation of an undivided one-half joint interest in and to the Dispersion
Intellectual Property to CMC pursuant to this CDL Agreement shall be borne by
CMC.
6.7 Costs associated with the prosecution and maintenance of the Dispersion
Patents shall be shared equally by Cabot and CMC. Cabot shall pay all such costs
and CMC shall promptly reimburse Cabot for one-half of such costs upon
presentation of appropriate supporting documentation. Neither party will
knowingly take any actions or intentionally fail to take any actions which will
cause the Dispersion Patents to become expired, abandoned or otherwise invalid
without providing thirty (30) days advance written notice thereof to the other
party. If at any time Cabot or CMC elects to not maintain any patent or
application of the Dispersion Patents, the party desiring to prosecute or
maintain the patent or application shall pay the entire cost thereof, and the
party not desiring to prosecute or maintain the particular patent or application
shall assign its rights to the particular patent or application to the party
desiring to prosecute or maintain same. Decisions as to prosecuting and/or
maintaining particular patents or patent applications of the Dispersion Patents
shall be on a country-by-country basis, and a party's decision not to
participate in prosecuting or maintaining a particular patent or application in
one country shall not prejudice its right to participate in another country
directed to the same patent or application.
6.8 All trade secrets, unpublished Dispersion Copyrights, unpublished patent
applications of the Dispersion Patents, and other confidential or proprietary
Dispersion Technology shall be deemed to be both Cabot Confidential Information
and CMC Confidential Information and subject to the provisions of Article 1 of
this CDL Agreement. However, notwithstanding the obligations of Article 1, Cabot
and CMC shall be permitted to disclose to its respective customers, potential
customers, and suppliers only such confidential Dispersion Technology as is
reasonably and commercially necessary for such manufacturing, distribution,
marketing and sales, provided, the third party to whom such disclosure is to be
made agrees to undertake obligations of confidentiality and non-use appropriate
to the circumstances. Such circumstances will include, for example, the quantity
and quality of information to be disclosed, the potential and likelihood of
adverse use of the information by the third party, and the like. Should a party
desire to disclose any of the confidential Dispersion Technology beyond that
which is reasonably and commercially necessary for the manufacture,
distribution, marketing, and sales of products, the parties agree to discuss
diligently and in good faith a waiver of the other party's obligations with
respect thereto to the extent needed to enable that other party to undertake
reasonably effective manufacturing, distribution, marketing and sales of any
products.
6.9 With respect to Dispersion Intellectual Property (in which Cabot and CMC
each own an undivided one-half interest), Cabot and CMC, as the case may be,
agree as follows:
(a) Cabot shall not license or assign any of such Dispersion
Intellectual Property to any party (other than an Affiliate of Cabot,
but only so long as an Affiliate) for use in the
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<PAGE> 9
production and/or sale or use of CMP consumables without the prior
written authorization of CMC; and
(b) CMC shall not license or assign any of such Dispersion Intellectual
Property to any party (other than an Affiliate of CMC, but only so long
as an Affiliate) for use in the production and/or sale or use of
products for use in non-CMP applications without the prior written
authorization of Cabot.
Any assignment by either Cabot or CMC of its interest in any Dispersion
Intellectual Property, or any of its rights therein, to any Person (including an
Affiliate) shall be subject to this Section 6.9 and other applicable provisions
of this CDL Agreement.
6.10 Cabot and/or CMC, at its sole discretion, individually or jointly, may
bring enforcement proceedings against an infringer of any Dispersion
Intellectual Property. However, the parties shall jointly discuss any such
possible enforcement proceeding prior to engaging litigation counsel in
connection therewith and/or notifying the party believed to infringe. The costs
of any jointly brought proceeding shall be borne equally by the parties unless
otherwise agreed. The costs of any proceeding brought by an individual party
shall be borne solely by that party (the "enforcing party"). The non-enforcing
party agrees to cooperate with the enforcing party and will join as an
indispensable party when deemed to be required by law. The enforcing party will
reimburse the non-enforcing party for its costs and expenses (including attorney
fees, but excluding the non-enforcing party's internal costs) for its
participation. Any monies recovered by way of damages or otherwise in respect to
any such proceeding shall be kept by the party which bore the costs of such
proceeding; or, in the case where the parties have shared the costs, shall be
shared in the same proportion as the costs, unless otherwise agreed.
6.11 CMC and Cabot each agrees to notify the other of (i) any threat or
allegation made by any third party, that any Dispersion Intellectual Property,
or the practice thereof, infringes any third party intellectual property rights,
or (ii) any activities or threatened activities of any third party of which CMC
or Cabot, as the case may be, becomes aware that infringe or will infringe upon
the Dispersion Intellectual Property.
7. DISCLAIMER
Nothing in this CDL Agreement shall be construed as a warranty or
representation that anything made, used, sold, offered for sale, or otherwise
disposed of under any license granted in this CDL Agreement is or will be free
from infringement of any intellectual property right of any third party
including any patent, copyright, copyright registration, mask work registration,
trademark, or trademark registration issued or to be issued by any country.
8. MISCELLANEOUS
8.1 Except as otherwise set forth in this CDL Agreement, this CDL Agreement and
any schedules hereto and the Master Separation Agreement and any schedules
thereto shall constitute the entire agreement between the parties hereto with
respect to the subject matter hereof and shall supersede all prior agreements
and understandings, whether written or oral, between the parties
-9-
<PAGE> 10
with respect to such subject matter.
8.2 This CDL Agreement shall be governed by and construed in accordance with the
laws of the State of Delaware (other than the laws regarding conflicts of laws)
as to all matters, including matters of validity, construction, effect,
performance and remedies.
8.3 Each of the parties hereto shall use all commercially reasonable efforts to
cause to be performed all actions, agreements and obligations set forth herein
to be performed by any Affiliate of such party.
8.4 All notices and other communications hereunder shall be in writing and shall
be delivered in person, by telecopy, by express or overnight mail delivered by a
nationally recognized air courier (delivery charges prepaid), or by registered
or certified mail (postage prepaid, return receipt requested) to the respective
parties as follows:
(a) If to Cabot, to:
Cabot Corporation
75 State Street
Boston, Massachusetts 02109
Attention:
Telecopy No.:
With a copy to:
Law Department
Cabot Corporation
75 State Street
Boston, Massachusetts 02109
Attention:
Telecopy No.:
(b) If to CMC, to:
Cabot Microelectronics Corporation
870 North Commons Drive
Aurora, Illinois 60504
Attention:
Telecopy No.:
or to such other address as the party to whom notice is given may have
previously furnished to the others in writing in the manner set forth above. Any
notice or communication delivered in person shall be deemed effective on
delivery or when delivery is refused. Any notice or communication sent by
telecopy or by air courier shall be deemed effective on the first Business Day
at the place at which such notice or communication is received following the day
on which such notice or communication was sent.
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<PAGE> 11
8.5 This CDL Agreement may be executed in two or more counterparts, each of
which shall be deemed to be an original, but all of which together shall
constitute one and the same agreement. The CDL Agreement may be delivered by
facsimile transmission of a signed copy thereof.
8.6 This CDL Agreement and all of the provisions hereof shall be binding upon
the parties hereto and inure to the benefit of the parties hereto and their
respective successors and permitted assigns. Except with respect to a merger of
either party with another Person, neither this CDL Agreement nor any of the
rights, interests or obligations hereunder shall be assigned by either party
hereto without the prior written consent of the other party, which consent shall
not be unreasonably withheld or delayed; provided, however, that Cabot and CMC
may assign their respective rights, interests, duties, liabilities and
obligations under this CDL Agreement to any of their respective Affiliates, but
such assignment shall not relieve Cabot or CMC, as the assignee, of its
obligations hereunder. The Schedules attached hereto or referred to herein are
an integral part of this CDL Agreement and are hereby incorporated into this CDL
Agreement and made a part hereof as if set forth in full herein. Notwithstanding
anything contained in this Agreement, Cabot and CMC shall not assign the
Ancillary License, in the case of CMC, or the Cabot License, in the case of
Cabot, to another Person, even upon a merger, without the prior written
authorization of the other party.
8.7 All disputes arising from or in connection with this CDL Agreement, whether
based on contract, tort, or otherwise (collectively, "Disputes"), shall be
exclusively governed by and settled in accordance with the provisions of Section
8.8 of the Mater Separation Agreement.
8.8 Any provision of this CDL Agreement which is prohibited or unenforceable in
any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions hereof. Any such prohibition or unenforceability in any jurisdiction
shall not invalidate or render unenforceable such provision in any other
jurisdiction.
8.9 The observance of any term of this CDL Agreement may be waived (either
generally or in a particular instance and either retroactively or prospectively)
by the party entitled to enforce such term, but such waiver shall be effective
only if it is in writing signed by the party against which such waiver is to be
asserted. Unless otherwise expressly provided in this CDL Agreement, no delay or
omission on the part of any party in exercising any right or privilege under
this CDL Agreement shall operate as a waiver thereof, nor shall any waiver on
the part of any party of any right or privilege under this CDL Agreement operate
as a waiver of any other right or privilege under this CDL Agreement, nor shall
any single or partial exercise of any right or privilege preclude any other or
further exercise thereof or the exercise of any other right or privilege under
this CDL Agreement. No failure by either party to take any action or assert any
right or privilege hereunder shall be deemed to be a waiver of such right or
privilege in the event of the continuation or repetition of the circumstances
giving rise to such right unless expressly waived in writing by the party
against whom the existence of such waiver is asserted.
8.10 This CDL Agreement may not be amended or modified in any respect except by
a written agreement signed by both of the parties hereto.
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<PAGE> 12
8.11 Each of the parties hereto represents to the other that (a) it has the
corporate power and authority to execute, deliver and perform this CDL
Agreement, (b) the execution, delivery and performance of this CDL Agreement by
it has been duly authorized by all necessary corporate action, (c) it has duly
and validly executed and delivered this CDL Agreement, and (d) this CDL
Agreement is a legal, valid and binding obligation, enforceable against it in
accordance with its terms subject to applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting creditors' rights
generally and general equity principles.
8.12 The headings contained in this CDL Agreement and in any Schedule hereto are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this CDL Agreement. Any capitalized term used in any Schedule
but not otherwise defined therein, shall have the meaning assigned to such term
in this CDL Agreement. When a reference is made in this CDL Agreement to an
Article or a Section or Schedule, such reference shall be to an Article or
Section of, or a Schedule to, this CDL Agreement unless otherwise indicated.
After the Contribution Date, the MMD Business shall be deemed to no longer exist
and all references made herein to CMC as a party which operate as of a time
following the Contribution Date, shall be deemed to refer to CMC and its
subsidiaries as a single party.
* * * * * * * *
[SIGNATURES ON FOLLOWING PAGE]
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<PAGE> 13
IN WITNESS WHEREOF, each of the parties has caused this CDL
Agreement to be executed on its behalf by its officers thereunto duly authorized
on the day and year first above written.
CABOT CORPORATION
By: /s/ Samuel W. Bodman
------------------------------
Name: Samuel W. Bodman
Title: Chairman and CEO
CABOT MICROELECTRONICS
CORPORATION
By: /s/ Matthew Neville
------------------------------
Name: Matthew Neville
Title: President and CEO
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<PAGE> 14
SCHEDULE 6.1
<TABLE>
<CAPTION>
COUNTRY APPLIC. NO. FILING DATE PATENT NO. GRANT DATE
------- ----------- ----------- ---------- ----------
<S> <C> <C> <C> <C> <C>
ASTL 52010/90 21MR1990 625980 21MR1990
BELG 9000319 21MR1990 BR266/90 02JL1991
BRAZ PI9001302 21MR1990 PI9001302 25NO1997
CANA 2012719-8 21MR1990 2012719 08JE1999
CHIN 90101525 21MR1990 28833 16OC1994
FRAN 9003557 20MR1990 9003557 11FE1994
GBRI 9006122.7 19MR1990 2229432 19MR1990
GERW P4006392.5 01MR1990
INDI 869/MAS/89 29NO1989 175167 01DE1995
ITAL 19748A90 21MR1990 01239546 05NO1993
JAPA 2-68568 20MR1990 2949633 09JL1999
KORS 3705/1990 20MR1990 148692 29MY1998
MAYS PI9000449 21MR1990
MEXI 19969 20MR1990 176811 05DE1994
TAIW 79100101 08JA1990 NI-43287 02AP1991
THAI 010174 26JA1990 7128 11SE1997
USA 07/829609 30JA1992 5246624 21SE1993
USA 07/326891 1MR1989 5116535 26MY1992
ASTL 52009/90 21MR1990 631847 21MR1990
BELG 9000320 21MR1990 9000320 27AU1991
BRAZ PI9001239 15MR1990 PI9001239 25NO1997
CANA 2012718-0 21MR1990 2012718 03DE1996
CHIN 90101086 28FE1990 29805 22JA1995
FRAN 9003558 20MR1990 9003558 04FE1994
GBRI 9006121.9 19MR1990 2229715 14OC1992
GERW P4006393.3-41 01MR1990
INDI 912/MAS/89 11DE1989 175056 03NO1995
ITAL 19747A90 21MR1990 01241073 29DE1993
JAPA 2-68569 20MR1990 2935125 04JE1999
KORS 3706/1990 20MR1990 145729 06MY1998
MAYS PI9000448 21MR1990
MEXI 19968 20MR1990 176602 14NO1994
TAIW 79102182 20MR1990 NI-44248 10MY1991
THAI 010175 26JA1990
</TABLE>
-14-
<PAGE> 15
SCHEDULE 6.4
None
-15-
<PAGE> 1
Exhibit 10.7
TRADEMARK LICENSE AGREEMENT
THIS AGREEMENT is made and effective as of this 28th day of March,
2000, by and between Cabot Corporation, a corporation organized and existing
under the laws of the State of Delaware and having its corporate offices at 75
State Street, Boston, Massachusetts 02109 (hereinafter, "CABOT") and Cabot
Microelectronics Corporation, a corporation organized and existing under the
laws of the State of Delaware and having its corporate offices at 870 N. Commons
Drive, Aurora 60504 (hereinafter, "CMC").
WHEREAS, CABOT is the owner, both at common law and through
registrations and applications for registration therefor, of certain trademarks,
service marks, trade names and associated goodwill (hereinafter, the "LICENSED
TRADEMARK(s)"), as set forth on Schedule A attached hereto, and is engaged in
the business of manufacturing, distributing and selling worldwide certain
products including, but not limited to, the representative list of products also
set forth on Schedule A (hereinafter "CABOT PRODUCT(s)").
WHEREAS, as a result of a mutually agreed to separation, CMC is the
successor in interest to CABOT's worldwide microelectronics materials and
polishing consumables business and is engaged in manufacturing, distributing and
selling throughout the world certain related products ("CMC PRODUCT(s)"), as
also set forth on Schedule A attached hereto.
WHEREAS, CMC desires to use and continue to use the LICENSED
TRADEMARK(s) on or in connection with the CMC PRODUCT(s) and Cabot is willing to
grant to CMC the right to use the LICENSED TRADEMARK(s) on or in connection with
the CMC PRODUCT(s), such use subject to the terms and conditions of this
Agreement.
NOW THEREFORE, in consideration of the mutual promises and covenants
set forth herein, the parties, intending to be legally bound, hereto agree as
follows:
ARTICLE 1 - GRANT OF LICENSE
1.1 CABOT hereby grants to CMC, and CMC hereby accepts, a non-exclusive,
worldwide, royalty-free license to use the LICENSED TRADEMARK(s) solely on or in
connection with the manufacture, use, sale, offer for sale, distribution or
other disposition of the CMC PRODUCT(s), subject to the limitations set forth in
this Agreement.
1.2 The grant of license in Section 1.1 above includes the right by CMC to grant
sublicenses within the scope of such license to CMC's wholly-owned subsidiaries,
but only for so long as each remains a wholly-owned subsidiary.
Trademark License Agreement - Page 1 of 10
<PAGE> 2
1.3 The license granted herein includes the right to use the designation "CABOT"
as a trade name, individually or in combination with other terms, subject to all
the provisions hereof relating to the LICENSED TRADEMARK(s).
1.4 Except as provided in this Article, all licenses granted herein shall be
nontransferable and nonassignable without the prior written consent of CABOT.
ARTICLE 2 - OWNERSHIP AND USE OF THE LICENSED TRADEMARKS
2.1 CMC acknowledges that CABOT owns the LICENSED TRADEMARK(s) and all rights
therein and that nothing in this Agreement shall give CMC any right, title or
interest in or to the LICENSED TRADEMARK(s). CMC further acknowledges and agrees
that all use of the LICENSED TRADEMARK(s) by CMC shall inure to the benefit of
CABOT.
2.2 CMC agrees that it will do nothing inconsistent with CABOT's ownership of
the LICENSED TRADEMARK(s) and shall not claim adversely to CABOT, or assist any
third party in attempting to claim adversely to CABOT, with regards to such
ownership. CMC agrees that it will not challenge the title of CABOT to the
LICENSED TRADEMARK(s), oppose any registration thereof, or challenge the
validity of this Agreement or the licenses granted herein. Furthermore, CMC will
not register, nor attempt to register, any trade name or trademark which, in
whole or in part, incorporates or is confusingly similar to the LICENSED
TRADEMARK(s).
2.3 Notwithstanding the license granted herein, CMC agrees not to use, display
or adopt any style, design, color, font, form or logo similar to any past or
then present style, design, color, form or logo of CABOT including, but not
limited to, the styles illustrated on Schedule B.
2.4 Without the prior written approval of CABOT, CMC is not authorized to use
the LICENSED TRADEMARK(s) in connection with any business activity unrelated to
the CMC's microelectronics materials and polishing consumables business, as
defined by the CMC PRODUCT(s).
2.5 Notwithstanding the license granted herein and any of the provisions hereof,
no rights nor licenses are granted to CMC with respect to any other trademark,
service mark, and/or trade name not listed on Schedule A hereto.
2.6 CMC agrees to assist CABOT in recording this Agreement with appropriate
government authorities where such recording is required by law or regulation or
where such recording is permitted or desired by CABOT.
2.7 All costs associated with recording this Agreement, the license granted
herein and registering, maintaining, or renewing LICENSED TRADEMARK(S)
exclusively used by CMC shall be borne by CMC. All costs associated with
registering, maintaining or renewing any LICENSED TRADEMARK(S) also used by
CABOT shall be borne by CABOT.
Trademark License Agreement - Page 2 of 10
<PAGE> 3
ARTICLE 3 - QUALITY PROVISIONS
3.1 CMC agrees that the nature and quality of all CMC PRODUCT(s) sampled, sold,
or otherwise disposed of and covered by the LICENSED TRADEMARK(s) shall conform
to the standards set by and under the control of CABOT (hereinafter, "QUALITY
STANDARD"). Such QUALITY STANDARD shall be reasonable, shall be no greater than
the quality standards imposed by CMC's customers, and shall be at least equal in
quality to the CMC PRODUCT(s) sold by CMC prior to the separation.
3.2 CMC shall, upon CABOT's reasonable request, supply samples of CMC PRODUCT(s)
to CABOT. It shall not be necessary for CABOT to provide constant supervision of
CMC's manufacture of the CMC PRODUCT(s). Alternatively, CABOT may request CMC to
assure that the CMC PRODUCT(s) conform to the QUALITY STANDARD and, to this end,
shall permit reasonable inspection during business hours by an authorized
representative of CABOT of CMC's facilities to inspect the CMC's operations,
methods of manufacture, materials used, storage and packing areas, and the like,
associated with the manufacture of the CMC PRODUCT(s). Any inspections conducted
by CABOT to ensure that the QUALITY STANDARD provided herein shall be at the
expense of CABOT.
3.3 CMC shall deliver to CABOT, upon CABOT's request and without charge to
CABOT, representative samples of labels, containers, advertisements, catalogs,
letterhead, and the like, containing the LICENSED TRADEMARK(s) to enable CABOT
to ensure that the LICENSED TRADEMARKS(s) are properly used.
3.4 CMC shall comply with all applicable laws and regulations, obtain all
appropriate governmental or regulatory approvals pertaining to the sale,
distribution and/or advertising of the CMC PRODUCT(s) and covered by the
LICENSED TRADEMARK(s).
3.5 Any CMC PRODUCT(s) intended to be marketed under the LICENSED TRADEMARK(s)
which fails to attain the QUALITY STANDARD shall, at the expense of CMC, be
withdrawn from production and corrected or properly destroyed.
3.6 CABOT reserves the right to impose on CMC, as necessary, other
specifications or requirements not provided for under this Article to maintain
control over the CMC PRODUCT(s) to ensure the requisite QUALITY STANDARD.
ARTICLE 4 - DURATION OF LICENSE AND TERMINATION
4.1 This Agreement and the license granted herein shall be effective as of the
effective date of this Agreement, and shall remain in effect until terminated in
accordance with this Article 4.
Trademark License Agreement - Page 3 of 10
<PAGE> 4
4.2 Should CMC ever discontinue the use of any LICENSED TRADEMARK(s) with the
intent not to resume such use, CMC shall promptly notify CABOT of such action.
As to any LICENSED TRADEMARK(s) with respect to which use is or has been
discontinued without the intent to resume by CMC, CABOT may terminate the
license with respect to such LICENSED TRADEMARK(s) upon three (3) month notice
to CMC. CMC's intent not to resume use shall be established if any LICENSED
TRADEMARK(s) is not used by CMC for a period of at least twelve (12) months.
4.3 CABOT shall have the right to terminate the license granted herein with
respect to any LICENSED TRADEMARK(s) upon two (2) months prior written notice to
CMC in the event that CMC breaches any provision of this Agreement, including
but not limited to failure by CMC to comply with the QUALITY STANDARD
established under Article 3, if such breach shall be continuing at the end of
such two (2) month period.
4.4 CABOT shall have the right to terminate immediately this Agreement, or any
or all licenses granted herein, upon written notice to CMC in the event of the
winding-up, sale, insolvency, consolidation or merger where CMC or one of its
wholly-owned subsidiaries is not the survivor, or any sequestration by
governmental authority of CMC.
4.5 Upon the termination of this Agreement with respect to the LICENSED
TRADEMARK(s), or the termination of all licenses under this Agreement, CMC
agrees to immediately discontinue all use of such LICENSED TRADEMARK(s) and/or
any similar trade name which contain "CABOT" as a part thereof, as the case may
be. In this connection, CMC agrees:
(a) that it will immediately take all steps to refrain, as promptly as
possible, from using the LICENSED TRADEMARK(s) as part of CMC's
company name, and shall refrain from using the LICENSED
TRADEMARK(s) in advertising, commercial registers, directories,
internet and company web-sites, telephone listings, and all other
similar listings.
(b) to use its best efforts and due diligence to obtain whatever
approvals are necessary, either governmental or otherwise, to
change its company name to exclude the LICENSED TRADEMARK(s)
therefrom, such change to be effected within three(3) months after
the termination of this Agreement.
ARTICLE 5 - PROTECTION
5.1 At the request of CMC, CABOT shall apply to register any unregistered
LICENSED TRADEMARK(s) in any country in the name of CABOT for the CMC PRODUCT(s)
provided herein, shall use its best efforts to obtain registrations thereof,
shall maintain such registrations in full force and effect, and shall apply to
register CMC as a registered user of the LICENSED TRADEMARK(s) in countries
which require such registration. CMC shall cooperate with CABOT to obtain and
maintain said registrations. The cost of obtaining and
Trademark License Agreement - Page 4 of 10
<PAGE> 5
maintaining any unregistered LICENSED TRADEMARK(s) exclusively used by CMC shall
be borne by CMC. The cost of obtaining and maintaining any unregistered LICENSED
TRADEMARK(s) also used by CABOT shall be borne by CABOT. If CMC notifies CABOT
that it is no longer interested in a trademark filed by CABOT under the
provisions of this paragraph, CABOT shall be free to discontinue prosecution
and/or maintenance of any application or registration for said LICENSED
TRADEMARK(s), and CMC shall have no obligation for any expense with respect
thereto incurred after the notice from CMC to CABOT.
5.2 In the event that registration is refused for any presently pending or
subsequently filed application for registration of the LICENSED TRADEMARK(s),
CABOT shall have the right to discontinue the prosecution thereof. Before
discontinuing any such prosecution, CABOT shall give CMC one (1) months' notice
and permit CMC, at CMC's expense, to take over prosecution thereof on CABOT's
behalf.
5.3 If any opposition, cancellation, or similar proceeding is initiated by any
third party with respect to the LICENSED TRADEMARK(s) or applications to
register any LICENSED TRADEMARK(s), CABOT shall notify CMC of such proceeding,
and CMC shall have one (1) month to notify CABOT if CMC wants such proceedings
to be contested. If CMC informs CABOT that CMC wants to contest such proceeding,
CABOT will defend such LICENSED TRADEMARK(s) in the proceeding or, at the option
of CABOT, permit CMC to take over the defense of such proceeding on behalf of
CABOT. CMC shall bear the expenses of such proceeding for the LICENSED
TRADEMARK(s). If CMC does not notify CABOT that CMC wants such proceeding to be
contested, CABOT shall have the right to proceed as it chooses with regard to
such proceeding and such LICENSED TRADEMARK(s), including, without limitation,
abandoning or cancelling such LICENSED TRADEMARK(s) or any application or
registration therefor without any liability to CMC.
5.4 CMC shall promptly notify CABOT of any and all infringements, imitations,
simulations or other illegal use or misuse of the LICENSED TRADEMARK(s) which
come to CMC's attention. As the sole owner of the LICENSED TRADEMARK(s), CABOT
shall determine whether to take any action to prevent the infringement,
imitation, simulation or other illegal use or misuse of the LICENSED
TRADEMARK(s). If CABOT elects not to take such action, CMC shall have the right
to take such action at CMC's expense. In this event, CABOT shall, at CMC's
expense, cooperate in such action with CMC including, without limitation,
joining as a party. Any money recovered by way of damages or otherwise with
respect to such action shall be kept by the party which bore the costs of such
action; or, in any case where the parties have shared the costs, such money
shall be shared in proportion to the costs borne by each party.
5.5 CMC shall render CABOT all reasonable assistance in connection with any
matter pertaining to the protection, enforcement or infringement of LICENSED
TRADEMARK(s) used by CMC, whether in the courts, administrative or
quasi-judicial agencies, or otherwise.
ARTICLE 6 - NEW TRADEMARKS
Trademark License Agreement - Page 5 of 10
<PAGE> 6
6.1 Should CMC desire to develop new trademarks using the prefix "CABOT" on the
CMC PRODUCT(s), it must first consult with and obtain the written approval of
CABOT, which approval will not be unreasonably withheld. Such newly developed
trademarks will be registered in the name of CABOT, and will be deemed to be
LICENSED TRADEMARK(s) licensed to CMC hereunder and will be subject to all of
the terms and conditions of this Agreement. Such approval will not be contingent
upon the payment of any fee or royalties to CABOT, however the cost of obtaining
and maintaining such new trademarks shall be borne solely by CMC.
Trademark License Agreement -- Page 6 of 10
<PAGE> 7
ARTICLE 7 - INDEMNIFICATION
7.1 CMC agrees to indemnify and hold harmless CABOT and its directors, officers
and employees from any and all claims for damage or injury to persons or
property or for loss of life or limb whereby CABOT has been found liable to any
third party under any product liability, tort liability or similar action
arising out of or in connection with the use by CMC of the LICENSED
TRADEMARK(s).
7.2 For purposes of indemnification, CMC shall purchase an insurance policy
covering at a minimum product and tort liability with a face value of ten
million dollars ($10,000,000), such policy naming CABOT as co-insured. CMC shall
pay any and all premiums of such policy on a timely basis, receipt of which
shall be furnished to CABOT.
ARTICLE 8 - MISCELLANEOUS
8.1 Entire Agreement. This Agreement contains the entire agreement of the
parties regarding the subject matter hereof and supersedes all prior agreements,
understandings and negotiations, whether written or oral, regarding the same.
This Agreement may not be changed, modified, amended or supplemented except by a
written instrument signed by both parties. Furthermore, it is the intention of
the parties that this Agreement be controlling over additional, different or
ambiguous terms of any separation agreement, asset transfer agreement or any
similar document, even if accepted in writing by both parties.
8.2 Assignability. This Agreement may not be assigned nor transferred by CMC
without the prior consent of CABOT.
8.3 Extension of Rights. All rights and obligations incurred hereunder by CABOT
or CMC shall extend to and be binding upon their respective domestic and
international divisions, subsidiaries, other controlled companies, affiliates
and related entities.
8.4 Waiver. The waiver by CABOT of a breach of any provision contained herein
shall be in writing and shall no way be construed as a waiver of any subsequent
breach of such provision or the waiver of the provision itself.
8.5 Injunctive Relief. CMC acknowledges that monetary relief would not be an
adequate remedy for a breach or threatened breach by CMC of the provisions of
this Agreement and that CABOT shall be entitled to the enforcement of this
Agreement by injunction, specific performance or other equitable relief, without
prejudice to any other rights and remedies that CABOT may have.
8.6 Disclaimer of Agency, Partnership and Joint Venture. Nothing herein shall be
deemed to create an agency, distributorship, joint venture or partnership
relationship between the parties hereto.
Trademark License Agreement - Page 7 of 10
<PAGE> 8
8.7 Severability. If any provision of this Agreement shall be held illegal or
unenforceable, that provision shall be limited or eliminated to the minimum
extent necessary so that this Agreement shall otherwise remain in full force and
effect and enforceable.
8.8 Notice and Reports. All notices, consents or approvals required by this
Agreement shall be in writing sent by certified, registered, or Express Mail
service, postage prepaid or by facsimile (confirmed by such certified,
registered, Express Mail or other overnight courier service) to the parties at
the following addresses or such other addresses as may be designated in writing
by the respective parties:
if to CABOT, to:
Cabot Corporation
75 State Street
Boston, Massachusetts 02109
Attn: General Counsel
with copies to:
Cabot Corporation
Law Department
157 Concord Road
Billerica, Massachusetts 01821
Attn: Chief Intellectual Property Counsel
if to CMC to:
Cabot Microelectronics Materials Corporation
870 N. Commons Drive
Aurora, Illinois 60504
Attn: General Counsel
with copy to:
Cabot Microelectronics Materials Corporation
870 N. Commons Drive
Aurora, Illinois 60504
Attn: President
Notices shall be deemed effective on the date of mailing.
8.9 Jurisdiction. This Agreement shall be binding in every jurisdiction
worldwide.
8.10 Governing Law. This Agreement shall be governed by, and construed in
accordance with, the laws of the Commonwealth of Massachusetts, without regard
to conflict of laws principles.
Trademark License Agreement - Page 8 of 10
<PAGE> 9
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized officers or agents as of the day and year
first above written.
CABOT CORPORATION CABOT MICROELECTRONICS
CORPORATION
By: /s/ Samuel W. Bodman By: /s/ Matthew Neville
Name: Samuel W. Bodman Name: Matthew Neville
Title: Chairman and CEO Title: President and CEO
Date: March 28, 2000 Date: March 28, 2000
Trademark License Agreement - Page 9 of 10
<PAGE> 10
SCHEDULE A
CABOT TRADEMARKS
CABOT with or without a logo or design,
block letters or stylized, as such
may be used as a trademark, service
mark or trade name, individually or
in combination with other names or
marks of CABOT.
CABOT & DEVICE with or without a logo or design,
block letters or stylized, as such
may be used as a trademark, service
mark or trade name, individually or
in combination with other names or
marks of CABOT, as depicted in U.S.
Reg. Nos. 613,329, 615,516, 615,689,
1,619,285, 1,827,952, and 1,833,580.
CAB AND CABO formatives and derivatives, with or
without a logo or design, block
letters or stylized, as such may be
used in combination with one or more
prefixes, suffixes or combinations
thereof.
CABOT
MICROELECTRONICS with or without a logo or design,
block letters or stylized, as such
may be used as a trademark, service
mark or trade name, individually or
in combination with other names or
marks of CABOT.
CAB-O-SPERSE with or without a logo or design,
block letters or stylized, as such
may be used as a trademark, service
mark or trade name, individually or
in combination with other names or
marks of CABOT.
CABOT PRODUCTS
Including, but not limited to, carbon black; metal, metalloid oxides
and alloys thereof such as silica, alumina, tantalum, niobium, cesium,
rubidium, tellurium, germanium and the like; cesium formate and related
drilling fluids; barium titanate; masterbatches and granulated
concentrates for use in such masterbatches; plastics; liquified natural
gas; coal; and any articles, applications, or dispersions formed from
any of the above, whether in a finished or unfinished state for use in
numerous end product applications.
CMC PRODUCTS
CMC PRODUCTS means polishing consumables for use in the semiconductor,
electronic, rigid disk and magnetic head industries, such as polishing
slurries, polishing pads, cleaning compositions, precursor
compositions, and related consumables.
Trademark License Agreement - Page 9 of 10
<PAGE> 11
SCHEDULE B
[CABOT]
[Cabot logo, CABOT]
[Cabot logo, CABOT, creating what matters]
Trademark License Agreement - Page 10 of 10
<PAGE> 1
Exhibit 10.8
The omitted portions indicated by brackets have been separately filed with the
Securities and Exchange Commission pursuant to a request for confidential
treatment under Rule 406, promulgated under the Securities Act of 1933, as
amended.
DISPERSION SERVICES AGREEMENT
This DISPERSION SERVICES AGREEMENT (the "Agreement"), executed this 20th
day of January, 2000, is between Cabot Corporation ("Cabot"), a Delaware
corporation, and Cabot Microelectronics Corporation ("CMC"), a Delaware
corporation. Notwithstanding the execution date hereof, this Agreement shall
become effective upon the date of the initial public offering by CMC of shares
of CMC common stock.
WHEREAS, Cabot and certain of its subsidiaries and CMC will be parties to
a Master Separation Agreement, (the "Master Separation Agreement"), which will
provide for the separation from Cabot of the business, assets and liabilities of
Microelectronics Materials Division of Cabot (the "MMD Business") and the
transfer of the MMD Business to CMC;
WHEREAS, in the past, the Microelectronics Materials Division of Cabot
has performed various dispersion services for Cabot;
WHEREAS, Cabot desires to have CMC provide to Cabot certain dispersion
services after the separation of the MMD Business; and
WHEREAS, CMC desires to provide such dispersion services to Cabot as
provided herein;
NOW, THEREFORE, in consideration of the foregoing premises and other good
and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereby agree as follows:
SECTION 1. TERM
This Agreement shall commence on the date of the initial public offering
by CMC of shares of CMC common stock, and shall continue until June 30, 2005
(the "Initial Term"). Unless either party shall give a notice of nonrenewal
prior to December 31, 2003, this Agreement shall continue after the Initial Term
until terminated by either party by a written notice of termination, which shall
terminate this Agreement effective on the first June 30 or December 31 more than
18 months after the date such notice is delivered. The Initial Term, together
with any continuations, are referred to herein as the "Term". Each year of the
Term beginning on the effective date or an anniversary thereof is referred to
herein as a "Term Year", including the stub period, if any, between the last
anniversary of the effective date and the end of the Term.
<PAGE> 2
SECTION 2. SERVICES
2.1 Purchase and Sale.
(a) Subject to the terms and conditions of this Agreement, during the
Term, CMC shall provide to Cabot, and Cabot shall purchase from CMC, the
Services (as defined below) in such quantities as specified by Cabot, subject to
Sections 2.3 through 2.6 below. "Services" means:
(i) the manufacturing and packaging of the type of dispersions set forth
on Schedule A hereto (the "Products") in accordance with the
specifications, formulae and processes provided by Cabot to CMC and
initially as set forth in the materials specified on Schedule A
hereto;
(ii) the packaging of the Products in accordance with specifications set
forth on Schedule A, which may be amended from time to time, by
mutual agreement; and
(iii) testing and other ancillary services as related thereto as may be
mutually agreed between Cabot and CMC from time to time.
(b) Any amendment to Schedule A shall require the consent of both CMC and
Cabot. Any increase in costs incurred by CMC in manufacturing and/or packaging
Products to comply with changes requested by Cabot to the specifications as set
forth on Schedule A shall be paid by Cabot.
(c) With respect to Products to be sold to customers of Cabot and/or its
subsidiaries which are located in the United States, Canada or Mexico
(collectively "North America"), Services shall be performed either by (i) CMC at
its facility in Aurora, Illinois (the "Aurora Plant"), or (ii) Davies Imperial
Coatings ("Davies"), pursuant to an agreement between CMC and Davies (the
"Davies Agreement"); provided that CMC shall continue to remain primarily liable
to Cabot for any Services provided by Davies. Cabot and CMC shall confer in good
faith in order to determine whether Services will be provided by the Aurora
Plant or Davies.
(d) With respect to Products to be sold to customers of Cabot and/or its
subsidiaries located in Europe, Services shall be performed at the dispersions
facility of CMC in Barry, Wales (the "Barry Plant").
(e) With respect to Products to be sold to customers of Cabot and/or its
subsidiaries located in regions other than North America or Europe, CMC shall
determine
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<PAGE> 3
the appropriate facility to perform such Services after review of its regional
capacity and capabilities and after consultation with Cabot.
(f) Notwithstanding anything to the contrary in subsections (c) and (d)
above, and subject to 2.3(a)(i), Cabot may specify Products to be manufactured
at the Aurora Plant, regardless of the ultimate geographic market for such
Products, provided that such Products would not be incompatible with the
dispersions manufacturing capabilities at the Aurora Plant or that such Products
would not create contamination issues with respect to the products CMC
manufactures at its Aurora Plant.
2.2 Forecasts.
Cabot shall provide CMC with forecasts (the "Forecasts") of the quantities
of Products that Cabot expects to purchase from CMC (the "Forecasted
Quantities"). The Forecasts shall identify the Forecasted Quantities of the
Products and the geographic locations for manufacture (i.e., the Aurora Plant,
Davies or the Barry Plant). Cabot shall provide the following Forecasts to CMC:
(a) not more than sixty (60) but not less than thirty (30) days prior to
each January 1, April 1, July 1 and October 1 during the Term, a Forecast
indicating the Forecasted Quantity for each month of the calendar quarter
commencing on such January 1, April 1, July 1 and October 1 (the "Quarterly
Forecast");
(b) not more than sixty (60) but not less than thirty (30) days prior to
on each July 1 and January 1 during the Term, a semi-annual Forecast indicating
the Forecasted Quantity for the six (6) month period commencing on such July 1
and January 1 (the "Six Month Forecast");
(c) not more than sixty (60) but not less than thirty (30) days prior to
on each July 1, a one (1) year Forecast indicating the Forecasted Quantity for
the calendar year commencing on the following July 1 (the "Annual Forecast");
and
(d) on or around each July 1, an eighteen (18) month Forecast indicating
the Forecasted Quantity for the eighteen month period commencing on the July 1
(the "18 Month Forecast"); provided, however, that Cabot shall provide CMC with
a revised eighteen (18) Month Forecast for the remainder of the eighteen (18)
month period covered by the last 18 Month Forecast as soon reasonably
practicable after Cabot becomes aware of any material changes to such 18 Month
Forecast.
For the purposes of this Agreement, Forecasts delivered by Cabot to CMC
after the execution hereof shall, upon the effectiveness of this Agreement, be
deemed to have been delivered hereunder.
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<PAGE> 4
2.3 CMC's Maximum Supply Obligations.
(a) The obligation of CMC to provide Products to Cabot shall be subject to
each of the following maximum monthly volume limitations:
(i) the maximum monthly volume of Products from CMC's Aurora, Illinois
facility (the "Aurora Plant") shall be [ ] gallons per month;
(ii) the maximum monthly volume of Products from Davies' Hammond, Indiana
facility (the "Hammond Plant") shall be [ ] gallons per month; and
(iii) the maximum monthly volume of Products from the Barry Plant shall be
[ ] gallons per month.
(b) In addition to the volume limitations set forth in 2.3(a) above, in
the event that Cabot orders volumes of Products from CMC in excess of Forecasted
Quantities, CMC shall not be obligated to supply to Cabot such Products in
excess of the following volumes:
(i) for any calendar quarter and any plant, [ ]% of the volumes for such
plant set forth in Cabot's Quarterly Forecasts;
(ii) for any calendar half year (beginning on or after July 1, 2000) and
any plant, [ ]% of the volumes for such plant set forth in Cabot's
Sixth Month Forecast; and
(iii) for any year beginning July 1 and any plant, [ ]% of the volumes for
such plant set forth in Cabot's Annual Forecast.
(c) The maximum supply volumes set forth in Sections 2.3 (a) and (b) are
referred to herein as the "Maximum Volumes". If Cabot shall order volumes of
Products in excess of the Maximum Volumes described above, CMC shall use
commercially reasonable efforts to supply such volumes ("Excess Volumes").
(d) Notwithstanding anything to the contrary in subsections (a) or (b)
above, if CMC shall increase its production capacity at its current dispersions
plants or at newly acquired or constructed dispersions plants, Cabot and CMC
shall negotiate in good faith regarding additional dispersions capacity that may
be available to Cabot and the price for dispersions services related to such
additional capacity.
2.4 Minimum Order Volumes.
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<PAGE> 5
Cabot agrees to order Products from CMC subject to the minimum batch
size requirements set forth on Schedule A hereto.
2.5 Exclusivity.
(a) Except in connection with its [ ] businesses, and subject to other
existing obligations, during the Term Cabot will not contract with any third
party (other than Cabot affiliates, CMC, CMIC or Davies) for the provision of
contract or toll manufacturing services for the production of fumed metal oxide
dispersions.
(b) Notwithstanding subsection (a) above or subsection (c) below:
(i) Cabot shall have right the during the Term to produce fumed metal
oxide dispersions for sale, its own use or the sale or use of its
subsidiaries;
(ii) if CMC or Davies is unable or unwilling to supply certain products
or volumes in accordance with the terms hereof, or above the Maximum
Volumes set forth in Section 2.3 hereof, Cabot shall have the right
to have such products or additional volumes of dispersions
manufactured for it by other parties;
(iii) In the event Cabot requests a change to the specifications, formulae
or processes set forth on Schedule A, which change is necessary in
order to achieve a material performance difference in Cabot's end
product, and CMC is not able or is unwilling to modify such Product,
Cabot shall have the right to have such changed products
manufactured for it by any other party; and
(iv) Cabot shall have the right to contract for and purchase from third
parties fumed metal oxide dispersions that are produced with fumed
metal oxides that are not supplied by Cabot.
(c) If Cabot terminates this Agreement, Cabot shall, for a period of [ ]
following the date of such termination purchase fumed metal oxide dispersions
products and services only from CMC, Davies or third parties who are not engaged
in the production and/or marketing of CMP (chemical mechanical polishing)
consumables.
(d) During the Term of this Agreement, CMC shall not knowingly, without
Cabot's prior written consent, directly or indirectly, (i) perform dispersions
services for any person or entity other than Cabot for use in the production of
any goods or products that compete with any Cabot products, or (ii) sell fumed
metal oxide dispersions products into applications, other than CMP applications,
which compete with any Cabot product.
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<PAGE> 6
2.6 Supply of Raw Materials
Cabot shall be responsible for the supply to CMC of the fumed metal oxide
particles necessary for the manufacture of the Products ordered by Cabot. Any
such volumes of fumed metal oxides shall not be deemed supplied pursuant to the
Fumed Metal Oxide Supply Agreement, of even date herewith. CMC shall be
responsible for the supply of all other materials necessary for the manufacture
of the Products, including packaging materials.
SECTION 3. PRICING
3.1 Prices. CMC shall perform the Services and sell the Products in
accordance with the following prices (the "Prices"):
(a) with respect to Products manufactured and the services performed by
CMC, the price shall equal the "Dispersion Manufacturing Cost" incurred by CMC
plus 25% of such Dispersion Manufacturing Cost. As used herein, the "Dispersion
Manufacturing Cost" of fumed metal oxide dispersions shall mean, all costs that
may be included in Inventory (applying GAAP), excluding the cost of fumed metal
oxides provided by Cabot, plus freight and handling costs associated with the
fumed metal oxides. CMC's budgeted standard cost of production of fumed metal
oxides may be used for calculating such Dispersion Manufacturing Cost, provided
that both parties mutually agree that it fairly approximates the above stated
Dispersion Manufacturing Cost, and that both parties mutually agree upon a
method to make adjustments due to variances between the budgeted standard cost
and the actual Dispersion Manufacturing Cost.
(b) with respect to Products manufactured and the services performed by
Davies, the price shall equal the Dispersion Manufacturing Cost incurred by CMC
(excluding the costs of the fumed metal oxide particle supplied by Cabot) plus
10% of such costs as an administrative charge.
Cabot shall have the right to have a recognized accounting firm audit the
books and records of CMC necessary to verify the Dispersions Manufacturing Cost
provided above. Such accounting firm shall be obligated to keep any information
obtained during the audit of CMC's books and records confidential and may
confirm to Cabot only whether, and to what extent, CMC's calculations of the
Dispersions Manufacturing Cost deviate from the calculation of such accounting
firm.
3.2 Cost Savings. Cabot and CMC acknowledge that it is their intention to
decrease the costs associated with manufacturing the Products, and to share any
cost savings resulting from joint efforts therefrom equally between them. Cabot
and CMC agree to discuss, from time to time, ways to jointly decrease such
costs.
-6-
<PAGE> 7
SECTION 4. SHIPPING, DELIVERY AND PAYMENT
(a) Orders for Products shall be issued by Cabot from time to time. Each
order shall specify the date(s) the Products are to be delivered, which date(s)
shall be not less than ten (10) business days prior to the date the order is
received by CMC. For purposes of applying Section 2.3 only, each volume of
Product shall be deemed to be in the month specified for its shipment in Cabot's
order; and if no date is specified, then in the month following the month in
which the order therefor is issued by Cabot.
(b) All sales of Products under this agreement are made F.O.B. CMC's point
of shipment. Cabot shall be responsible for all transportation costs and title
and risk of loss shall pass to Cabot upon delivery to carrier.
(c) All Products shall be prepared by CMC for delivery to Cabot in
accordance with Cabot's reasonable instructions to be supplied by Cabot to CMC
as far in advance of, and not later than ten (10) business days prior to, a
requested shipment date.
(d) CMC shall invoice Cabot for the Products delivered to Cabot during
each month by the fifteenth (15th) calendar day of the following month. CMC
shall deliver such invoices to Cabot by regular U.S. mail, or other methods such
as express U.S. mail, overnight courier or other means, if mutually acceptable.
(e) Cabot shall pay each such invoice within fifteen (15) calendar days of
receipt thereof. Such payment shall be made by check or wire transfer in readily
available same day or next day funds denominated in United States dollars. If
payment is to be made by wire transfer, Cabot shall request and CMC shall
provide to Cabot, wire transfer instructions.
SECTION 5. WARRANTIES
5.1 Warranty as to Products. CMC represents and warrants to Cabot that,
when delivered to Cabot, the Products and Services will conform in all respects
to the specifications then in effect and as then set forth in the materials
specified on Schedule A hereto. CMC MAKES NO OTHER REPRESENTATION OR WARRANTY OF
ANY KIND, EXPRESS OR IMPLIED, AS TO MERCHANTABILITY, FITNESS FOR A PARTICULAR
PURPOSE OR ANY OTHER MATTER WITH RESPECT TO THE PRODUCTS OR SERVICES, WHETHER
USED ALONE OR IN COMBINATION WITH OTHER SUBSTANCES, EVEN IF THE PURPOSES OR USES
OF SUCH PRODUCTS ARE KNOWN BY CMC.
5.2 Remedies. If any Products do not conform in all respects to the
specifications then in effect and as then set forth on Schedule A hereto, CMC
agrees to replace such Products with Products that conform to such
specifications. Subject to the
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<PAGE> 8
following sentence, Cabot shall not be obligated to accept or pay for Products
not conforming to the specifications then in effect for such Products. If such
non-conformity is the result of materials or formulae provided by Cabot to CMC,
Cabot shall pay CMC for the Services and such volumes shall be included in
determining the volumes of Products delivered by CMC to Cabot hereunder. In no
event shall CMC be responsible or liable for any special, incidental or
consequential damages arising as a result of any breach of warranty in respect
of any PRODUCTS OR Services under this Agreement or the transactions
contemplated hereby.
SECTION 6. RELATIONSHIP OF PARTIES
(a) CMC and Cabot are each independent contractors. Nothing herein
contained shall be construed to place CMC and Cabot in the relationship of
principal and agent, master and servant, partners, or joint venturers, and,
except as otherwise set forth in this Agreement, neither party shall have,
expressly or by implication, the power to represent itself as having any
authority to make contracts in the name of or binding upon the other, or to
obligate or bind the other in any manner whatsoever.
(b) Cabot recognizes and agrees that certain dispersions services shall be
performed on CMC's behalf by Davies. However, such services by Davies shall be
considered to have been subcontracted by CMC to Davies, and ultimate
responsibility for the performance of such services shall remain with CMC. Cabot
shall have no direct contractual relationship with Davies with respect to
dispersion services obtained by CMC pursuant to this Agreement.
SECTION 7. INTELLECTUAL PROPERTY AND CONFIDENTIALITTY
(a) Any intellectual property relating to the process engineering or
method of production of dispersions ("Dispersions Intellectual Property")
developed by CMC or CMIC principally in the course of performing Services for
Cabot hereunder shall be jointly owned by Cabot and either CMC or CMIC, as the
case may be. Notwithstanding the above, Cabot shall not sublicense or assign
such intellectual property to any party (other than a subsidiary or affiliate of
Cabot) for use in the production and/or sale of CMP consumables. Similarly, CMC
shall not sublicense or assign such intellectual property to any party (other
than a subsidiary or affiliate of CMC) for use in the production and/or sale of
products for use in non-CMP applications.
(b) CMC or CMIC shall, upon the request of Cabot, grant a non-exclusive
license to Cabot, in exchange for a commercially reasonable royalty payment from
Cabot to CMC or CMIC, as the case may be, to be mutually agreed between the
appropriate parties, any Dispersions Intellectual Property developed by CMC or
CMIC other than in the performance of Services but which is used by CMC or CMIC
in the production of
-8-
<PAGE> 9
Products. Notwithstanding the above, Cabot shall not sublicense or assign such
intellectual property to any party (other than a subsidiary or affiliate of
Cabot) for use in the production and/or sale of CMP consumables.
(c) CMC and CMIC shall use their commercially reasonable best efforts,
including by seeking to have included in the Davies Agreement appropriate
provisions, to have Davies bound by the provisions of subsections (a) and (b)
above to the same extent as CMC and CMIC.
(d) Each of Cabot and CMC agree to keep confidential and not disclose, and
shall cause their respective subsidiaries and affiliates to keep confidential
and not disclose, to any party or use for any purpose (other than the
performance of this Agreement), any proprietary or other confidential
information of the other party which is received pursuant to this Agreement
("Confidential Information"). Confidential Information shall be subject to the
restrictions of this paragraph only if it is marked as confidential or
proprietary or, if not disclosed in tangible form, the disclosing party notifies
the recipient of its confidential or proprietary nature prior to its disclosure.
For purposes of this Agreement, Confidential Information of a party does not
include, and a party and a party's subsidiaries and affiliates will have no
obligations under this provision with respect to, any information of the other
party or any subsidiary or affiliate of the other party (the other party and
subsidiaries and affiliates of the other party being referred to as the
"receiving party") which:
(i) is already known to the receiving party from a source other than the
disclosing party as evidenced by competent proof thereof; or
(ii) is or becomes publicly known through no wrongful act of the
receiving party (in which event the receiving party's obligations under this
Agreement in respect thereto shall terminate on the date such information enters
the public domain); or
(iii) is rightfully received by the receiving party from a third party
without violation of any obligations of confidentiality owed by the third party
to the disclosing party; or
(iv) is disclosed by the disclosing party to a third party without
restrictions on the third party's right to use or disclose such information; or
(v) is independently developed by employees or consultants of the
receiving party without use of or reference to the disclosing party's
Confidential Information; or
(vi) is approved for release by written authorization of the disclosing
party
SECTION 8. CONSENTS; NOTICES
Unless otherwise set forth herein, whenever any notice, consent or
approval is to be given in this Agreement, it must be in writing and delivered
in accordance with the
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<PAGE> 10
provisions of this Section 8. Any such writing will be duly given upon delivery,
if delivered by hand, facsimile transmission or mail, to the following
addresses:
If to Cabot: Cabot Corporation
Business and Technical Center
Billerica, MA 01821
Attn: Fumed Metal Oxide Product Line Manager
Telecopier:
With a copy to:
Cabot Corporation
75 State Street
Boston, MA 02109
Attn: Law Department
Telecopier: 617-342-6039
If to CMC: Cabot Microelectronics Corporation
870 North Commons Drive
Aurora, IL 60504
Attn: Global Manufacturing Manager
Telecopier: 630-375-5596
or to such other address as may be designated in writing by any of the parties
from time to time in accordance herewith.
SECTION 9. GENERAL
9.1 Severability. If any provision of this Agreement shall be found to be
invalid or unenforceable, then such provision or provisions shall not invalidate
or in any way affect the enforceability of the remainder of this Agreement and
such provision or provisions shall be curtailed and limited to the extent
necessary to bring the Agreement within any legal requirement and the parties
shall negotiate in good faith with respect to an equitable modification of the
provision or application thereof held to be invalid.
9.2 Modification; Waivers. Except as expressly provided herein, this
Agreement may be modified or amended only with the written consent of each party
hereto. Neither party hereto shall be released from its obligations hereunder
without the written consent of the other party. The observance of any term of
this Agreement may be waived (either generally or in a particular instance and
either retroactively or prospectively) by the party entitled to enforce such
term, but any such waiver shall be
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<PAGE> 11
effective only if in a writing signed by the party against which such waiver is
to be asserted. Except as otherwise specifically provided herein, no delay on
the part of either party hereto in exercising any right, power or privilege
hereunder shall operate as a waiver thereof, nor shall any waiver on the part of
either party hereto of any right, power or privilege hereunder operate as a
waiver of any other right, power or privilege hereunder nor shall any single or
partial exercise of any right, power or privilege hereunder preclude any other
or further exercise thereof or the exercise of any other right, power or
privilege hereunder.
9.3 Succession. This Agreement shall be binding upon and shall inure to
the benefit of the parties hereto and their respective successors and other
legal representatives and, to the extent that any assignment hereof is permitted
hereunder, their assignees.
9.4 Counterparts. This Agreement may be executed in counterparts.
9.5 Further Assurances. Each party agrees to provide any additional
documents and take any such further action as may be reasonably requested by the
other party in order to carry out the purpose and intent of this Agreement.
9.6 Entire Agreement. This Agreement contains the full and complete
undertaking and agreement between the parties hereto with respect to the
manufacture and supply of fumed metal oxide dispersions, and supersedes all
other agreements between Cabot, on the one hand, and CMC, on the other, whether
written or oral except any confidentiality agreements between the parties, which
shall, to the extent such agreements do not contradict the terms of this
Agreement, continue in effect.
9.7 Headings. The headings of the sections and other subdivisions of this
Agreement are for convenient reference only. They shall not be used in any way
to govern, limit, modify, construe this Agreement or any part or provision
thereof nor otherwise be given any legal effect.
9.8 Assignees and Third Parties. This Agreement may not be assigned by
either party without the prior written consent of the other party and any
attempted assignment without such consent shall be null and void; provided,
however, that Cabot may assign this Agreement to a subsidiary or affiliated
company. In addition, CMC may make arrangements for the production and sale of
Services and Products required hereunder to be manufactured and sold by a
subsidiary or an affiliate, including but not limited to Cabot Microelectronics
International Corporation. Such arrangements may take the form of an assignment
of certain rights and obligations hereunder or a subcontract of certain
obligations hereunder. Similarly, Cabot may make arrangements for the purchase
of Products and Services hereunder to be made by a subsidiary, including but not
limited to Cabot Carbon Ltd. Such arrangements may take the form of an
assignment of certain
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<PAGE> 12
rights and obligations hereunder. However, all sales of Products and Services
pursuant to any such arrangement shall be governed by the terms of this
Agreement.
9.9 Governing Law. This Agreement shall be governed by and construed and
enforced in accordance with the laws of Delaware, without giving effect to
principles of conflicts or choice of laws of Delaware or of any other
jurisdiction.
9.10 Force Majeure. Each of the parties hereto shall be excused from
delays in performing or from failure to perform hereunder to the extent that
such delays or failures result from causes beyond the reasonable control of such
party, including, but not limited to, forces of nature, acts of God, strikes,
lockouts, wars, blockades, insurrections, riots, epidemics, restraints or
requirements of any government or government agency, civil disturbances,
explosions, breakage or accident to machinery or lines of pipe, unavailability
of raw material or supplies, strandings, perils of the sea, the binding order of
any court or governmental authority which has been resisted in good faith by all
reasonable means, and other cause, whether of the kind enumerated or otherwise,
not reasonably within the control of the party claiming suspension. Failure to
prevent or settle any strike shall not be considered to be a matter within the
control of the party claiming suspension. However, in order to be excused from
delay or failure to perform, such party must act diligently to remedy the cause
of such delay or failure.
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<PAGE> 13
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as a
sealed instrument and have delivered this Agreement as of the day and year first
above written.
CABOT CORPORATION
By: /s/ Samuel W. Bodman
------------------------------------
Name: Samuel W. Bodman
Title: Chief Executive Officer
CABOT MICROLELECTRONICS
CORPORATION
By: /s/ Matthew Neville
------------------------------------
Name: Matthew Neville
Title: President and
Chief Executive Officer
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<PAGE> 14
SCHEDULE A
North America
Products, Materials Specifying Specifications, Formulae,
Processes, Quality Control, Maintenance
<TABLE>
<CAPTION>
PRODUCT FORMULA CONTROL PLAN SPECIFICATION CMC TEST STANDARD MINIMUM
(REVISION (EFFECTIVE (SPECIFICATION NO./ METHODS PACKAGE ORDER
DATE) DATE/REVISION REVISION DATE) (TEST METHOD QUANTITY
LEVEL) NUMBER)
<S> <C> <C> <C> <C> <C> <C>
[ ] 9/19/96 8-5-96, Rev. A [ ] -10/98-Rev. 101, 200, 300, 302 55 G Poly 8 Drums
1-10/98 Drum
[ ] 1/19/00 5-1-97, Rev. A [ ] -1/0-Rev. 203, 6010A (1) 275 G Rock 2 Totes
3-1/00 Tote
[ ] 5/4/95 10-1-97, Rev. A [ ] -4/98-Rev. 101, 200, 300, 302 55 G Fiber 8 Drums
1-5/97 Drum
[ ] 7/5/94 8-5-96, Rev. A [ ] -4/98-Rev. 101, 200, 300, 302 55 G Fiber 8 Drums
1-5/97 Drum
[ ] 2/1/93 10-1-97, Rev. A [ ] -4/98-Rev. 101, 200, 300, 302 55 G Fiber 5 Drums
1-5/97 Drum
[ ] 7/5/93 10-1-97, Rev. A [ ] -4/98-Rev. 101, 200, 300, 302 55 G Fiber 5 Drums
1-5/97 Drum
[ ] 7/6/94 10-1-97, Rev. A [ ] -4/98-Rev. 101, 200, 300, 302 55 G Fiber 4 Drums
1-5/97 Drum
[ ] 7/16/93 10-1-97, Rev. A [ ] -4/98-Rev. 101, 200, 300, 302 55 G Fiber 6 Drums
1-5/97 Drum
[ ] 9/27/94 10-1-97, Rev. A [ ] -4/98-Rev. 101, 200, 300, 302 55 G Fiber 5 Drums
1-5/97 Drum
[ ] 11/18/93 10-1-97, Rev. A [ ] -4/98-Rev. 101, 200, 300, 302 55 G Poly 8 Drums
1-5/97 Drum
[ ] 8/23/96 10-1-97, Rev. A [ ]-4/98-Rev.1-5/97 101, 200, 300, 302 55 G Poly 6 Drums
Drum
</TABLE>
-14-
<PAGE> 15
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
[ ] 9/19/96 8-5-96, Rev. A [ ] -4/98-Rev. 101, 200, 300, 302 55 G Fiber 8 Drums
1-4/98 Drum
[ ] 9/19/96 8-5-96, Rev. A [ ] -4/98-Rev. 101, 200, 300, 302 55 G Fiber 6 Drums
1-4/98 Drum
[ ] 6/9/98 6-9-98, Rev. B [ ] -6/98-Rev. B 400, 404, 408 55 G Poly 5 Drums
6/98 Drum
[ ] 8/31/99 8-31-96, Rev. A [ ] -8/99-Rev. A DTM 101, 201, 55 G Poly 6 Drums
8/99 302, 303, 500, 607 Drum
[ ] 1/19/00 1-19-00, Rev. B [ ] -1/00-Rev. 1 203, 6010A (1) 275 G Rock 2800 LBS
Tote
</TABLE>
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<PAGE> 16
SCHEDULE A
Europe
Products, Materials Specifying Specifications, Formulae,
Processes, Quality Control, Maintenance
<TABLE>
<CAPTION>
PRODUCT FORMULA CONTROL PLAN SPECIFICATION CMC TEST STANDARD MINIMUM ORDER
(REVISION (EFFECTIVE (SPECIFICATION NO./ METHODS PACKAGE QUANTITY
DATE) DATE/REVISION REVISION DATE) (TEST METHOD
LEVEL) NUMBER)
<S> <C> <C> <C> <C> <C> <C>
[ ] (US-[ ]) 10-1-97 Rev. A [ ] -4/98-Rev. CTM 400, 407, 404 220 liter 1000 Kgs
5/4/95 1-5/97 Poly Drum
[ ] D1.701.013 D1.701.013 Rev. 3 D1.701.013 Rev 3 CTM 400, 407, 405 220 liter 1062 Kgs
Rev 3 23/12/99 23/12/99 23/12/99 Poly Drum
[ ] D1.701.003 D1.701.003 Rev. 2 D1.701.003 Rev.2 CTM 400, 407, 406 220 liter 1062 Kgs
Rev.2 15/12/99 15/12/99 15/12/99 Poly Drum
[ ] D1.701.005 D1.701.005 Rev. 3 D1.701.005 Rev 3 CTM 400, 407, 407 220 liter 1090 Kgs
Rev 3 16/12/99 16/12/99 16/12/99 Poly Drum
[ ] D1.701.024 D1.701.024 Rev. 2 D1.701.024 Rev. 2 CTM 400, 407, 411 220 liter 1028 Kgs
Rev. 2 16/12/99 16/12/99 Poly Drum
16/12/99
[ ] (US-A1695) 10-1-97 Rev. A A1695-4/98-Rev. CTM 400, 407, 413 220 liter 1000 Kgs
7/5/93 1-5/97 Poly Drum
[ ] D1.701.036 D1.701.036 Rev. 2 D1.701.036 Rev. 2 CTM 400, 407, 416 220 liter 1088 Kgs
Rev.2 23/12/99 23/12/99 23/12/99 Poly Drum
[ ] D1.701.037 D1.701.037 Rev. 2 D1.701.037 Rev. 2 CTM 400, 407, 417 220 liter 1088 Kgs
Rev. 2 06/01/00 06/01/00 Poly Drum
06/01/00
[ ] D1.701.038 D1.701.038 Rev. 2 D1.701.038 Rev. 2 CTM 400, 407, 418 220 liter 1460 Kgs
Rev. 2 06/01/00 06/01/00 Poly Drum
06/01/00
[ ] D1.701.040 D1.701.040 Rev, 3 D1.701.040 Rev. 3 CTM 400, 407, 420 220 liter 1090 Kgs
Rev. 3 15/12/99 15/12/99 Poly Drum
15/12/99
[ ] D1.701.002 D1.701.002 Rev. 2 D1.701.002 Rev. 2 CTM 400, 407, 424 220 liter 1240 Kgs
Rev. 2 05/01/00 05/01/00 05/01/00 Poly Drum
</TABLE>
-16-
<PAGE> 17
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
[ ] D1.701.017 D1.701.017 Rev. 2 D1.701.017 Rev. 2 CTM 400, 407, 425 220 liter 988 Kgs
Rev. 2 15/12/99 15/12/99 Poly Drum
15/12/99
[ ] D1.701.033 D1.701.033 Rev. 2 D1.701.033 Rev. 2 CTM 400, 407, 426 220 liter 1070 Kgs
Rev. 2 08/12/99 08/12/99 Poly Drum
08/12/99
</TABLE>
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<PAGE> 1
Exhibit 10.11
The omitted portions indicated by brackets have been separately filed with the
Securities and Exchange Commission pursuant to a request for confidential
treatment under Rule 406, promulgated under the Securities Act of 1933, as
amended.
INTEL CORPORATION PURCHASE AGREEMENT - CHEMICALS/GASES
Agreement #: C-06438
Effective Date: FEB. 18, 1999
Expiration Date: DEC. 31,2001
CNDA #: 17452
BUYER: Intel Corporation (and all Intel divisions and subsidiaries,
hereinafter "BUYER" or "INTEL")
Intel Corporation
2200 Mission College Blvd
Santa Clara, CA 95052-8119
SUPPLIER: Cabot Corporation (hereinafter "SUPPLIER")
500 Commons Drive
Aurora, IL 60504
<TABLE>
<S> <C> <C>
X Terms and Conditions of Purchase Agreement - Goods
Addenda attached here to and X A Product Description and Price Schedule
Incorporated herein by reference X B Key Contacts & Intel Fab Locations
(Mark "X" where applicable.) X C Quality Requirements
X D Volume Commitments
E
F
</TABLE>
Buyer will purchase and Supplier will sell certain Items in accordance with the
Terms and Conditions and Addenda attached hereto. All Purchase Orders issued to
Supplier by Buyer during the term of this Agreement shall be governed only by
the Terms and Conditions of this Agreement notwithstanding any preprinted terms
and conditions on Supplier's acknowledgment or Buyer's Purchase Order. Any
additional or different terms in documents exchanged by the parties subsequent
to execution of this agreement are hereby deemed to be material alterations and
notice of objection to and rejection of them is hereby given.
INTEL CORPORATION SUPPLIER
By: /s/ Mumtaz Ahmed By: /s/ Matthew Neville
-------------------------- --------------------------
Signature Signature
Mumtaz Ahmed Matthew Neville
Printed Name Printed Name
Commodity Manager GM & VP
Title Title
2/18/99 2/18/99
Date Date
<PAGE> 2
TERMS AND CONDITIONS OF PURCHASE AGREEMENT - CHEMICALS/GASES
1. DEFINITIONS
A. "Release" means Buyer's authorization to ship in accordance with the
Buyer's Purchase Order, and authorizing Supplier to ship a definite
quantity of Items to a specified schedule. The Release is contained in the
Purchase Order sent to Supplier.
B. "Items" means the goods which Supplier is to provide to Buyer as set forth
on Addendum A. Any Item which is custom made for Buyer shall be indicated
by an asterisk (*) on such Addenda A.
C. "Estimated Usage" or "Forecast" is the quantity Buyer reasonably expects to
Release, however, Buyer shall not be obligated to Release such quantities
of Items.
D. "Purchase Order" is Buyer's document setting forth specific line Items
ordered and Release information.
E. "CIF" means "Cost, Insurance and Freight (named port of shipment)."
Reference Incoterms 1990.
F. "DDP" means "Delivered Duty Paid (named place of destination)." Reference
Incoterms 1990.
G. "DDU" means "Delivered Duty Unpaid (named place of destination)." Reference
Incoterms 1990.
H. "FMO" is Fab Materials Operation (a department within Intel Corporation).
I. "FOB" means "Freight on Board (named port of shipment)." Reference
Incoterms 1990.
J. "FCA" means "Free Carrier (named place of destination)". Reference
Incoterms 1990.
2. TERM OF AGREEMENT
A. The term of this Agreement shall begin on the Effective Date and continue
to the Expiration Date, unless renewed pursuant to the terms of this
Section. After the initial term, this Agreement shall be automatically
renewed from year to year (for one-year periods) without action by either
party, unless terminated pursuant to Section 5 of this Agreement. At
Buyer's option, Items may be scheduled for delivery up to three (3) months
following expiration or termination of this Agreement.
B. This Agreement shall be effective to all Intel manufacturing facilities in
the U.S. and the non-U.S. facilities identified in Addenda hereto.
3. PRICING
A. Prices of Items are as set forth in Addendum A, and may only be modified by
mutual agreement. Supplier will publish newly negotiated prices to
corporate representative and all Site buyers within 10 days of signed
agreement.
B. For any Item of which Supplier supplied Buyer with [ ]% or more of Buyer's
requirements, as described in Addendum D, during the previous calendar
year, Supplier agrees that the price for such Item shall always be
Supplier's lowest net price charged any customer for like volumes of such
Item. If the net price charged to Buyer for such is greater than that
charged to another customer of Supplier for like volumes, Supplier shall
adjust its price to Buyer to the lower price for as long as Supplier
continues to offer such lower price to another customer. In addition, to
the extent Buyer was charged a higher price during a period that Supplier
was selling like volumes of such Item to another customer at a lower price,
Supplier shall refund to Buyer the difference in the purchase price paid by
Buyer and such lower price.
C. In the event Supplier offers any Item of which Supplier supplied Buyer with
[ ]% or more of Buyer's requirements as described in Addendum D during the
previous calendar year at a lower price (taking into account volume
discounts) either as a general price drop or only to some customer(s) for
any reason, Supplier shall immediately inform Buyer of this price.
-2-
<PAGE> 3
D. Applicable taxes and other charges such as duties, customs, tariffs,
imposts and government imposed surcharges, and freight shall be stated
separately on Supplier's invoice.
E. Additional costs, except those described in Section 3(D) or in Addenda A or
D, will not be reimbursed without Buyer's prior written approval.
F. Buyer reserves the right to have Supplier's records inspected and audited
only by an independent third party auditor to ensure compliance with
section 3B of this Agreement. At Buyer's option or upon Supplier's written
demand, such audit will be performed by an independent third party at
Buyer's expense. However, if Supplier is found to not be complying with
section 3B of this Agreement in any way, Supplier shall reimburse Buyer for
all costs associated with the audit. The results of such audit shall be
kept confidential by the auditor, and only Supplier's failures to abide by
the obligations of this Agreement shall be reported to Buyer.
G. If a new product not included in Addendum A is to be purchased regularly,
its price will be negotiated by a corporate representative at the time of
initial purchase. If the product is for test purposes only at a given site,
its price may be established between Supplier and a Sitebuyer. Said price
shall be in effect until such time as an Intel part number is created, at
which time a corporate-wide price will be negotiated by a corporate
representative.
H. Supplier will publish quarterly updates of Addendum A to FMO, all Buyer's
Site Chemicals buyers and Buyer's Accounts Payable department, including
new chemicals, their negotiated prices, supplier part numbers, Intel part
numbers and any other changes. Quarterly updates of Addendum A will be
issued on 1/30, 4/30, 7/30 and 10/30 of each year. Names and addresses of
all parties to receive the updates will be provided and updated by Site
buyer (see Addendum B).
I. U.S. and non-U.S. prices will be fixed in U.S. dollars regardless of the
Item country of origin or destination. Buyer retains the right to buy from
Supplier or any subsidiaries of Supplier in U.S. dollars.
J. The cost of containers, both returnable and disposable, diptubes and any
required accessories will be included in the cost of the chemical
K. Warehousing costs will be separate from this Agreement and will be billed
separately.
4. INVOICING AND PAYMENT
A. Any applicable prompt payment discounts will be computed from the latest
of: (i) the scheduled delivery date; (ii) the date of actual delivery; or
(iii) the date a properly filled out original invoice or packing list is
received. Payment is made when Buyer's check is mailed or EDI funds
transfer initiated. Buyer shall make payment within forty-five (45) days of
receipt of the proper original invoice or packing list.
B. Original invoices or packing lists shall be submitted and shall include:
full legal company name, payment terms, freight terms, tax status and rate,
purchase agreement number from the Purchase Order, purchase order number,
line Item number, Release number, part number, complete bill to address,
description of Items, quantities, unit price and extended totals. Buyer's
payment shall not constitute acceptance. Invoice must match Buyer's PO and
packing slip exactly including unit of measure.
C. Supplier shall provide to Buyer's Accounts Payable, and update as
necessary, the names and phone numbers of a contact in Accounts Receivable.
D. All international shipments must be accompanied by original invoice.
E. Supplier will invoice Buyer for material and services no later than 120
days after delivery.
5. TERMINATION
This Agreement may not be terminated by either party prior to the
Expiration Date, except upon material breach by the other party. The
Agreement may be terminated by
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<PAGE> 4
either party on or after the Expiration Date by delivering to the other
party written notice of termination at least one year prior to the date of
such termination.
6. CONTINGENCIES
Neither party shall be responsible for its failure to perform due to causes
beyond its reasonable control such as acts of God, fire, theft, war, riot,
embargoes or acts of civil or military authorities. If delivery is to be
delayed by such contingencies, Supplier shall immediately notify Buyer in
writing and Buyer may either: (i) extend time of performance; or (ii)
terminate all or part of the uncompleted portion of the Purchase Order at
no cost to Buyer.
7. DELIVERY, RELEASES AND SCHEDULING
A. Any Forecasts provided by Buyer are for planning purposes only and do not
constitute a Release or other commitment by Buyer.
B. [Left intentionally blank]
C. Supplier shall notify Buyer in writing within two (2) business days of
receipt of Buyer's Purchase Order if Supplier is unable to make any
scheduled delivery and state the reasons therefor. The absence of such
notice constitutes acceptance of the Purchase Order and commitment to the
Release terms.
D. Supplier shall not deliver Items earlier than five (5) business days prior
to agreed scheduled delivery dates and Buyer may return early, excess, or
non-conforming shipments at Supplier's risk and expense.
E. Buyer may reschedule or cancel any Release in whole or in part prior to the
Release date at no additional charge.
F. Buyer may place any portion of a Release on hold by notice which shall take
effect immediately upon receipt. Releases placed on hold will be
rescheduled or canceled within a reasonable time.
G. Supplier shall not deliver Items until such Items are specified in an
issued Purchase Order which contains specific Release dates for specific
Items.
H. Purchase orders will specify the destination date at Buyer dock or
designated warehouse.
I. Supplier must notify FMO, Accounts Payable and all Site Chemical buyers
immediately in writing of any changes, including changes in delivery
schedules, part numbers, contact persons and the party to be invoiced.
J. Supplier must provide FMO with a Certificate of Analysis (C of A) or sample
for each lot to be shipped, as directed in the most current appropriate
Intel Specification (Addendum C).
K. Buyer may return any standard Item in same condition as received within [ ]
days of receipt. Buyer will pay return freight and disposal costs, if
necessary (Disposal costs paid only if the product conformed to all
required specifications in place). Reimbursement for Items returned will be
made by credit memo.
L. Supplier shall ship all Items according to the delivery address provided on
each Purchase Order submitted by Buyer.
M. Supplier shall provide and update as necessary the name and phone number of
one person which Buyer's representative may contact regarding scheduling
and delivery. Additionally, Supplier will provide 24-hour hotline/contact
number which Buyer may contact in case of emergency.
N. Supplier agrees to maintain safety stock on specified Items as mutually
agreed with Buyer's local sites. Supplier shall notify Buyer whenever
safety stock falls below minimum levels and will provide a corrective
action plan to replenish Items. In the event Buyer no longer intends to
purchase a particular Item from Supplier for use at a particular site,
Buyer shall so notify Supplier of such fact and Buyer shall purchase
Buyer's minimum required safety stock of such Items at that site.
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<PAGE> 5
O. Supplier shall maintain an on-hand supply of emergency packaging material
sufficient to meet pre-agreed requirements with Buyer's Site Chemical
buyer.
8. ACCEPTANCE AND WARRANTY
A. Buyer may with reasonable advance notification inspect and test all Items
at reasonable times before, during and after manufacture. If any inspection
or test is made on Supplier's premises, Supplier shall provide reasonable
facilities and assistance for the safety and convenience of Buyer's
inspectors in such manner as shall not unreasonably hinder or delay
Supplier's performance. All Items shall be received subject to Buyer's
inspection, testing, approval and acceptance at Buyer's premises
notwithstanding any inspection or testing at Supplier's premises or any
prior payment for such Items. Items rejected by Buyer as not conforming to
this Agreement or Item specifications whether provided by Buyer or
furnished with the Item may be returned to Supplier at Supplier's risk and
expense and, at Buyer's request shall immediately be repaired or replaced.
B. Supplier warrants that all Items furnished here under shall be new, of the
grade and quality specified, conform to all agreed-to specifications, and
will be free of liens and encumbrances (excluding claims of intellectual
property infringement, which are the exclusive subject of Section 14).
These warranties shall survive any delivery, inspection, acceptance,
payment or resale of the Items. Original specifications and any subsequent
modifications to those specifications shall be agreed upon by both Buyer
and Supplier. SUPPLIER MAKES NO OTHER REPRESENTATION OR WARRANTY OF ANY
KIND, EXPRESS OR IMPLIED, AS TO MERCHANTABILITY, FITNESS FOR A PARTICULAR
PURPOSE OR ANY OTHER MATTER WITH RESPECT TO THE ITEMS, WHETHER USED ALONE
OR IN COMBINATION WITH OTHER SUBSTANCES, EVEN IF THE PURPOSES OR USES OF
SUCH PRODUCTS ARE KNOWN BY SUPPLIER.
C. During the Items' specified shelf life, at Buyer's option, Supplier shall
promptly repair, replace or refund the purchase price of all Items not
conforming to the foregoing warranties, and shall also refund the cost of
return shipping of such Items. Supplier will bear the risk of loss of such
Items while in transit. Supplier's warranty liability for damages arising
from each "Non-Conformance Event" shall [ ]. Furthermore, in no event shall
Supplier's [ ]. As used herein, "Non-Conformance Event" shall mean the
receipt by Buyer of a lot of Items which are not in conformity with the
warranty given in Section 8B above. IN NO EVENT SHALL SELLER BE RESPONSIBLE
OR LIABLE FOR ANY SPECIAL, INCIDENTAL, OR CONSEQUENTIAL DAMAGES ARISING IN
WARRANTY UNDER THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY. The
[ ]contained in this Section 8 is separate and independent from the [ ]
contained in Section 14, and the amount of liability imposed under one of
these Sections does not limit or restrict the amount of liability imposed
under another Section. NOTHING IN THIS SECTION IS INTENDED TO PLACE A
LIMITATION ON EITHER PARTY'S LIABILITY IN TORT FOR PERSONAL INJURY.
D. Freight charges for returned non-conforming Items shall be paid by Supplier
with the understanding that returns must be authorized in accordance with
Supplier's return authorization procedures. Returns must be authorized by
Supplier within 10 days of Buyer's request. Credit for returned Items will
be issued within 30 days of notification by Buyer.
E. Notwithstanding anything to the contrary contained in this Agreement,
Supplier represents and warrants to Buyer that there will be no disruption
in the supply of those goods and/or services which are under the direct
control of the Supplier as a result of or due to the date change from and
between December, 1999, and January, 2000, nor due to the year 2000 being a
leap year. Supplier does not provide any such warranty for disruptions
caused by those goods and/or services which are not under the Supplier's
direct control. As used herein, "direct control" refers to goods and/or
services which the Supplier actively manages by contract and/or owns.
Furthermore, in no event shall
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<PAGE> 6
Seller's total and aggregate liability under such warranty exceed $500,000
over the term of this Agreement
9. PRODUCT SPECIFICATIONS/IDENTIFICATION/ ERRATA
A. Supplier shall not modify the specifications for Items without Buyer's
written consent. Supplier shall notify FMO and all Site Chemical buyers
immediately in writing of any change in Supplier's part number, in the
manufacturing process, packaging or description for any Item sold to Buyer
at least ninety (90) days in advance of any changes. Such notice shall also
be included in the quarterly update mentioned in Section 3 (I).
B. Supplier shall cooperate with Buyer to provide configuration control and
traceability systems for Items supplied hereunder.
C. Items must comply with Buyer's raw material specifications (Intel
Specification 07-400).
D. As long as Buyer is purchasing a particular Item, Supplier shall notify FMO
and all Site Chemical buyers at least one year in advance of expected
discontinuance of that Item. Exception: In the event of changes or
discontinuation required by governmental order or requirement, Supplier
shall notify Buyer in writing immediately. Notification of any change in
product specification must follow Intel's " Materials Change Control
Procedure." (Intel Specification 07-120).
E. Where an existing agreed-to Intel Specification (Addendum C) is updated,
the updated Specification must be agreed to by Buyer and Supplier before it
will be in effect.
10. CONTAINERS AND DIPTUBES
A. All necessary chemical containers, packaging and diptubes will be provided
by Supplier and included in the cost of the Item.
B. All containers and diptubes shall be inspected by Supplier before each use
and repaired or replaced as necessary.
C. At all times, ownership and title of containers and diptubes will remain
with the Supplier.
D. Buyer will not be responsible for any additional charges for acquisition,
termination or disposal of containers or diptubes.
E. In the event that containers or diptubes become damaged through neglect or
misuse by Buyer, Buyer will reimburse Supplier an amount agreed upon and
pro-rated based upon useful life.
F. All packaging including quartz, stainless steel, bottles, drums and ICBs,
shall be equipped with tamper evident seals.
11 PACKING AND SHIPMENT
A. Shipments to Israel: Delivery terms for Israel will be DDP Intel,
Jerusalem. Supplier fulfills its obligation to deliver when Items are made
available at Buyer's dock or designated warehouse. Supplier will bear all
risks, liabilities and costs involved in bringing the Items thereto. Buyer
will ship empty containers to the point of manufacture in a timely manner.
B. Shipments to Ireland: Delivery terms for Ireland will be DDU Intel,
Leixlip. Supplier fulfills its obligation to deliver when Items are made
available at Buyer's dock or designated warehouse. Supplier will bear all
risks, liabilities and costs involved in bringing the Items thereto,
excluding duties, taxes and other official charges payable upon
importation. Buyer will ship empty containers to the point of manufacture
in a timely manner.
C. For all other Intel Factories, both U.S. and non-U.S., Items shall be DDP
Buyer's dock or as otherwise specified in the Release. Buyer will ship
empty containers to the point of manufacture in a timely manner. All Items
shall be prepared for shipment in a manner which: (i) follows good
commercial practice; (ii) is acceptable to common carriers for shipment at
the lowest rate; and (iii) is adequate to ensure safe arrival. Supplier
shall mark all containers with necessary lifting, handling and shipping
information, purchase order number, date of shipment and the names of the
Buyer and Supplier. Buyer shall
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<PAGE> 7
notify Supplier of the method of shipment and expected delivery date. If no
instructions are given, Supplier shall select the most cost effective
carrier, given the time constraints known to Supplier. Supplier shall ship
only the quantity of Items specified in the Release. Buyer may return at
Supplier's expense any Items in excess of the quantity stated in the
Release.
D. Supplier shall be responsible for all Supplier's activities through
manufacture, storage, transport, and delivery of Items to Buyer. In the
event that Buyer must deploy emergency, safety, or materials personnel in
response to an emergency or non-compliance with Intel or regulatory
procedure involving Items supplied hereunder, Buyer and Supplier will
review the incident. If Buyer and Supplier agree that (i) such deployment
was necessary, and (ii)Supplier's negligent act or failure to act was the
proximate cause of such emergency or non-compliance, then Supplier agrees
to reimburse Buyer for the out-of-pocket cost incurred by Buyer in
deploying its personnel to respond to such incident. Supplier will not be
responsible for costs incurred by such deployment due to Buyer's negligent
act or failure to act. International shipments: Supplier will provide
Buyer's representative with shipping documents as requested. Buyer's
purchase orders will contain detailed shipping instructions. E. Shipment of
all Items qualified for Buyer's Preship or Direct Ship Programs will be
done in accordance with latest mutually accepted Intel Specification 07-402
(Intel Chemical and Gas Quality Program.).
12. OWNERSHIP AND BAILMENT RESPONSIBILITIES
A. Any specifications, drawings, schematics, technical information, data,
tools, dies, patterns, masks, gauges, test equipment, and other materials
furnished or paid for by Buyer shall: (i) be kept confidential; (ii) remain
Buyer's property; (iii) be used by Supplier exclusively for Buyer's orders;
(iv) be clearly marked as Buyer's property and segregated when not in use;
(v) be kept in good working condition at Supplier's expense; and (vi) be
shipped to Buyer promptly on demand.
B. Supplier shall insure Buyer's property and be liable for loss or damage
while in Supplier's possession or control, ordinary wear and tear excepted.
13. CONFIDENTIALITY AND PUBLICITY
A. During the course of this Agreement, either party may have or may be
provided access to the other's confidential information and materials.
Provided such are marked in a manner reasonably intended to make the
recipient aware, or the recipient is sent written notice within forty-eight
(48) hours of disclosure, that the information or materials are
"Confidential", each party agrees to maintain such information in
accordance with the terms of this Agreement and the CNDA referenced on the
signature page of this Agreement or any applicable separate nondisclosure
agreement between Buyer and Supplier. In the absence of a CNDA or other
written agreement, at a minimum each party agrees to maintain such
information in confidence and limit disclosure on a need to know basis, to
take all reasonable precautions to prevent unauthorized disclosure, and to
treat such information as it treats it's own information of a similar
nature, until the information becomes publicly available through no fault
of the non disclosing party. Supplier's employees who access Buyer's
facilities may be required to sign a separate non-disclosure agreement
prior to admittance to Buyer's facilities.
B. The parties agree that neither will disclose the existence of this
Agreement, nor any of its details or the existence of the relationship
created by this Agreement, to any third party without the specific, written
consent of the other. If disclosure of this Agreement or any of the terms
hereof is required by applicable law, rule or regulation, or is compelled
by a court or governmental agency, authority or body: (i) the parties shall
use all legitimate and legal means available to minimize the disclosure to
third parties of the content of the Agreement, including without limitation
seeking a confidential
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treatment request or protective order; (ii) the disclosing party shall
inform the other party at least ten (10) business days (i.e., not a
Saturday, Sunday or a day on which banks are not open for business in the
geographic area in which the non-disclosing party's principal office is
located) in advance of the disclosure; and (iii) the disclosing party shall
give the other party a reasonable opportunity to review and comment upon
the disclosure, and any request for confidential treatment or a protective
order pertaining thereto, prior to making such disclosure. The parties may
disclose this Agreement in confidence to their respective legal counsel,
accountants, bankers and financing sources as necessary in connection with
obtaining services from such third parties. The obligations stated in this
section shall survive the expiration or termination of this Agreement.
14. PATENTS, COPYRIGHTS, TRADE SECRETS, TRADEMARKS AND MASKWORK RIGHTS
A. Supplier makes no agreement to defend, indemnify or hold Buyer harmless
from any costs, expenses, losses, damages or liabilities incurred because
of actual or alleged infringement of any patent, trade secret or other
intellectual property right by, or arising from use of, [ ] slurry or any
other Items designated as custom by the parties. For all other Items,
Supplier agrees to indemnify and hold Buyer harmless from any costs and
expenses (including reasonable attorneys' fees) incurred in connection
with, and damages awarded to a third party as a direct result of,
adjudicated claims of infringement of any third party patent, trade secret,
trademark or other intellectual property right arising out of the purchase
of Items by Buyer or the use of Items by Buyer or Buyer's customers,
provided, however, that Seller is not obligated to so indemnify Buyer, if
(i) the sale of such Item by Supplier does not constitute contributory
infringement or inducement to infringe; or (ii) Buyer modifies the Item; or
(iii) Buyer uses the Item in a manner other than the specific use for which
the Item is sold by Supplier. Buyer shall promptly notify Supplier of such
claim or demand and shall permit Supplier to participate in the defense
thereof.
B. To the extent any settlement of a claim or demand is for an amount less
than the Liability Cap set forth in this Section, Supplier shall have the
right to settle said claim at its discretion.
C. If an injunction issues as a result of any such claim or action or if
Supplier determines in good faith that it is unable or unwilling to supply
an Item because the Item itself or the use of the Item may infringe a
patent or may constitute a misappropriation of a trade secret, Supplier
agrees at its expense and Buyer's option to either: (i) procure for Buyer
and Buyer's customers the right to continue using Items; (ii) replace them
with non-infringing Items; or (iii) modify them so they become
non-infringing. Buyer's sole remedy for Supplier's failure to supply or to
obtain the remedy elected shall be [ ], and upon [ ] Supplier shall not be
deemed in breach of this Agreement.
D. In no event shall Supplier's total and aggregate liability under Section
14A above exceed forty million dollars ($40,000,000.00)(the "Liability
Cap"). The limitation on liability contained in this Section 14 is separate
and independent from the [ ] contained in Section 8, and the amount of
liability imposed under one of these Sections does not limit or restrict
the amount of liability imposed under another Section.
15. HAZARDOUS MATERIALS
A. If Items or any services provided hereunder include hazardous materials as
defined by relevant local, state, and national law, Supplier represents and
warrants that Supplier and its personnel providing services to Buyer
understand the nature of and hazards associated with the design and/or
service of Items including handling, transportation, and use of such
hazardous materials, as applicable to Supplier. Prior to causing hazardous
materials to be on Buyer's property, Supplier shall obtain written approval
from Buyer's Site Environmental/Health/Safety organization. Supplier will
indemnify Buyer from any
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environmental liability incurred by Buyer which results from the shipment
and delivery of hazardous Items to Buyer, provided Buyer's negligence was
not a proximate cause of such liability.
B. Supplier will timely provide Buyer with material safety data sheets and any
other documentation reasonably necessary to enable Buyer to comply with
applicable laws and regulations.
C. Supplier hereby certifies that Items supplied to Buyer do not contain and
are not manufactured with any ozone depleting substances, as those terms
are defined by law.
16. CUSTOMS CLEARANCE
Upon Buyer's request, Supplier will promptly provide Buyer with a statement
of origin for all Items and with applicable customs documentation for Items
wholly or partially manufactured outside of the country of import.
17. COMPLIANCE WITH LAWS
A. Supplier shall comply with all national, state, and local laws and
regulations governing the manufacture, transportation, and/or sale of Items
and/or the performance of services in the course of this Agreement. In the
United States, these may include, but are not limited to, Department of
Commerce, Environmental Protection Agency, and Department of Transportation
regulations applicable to hazardous materials.
B. Supplier represents and agrees that it is in compliance with Executive
Order 11246 and implementing Equal Employment Opportunity regulations and
the Immigration Act of 1987, unless exempted or inapplicable.
18. MERGER, MODIFICATION, WAIVER, AND REMEDIES
A. This Agreement contains the entire understanding between Buyer and Supplier
with respect to the subject matter hereof and merges and supersedes all
prior and contemporaneous agreements, dealings and negotiations. No
modification, alteration or amendment shall be effective unless made in
writing, dated and signed by duly authorized representatives of both
parties.
B. No waiver of any breach hereof shall be held to be a waiver of any other or
subsequent breach.
C. Except as otherwise expressly limited herein, the parties' rights and
remedies herein are in addition to any other rights and remedies provided
by law or in equity.
D. If any provision of this Agreement is determined by a court of competent
jurisdiction to be invalid, illegal or unenforceable, such determination
shall not affect the validity of the remaining provisions unless Buyer
determines in its discretion that the court's determination causes this
Agreement to fail in any of its essential purposes.
19. ASSIGNMENT
Neither party may assign or factor any rights in nor delegate any
obligations under this Agreement or any portion thereof without the written
consent of the other. However, Supplier may assign its rights and
obligations hereunder to its direct and indirect subsidiaries, without such
consent. Buyer may cancel this Agreement for cause should Supplier attempt
to make an unauthorized assignment of any right or obligation arising
hereunder.
20. APPLICABLE LAW
This Agreement is to be construed and interpreted according to the laws of
the State of Delaware, excluding its conflict of laws provisions. This
Agreement is not subject to the United Nations Convention on Contracts for
the International Sale of Goods, in accordance with Article 6 thereof.
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21. HEADINGS
The headings provided in this Agreement are for convenience only and shall
not be used in interpreting or construing this Agreement.
22. SPECIFIC PERFORMANCE
Notwithstanding anything else contained in this Agreement, the parties
hereto agree that failure to perform certain obligations undertaken in
connection with this Agreement would cause irreparable damage, and that
monetary damages would not provide an adequate remedy in such event. The
parties further agree that failure to deliver against accepted Purchase
Orders, or to deliver confirmed supply or pricing, are such obligations.
Accordingly, it is agreed that, in addition to any other remedy to which
the non breaching party may be entitled, at law or in equity, the non
breaching party shall be entitled to injunctive relief to prevent breaches
of the provisions of this Agreement, and an order of specific performance
to compel performance of such obligations in any action instituted in any
court of the United States or any state thereof having subject matter
jurisdiction.
23. SURVIVAL
The provisions of Sections: 1, 8, 13, 14, 15, 20 will survive any
termination or expiration of this Agreement. In addition, any license
granted pursuant to Section 25 which is exercised prior to the Expiration
Date shall remain in force and effect for a period of three (3) years
following the Expiration Date, and Section 25 shall survive for this
three-year time period following the Expiration Date.
24. VOLUME COMMITMENTS
A. Buyer's and Supplier's volume obligations and sales commitments for [ ] are
set forth in Addendum D for the years set forth therein.
B. Notwithstanding the volume obligations described above and set forth in
detail in Addendum D of this Agreement, in the event that (i) Buyer is made
a party to litigation arising from a claim of intellectual property
infringement for which Buyer is indemnified, pursuant to Section 14 above,
and (ii) Buyer determines, in good faith, after a thorough review of the
claim, underlying patent, requested relief, Buyer's defenses and other
relevant facts, that Supplier's indemnification obligation (which Supplier
has the unilateral right to increase) would not be adequate with respect to
the potential liability to such person, [ ], unless Supplier agrees in
writing to increase the amount of the Liability Cap set forth in Section 14
to a level which exceeds Buyer's good faith estimate of the amount of the
likely damages to be incurred in such lawsuit.
C. Notwithstanding the volume obligations described above and set forth in
detail in Addendum D of this Agreement, in the event Supplier does not
supply a particular Item for the reasons stated in Section 14C above,
Supplier shall be released from its contractual obligation to supply the
affected Item to Buyer.
25. LICENSE
A. Supplier agrees to grant to Buyer and/or its designee a contingent,
royalty-free, fully-paid, worldwide, non-exclusive, irrevocable license,
under those intellectual property rights that are owned by Supplier, or
licensed to Supplier (which Supplier has the right to sublicense), that are
necessary to make, use and import, and in the
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case of any such designee, to sell to Buyer or offer for sale to Buyer,
those specific Items that Supplier is not able to supply under this
Agreement for one of the following reasons:
(i) Supplier is [ ] selling or delivering such specific Item(s) to Buyer,
or
(ii) Supplier determines in good faith that it is [ ].
The above described license is expressly limited to the right to make Items
for Buyer's sole use, or in the case of a designee, to make, sell or offer
for sale Items (not supplied for the reasons set forth above), in an amount
not to exceed those set forth in Addendum D, for Buyer's sole use. In
addition, the above described license shall not obligate Supplier to
disclose any trade secrets to Buyer or its designee other than the
formulation (i.e., the ingredients and proportions) of the Item which has
not been supplied. Any disclosure of such Item's formulation to Buyer
and/or its designee shall be subject to Buyer and/or its designee entering
into appropriate obligations of confidentiality with respect to such
formulation.
B. In the event (i) Buyer is made a defendant in litigation by any person or
entity other than [ ], arising from a claim of patent infringement for
which Buyer is indemnified, pursuant to Section 14 above; and (ii) Supplier
is willing to continue to supply the affected Items; and (iii) Supplier is
unable to settle such litigation for an amount less than the [ ]; and (iv)
Buyer determines, in good faith, after a thorough review of the claim,
underlying patent, requested relief, Buyer's defenses and other relevant
facts, that Supplier's indemnification obligation (which Supplier has the
unilateral right [ ] with respect to the [ ] to such person, then Supplier
shall be obligated to either:
(i) Grant to Buyer and/or its designee a non-exclusive,
royalty-bearing, irrevocable license, under those patent rights that are
owned by Supplier, or licensed to Supplier (which Supplier has the right to
sublicense), that are necessary to make, use and import, and in the case of
any such designee, to make and sell to Buyer or offer for sale to Buyer,
those specific Items (in an amount not to exceed that set forth in Addendum
D) that are the subject of such litigation, provided, that Supplier
receives a non-exclusive, royalty-bearing, perpetual, irrevocable license
under the patent that is being asserted in the infringement litigation and
any other such patents of such party that are necessary to make and use
those specific Items. The [ ] in such case with respect to the
cross-licenses granted shall be [ ] of the purchase price or fair market
value (if produced by Buyer internally) of the Item that is [ ]; or
(ii) Grant to Buyer and/or its designee a non-exclusive,
royalty-bearing, irrevocable license, under those patents that are owned by
Supplier, or licensed to Supplier (which Supplier has the right to
sublicense), that are necessary to make, use and import, and in the case of
any such designee, to make and sell to Buyer or offer for sale to Buyer,
those specific Items that are the subject of such litigation. The [ ] in
such case shall be [ ] of the purchase price or fair market value (if
produced by Buyer internally) of the Item that is [ ]. The foregoing
license grant is expressly limited to the right to make Items (in an amount
not to exceed that set forth in Addendum D) for Buyer's sole use.
In the event Buyer exercises its right to have a license granted to Buyer
and/or its designee under this Section 25B, any such license grant shall
not subsequently
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revert to a license grant under Section 25A, regardless of whether Supplier
subsequently stops supplying the affected Item.
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ADDENDUM A
PRODUCT DESCRIPTION AND PRICE SCHEDULE
A. [ ]
TABLE A
PRICES WHICH APPLY IF BUYER PURCHASES [ ]% SHARE OF BUYER'S TOTAL
REQUIREMENTS FOR CMP SLURRIES UTILIZED IN [ ] POLISHING ASSOCIATED WITH THE
FOLLOWING MANUFACTURING PROCESSES OF BUYER: [ ]
<TABLE>
<CAPTION>
CABOT PART # PKG POINT OF DESTINATION PRICE PER GALLON
MANUFACTURE
<S> <C> <C> <C> <C>
[ ] IBC United States United States (FOB $[ ]
local Warehouse)
Ireland (DDU) $[ ]
Israel (DDP) $[ ]
[ ] IBC Barry, Wales United States (FOB $[ ]
local Warehouse)
Ireland (DDU) $[ ]
Israel (DDP) $[ ]
[ ] IBC/DTA United States United States (FOB $[ ]
local Warehouse)
</TABLE>
TABLE B
PRICES WHICH APPLY IF BUYER PURCHASES [ ]% SHARE OF BUYER'S TOTAL
REQUIREMENTS FOR CMP SLURRIES UTILIZED IN [ ] POLISHING ASSOCIATED WITH THE
FOLLOWING MANUFACTURING PROCESSES OF BUYER: [ ]
<TABLE>
<CAPTION>
CABOT PART # PKG POINT OF DESTINATION PRICE PER GALLON
MANUFACTURE
<S> <C> <C> <C> <C>
[ ] IBC United States United States (FOB $[ ]
local Warehouse)
Ireland (DDU) $[ ]
Israel (DDP) $[ ]
[ ] IBC Barry, Wales United States (FOB $[ ]
local Warehouse)
Ireland (DDU) $[ ]
Israel (DDP) $[ ]
[ ] IBC/DTA United States United States (FOB $[ ]
local Warehouse)
</TABLE>
-13-
<PAGE> 14
TABLE C
PRICES WHICH APPLY IF BUYER PURCHASES [ ]% SHARE OF BUYER'S TOTAL
REQUIREMENTS FOR CMP SLURRIES UTILIZED IN [ ] POLISHING ASSOCIATED WITH THE
FOLLOWING MANUFACTURING PROCESSES OF BUYER: [ ]
<TABLE>
<CAPTION>
CABOT PART # PKG POINT OF DESTINATION PRICE PER GALLON
MANUFACTURE
<S> <C> <C> <C> <C>
[ ] IBC United States United States (FOB $[ ]
local Warehouse)
Ireland (DDU) $[ ]
Israel (DDP) $[ ]
[ ] IBC Barry, Wales United States (FOB $[ ]
local Warehouse)
Ireland (DDU) $[ ]
Israel (DDP) $[ ]
[ ] IBC/DTA United States United States (FOB $[ ]
local Warehouse)
</TABLE>
Prices for purchases of requirements percentages between the requirements
percentages shown in the above tables (i.e. quantities between [ ]%, [ ]%
and [ ]%) shall be determined by a straight line extrapolation of the
prices shown in the above tables.
The price per gallon of [ ] shall be calculated based upon the percent
share of Buyer's requirements for [ ] or its equivalent associated with
Buyer's [ ] manufacturing processes which Buyer forecasts for the relevant
calendar year. For example, if Buyer purchases [ ]% of its total
requirements for [ ] or its equivalent associated with Buyer's [ ]
manufacturing processes in the form of [ ] from Supplier in calendar year
2000, the price will be determined using Table B. However, if Buyer
purchases [ ]% of its total requirements for [ ] or its equivalent
associated with Buyer's [ ] manufacturing processes in the form of [ ] from
Supplier in calendar year 2000, the price will be determined using Table A.
B. [ ]
<TABLE>
<CAPTION>
CABOT PART # PKG POINT OF DESTINATION PRICE BASED ON CUMULATIVE VOLUMES OF [ ] PURCHASED
MANUFACTURE
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
# [ ]-[ ] [ ]-[ ] [ ]-[ ] [ ]-[ ] [ ]-[ ] > [ ]*
[ ] IBC United States United States $[ ] $[ ] $[ ] $[ ] $[ ] $[ ]
(FOB local
warehouse)
United States Israel $[ ] $[ ] $[ ] $[ ] $[ ] $[ ]
(DDP)
United States Ireland (DDU) $[ ] $[ ] $[ ] $[ ] $[ ] $[ ]
</TABLE>
* volumes in thousands of gallons
The price per gallon of [ ] shall be calculated based upon the cumulative
volume of gallons of [ ] purchased by Buyer from Supplier during the term
of this Agreement. Adjustments to the price, based upon the cumulative
gallons of [ ] purchased by
-14-
<PAGE> 15
Buyer from Supplier, shall take effect in the quarter following the quarter
in which Buyer surpasses a volume threshold.
C. [ ]
<TABLE>
<CAPTION>
CABOT PART # PKG POINT OF MANUFACTURE DESTINATION # PRICE PER GALLON
<S> <C> <C> <C> <C>
[ ] * IBC United States United Sates (FOB local $[ ]
warehouse)
[ ] * IBC United States Ireland (DDU) $[ ]
[ ] * IBC Barry, Wales Ireland (DDU) $[ ]
[ ] * IBC Barry, Wales United Sates (FOB local $[ ]
warehouse)
</TABLE>
* [ ]
D. [ ]
<TABLE>
<CAPTION>
CABOT PART # PKG POINT OF MANUFACTURE DESTINATION # PRICE PER GALLON
<S> <C> <C> <C> <C>
[ ] IBC United States United Sates (FOB local $[ ]
warehouse)
</TABLE>
-15-
<PAGE> 16
ADDENDUM B
KEY CONTACTS & INTEL FAB LOCATIONS
<TABLE>
<CAPTION>
DEPARTMENT/TITLE NAME PHONE
<S> <C> <C>
OHKA:
Account Representative Brad Staley 630-375-5508
Accounts Receivable 630-585-9471
24-Hour Emergency Contact Brad Staley 630-375-5508
Schedule/Delivery Contact Soni Pahia 916-939-9364
General Bruce Zwicker 630-375-5540
INTEL:
FMO
Commercial Mumtaz Ahmed 408-765-88
Technical Ara Philipossian 408-765-6256
Joe Schoenholtz 408-765-2435
Buyers
Ireland Caitriona Delaney 011-353-1-606-8630
New Mexico Tami Freeman 505-893-3538
Fab 6 Oscar Ochoa 602-554-8417
Fab 12 Oscar Ochoa 602-554-8417
Israel
Fab 8 Anna Provad 011-972-2-5896357
Fab 18 Yaron Ozer 011-972-7-666-6953
Santa Clara
D2 Karen Ma 408-765-6152
Ethel Swindall 408-765-2392
Oregon Heather Holcomb 503-642-8693
Massachusetts
F17 Tony Quarta
Accounts Payable:
AZ/CA Linda Medill 503-696-3237
OR Jessica Ailshie 503-696-3046
NM Debbie Martin 503-696-3302
</TABLE>
-16-
<PAGE> 17
ADDENDUM C
QUALITY REQUIREMENTS
LIST OF GOVERNING INTEL SPECIFICATIONS
<TABLE>
<CAPTION>
SPEC. NO. REV. TITLE ISSUE DATE
<S> <C> <C> <C>
07-116 0 MATERIALS CHANGE CONTROL POLICY 05/22/98
07-123 2 SUPPLIER CORRECTIVE ACTION POLICY 02/25/98
07-124 4 FMO/ATMO-DISCREPANT RAW MATERIAL DISPOSITION POLICY 06/09/98
07-400 7 CHEMICALS SPECIFICATION SYSTEM 06/05/97
07-401 6 PROCEDURE FOR SHIPPING & RECEIVING OF CHEMICALS 12/05/97
07-402 5 INTEL CHEMICAL QUALITY PROGRAM 06/26/98
07-403 2 SHIPPING OF TEMP-SENSITIVE CHEMICALS 12/05/97
07-411 4 PROCUREMENT SPEC FOR CHEMICALS 11/25/98
</TABLE>
-17-
<PAGE> 18
ADDENDUM D
VOLUME OBLIGATIONS
A. [ ]
During the years set forth below, Buyer shall be obligated to purchase
from Supplier a [ ] volume of [ ] which is equal to the product of (i) Buyer's
total requirements for [ ] utilized in [ ] polishing associated with Buyer's [ ]
manufacturing processes ("[ ] Slurry Requirements"), multiplied by (ii) the [ ]
Percentage (set forth in the table below). During the years specified below,
Supplier shall be obligated to supply to Buyer a volume of [ ] which is equal to
the product of (i) Buyer's forecasted volume of [ ] Slurry Requirements for the
upcoming calendar year (which forecast shall be provided to Supplier 90 days
prior to the commencement of each calendar year), multiplied by (ii) the [ ]
Percentage (set forth in the table below).
[ ] SLURRY VOLUME OBLIGATIONS
<TABLE>
<CAPTION>
CALENDAR YEAR BUYER'S [ ] PERCENTAGE SUPPLIER'S [ ] PERCENTAGE
------------- ---------------------- -------------------------
<S> <C> <C>
1999 [ ] % [ ] %
2000 [ ] % [ ] %
2001 [ ] % [ ] %
</TABLE>
Ninety days prior to the commencement of each calendar year, Buyer shall commit
and obligate itself to purchase from Supplier a specific percentage of its [ ]
Slurry Requirements (which percentage shall be at least as large as the [ ]
Percentage) which it shall purchase from Supplier during the upcoming year. The
amount of [ ] which Buyer will purchase, above the [ ] Percentage, will be
determined according to whether Supplier meets requirements set by Buyer's
Supplier Score Card.
B. [ ]
During the years set forth below, Buyer shall be obligated to purchase from
Supplier a [ ] volume of [ ] which is equal to the product of (i) Buyer's total
requirements for [ ] utilized in [ ] polishing applications associated with
Buyer's [ ] manufacturing processes ("[ ] Requirements"), multiplied by (ii) the
[ ] Percentage (set forth in the table below). During the years specified below,
Supplier shall be obligated to supply to Buyer a volume of [ ] which is equal to
the product of (i) Buyer's forecasted volume of [ ] Requirements for the
upcoming calendar year (which forecast shall be provided to Supplier 90 days
prior to the commencement of each calendar year), multiplied by (ii) the [ ]
Percentage (set forth in the table below). Notwithstanding the foregoing, during
the course of any
-18-
<PAGE> 19
calendar year, Buyer may, by giving 4 months advance written notification to
Supplier, increase its forecasted [ ] requirements for the remainder of the year
(starting after the 4 month notice period), provided, however, such new
forecasted amount may not exceed a volume which is greater than the product of
the remaining volumes from the original forecasted amount, multiplied by [ ].
[ ] SLURRY VOLUME OBLIGATIONS
<TABLE>
<CAPTION>
CALENDAR YEAR BUYER'S [ ] PERCENTAGE SUPPLIER'S [ ] PERCENTAGE
<S> <C> <C>
1999 [ ] % [ ] %
2000 [ ] % [ ] %
2001 [ ] % [ ] %
</TABLE>
90 days prior to the commencement of 2001, Buyer shall commit and obligate
itself to purchase from Supplier a specific percentage of its [ ] Requirements
(which percentage shall be at least as large as the [ ] Percentage) which it
shall purchase from Supplier during 2001. The amount of [ ] which Buyer will
purchase, above the [ ] Percentage, will be determined according to whether
Supplier meets requirements set by Buyer's Supplier Score Card.
C. [ ]
During the years set forth below, Buyer shall be obligated to purchase from
Supplier a [ ] volume of [ ] which is equal to the product of (i) Buyer's total
requirements for [ ] utilized in [ ] polishing applications associated with
Buyer's [ ] manufacturing processes ("[ ] Requirements"), multiplied by (ii) the
[ ] Percentage (set forth in the table below). For each month of this Agreement,
Supplier shall be obligated to supply to Buyer a volume of [ ] which is equal to
the product of (i) the volume of [ ] Buyer purchased from Supplier during the
preceding month, multiplied by (ii) the [ ] Percentage (set forth in the table
below).
[ ] SLURRY VOLUME OBLIGATIONS
<TABLE>
<CAPTION>
CALENDAR YEAR [ ] PERCENTAGE [ ] PERCENTAGE
<S> <C> <C>
1999 [ ] % [ ] %
2000 [ ] % [ ] %
2001 [ ] % [ ] %
</TABLE>
D. [ ]
Neither Buyer nor Supplier have any volume obligations with respect to [ ]
-19-
<PAGE> 20
With respect to all of the above describe Items, in the event Buyer does not
purchase a particular Item for use in its facilities in either North America,
Ireland and/or Israel for any [ ], Supplier shall no longer be obligated to
supply such Item to Buyer's facilities in the relevant geographic region.
-20-
<PAGE> 1
Exhibit 10.12
The omitted portions indicated by brackets have been separately filed with the
Securities and Exchange Commission pursuant to a request for confidential
treatment under Rule 406, promulgated under the Securities Act of 1933, as
amended.
SERVICES AGREEMENT
This SERVICES AGREEMENT (the "Agreement"), dated October 27, 1998, by
and among Davies-Imperial Coatings, Inc. ("Davies"), an Indiana corporation
having a place of business at 1275 State Street, Hammond, Indiana, Cabot
Corporation ("Cabot"), a Delaware corporation having a place of business at 75
State Street, Boston, Massachusetts, and, for purposes of Sections 10.1, 11,
13.4, 15, 18, 19, 20.6 and 20.9, Donn Davies, an individual, and JoAnn Davies,
an individual.
WHEREAS, Cabot desires to have Davies provide to Cabot metal oxide
dispersion services; and
WHEREAS, Davies desires to provide metal oxide dispersion services to
Cabot;
NOW, THEREFORE, in consideration of the foregoing premises and other
good and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereby agree as follows:
SECTION 1. TERM
This Agreement shall commence on October 27 , 1998, and shall continue
until October 27, 2004 (the "Initial Term"). This Agreement shall thereupon be
automatically renewed for additional one (1) year periods (each a "Renewal
Term", and together with the Initial Term, the "Term"; each year of the Term
referred to herein as a "Term Year"), unless either party gives written notice
of its intention to terminate the Agreement at least 90 days prior to the
expiration of the Initial Term or any Renewal Term.
SECTION 2. SERVICES
2.1 Purchase and Sale. Subject to the terms and conditions of this
Agreement, during the Term, Davies shall provide to Cabot, and Cabot shall
purchase from Davies, the Services (as defined below) in such quantities as
specified by Cabot, subject to Section 2.4, below. "Services" means (a) the
manufacturing of the metal oxide dispersions set forth on Schedule A hereto (the
"Products") in accordance with the specifications, formulae and processes
provided by Cabot to Davies and initially as set forth in the materials
specified on Schedule A hereto, (b) the packaging of the Products in accordance
with specifications provided by Cabot from time to time, and (c) such ancillary
services as specified herein. Cabot may amend Schedule A from time to time on 30
days written notice to Davies provided such amendments either do not result in a
material increase in cost to Davies or are agreed to in advance by Davies;
Davies may only amend such schedule with Cabot's prior written consent.
2.2 Materials, Labor, etc.
(a) Subject to the following sentence, Cabot shall supply to Davies all
raw materials, packaging materials and filter media, with the exception of
wooden pallets and nominal filter bags, necessary for Davies to perform the
Services. In the event Cabot requests that Davies purchase specified materials,
Davies shall acquire the specified materials and shall bill Cabot therefor at
Davies' cost, including any handling charges incurred by Davies in connection
therewith. Title to all such materials shall remain with Cabot at all times.
<PAGE> 2
(b) Davies shall supply all materials and services, other than as set
forth in Section 2.2(a), above, necessary to provide the Services, including,
but not limited to, labor, administration, raw materials management, inventory
management, on-site warehousing, security, facility space, utilities,
maintenance, quality control, quality assurance, preparation of certificates of
analysis, order fulfillment, sample fulfillment, wooden pallets, coordination of
shipping and implementation of ISO conformance, as such may be set forth in
greater detail elsewhere in this Agreement. Subject to the following sentence,
Davies shall adequately insure all equipment at its Hammond, Indiana facility,
including the Cabot Assets, as defined below and as set forth on Schedule C
hereto. With respect to Products, as defined herein, Cabot shall adequately
insure all raw materials, finished goods and works-in-process.
2.3 Payment. Davies shall make good faith efforts to invoice Cabot for
its Services and for other charges on or before the second business day of each
month during the Term, but in no event later than the tenth day of such month,
and shall send such invoices to Cabot by express mail or similar means of
delivery. Cabot shall make a good faith effort to pay such invoices as soon as
possible following its first check run after it receives the relevant invoice,
but in any event, payment shall be made within ten (10) days after the date of
invoice.
2.4 Quantity. During each Term Year, Cabot will purchase Services from
Davies for not less than the lesser of (i) [ ] gallons of Product or (ii) [ ]
percent ([ ]%) of the total amount of orders received by Cabot for Products for
shipment to customer locations in North America. Cabot's purchase of Services
from Davies shall reflect its good faith expectations of customer demand and
Cabot shall use its reasonable efforts to distribute substantially evenly the
quantities of its purchases of Services to avoid creating production capacity
problems for Davies.
2.5 Failure to Provide Services. In addition to any other rights and
remedies of Cabot under this Agreement, in the event that Davies fails to supply
Cabot with its requirements for Services for any reason, Cabot shall have the
right to provide such Services for itself or purchase Services from sources
other than Davies. In such event, the amount of Products so provided or
purchased shall count toward the volume requirements of Section 2.4 hereof (each
a "Setoff"), provided, however, than in order for Cabot to be entitled to a
Setoff, Cabot must have provided Davies at least one week lead time on the
relevant order and the relevant order must not be for a quantity in excess of [
] per week.
SECTION 3. SHIPPING; DELIVERY
All Products shall be prepared for delivery to Cabot or a customer of
Cabot, as the case may be, in accordance with Cabot's instructions.
SECTION 4. PRICING
4.1 Prices. Davies shall perform the Services and provide such
miscellaneous services in connection therewith in accordance with the prices set
forth on Schedule B hereto (the "Prices").
4.2 Renegotiation. Cabot and Davies acknowledge that it is their
intention simultaneously to increase the quality of the Products and to decrease
the costs associated with manufacturing the Products, and to share any cost
savings between them. Recognizing that intention, on each two-year anniversary
of the execution of this Agreement, Cabot and Davies shall in good faith
negotiate any necessary changes (increases or decreases) to the Prices.
Necessary changes are changes that reflect changes in Davies' manufacturing
costs. In determining the changes to be made, the parties shall give
consideration to price pressures in the marketplaces of which the relevant
Products are a part. In no event shall the Price for Services relating to any
one Product be increased more than [ ]% per year.
2
<PAGE> 3
SECTION 5. CAPITAL EXPENDITURES
5.1 CapEx Investment. Cabot agrees to invest not less than One Hundred
Fifty Thousand Dollars ($150,000) (the $150,000 minimum referred to herein as
the "CapEx Investment") in capital improvements, capacity expansions and/or
capital expenditures to maintain capacity at Davies' facility relating to the
Services during each Term Year. Prior to making any such capital expenditures,
Cabot will consult with Davies to identify the priorities for such expenditures.
5.2 CapEx Carryover. If Cabot does not spend the total amount of the
CapEx Investment in a given Term Year, Davies may carry over the unspent portion
of such CapEx Investment to the next Term Year, provided, however, that Cabot
may, at its sole option, pay Davies within ninety (90) days of the end of such
Term Year an amount in cash equal to such unspent portion, in which case there
shall be no carryover for such Term Year. Notwithstanding the foregoing
sentence, if in any given Term Year Cabot agrees to spend more than the CapEx
Investment for that Term Year (including any carryover) on capital improvements
and/or capital expansions at Davies' facility, the excess shall be credited
toward the CapEx Investment in future Term Years, beginning with the immediately
succeeding Term Year.
SECTION 6. MAINTENANCE AND IMPROVEMENTS
6.1 Maintenance.
(a) Davies shall be responsible for the proper customary maintenance of
all assets used, directly or indirectly, in its provision of Services, including
the Cabot Assets (as defined below). Notwithstanding the foregoing, Cabot shall
be responsible for costs under third-party maintenance contracts relating to the
[ ] system located at Davies' facility in Hammond, Indiana. The parties
acknowledge that to the extent certain maintenance items are not individually
specified on Schedule A hereto, the cost of such maintenance items are reflected
in the Prices for the Services.
(b) If Cabot makes a good faith determination that Davies is not
complying with Section 6.1(a) hereof, Cabot shall have the right to enter upon
Davies' premises in order to perform the maintenance required by Section 6.1(a).
Any amounts expended by Cabot pursuant to this Section 6.1(b) shall be credited
toward the CapEx Investment for such Term Year. The fact that Cabot makes use of
this Section 6.1(b) shall have no effect on any of its rights and remedies with
respect to Davies' failure to comply with Section 6.1(a).
6.2 Improvements. After taking into account the improvements made
pursuant to Section 5.1 hereof, Davies agrees to make all capital improvements
to its Hammond, Indiana facility that are necessary or advisable in order to
continue to provide the Services in a timely manner.
SECTION 7. RIGHT TO BID
Cabot shall provide Davies the opportunity to bid to provide the
Services with respect to all Cab-O-Sperse(R) and Semi-Sperse(R) metal oxide
dispersions to be manufactured in North America, other than those to be
manufactured solely by Cabot or any Cabot affiliate. As used in this Agreement,
"affiliate" means, with respect to any person or entity, any person or entity,
directly or indirectly controlling, controlled by, or under common control with
any such person or entity.
3
<PAGE> 4
SECTION 8. PROPRIETARY INFORMATION; CONFIDENTIALITY
8.1 Proprietary Information.
(a) Subject to Section 8.1(b) hereof, the term "Proprietary
Information" shall mean, whether disclosed prior to, on or after the date hereof
and whether or not marked or identified as confidential, formulae,
specifications, demographic and trade information, costs, intellectual property
and applications for the same (including, but not limited to, patents,
copyrights, trademarks, trade names, service marks, service names, technology,
know-how, processes, trade secrets, inventions, data and software), names of
investors and customers, and other strategic business, marketing, sales and
financial information relating to the relevant party's business (including, but
not limited to business plans, marketing strategy, and production information).
(b) The term "Proprietary Information" does not include any information
which (i) at the time of disclosure or thereafter is generally available to or
known by the public (other than as a result of the acts by the recipient or its
representatives in breach of this Agreement), (ii) was or becomes available to
the recipient on a non-confidential basis from a source other than the provider
or its advisors, provided that such source is not and was not bound by a
confidentiality agreement with the provider, or (iii) has been independently
acquired or developed by the recipient without violating any of its obligations
under this Agreement.
8.2 Ownership. All information and materials, including Proprietary
Information of Cabot, its subsidiaries and its affiliates and all physical
manifestations thereof, that are received by Davies from Cabot prior to, on or
after the date hereof in connection with the Services or that are or were
created or produced by Davies and are based upon, or are otherwise prepared with
use of or reference to, Proprietary Information of Cabot, shall be and remain
the sole and exclusive property of Cabot. Upon written request by Cabot, Davies
shall return to Cabot all tangible forms of the Proprietary Information of
Cabot, including any and all copies, and all unused samples of materials Cabot
may have provided.
8.3 Confidentiality.
(a) Davies acknowledges, understands and agrees that all Proprietary
Information of Cabot and its subsidiaries and affiliates is confidential and
shall remain the exclusive property of Cabot, its subsidiaries or its
affiliates, as the case may be. Cabot acknowledges, understands and agrees that
all Proprietary Information of Davies is confidential and shall remain the
exclusive property of Davies. Each of Cabot and Davies agrees that for a period
of fifteen (15) years from and after the termination or expiration of the Term,
it shall keep and hold as confidential, and shall require its directors,
officers, employees, agents and representatives, to keep and hold as
confidential, any and all Proprietary Information of the other unless disclosure
is required by applicable law or by terms of a subpoena or other order issued by
a court of competent jurisdiction. Each party shall promptly notify the other of
any such subpoena or order, shall contest any such subpoena or order and shall
(to the extent possible) permit the owner of such Proprietary Information to
contest any such subpoena or order. Except as so required, neither party shall
disclose any Proprietary Information of the other to third parties, or to its
employees or representatives who do not have a need to know it in connection
with the subject of the transactions contemplated by this Agreement, and neither
party shall use (or permit to be used) any Proprietary Information of the other
except for the purposes contemplated hereby. For purposes of this Section 8, the
party providing any of its Proprietary Information is sometimes referred to as
the "provider" and the party receiving any of the other's Proprietary
Information is sometimes referred to as the "recipient."
(b) Davies agrees to cause each of its employees as of the date of this
Agreement, and any person who becomes an employee of Davies during the Term, to
enter into a confidentiality agreement with Cabot that provides for essentially
the same kind and degree of confidentiality as set forth in Section 8.3(a)
hereof with respect to Davies.
4
<PAGE> 5
8.4 Redelivery Upon Termination. The recipient shall deliver or cause
to be delivered to the provider, or destroy, promptly after termination of this
Agreement for any reason any documents containing Proprietary Information and
any copies thereof which the recipient (or others to whom the recipient has
disclosed the same hereunder whether authorized hereby or not) may have and
shall permanently erase or cause to be erased all Proprietary Information from
any computer memory or storage.
SECTION 9. INTELLECTUAL PROPERTY
9.1 Intellectual Property.
(a) With regard to any inventions, improvements and technical
information that are created or produced on or after the date of this Agreement
by any of the parties hereto in connection with the Services, or that are based
upon or suggested by any Proprietary Information of Cabot (the foregoing,
collectively, referred to herein as the "Term IP"), Davies agrees that Cabot
will be the sole and exclusive owner thereof, including all patents, copyrights,
and other intellectual property rights therein. Davies hereby assigns and agrees
to assign, without any additional compensation, all right, title and interest in
and to such inventions, improvements and technical information, including all
patents, copyrights and other intellectual property rights therein, to Cabot.
Davies further agrees, at Cabot's request and expense, to provide assistance to
Cabot in every reasonable way to perfect and vest title in and to such
inventions, improvements and technical information, including all patents,
copyrights and other intellectual property rights therein, in Cabot and to
assist Cabot in every reasonable way in obtaining and enforcing patents,
copyrights, and other intellectual property rights in and to such inventions,
improvements and technical information throughout the world.
(b) The parties acknowledge that over the course of their relationship
and prior to the date of this Agreement, they, individually or jointly, have
created or produced certain inventions, improvements and technical information
relating to the processes and techniques for dispersing metal oxides (the
"Existing IP"). Except as provided in Section 8.2 hereof, the portion of the
Existing IP created or produced solely by Davies is referred to herein as the
"Davies IP." The portion of the Existing IP created or produced solely by Cabot
or jointly by Cabot and Davies, together with the Term IP, is referred to herein
as the "Cabot IP."
9.2 Licenses.
(a) Davies hereby grants to Cabot a fully paid-up, nonexclusive,
irrevocable, world-wide, perpetual license to use the Davies IP, including the
right for Cabot to sub-license the Davies IP to any of its subsidiaries,
affiliates or any third parties (collectively the "Sub-licensees").
Notwithstanding Section 8.3 hereof, the license provided for by this Section
9.2(a) shall include Cabot's and the Sub-licensees' right to use the Proprietary
Information of Davies.
(b) Subject to Section 9.3 hereof, Cabot hereby grants to Davies a
fully paid-up, nonexclusive, irrevocable, world-wide, perpetual license to use
the Cabot IP, provided, however, that Davies may neither transfer any or all of
the Cabot IP to any third party, nor grant a sub-license with respect to any or
all of the Cabot IP.
(c) The licenses granted pursuant to this Section 9.2 shall survive the
termination of this Agreement.
9.3 Use of IP to Benefit Competitors. Davies agrees that from and after
the date hereof, and notwithstanding any termination of this Agreement, it will
not use either the Davies IP or the Cabot IP for the benefit of any entity
which, directly or indirectly, competes with any business carried on by Cabot or
any of Cabot's affiliates.
5
<PAGE> 6
SECTION 10. RIGHT OF FIRST REFUSAL TO PURCHASE DAVIES' BUSINESS
10.1 Offer.
(a) If, at any time, Davies, Donn Davies or JoAnn Davies desires to
sell part or all of the equity of Davies (in an aggregate amount greater than
10% of the total equity) or the assets owned by Davies and used or useful in
connection with its metal oxide dispersion business (in a single transaction or
series of transactions) (the portion of assets or equity, as the case may be,
that Davies, Donn Davies or JoAnn Davies desires to sell referred to herein as
the "Business"), whether by merger, stock sale, asset sale or otherwise or in a
single transaction or a series of transactions, such party or parties shall
submit a written offer (the "Offer") to sell the Business to Cabot as provided
herein. The Offer shall disclose which assets or stock is proposed to be sold,
the terms and conditions, including price and payment terms, of the proposed
sale, and the prospective purchaser of the Business. The Offer shall further
state that Cabot may acquire all but not less than all of the Business for the
price and upon the other terms and conditions set forth therein.
(b) If Cabot wishes to purchase the Business at the price and on the
terms and conditions set forth in the Offer, it shall, within 30 days from the
date of the Offer, notify Davies in writing (the "Acceptance").
10.2 No Transfer Except as Provided. Davies shall not, at any time
during the Term of this Agreement, in any manner convey or transfer the
Business, or any part thereof, except in accordance with the terms and
conditions contained in this Section 10.
10.3 Right to Sell to Third Party. If Cabot does not provide Davies
with an Acceptance within the 30-day period set forth in Section 10.1(b) hereof
(or if Cabot by notice to Davies earlier waives its right to purchase), Davies
shall be free, during the 120-day period following Davies' submission of the
Offer pursuant to Section 10.1(a) hereof, to convey the Business to the third
party identified in the Offer on terms and conditions (including price) no more
favorable to the third party than those contained in the Offer. If Davies does
not sell the Business within such 120-day period, the Business shall again
become subject to this right of first refusal.
10.4 Right to Remove Assets. If Davies enters into an agreement to sell
the Business to such third party in accordance with the provisions of this
Section 10, it shall notify Cabot at least 30 days prior to the closing of such
sale and Cabot shall be permitted at Cabot's expense to remove the Cabot Assets
(as defined below) prior to any such sale.
SECTION 11. NONCOMPETITION AND RELATED PAYMENTS
(a) Each of Davies, Donn Davies and JoAnn Davies (collectively, the
"Davies Group") hereby acknowledges the value each shall receive from the
execution of this Agreement by the other parties hereto, including Cabot, and
the benefits associated therewith. In consideration for such value each member
of the Davies Group hereby agrees that during the Term and the Additional
Non-Compete Period (as defined below), none of the members of the Davies Group
shall provide or assist any other person or entity to provide metal oxide
dispersion services to any Competitor. In the event of a breach of this Section
11(a) by any member of the Davies Group, none of the members of the Davies Group
shall receive any part of the Noncompetition Payment. For purposes of this
Section 11, "Competitor" shall mean any person or entity (other than Cabot and
Cabot's affiliates) that, directly or indirectly, competes with any business
carried on by Cabot or any of Cabot's affiliates. As used herein, "Additional
Non-Compete Period" shall mean (a) if Davies shall give notice of election not
to renew the Agreement in accordance with Section 1 hereof (a "Non-Renewal
Notice") or if Cabot shall terminate this Agreement pursuant to Section 13.1
hereof, a period of [ ] after the termination of the Agreement, or (b) if Cabot
shall give a Non-Renewal Notice or if both Davies and Cabot shall give a
Non-Renewal Notice or if Davies shall terminate this Agreement pursuant to
Section 13.3 hereof, a period of[ ] after the termination of the Agreement.
-6-
<PAGE> 7
(b) If Cabot shall give a Non-Renewal Notice, if Davies shall terminate
this Agreement pursuant to Section 13.3 hereof or if Cabot shall terminate this
Agreement pursuant to Section 13.1(a), 13.1(b) or 13.1(c), Cabot shall pay to
the Davies Group in consideration for such noncompetition covenant the following
total amount (the "Noncompetition Payment"), to be divided equally among those
members of the Davies Group in existence or living at the commencement of the
Additional Non-Compete Period:
(i) [ ] if such notice by Cabot is at the end of the Initial
Term;
(ii) [ ] if such notice by Cabot is at the end of the first
Renewal Term (if at all);
(iii) [ ] if such notice by Cabot is at the end of the second
Renewal Term (if at all); and
(iv) [ ] if such notice by Cabot is at the end of any Renewal
Term thereafter.
The Noncompetition Payment will be payable in two equal installments on the date
of any such termination and on the first anniversary thereof.
SECTION 12. WARRANTIES
12.1 Warranty as to Products. Davies represents and warrants to Cabot
that, when shipped to Cabot or a customer of Cabot, as the case may be, by
Davies, the Products will conform in all respects to the specifications then in
effect and as then set forth in the materials specified on Schedule A hereto.
12.2 Quality Control. Quality control with respect to the Products
shall be performed in accordance with the terms contained in the materials
specified on Schedule A hereto.
12.3 Rejection. Subject to the following sentence, Cabot shall not be
obligated to accept or pay for Services relating to any batch or lot containing
Product not conforming to the specifications then in effect for such Product. If
such non-conformity is the result of materials or formulae provided by Cabot,
Cabot shall pay Davies for the Services relating to such batch or lot and such
amount shall count toward the volume requirements contained in Section 2.4
hereof.
12.4 Warranty as to Violations. Davies represents and warrants that
there is no past or present violation of, and there is no pending or threatened
action, suit or proceeding relating to, any alleged violation of any laws,
ordinances, rules or regulations relating to the environment or otherwise
governing, directly or indirectly, any hazardous substances, wastes or materials
in connection with the business, properties or operations of Davies.
SECTION 13. TERMINATION
Cabot and Davies each acknowledge that in the performance of this
Agreement, including any exercise of termination rights under this Section, it
will act in good faith.
13.1 Davies Default. Cabot may terminate this Agreement in the event of
any one or more of the following occurrences (each a "Davies Default"):
(a) upon Davies' filing a petition for adjudication as a bankrupt, for
reorganization or for an arrangement under any bankruptcy or insolvency law;
(b) if any involuntary petition under any bankruptcy or insolvency law
is filed against Davies, is not dismissed within thirty (30) days thereafter and
is then continuing;
7
<PAGE> 8
(c) if Davies shall make an assignment of all or substantially all of
its assets for the benefit of creditors, or if Davies' interest under this
Agreement shall be taken upon execution;
(d) if Davies shall fail to perform any material covenant or material
obligation hereunder, except as excused under Section 20.10 hereof, and such
failure has not been cured within thirty (30) days following Cabot's written
notice to Davies of such failure; or
(e) in the event that Davies is no longer owned or controlled by either
Donn Davies or JoAnn Davies.
13.2 Continuation of Supply. Notwithstanding any termination of this
Agreement, in the event of a Davies Default, Davies shall nevertheless continue
to have the obligation to perform the Services for Cabot for a period of 120
days after termination of this Agreement by Cabot on the terms and conditions
contained herein.
13.3 Cabot Default. Davies may terminate this Agreement in the event of
any one or more of the following occurrences (each a "Cabot Default"):
(a) upon Cabot's filing a petition for adjudication as a bankrupt, for
reorganization or for an arrangement under any bankruptcy or insolvency law;
(b) if any involuntary petition under such law is filed against Cabot,
is not dismissed within thirty (30) days thereafter and is then continuing;
(c) if Cabot shall make an assignment of all or substantially all of
its assets for the benefit of creditors, or if Cabot's interest under this
Agreement shall be taken upon execution; or
(d) if Cabot shall fail to perform any material covenant or material
obligation hereunder and such failure has not been cured within thirty (30) days
following Davies' written notice to Cabot of such failure.
13.4 Effect of Termination.
(a) Termination of this Agreement, whether by lapse of time, mutual
consent, operation of law, exercise of right of termination or otherwise shall
not affect the ownership interests in the respective proprietary and other
rights of the parties.
(b) Upon any termination of this Agreement, Davies shall continue to
have the obligation to perform the Services to fill any outstanding orders
received by Davies prior to the receipt of notice of termination.
(c) The provisions contained in Sections 8, 9, 10.4, 11, 12, 13.2,
13.4, 14, 15, 18, 19 and 20.9hereof shall survive the termination of this
Agreement.
8
<PAGE> 9
SECTION 14. CABOT ASSETS; PROTECTION OF RIGHTS
14.1 Cabot Assets. The parties acknowledge and agree that Cabot owns
all right, title and interest in (a) the equipment and assets listed on Schedule
C hereto and which are located at Davies' facility in Hammond, Indiana, (b)
those assets purchased with the CapEx Investment pursuant to Section 5 hereof,
(c) all raw materials and packaging materials provided to Davies pursuant to
Section 2.2(a) hereof, and (d) all Products (collectively, the "Cabot Assets").
All of the Cabot Assets shall be subject to removal in accordance with the terms
of this Agreement; provided, however, that all pipes, cables and wiring
installed in the walls, ceilings, roof, floors or subfloors of Davies' facility
and used in connection with the Cabot Assets shall remain property of Davies
whether supplied or installed by Cabot or Davies.
14.2 Protection of Rights. Davies shall do all such things and execute
all such documents (including without limitation, financing statements) as Cabot
deems necessary or desirable to enable Cabot to protect its title to and
preserve its rights in the Cabot Assets.
SECTION 15. REMEDIES
The relationship between Davies, Donn Davies or JoAnn Davies on the one
hand, and Cabot on the other hand, and which is reflected in this Agreement is
unique and has a value which may not be readily measured in monetary terms. Each
of Cabot, Davies, Donn Davies and JoAnn Davies agrees that in the event of a
violation by it of any of its undertakings hereunder, the non-breaching party
shall be entitled (a) to specific performance and injunctive and other equitable
relief; (b) to recover from the breaching party monetary damages caused by any
such violation; and (c) to any other rights and remedies that may be available
at law or in equity, which rights and remedies may be exercised, at the option
of the non-breaching party, concurrently with any other right or remedy provided
in this Agreement. The remedies provided herein shall not be exclusive and shall
be in addition to any other rights or remedies now or hereafter existing at law
or in equity, by statute or otherwise.
SECTION 16. RELATIONSHIP OF PARTIES
Davies and Cabot are each independent contractors. Nothing herein
contained shall be construed to place Davies and Cabot in the relationship of
principal and agent, master and servant, partners, joint venturers, and, except
as otherwise set forth in this Agreement, neither party shall have, expressly or
by implication, the power to represent themselves as having any authority to
make contracts in the name of or binding upon the other, or to obligate or bind
the other in any manner whatsoever.
SECTION 17. COMPLIANCE WITH LAWS
Davies warrants and agrees that during the Term it shall observe and
comply in all material respects with all applicable federal, state, local and
foreign laws, ordinances, statutes, standards, rules, regulations and orders,
including but not limited to those relating to safety and health and the
environment. Davies shall be responsible for obtaining all permits and licenses
from governmental authorities and from private parties that are required in
connection therewith. Davies shall be responsible for the handling, disposal and
release of packaging material waste generated by Davies during the term of this
Agreement. Cabot shall be responsible for the disposal of all off-quality
Product, except for that which is off-quality through no fault of Cabot. Cabot
and Davies shall make good faith efforts to jointly pursue a waste minimization
program in connection with the manufacturing of Products pursuant to this
Agreement.
9
<PAGE> 10
SECTION 18. CONSENTS; NOTICES
Unless otherwise set forth herein, whenever any consent or approval is
required of either party, it must be given to the other party in writing and
delivered in accordance with the provisions of this Section 18. Any notice of a
party shall be in writing and shall be given by (a) telecopier with original
posted first class mail, postage prepaid, within two (2) business days
thereafter; (b) certified or registered mail with an acknowledgment of receipt,
postage prepaid, return receipt requested; or (c) a reputable private courier,
such as Federal Express, which provides evidence of receipt as a part of its
delivery service, and addressed as follows:
If to Cabot: Cabot Corporation
500 Commons Drive
Aurora, IL 60504
Attn: Operations Director
Telecopier: (630) 585-9981
If to Davies: Davies-Imperial Coatings, Inc.
1275 State Street
P.O. Box 790
Hammond, IN 46325
Attn: Donn T. Davies
Telecopier: ___________
If to Donn T. Davies: Donn T. Davies
c/o Davies-Imperial Coatings, Inc.
1275 State Street
P.O. Box 790
Hammond, IN 46325
Telecopier: ___________
If to JoAnn Davies: JoAnn Davies
c/o Davies-Imperial Coatings, Inc.
1275 State Street
P.O. Box 790
Hammond, IN 46325
Telecopier: ___________
or to such other address as may be designated in writing by any of the parties
from time to time in accordance herewith, and shall be deemed delivered two (2)
business days following delivery by hand, by private courier or when so
telecopied and five (5) business days following proper dispatch by certified or
registered mail. A business day is any Monday through Friday on which first
class mail is delivered.
SECTION 19. ATTORNEYS' FEES
If any action or proceeding is brought to enforce or interpret any
provision of this Agreement then, in addition to any other relief to which the
prevailing party may be entitled, the prevailing party shall be entitled to
recover its reasonable costs and attorneys' fees.
10
<PAGE> 11
SECTION 20. GENERAL
20.1 Severability. If any provision of this Agreement shall be found to
be invalid or unenforceable, then such provision or provisions shall not
invalidate or in any way affect the enforceability of the remainder of this
Agreement and such provision or provisions shall be curtailed and limited to the
extent necessary to bring the Agreement within any legal requirement and the
parties shall negotiate in good faith with respect to an equitable modification
of the provision or application thereof held to be invalid.
20.2 Modification; Waivers. Except as expressly provided herein, this
Agreement may be modified or amended only with the written consent of each party
hereto. Neither party hereto shall be released from its obligations hereunder
without the written consent of the other party. The observance of any term of
this Agreement may be waived (either generally or in a particular instance and
either retroactively or prospectively) by the party entitled to enforce such
term, but any such waiver shall be effective only if in a writing signed by the
party against which such waiver is to be asserted. Except as otherwise
specifically provided herein, no delay on the part of either party hereto in
exercising any right, power or privilege hereunder shall operate as a waiver
thereof, nor shall any waiver on the part of either party hereto of any right,
power or privilege hereunder operate as a waiver of any other right, power or
privilege hereunder nor shall any single or partial exercise of any right, power
or privilege hereunder preclude any other or further exercise thereof or the
exercise of any other right, power or privilege hereunder.
20.3 Succession. This Agreement shall be binding upon and shall inure
to the benefit of the parties hereto and their respective successors and other
legal representatives and, to the extent that any assignment hereof is permitted
hereunder, their assignees.
20.4 Counterparts. This Agreement may be executed in counterparts. Each
counterpart, including a signature page executed by each of the parties hereto,
shall be an original counterpart of this Agreement, but all of such counterparts
together shall constitute one instrument.
20.5 Further Assurances. Each party agrees to provide any additional
documents and take any such further action as may be reasonably requested by the
other party in order to carry out the purpose and intent of this Agreement.
20.6 Entire Agreement. This Agreement contains the full and complete
undertaking and agreement among the parties hereto with respect to the within
subject matter, and supersedes all other agreements between Cabot on the one
hand, and Davies, Donn Davies, or JoAnn Davies on the other, whether written or
oral except any confidentiality agreements between the parties, which shall, to
the extent such agreements do not contradict the terms of this Agreement,
continue in effect.
20.7 Headings. The headings of the sections and other subdivisions of
this Agreement are for convenient reference only. They shall not be used in any
way to govern, limit, modify, construe this Agreement or any part or provision
thereof nor otherwise be given any legal effect.
20.8 Assignees and Third Parties. This Agreement may not be assigned by
either party without the prior written consent of the other party and any
attempted assignment without such consent shall be null and void; provided,
however, that Cabot may assign this Agreement to a subsidiary or affiliated
company.
20.9 Governing Law. This Agreement shall be governed by and construed
and enforced in accordance with the laws of the Commonwealth of Massachusetts,
without giving effect to principles of conflicts or choice of laws of
Massachusetts or of any other jurisdiction.
11
<PAGE> 12
20.10 Force Majeure. Each of the parties hereto shall be excused from
delays in performing or from failure to perform hereunder to the extent that
such delays or failures result from causes beyond the reasonable control of such
party; provided that, in order to be excused from delay or failure to perform,
such party must act diligently to remedy the cause of such delay or failure.
[remainder of page intentionally left blank]
12
<PAGE> 13
IN WITNESS WHEREOF, the parties hereto have set their hands to this
Agreement as a sealed instrument and have delivered this Agreement as of the day
and year first above written.
DAVIES-IMPERIAL COATINGS, INC.
By: /s/ Donn Davies
------------------------------------
Its: President
CABOT CORPORATION
By: /s/ Matthew Neville
------------------------------------
Its: Vice President and General Manager
Solely for purposes of
Sections 10.1, 11, 13.4,
15, 18, 19, 20.6 and 20.9:
/s/ Donn Davies
------------------------------------
Donn Davies
Solely for purposes of
Sections 10.1, 11, 13.4,
15, 18, 19, 20.6 and 20.9:
/s/ JoAnn Davies
------------------------------------
JoAnn Davies
13
<PAGE> 14
SCHEDULE A
Products, Materials Specifying Specifications, Formulae,
Processes, Quality Control, Maintenance
<TABLE>
<CAPTION>
PRODUCT FORMULA CONTROL PLAN SPECIFICATION DAVIES TEST METHODS
(REVISION DATE) EFFECTIVE DATE/ REVISION LEVEL) (SPECIFICATION NO./ (TEST METHOD NUMBER)
REVISION DATE)
<S> <C> <C> <C> <C>
Cab-0-Sperse(R) II 9/19/96 8-5-96, Rev A [ ] 101, 200, 300, 302
Cab-0-Sperse(R) SC-E 5/04/95 10-1-97, Rev A [ ] 101, 200, 300, 302
Cab-0-Sperse(R) SC-1 9/27/94 4-28-98, Rev B [ ] 101, 200, 300, 302
Cab-0-Sperse(R) SC-112 10/07/94 6-1-97, Rev A [ ] 101, 200, 300, 302
Cab-0-Sperse(R) SC-113 9/18/96 6-1-97, Rev A [ ] 101, 200, 300, 302
Cab-0-Sperse(R) SC-720 3/28/95 5-1-97, Rev A [ ] 101, 200, 300, 302
Cab-0-Sperse(R) 5010 7-10-98 5-1-97, Rev A [ ] 101, 300
Cab-0-Sperse(R) A105 5/04/95 10-1-97, Rev A [ ] 101, 200, 300, 302
Cab-0-Sperse(R) A205 7/5/94 8-5-96, Rev A [ ] 101, 200, 300, 302
Cab-0-Sperse(R) A1095 2/1/93 10-1-97, Rev A [ ] 101, 200, 300, 302
Cab-0-Sperse(R) A1695 7/5/93 10-1-97, Rev A [ ] 101, 200, 300, 302
Cab-0-Sperse(R) A2095 7/6/94 10-1-97, Rev A [ ] 101, 200, 300, 302
Cab-0-Sperse(R) A8875 7/16/93 10-1-97, Rev A [ ] 101, 200, 300, 302
Cab-0-Sperse(R) P1010 9/27/94 10-1-97, Rev A [ ] 101, 200, 300, 302
Cab-0-Sperse(R) P1685 11/18/93 10-1-97, Rev A [ ] 101, 200, 300, 302
Cab-0-Sperse(R) S109 5/16/96 10-1-97, Rev A [ ] 101, 200, 300, 302
Cab-0-Sperse(R) S2095 7/6/94 10-1-97, Rev A [ ] 101, 200, 300, 302
Cab-0-Sperse(R) S3295 7/6/94 10-1-97, Rev A [ ] 101, 200, 300, 302
Cab-0-Sperse(R) LT11X 8/23/96 10-1-97, Rev A [ ] 101, 200, 300, 302
Cab-0-Sperse(R) LT12X 8/23/96 10-1-97, Rev A [ ] 101, 200, 300, 302
Cab-0-Sperse(R) LT312 8/23/96 10-1-97, Rev A [ ] 101, 200, 300, 302
Cab-0-Sperse(R) LT322 9/18/96 10-1-97, Rev A [ ] 101, 200, 300, 302
Cab-0-Sperse(R) LT511 8/23/96 10-1-97, Rev A [ ] 101, 200, 300, 302
Semi-Sperse(R) 11 1/12/96 10-1-97, Rev A [ ] 101, 200, 300, 302
Semi-Sperse(R) 12 1/12/96 5-1-97, Rev A [ ] 101, 200, 300, 302
Semi-Sperse(R) 25 5/04/95 4-28-98, Rev B [ ] 101, 200, 300, 302, 600
Semi-Sperse(R) R225 12-June-98 8-5-96, Rev A [ ] 101, 200, 300, 302, 600
Semi-Sperse(R) 6025 5/4/95 4-28-98, Rev B [ ] 101, 200, 300, 302, 600
Semi-Sperse(R) DWB-100C 5/13/97 10-1-97, Rev A [ ] 101, 200, 300, 302
Semi-Sperse(R) KD-100C 7/11/97 5-1-97, Rev A [ ] 101, 200, 300, 302, 400,
(w/kathon) 600, 606
Semi-Sperse(R) W-A355(Base) 5/17/96 N/A [ ] 101, 200, 300, 302, 500
Semi-Sperse(R) W-A355/ 5/17/96 8-5-96, Rev A [ ] 101, 200, 300, 302, 500
W-A400
Semi-Sperse(R) W-A355 3/21/96 N/A [ ] 101, 200, 300, 302, 500
(High Solids)
Semi-Sperse(R) FE-10 5/23/96 8-5-96, Rev A [ ] 101, 200, 300, 302, 501
</TABLE>
<PAGE> 15
<TABLE>
<S> <C> <C> <C> <C>
Semi-Sperse(R) FE-400 7/02/96 5-1-97, Rev A [ ] 101, 200, 300, 302, 501
Fullgrip WB 4722 9/19/96 8-5-96, Rev A [ ] 101, 200, 300, 302
Fullgrip WB 4722 12/18/96 8-5-96, Rev A [ ] 101, 200, 300, 302
(dirty water)
Fullgrip WB 4728 9/19/96 8-5-96, Rev A [ ] 101, 200, 300, 302
</TABLE>
2
<PAGE> 16
SCHEDULE B
Prices
CONVERSIONS CHARGES:
<TABLE>
<CAPTION>
Price/Lb.,
F.O.B.
Hammond, IN
Product Weight per 55-gal. Drum
<S> <C> <C>
[ ] 516 $[ ]
[ ] 500 $[ ]
[ ] 491 $[ ]
[ ] 531 $[ ]
[ ] 505 $[ ]
[ ] 506 $[ ]
[ ] 492 $[ ]
[ ] 548 $[ ]
[ ] 509 $[ ]
[ ] 516 $[ ]
[ ] 506 $[ ]
[ ] 500 $[ ]
[ ] 499 $[ ]
[ ] 500 $[ ]
[ ] 500 $[ ]
[ ] 500 $[ ]
[ ] 500 $[ ]
[ ] 500 $[ ]
[ ] 548 $[ ]
[ ] 492 $[ ]
[ ] 495 $[ ]
[ ] 492 $[ ]
[ ] 613 $[ ]
[ ] 489 $[ ]
[ ] 493 $[ ]
[ ] 536 $[ ]
[ ] 536 $[ ]
</TABLE>
<PAGE> 17
<TABLE>
<S> <C> <C>
[ ] 531 $[ ]
[ ] 504 $[ ]
[ ] 489 $[ ]
[ ] 480 $[ ]
[ ] 480 $[ ]
[ ] 480 $[ ]
[ ] 480 $[ ]
[ ] 480 $[ ]
[ ] 516 $[ ]
[ ] 515 $[ ]
</TABLE>
MISCELLANEOUS CHARGES:
Monthly Storage $[ ]
Monthly Equipment Maintenance $[ ]
Sample preparation
25 or less $[ ]
over 25 $[ ]
Hazardous Material Labeling Charge $[ ]
Dangerous Goods Preparation $[ ]
Palletizing with 6-way bands $[ ]
Pallets for Bracing Intel Tote Loads $[ ]
Drum Condoms
single $[ ]
double $[ ]
Power Washing
Regular $[ ]
Wash and Insert Dip-Tubes $[ ]
2
<PAGE> 18
Aurora Delivery via Davies truck $[ ]
Recertify Totes and install certification
placard $[ ]
Install metal [ ] Placards on totes
$[ ]
Rebills $$[ ] per invoice
3
<PAGE> 19
SCHEDULE C
Asset List
Cabot Owned Equipment at Davies*
10/27/98
*The parties agree that this schedule is substantially accurate
as of October 27, 1998, but that greater detail, and any assets
inadvertently left off the list, will be added within a
reasonable time after execution of the agreement
DESCRIPTION QUANTITY
10,000 pound Cardinal Scale 1
500 pound scale 1
75 pound scale 1
[ ] 5
[ ] 5
[ ] 10
Clean filling room 2
36,000 BTU air conditioners 4
24,000 BTU air conditioners 2
200,000 BTU furnaces 2
York air handler 2
Stainless steel power washers 5
Brass power washer 1
[ ] 1
[ ] 1
[ ] 3
Single housing filter unit 8
Double housing filter units 5
[ ] 1
[ ] 1
[ ] 1
[ ] 1
[ ] 1
[ ] 3
[ ] 6
Bag dump/compactor units 4
RO equipment only (excludes instrumentation) 1
Mettler Toledo density meter 1
[ ] 1
Weber label printers 2
VWR lab oven 1
[ ] 1
[ ] 2
And lab balance 1
<PAGE> 1
Exhibit 10.13
[LOGO]
DATED 28TH MARCH 2000
LANDLORD: CABOT CARBON LIMITED
and
TENANT: CABOT MICROELECTRONICS
CORPORATION
SUB-SUB-UNDERLEASE
OF
LAND AT THE SOUTH SIDE OF CARDIFF ROAD, BARRY
Term: 10 years beginning on 28th March 2000
Initial Rent: pound sterling 37,788 per annum
<PAGE> 2
CONTENTS
PAGE
1. DEFINITIONS........................................................ 2
2. INTERPRETATION..................................................... 4
3. DEMISE............................................................. 5
4. THE TENANT'S COVENANTS............................................. 5
4.1 Rent............................................................ 5
4.2 Outgoings and Utilities......................................... 5
4.3 Repair.......................................................... 6
4.4 Permitted Use................................................... 6
4.5 Restrictions on Use............................................. 6
4.6 Alienation...................................................... 7
4.7 Alterations..................................................... 7
4.8 Notices......................................................... 7
4.9 Statutes........................................................ 8
4.10 Planning..................................................... 8
4.11 Landlord's Costs............................................. 8
4.12 Permit Landlord to Enter..................................... 9
4.13 To Insure.................................................... 9
4.14 Defective Premises Act 1972.................................. 10
4.15 Covenants Affecting the Reversion............................ 10
4.16 Common facilities............................................ 10
4.17 Protection of the Demised Premises and adjoining premises.... 10
4.18 Information.................................................. 11
4.19 Protection of Easements...................................... 11
4.20 Indemnities.................................................. 11
4.21 Reletting and Sale Boards.................................... 12
4.22 Not to vitiate insurance..................................... 12
4.23 Yield up..................................................... 13
4.24 Superior Lease............................................... 13
4.25 VAT.......................................................... 13
4.26 Plant Air Supply ............................................ 13
5. LANDLORD'S COVENANTS............................................... 14
5.1 Quiet Enjoyment................................................. 14
5.2 Insurance....................................................... 14
5.3 To Reinstate.................................................... 15
5.4 Headlease....................................................... 15
5.5 Management of the Property...................................... 13
5.6 Information..................................................... 14
6. PROVISOS........................................................... 16
6.1 Re-Entry........................................................ 16
6.2 Service of Notices.............................................. 17
6.3 Compensation.................................................... 18
2
<PAGE> 3
6.4 Use............................................................. 18
6.5 Release of the Landlord......................................... 15
6.6 Proviso for Abatement of Rent................................... 18
6.7 Neighbouring Property........................................... 19
6.8 Removal of Tenant's property.................................... 19
6.9 Disputes........................................................ 19
6.10 Easements.................................................... 20
6.11 Landlord's Option to Determine............................... 20
6.12 Expansion Right.............................................. 20
6.13 Jurisdiction................................................. 21
6.14 Landlord and Tenant Act 1954................................. 22
FIRST SCHEDULE........................................................... 23
(Particulars of the Demised Premises).................................... 23
SECOND SCHEDULE.......................................................... 25
(Matters to which the demise is subject)................................. 25
THIRD SCHEDULE........................................................... 26
(Rent Review)............................................................ 26
3
<PAGE> 4
THIS SUB-SUB-UNDERLEASE is made the 28th day of March 2000
BETWEEN:
(1) CABOT CARBON LIMITED a company registered in England under No. 462857
and whose registered office is at Stanlow Ellesmere Port Cheshire L65
4HT (the "LANDLORD");
(2) CABOT MICROELECTRONICS CORPORATION whose address is Cab O Sil Site,
Sully Moors Road, Sully, South Glamorgan, CF64 5RP (the " TENANT ").
WITNESSES that:
1. DEFINITIONS
1.1 In this Lease:
"THE BUILDING" means the building upon the Demised Premises housing the
dispersion plant and equipment;
"BUSINESS DAY" means a day (excluding Saturday and Sunday) on which
banks generally are open for business in London;
"CONDUITS" means all conducting media of whatever nature (including
without limitation sewers drains pipes galleys gutters ducts flues
watercourses channels subways wires and cables) including any tanks
meters sprinklers fixings louvres cowls and any other ancillary
apparatus attached thereto;
"THE CONTRACTUAL TERM" has the meaning given to it in Clause 3;
"THE DEMISED PREMISES" means the premises described in Part I of the
First Schedule;
"GROUP" is to be construed so that two bodies corporate shall be taken
to be members of a Group if and only if one is a subsidiary of the
other or both are subsidiaries of a third body corporate. A Company is
a subsidiary of another Company its "Holding Company" if the Holding
Company:
(a) holds the majority of the voting rights in the subsidiary or;
(b) is a member of the subsidiary and has the right to appoint or
remove a majority of its board of directors or;
(c) is a member of the subsidiary and controls alone pursuant to
an agreement with other shareholders or members a majority of
the voting rights in it or
(d) if the Holding Company is a subsidiary of a company which is
itself a subsidiary of that other company.
A company is a wholly owned subsidiary of another company if it has no members
except that
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other and that others wholly owned subsidiaries or persons acting on behalf of
that other or its wholly owned subsidiaries.
"THE HEADLEASE" means a sub-underlease dated 22 June 1995 made between
Morgan Grenfell & Co Ltd (1) and the Landlord (2) in respect of the
Property including the Demised Premises;
"THE INSURANCE RENT" means the cost to the Landlord from time to time
of insuring the Demised Premises;
"THE INSURED RISKS" means fire storm tempest flood lightning explosion
riot civil commotion and malicious damage acts of terrorism earthquake
impact aircraft (other than hostile aircraft) and (except in time of
war) articles dropped therefrom bursting and overflowing of water tanks
apparatus and pipes and property owners liability and such other risks
against which the Landlord may from time to time insure;
"THE LANDLORD" includes the person for the time being entitled to the
reversion immediately expectant on the determination of the Term;
"THIS LEASE" means this sub-sub-underlease;
"THE PLAN" means the plan attached to this Lease;
"THE PLANNING ACTS" means the Town and Country Planning Acts for the
time being in force;
"THE PRESCRIBED RATE" means four per cent above the base leading rate
from time to time of Lloyds TSB Bank Plc;
"THE PROPERTY" means the land and buildings shown edged blue on the
plan annexed hereto and more particularly described in the Headlease
"RENT" means the rent payable pursuant to Clause 3;
"THE SERVICES" means the services described in Parts 2, 3 and 4 of the
Fourth Schedule
"THE SERVICE CHARGE" has the meaning given to it in the Fourth Schedule
"SUPERIOR LANDLORD" means any person for the time being entitled to any
interest reversionary to the Headlease;
"THE TENANT" shall include the successors in title and personal
representatives of the Tenant;
"THE TERM" means the Contractual Term together with any continuation or
extension thereof whether statutory or otherwise or such shorter period
up to the date of any early determination of the Contractual Term;
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"TREATED PLANT" means the Landlord's plant and equipment in the area
shown hatched yellow on the Plan;
"UTILITIES" means water soil gas steam air electricity telephone radio
television telegraphic and other signals services and supplies of any
nature;
"VAT" means United Kingdom Value Added Tax
2. INTERPRETATION
In this Lease unless the context requires otherwise:
2.1 Where any party hereto consists of two or more persons any obligations
stated or implied to be made by or with any of them shall be deemed to
be made by or with them jointly and severally.
2.2 Any reference to Acts of Parliament generally or to any Act of
Parliament or to the Planning Acts includes a reference to the relevant
Act or Acts as amended ore replaced from time to time and to any
subordinate legislation order instrument plan regulation permission and
direction made or issued thereunder or deriving validity therefrom.
2.3 The headings shall not affect the interpretation of this Lease.
2.4 The singular includes the plural and vice versa and the masculine
includes the feminine and neuter and vice versa.
2.5 Any covenant by the Landlord or the Tenant not to do any act or thing
shall covenant by the Landlord or the Tenant not to do any act or thing
shall include an obligation not to permit such act or thing to be done.
2.6 References to a clause or schedule are to the relevant clause or
schedule in this Lease.
2.7 Any provision herein conferring on or reserving to the Landlord any
right shall be construed as conferring that right also to any Superior
Landlord and to any person authorised by the landlord or any Superior
Landlord.
2.8 References to the Demised Premises shall be read as references to the
whole and each and every part of the Demised Premises.
2.9 Except as otherwise herein provided expressions defined in the
Agreement have the same meanings in this Lease.
3. DEMISE
The landlord DEMISES to the Tenant the Demised Premises TO HOLD the
same unto the Tenant for a term of 10 YEARS beginning on and including
March 28 2000 ("the Contractual Term") TOGETHER WITH the rights set out
in Part II of the First Schedule SUBJECT TO the exceptions and
reservations in Part III of the First Schedule all easements rights
quasi-easements and privileges to which the Demised
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Premises are or may be subject and the provisions or matters contained
or referred to in the documents referred to in the Second Schedule
insofar as the same affect the Demised Premises and are capable of
being enforced.
YIELDING AND PAYING therefor during the Term the following rents:
3.1 the yearly rent of pound sterling 37,788 (subject to revision in
accordance with the Third Schedule) payable by equal quarterly
instalments in advance on the usual quarter days without any deduction
save as may be required by law;
3.2 by way of further rent payable on demand the Insurance Rent;
3.3 by way of further rent the Service Charge and all other sums payable by
the terms of this Lease;
all Rent and other payments shall be paid on the dates set out herein
or if any of those dates is not a Business Day on the immediately
succeeding Business Day.
4. THE TENANT'S COVENANTS
The Tenant HEREBY COVENANTS with the Landlord as follows:-
4.1 RENT
To pay the rents as aforesaid.
4.2 OUTGOINGS AND UTILITIES
4.2.1 To pay all outgoings (including without limitation all rates taxes
duties charges assessments and impositions whatsoever) payable now or
at any time during the Term in respect of the Demised Premises or the
ownership or occupation thereof except any tax payable by the Landlord
in respect of its ownership of, rental income from or any dealing with
its reversionary interest.
4.2.2 To pay to the suppliers and indemnify the Landlord against all charges
(together with any applicable VAT thereon) for Utilities used at the
Demised Premises;
4.2.3 If any outgoings or Utilities are payable in respect of the demised
premises in common with the Property or other premises the Tenant will
on demand pay to the Landlord a fair proportion (determined according
to use if appropriate) thereof to be determined by the Landlord's
surveyor (his decision shall be binding on the Tenant) and to be
recoverable as rent in arrears.
4.2.4 To pay to the Landlord on demand a sum equivalent to any actual loss of
rating relief (if any) suffered by the Landlord as a result of the
Tenant being allowed rating relief in respect of any period before the
end of the Term (however determined).
4.3 REPAIR
4.3.1 Consistent with past practice to keep the Demised Premises in a good
state of repair
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and condition
4.3.2 To put and keep in good repair and condition and when necessary replace
and cause to be inspected and overhauled by some competent person at
least once in every six months all landlord's fixtures and fittings and
all plant installed in or forming part of the Demised Premises from
time to time.
4.3.3 As often as maybe required in order to maintain the Demised Premises in
reasonable condition to decorate the Demised Premises in a good and
workmanlike manner with appropriate materials of good quality and in
any event to decorate during the last year of the term (howsoever
determined).
4.3.4 To effect all repairs under clauses 4.3.1 to 4.3.3 of which notice in
writing shall be served on the Tenant by the Landlord and for which the
Tenant is liable hereunder within three months after the date of
service or forthwith in the case of emergency.
4.3.5 If the Tenant fails to comply with any such notice the Landlord may
with or without workmen and appliances (but without prejudice to the
right of re-entry hereinafter contained) enter upon the Demised
Premises and make good the same at the cost of the Tenant which cost
shall be repaid by the Tenant to the Landlord on demand together with
all professional charges and other expenses incurred by the Landlord in
connection therewith together with interest thereon at the Prescribed
Rate from the date of payment by the Landlord to the date of payment by
the Tenant.
4.4 PERMITTED USE
To procure that the Demised Premises are not used otherwise than as a
CMP materials production plant or for such other use as the Landlord
shall approve (such approval not to be unreasonably withheld or
delayed).
4.5 RESTRICTIONS ON USE
To procure that the Demised Premises and any rights granted to the
Tenant hereunder are not used or exercised:
4.5.1 for any dangerous noxious offensive illegal or immoral purpose and not
to cause permit or suffer any waste or noxious substance or other
contamination upon or leaching from the Demised Premises;
4.5.2 in such a way as in the opinion of the Landlord causes or might cause
the annoyance nuisance or prejudice to the Landlord or the owners
occupiers or users of adjoining or neighbouring property or to the
public;
4.5.3 for residential purposes;
4.5.4 for any sale by auction or for any public meeting entertainment or
exhibition.
4.6 ALIENATION
4.6.1 Not to charge assign or underlet part only or the whole of the Demised
Premises
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except as permitted by this clause 4.6.
4.6.2 Not to part with or share possession or occupation of the whole or part
of the Demised Premises or any part thereof:
4.6.3 Notwithstanding the provisions of this clause but subject always to the
Landlord's right in clause 6.10 the Tenant may assign this lease or
sub-let the whole of the Demised Premises to any company which is a
wholly owned subsidiary of the Tenant
4.7 ALTERATIONS
4.7.1 Not to make any structural alterations or additions to the Demised
Premises which would have a material adverse effect on their value
except with the previous consent in writing of the Landlord which shall
not be unreasonably withheld or delayed nor to make any alterations
which would or would be likely to interfere with any equipment at the
Demised Premises which relates to the Landlord's Treated Plant. For the
avoidance of doubt the Tenant may install plant and equipment subject
to the Tenant removing the same when this Lease ends
4.7.2 If the Tenant has breached the foregoing provisions of this Clause and
fails to remedy any such breach within a reasonable time after
receiving written notice from the landlord requiring it to do so to
permit the Landlord with or without workmen and appliances to enter the
Demised Premises (but without prejudice to the right of re-entry
hereinafter contained) and to remove any alterations and additions and
execute such works as are necessary to restore the Demised Premises to
their former state at the cost of the Tenant which cost shall be repaid
by the Tenant to the Landlord on demand together with all proper and
reasonable professional charges and other expenses reasonably and
properly incurred by the Landlord in connection therewith and interest
thereon at the Prescribed Rate from the date of payment by the Landlord
to the date of payment by the Tenant.
4.8 NOTICES
To give full particulars to the Landlord of any notice direction or
order made given or issued to the Tenant by any local or public
authority as soon as reasonably practicable and if so required by the
Landlord to produce the same to the Landlord.
4.9 STATUTES
To comply with all present and future Acts of Parliament statutes and
to execute and to do at the expense of the Tenant all such works and
things whatever as may now or at any time during the Term be required
by any competent authority to be executed or done upon or in respect of
the Demised Premises whether by the owner or occupier thereof.
4.10 PLANNING
4.10.1 Not to apply for or implement any permission or give notice to any
authority of an intention to commence or carry out any Development (as
defined in the Planning
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Acts) or enter into any agreement with any Planning Authority without
the Landlords previous consent in writing (not to be unreasonably
withheld or delayed if the Landlord has already consented to the
Development in question).
4.10.2 To notify the Landlord before implementing any planning permission or
giving notice to any authority of an intention to commence or carry out
any Development on the Demised Premises.
4.10.3 Unless the Landlord shall otherwise direct to carry out in a good and
workmanlike manner with suitable materials of good quality before the
expiration or sooner determination of the Term (however the same maybe
determined) and works stipulated to be carried out to the Demised
Premises by a date subsequent to such expiration or sooner
determination as a condition of any planning permission which may have
been granted to the Tenant and implemented.
4.10.4 "Development" in this Clause has the meaning given to it by the
Planning Acts.
4.11 LANDLORD'S COSTS
To pay to the Landlord all actual and reasonable and proper expenses
including without limitation costs fees charges disbursements stamp
duty (other than stamp duty falling under the provisions of the
Agreement) and expenses (including without limitation those payable to
counsel solicitors surveyors and bailiffs) reasonably and properly
incurred by the Landlord in relation or incidental to:
4.11.1 Every application made by the Tenant for a consent or approval required
by the provisions of this Lease whether granted or properly refused or
proffered subject to any qualification or condition or whether the
application is withdrawn (but not where such consent or approval is
unreasonably withheld or proffered subject to unreasonable
qualifications or conditions in circumstances where this Lease provides
that the consent or approval is not to be unreasonably withheld or
delayed).
4.11.2 The preparation and service of a notice under Section 146 of the Law of
Property Act 1925 notwithstanding that forfeiture is avoided otherwise
than by relief granted by the Court.
4.11.3 The recovery or attempted recovery of arrears of rent or other sums due
from the Tenant.
4.11.4 Any steps taken in connection with the enforcement of or in remedying
any breach of any of the Tenant's obligations hereunder.
4.12 PERMIT LANDLORD TO ENTER
To permit the Landlord and or its agents to enter the whole or any part
of the Demised Premises at the Tenant's convenience during the daytime
after reasonable prior written notice (save in emergency) accompanied
by a member of the Tenant's staff for any reasonable period of time and
any reasonable purpose.
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4.13 TO INSURE
4.13.1 LIABILITY INSURANCE
Until the expiry of the Contractual Term the Tenant shall within seven
days of the date of this Lease effect (i) cover in respect of
environmental risks as held by the Tenant from time to time in
connection with the Demised Premises and (ii) comprehensive general
liability insurance including (but not limited to) public liability
liabilities arising pursuant to statute liability to third parties
employer's liability (insofar as both such insurances are available in
the market at normal premium rates) for such amount as is prudent in
all the circumstances with a reputable insurance company in the joint
names of the Landlord and the Tenant and the Superior Landlord as
required by the Headlease.
4.13.2 INFORMATION AS TO INSURANCES
(a) The Tenant shall procure that its insurance brokers or the
insurers as the case may be provide to the Landlord and its
insurance advisers annually a summary of the insurances taken
out or to be taken out in compliance with the Tenant's
obligations under the foregoing provisions of this Clause 4.13
setting out details of the insurers, the renewal date, the
sums insured and/or the limits of indemnity, the insured risks
and a summary of the principal exclusions or excesses.
(b) The Tenant shall notify the Landlord within 21 days after any
change in the insurer.
4.13.3 INSURANCE ADVISERS
The landlord may at his own cost from time to time appoint such
insurance advisers as it shall deem appropriate to report on the
insurance arrangements entered into by the Tenant in respect of the
Demised Premises or third party liabilities.
4.13.4 INSURANCE BY LANDLORD
If the Tenant shall fail to effect insurance in accordance with the
requirements of this Clause 4.13 at any time after notice from the
landlord requiring it so to do the Landlord may (but shall not be
obliged to) effect such insurance itself and the cost of so doing shall
be recoverable from the Tenant on demand together with interest thereon
at the Prescribed Rate from the date of payment by the Landlord to the
date of payment by the Tenant.
4.14 DEFECTIVE PREMISES ACT 1972
To indemnify the Landlord against any claim proceedings demands costs
and expenses incurred under or in connection with any claims made
pursuant to the Defective Premises Act 1972 and to erect and display at
the Demised Premises promptly all appropriate notices and warnings of
relevant defects (within the meaning of Section 4 of that Act) and
without prejudice to the foregoing to display such
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notices as the Landlord may from time to time reasonably require to be
displayed in relation thereto.
4.15 COVENANTS AFFECTING THE REVERSION
To perform and observe the provisions of the documents referred to in
the Second Schedule so far as the same are still subsisting and capable
taking effect and relate to the Demised Premises.
4.16 COMMON FACILITIES
To pay on demand to the Landlord a fair proportion according to use
(determined by the Landlord's surveyor) of the cost incurred or payable
by the Landlord in connection with carrying out any works (including
without limitation construction repair and improvement) to the roadways
and conduits on the Property or of any cost relating to anything used
or capable of use in common with the Demised Premises and the Property
or other premises save where included in the Service Charge and any
dispute between the parties under this clause shall be subject to
paragraph 4 of Part I of the Fourth Schedule
4.17 PROTECTION OF THE DEMISED PREMISES AND ADJOINING PREMISES
4.17.1 To keep clean and unobstructed all Conduits at any time during the Term
in or forming part of the Demised Premises and not to overload or use
such Conduits (or any other conduits in the Landlord's adjoining land)
for any purpose for which they were not constructed and not to place
any foreign substance therein
4.17.2 To keep the Demised Premises at a temperature sufficiently high to
prevent freezing of water in such Conduits
4.17.3 Not to interfere with or otherwise cause access to any such Conduits
and any other Conduits under or near the Demised Premises to be or
become more difficult than the same now is
4.17.4 Not to do anything on the Demised Premises which would remove support
from or endanger any adjoining land buildings or structures in any way
whatsoever
4.17.5 Not to overload or do anything likely to lead to the overloading of the
Demised Premises
4.18 INFORMATION
4.18.1 On making an application for any consent required under this Lease to
disclose to the Landlord such information as the Landlord may
reasonably require to enable it to deal with such application
4.18.2 To produce on demand such evidence as the Landlord may reasonably
require to
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satisfy itself that the Tenant's covenants in this Lease have been
complied with and full particulars of all derivative or occupational
rights existing in respect of the Demised Premises however remote or
inferior
4.18.3 To notify the Landlord in writing immediately of any defect in the
Demised Premises which might give rise to a duty imposed by common law
or statute on the Landlord in favour of the Tenant or any other person
4.19 PROTECTION OF EASEMENTS
4.19.1 Demised Premises
4.19.2 Not to permit any easement to be acquired or encroachment made against
or upon the Demised Premises and promptly to give notice to the
Landlord of any attempt to make or acquire the same and to take such
steps (whether by legal proceedings or otherwise) to prevent the same
from being acquired or made as the Landlord may reasonably require
4.19.3 Not to give any person any acknowledgement that the Tenant enjoys the
access of light or air to any of the windows or other apertures in the
Demised Premises by the consent of such person
4.19.4 Not to enter into any agreement with or offer any inducement to any
person for that person to abstain from obstructing such access of light
or air
4.19.5 To notify the Landlord immediately if any person does or threatens to
do anything to obstruct such access of light or air and to take such
steps as the Landlord reasonably requires in respect of such actual or
threatened obstruction
4.20 INDEMNITIES
To be responsible for and to keep the Landlord fully indemnified
against all damage damages losses costs expenses actions demands
proceedings claims and liabilities made against or suffered or incurred
by the Landlord arising directly or indirectly out of:
4.20.1 Any act omission or negligence of the Tenant its servants or agents or
any person (other than the Landlord or any person claiming by through
or under the Landlord) at the Demised Premises expressly or impliedly
with the Tenant's authority; or
4.20.2 Any breach or non-observance by the Tenant of the covenants conditions
or other provisions of this Lease or any of the matters to which this
demise is subject as the same relate to the Demised Premises
4.21 RELETTING AND SALE BOARDS
4.21.1 To permit the Landlord to fix and retain on the Demised Premises in
such place as the Landlord shall reasonably determine notice boards for
the sale of the Landlord's interest in the Demised Premises and in the
last six months of the Term for the
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reletting of the Demised Premises
4.21.2 Not to take down or obscure any such boards
4.21.3 To permit all persons authorised by the Landlord to view the Demised
Premises at all reasonable times by prior appointment
4.22 NOT TO VITIATE INSURANCE
4.22.1 Not to do bring or keep at the Demised Premises any thing which is or
may become dangerous or offensive provided that this sub-clause shall
not prevent the Tenant from having at the Demised Premises any thing
which the Tenant requires for the carrying on at the Demised Premises
the use permitted by clause 4.4 subject to obtaining all necessary
consents from any relevant authority
4.22.2 Not to do anything to cause the insurance of the Demised Premises or
any adjoining or neighbouring property to become void voidable or the
premium to be increased
4.22.3 To comply with all recommendations of the insurers made under any such
insurance and the appropriate fire authority
4.22.4 To notify the Landlord in writing immediately if the Demised Premises
are destroyed or damaged by any Insured Risk
4.22.5 Not to effect any separate insurance of the Demised Premises against
loss or damage by any of the Insured Risks and to hold any moneys
received under any policy maintained in breach of this paragraph on
trust for the Landlord
4.22.6 In the event of the Demised Premises or any adjoining or neighbouring
property of the Landlord or any part thereof being destroyed or damaged
by any Insured Risk and the moneys under any insurance against the same
effected thereon by the Landlord being wholly or partially
irrecoverable by reason solely or in part of any act or default of the
Tenant or any person at the Demised Premises with the express or
implied authority of the Tenant or the Tenant's servants or agents
excluding then in every such case the Tenant will forthwith on demand
pay to the Landlord the whole or (as the case may require) the
irrecoverable proportion of the cost (including professional and other
fees) of completely making good such destruction or damage to the
Landlord's satisfaction
4.23 YIELD UP
At the expiration or sooner determination of the Term to yield up the
Demised Premises together with (subject to clause 6.12) all fixtures
and in good condition in accordance with the terms of this Lease and to
remove all signs erected by the Tenant and to the extent required by
the Landlord any alterations or additions made during the term and all
chattels and to immediately make good all damage caused by such removal
and to give up all keys to the Demised Premises to the Landlord
4.24 SUPERIOR LEASE
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4.24.1 To observe and perform the obligations of the Lessee contained in the
Headlease and any lease superior to it insofar as they relate to the
Demised Premises and are consistent with the terms of this Lease (but
not those expressly assumed by the Landlord in this Lease) and to
indemnify the Landlord (other than through its own acts) against all
losses arising directly or indirectly from any breach.
4.24.2 Not to omit or allow anything which might cause the Landlord to be in
breach of the Headlease or which if done, omitted or allowed by the
Landlord might be a breach of the covenants on the part of the Lessee
or the conditions contained in this Lease.
4.24.3 To permit any superior landlord or any persons authorised by any
superior landlord to enter the Demised Premises for the purposes
specified and upon the terms contained in the Headlease or any lease
superior to it as if the provisions in those documents dealing with the
Lessor's access to the Demised Premises were incorporated into this
Lease.
4.25 VAT
4.25.1 To pay to the Landlord any VAT chargeable in respect of any supplies
made by the Landlord to the Tenant hereunder
4.25.2 Where the Tenant is liable hereunder to reimburse the Landlord in
respect of any costs incurred by the Landlord the Tenant shall also
reimburse any VAT on such costs save to the extent that the VAT is
recoverable by the Landlord from H.M. Customs & Excise
4.25.3 Where such reimbursement shall be regarded by H.M. Customs & Excise as
consideration for supplies by the Landlord to the Tenant the Tenant
shall pay to the Landlord any VAT chargeable by the Landlord on any
such supplies
4.25.4 Any rent or other consideration payable in respect of any supply or
supplies by the Landlord to the Tenant shall be deemed to be exclusive
of VAT which shall be added where appropriate to such rent or other
consideration at the appropriate rate at the date of payment
4.26 PLANT AIR SUPPLY
Without prejudice to the generality of the obligation contained in
clause 4.3.2 to maintain in good working order the compressor, filter
and air receiver forming the Landlord's plant air supply and to ensure
at all times the uninterrupted supply of plant air to the buildings on
the part of the Property retained by the Landlord free of charge.
5. LANDLORD'S COVENANTS
The Landlord HEREBY COVENANTS with the Tenant as follows:-
5.1 QUIET ENJOYMENT
That the Tenant paying the Rent hereby reserved and performing and
observing its
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obligations hereunder may peaceably hold and enjoy the Demised Premises
during the Term without any interruption by the landlord or any person
lawfully claiming through under or in trust for it.
5.2 INSURANCE
5.2.1 To keep the Demised Premises insured against such of the Insured Risks
as are reasonably insurable in a sum which in the Landlord's opinion
represents the full reinstatement value thereof (including architects'
and surveyors' fees and demolition and site clearance charges) and
three years' loss of rent and any likely increases in rent during the
period covered by the insurance
5.2.2 To make all payments for the above purposes as soon as the same shall
respectively become payable and to provide the Tenant on request with a
copy or with particulars of such insurance policy
5.2.3 The Landlord may insure the Demised Premises in accordance with
paragraph 5.2.1 above together with other premises and the Insurance
Rent shall then be a fair proportion of the premium to be conclusively
determined by the Landlord's surveyor
5.2.4 Not to do or omit to do anything on the Property which would cause the
insurance of the Demised Premises to be void
5.3 TO REINSTATE
5.3.1 In the event of the Demised Premises being destroyed or damaged by any
Insured Risk then (subject to clause 6.5) to use all reasonable
endeavours to lay out any moneys received under the said policy of
insurance (except payments in respect of loss of rent which shall
belong to the Landlord absolutely) to reinstate the Demised Premises or
such part of it as shall have been so destroyed or damaged
5.3.2 The Landlord shall be under no obligation to reinstate the Demised
Premises in the form in which they existed before the damage or
destruction in question so long as the Demised Premises are equally
commodious and suitable for the use permitted by clause 4.4
5.3.3 In case it shall be impossible or impracticable to reinstate in
accordance with paragraph 5.3.1 above any moneys received under the
said policy of insurance (except payments in respect of loss of rent
which shall belong to the Landlord absolutely) shall be divided between
the Landlord and the Tenant according to the value at the date of the
damage or destruction of their respective interests in the Demised
Premises (to be determined in default of agreement by a single
arbitrator to be appointed by the President on the application of
either party)
5.4 HEADLEASE
5.4.1 To pay the rent and all other payments payable under the Headlease and
to perform so far as the Tenant is not liable for such performance
under the terms of this Lease the covenants and conditions on the part
of the lessee contained in the Headlease
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5.4.2 At the request and cost of the Tenant to use reasonable endeavours to
enforce the covenants on the part of the Superior Landlord contained in
the Headlease
5.4.3 Where the consent of the Superior Landlord is needed under the
provisions of this Lease to use reasonable endeavours at the request
and cost of the Tenant to obtain such consent (unless the Landlord's
consent is also required and is reasonably withheld)
PROVIDED THAT if any such request is made by the Tenant for the
Landlord to use reasonable endeavours to enforce the Superior
Landlord's obligations or obtain the Superior Landlord's consent the
Tenant shall as a condition precedent to the Landlord complying with
such request pay to the Landlord such sum as security for the
Landlord's costs of complying with the request as the Landlord shall
reasonably require
5.5 MANAGEMENT OF THE PROPERTY
Subject to the Tenant paying the rent the Insurance rent and the
Service Charge and complying with its obligations under this Lease the
Landlord shall throughout the Term
5.5.1 perform the Services in Parts 2 and 3 of the Fourth Schedule provided
that the Landlord shall not be liable to the Tenant in respect of:-
(a) Any failure or interruption in the provision of any of the
Services by reason of necessary repair replacement maintenance
of or the damage or destruction of any part or the whole of
the Property or any thing therein or forming part thereof or
by reason of mechanical or other defect or breakdown or frost
or other inclement conditions or shortage of materials
utilities or labour or any other cause whatsoever not
reasonably within the Landlord's control or where it becomes
impossible or impracticable to provide such services.
(b) Any act omission or negligence of any person undertaking the
Services or any of them save any act or omission of the
Landlord
(c) Any loss or damage to the Tenant caused as a result of any
works of construction repair or otherwise carried out on the
Property save any such works carried out by the Landlord
Provided that the Landlord shall not withdraw any of the Services in Parts 2 and
3 of the Fourth Schedule on ground solely of cost unless the Landlord first
consults with the Tenant with regard to the same and the Tenant refuses to
provide reasonable security for such cost prior to the Landlord incurring the
same.
5.5.2 At its discretion provide the Services in Part 4 of the Fourth
Schedule.
5.6 INFORMATION
5.6.4 To give full particulars to the Tenant of any notice direction or order
made given or
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issued to the Landlord in respect of the use and occupation or the
Tenant's interest in the Demised Premises by any local or public
authority as soon as reasonably practicable
5.6.5 If the Landlord is given notice by any utility company of any proposed
interruption of any of the Utilities serving the Demised Premises the
Landlord will give full particulars thereof to the Tenant as soon as
reasonably practicable
6. PROVISOS
6.1 RE-ENTRY
6.1.1 If any of the following events occur, namely:-
(a) if any of the Rent or other monies payable hereunder by the
Tenant or any part thereof shall be unpaid for fourteen days
after the Landlord has made a demand in writing requiring
payment of such Rent or other monies; or
(b) if there shall be any breach of any other covenant or
obligation on the part of the Tenant contained herein which
breach is not remedied (if capable of remedy) within thirty
days (or such longer period as is reasonable in the
circumstances) after the Landlord has notified the Tenant of
the breach; or
(c) if the Tenant takes any corporate action or other steps are
taken or legal proceedings started or renewed after a stay
(which proceedings are not vexatious or frivolous and not
brought without due cause) for its winding-up, dissolution or
re-organisation except for the purposes of reconstruction,
amalgamation or merger whilst solvent; or
(d) if the Tenant convenes a meeting of or proposes to enter into
any arrangement or composition with or assignment for the
benefit of all or any class of its creditors; or
(e) if an application is made or any other steps taken for the
appointment of an administrator or a liquidator or a similar
or analogous officer of the Tenant; or
(f) if an encumbrancer takes possession or a trustee, receiver,
administrative receiver or other similar officer is appointed
in respect of the whole or any material part of the
undertaking or assets of the Tenant.
then and in any such case and at any time thereafter it shall be lawful
for the Landlord or any person duly authorised by the Landlord in its
behalf to re-enter repossess and enjoy the Demised Premises or any part
thereof in the name of the whole and without prejudice to any right of
action or remedy of the Landlord in respect of any antecedent breach of
any of the covenants by the Tenant.
6.2 SERVICE OF NOTICES
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6.2.1 Each communication to be made hereunder shall be in English and shall
unless otherwise stated be made in writing but unless otherwise stated
may be made by telex letter or telefax.
6.2.2 Subject to 6.15.3 any communication or document to be made or delivered
by one person to another pursuant to this Lease shall be made or
delivered to that person at the address telex or telefax number
specified below (or to such other address telex or telefax number as
notified by that person from time to time to each of the other parties
hereto) and shall (subject to sub-clause (c)) be deemed to have been
made or delivered when such communication or document has been
despatched and the appropriate answerback received (in the case of any
communication made by telex) or (in the case of any communication made
by letter) when left at that address or as the case may be two business
days after being deposited in the post first class postage prepaid in
an envelope addressed to it at that address (four business days if
posted airmail from or to the United States of America) or in the case
of telefax upon transmission provided that confirmation of receipt is
received from the addressee
(i) CABOT CARBON
Address: Lees Lane, Stanlow, Ellesmere Port, South Wirral L65 4HT
Telefax No: 0151 356 0712
Attention: Secretary
(ii) CABOT MICROELECTRONICS CORPORATION
Address: 870 North Commons Drive, Aurora, Illinois 60504
Telefax No:
Attention: Vice President of Operations
6.2.3 Any communication or document which in accordance with sub-clause 6.2.2
of this clause is made or delivered outside working hours will be
deemed to have been made or delivered at the commencement of the next
period of working hours.
6.3 COMPENSATION
Subject to the provisions of any Act of Parliament to the contrary
neither the Tenant nor any underlessee shall be entitled on quitting
the Demised Premises to any compensation (including without limitation
under Section 37 of the Landlord and Tenant Act 1954).
6.4 USE
No representation or warranty is made or given by the Landlord that the
Demised Premises may lawfully be used (whether under the Planning Acts
or otherwise) for the use permitted hereunder.
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<PAGE> 20
6.5 PROVISO FOR ABATEMENT OF RENT AND CONDEMNATION TERMINATION
6.5.1 If the Demised Premises are so damaged or destroyed by an Insured Risk
as to become unfit for occupation in whole or in part (and the sum
insured is not wholly or partly irrecoverable by reason of any act or
omission of the Tenant or any person (other than the Landlord and any
person claiming by through or under the Landlord) in the Demised
Premises expressly or impliedly with the Tenant's authority or the
Tenant's servants or agents) then the rent or a fair proportion of it
shall be suspended until the expiry of three years after the date of
the damage or destruction or (if earlier) the date on which the Demised
Premises are again fit for occupation and use and in the event of such
damage or destruction the Landlord shall have 90 days in which to elect
whether or not to reinstate the Demised Premises. In the event that the
Landlord makes an election not to reinstate the Demised Premises then
either the Landlord or the Tenant may determine this Lease upon giving
to the other not less than one month's prior notice in writing. In the
event that the Landlord does not elect not to reinstate but
nevertheless the Landlord fails to complete reinstatement works within
12 months of the date of such damage or destruction then the Tenant
shall be entitled during the month following the expiry of 12 months of
the date of such damage or destruction serve upon the Landlord one
month's notice in writing to determine the Lease. Upon the
determination of the Lease under the provisions of this clause this
Lease shall determine absolutely but without prejudice to any
antecedent right of either party or any antecedent breach of the terms
of this Lease.
6.5.2 Paragraph 6.5.1 above shall not apply to the Insurance Rent or the
Service Charge to the extent that insurance is effected or services are
provided.
6.5.3 Any dispute as to the proportion aforesaid shall be determined by a
single arbitrator to be appointed in default of agreement by the
President on the application of either party
6.6 NEIGHBOURING PROPERTY
The Landlord shall have power at all times to do or permit to be done
anything it may think fit with (and notwithstanding anything to the
contrary herein expressed or implied the Tenant shall not be entitled
to any rights which would restrict or interfere with the free user of)
any adjoining or neighbouring land (including any part of the Property
for building or any other purpose
6.7 REMOVAL OF TENANT'S PROPERTY
If at such time as the Tenant has vacated the Demised Premises after
the determination of the Term (however determined) any property of the
Tenant shall remain in the Demised Premises and the Tenant shall fail
to remove the same within thirty days after being served with a notice
by the Landlord requesting the Tenant to do so then the Landlord may as
the agent of the Tenant (and the Landlord is hereby appointed by the
Tenant to act in that behalf) sell such property and shall then hold
the proceeds of sale (after deducting the costs and expenses of removal
storage and
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sale reasonably and properly incurred by it and any sums due to it by
the Tenant) to the order of the Tenant provided that the Tenant shall
indemnify the Landlord against any liability incurred by it to any
third party whose property shall have been sold by the Landlord
6.8 DISPUTES
In case any dispute shall during the Term arise between the Tenant and
the tenants and occupiers of any adjoining or neighbouring property
belonging to the Landlord relating to the Conduits serving the Demised
Premises or any such adjoining or neighbouring property or any fence
roadway or other thing used in common with the Demised Premises and any
such property the same shall from time to time be settled and
determined by the Landlord which determination shall be final and
binding and the costs to the Landlord shall be borne equally amongst
the parties in dispute
6.9 EASEMENTS
The Tenant shall not be entitled to any rights not expressly conferred
by this Lease and Section 62 of the Law of Property Act 1925 shall not
apply
6.10 LANDLORD'S OPTION TO DETERMINE
The Landlord shall be entitled to determine this Lease if any single
person or company (or together members of a company in the same Group
shall acquire more than 25% of the shares in the Tenant subsequent to
the Landlord (or together members in the same Group as the Landlord)
ceasing to maintain any ownership of shares in the Tenant and following
which at any time thereafter the Landlord may serve not less than one
hundred and twenty days notice in writing upon the Tenant and upon
expiry of any such notice this lease shall determine but without
prejudice to any antecedent liability of either Landlord or Tenant.
6.11 EXPANSION RIGHT
The Landlord hereby grants to the Tenant the continuing right and
option to expand the Demised Premises to include either or both of the
expansion area shown hatched yellow on the Plan and comprising
approximately 454 square metres and/or the expansion area hatched green
on the plan and comprising approximately 634 square metres. The option
is granted on the following terms:
6.11.1 The option is exerciseable upon the Tenant serving not less than six
months notice in writing upon the Landlord specifying which expansion
area the Tenant requires but without prejudice to the Tenant's right to
serve a notice also in respect of the other expansion area (if not
already served)
6.11.2 The exercise of the option with regard to the area hatched yellow is
conditional upon the Landlord and Tenant agreeing an alternative
location at the Property for relocating the Landlord's Treated Plant
and the Tenant procuring all statutory and other consents which may be
required for the relocation of the Treated Plant and upon the Tenant
either undertaking the relocation of the Treated Plant or (at the
election of the
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Landlord) reimbursing to the Landlord all actual and reasonable costs
and expenses incurred by the Landlord in connection with such
relocation including without limitation all costs of re-routing
services and utilities.
6.11.3 Upon the date specified in the Tenant's notice the landlord and the
Tenant will enter into a deed (the "SUPPLEMENTAL DEED") supplemental to
this Lease amending the definition of the Demised Premises to include
the relevant expansion area and increasing the rental for the Demised
Premises so that in addition to the rental payable immediately prior to
the Supplemental Deed the rent will increase by an amount which
represents a rental per square foot for the expansion area which is
equivalent to the rental per square foot for the remainder of the
Demised Premises.
6.11.4 Upon completion of the Supplemental Deed the Tenant shall also pay an
apportioned sum representing a pro-rata increase based upon square
footage of the expansion area in respect of any other costs payable by
the Tenant under this Lease and all other terms of this Lease shall
apply to the expansion area.
6.12 TENANT'S PLANT AND EQUIPMENT
It is agreed that the fumed metal oxide dispersions plant and equipment
within the Building and the Demised Premises and whether in existence
at the date of this Lease or installed by or at the cost of the Tenant
after the date of this Lease are as the date of this Lease and at all
times hereafter chattels in the ownership of the Tenant.
6.13 CO-OPERATION
The parties will co-operate with each other in good faith with regard
to the shared use of the instrument room at the Demised Premises and so
as not to interfere with each other's use of the instrument room or the
carrying on of each other's business.
6.14 CONFIDENTIALITY
Each of the Landlord and the Tenant agree to keep confidential and not
disclose, and shall cause their respective Group Members to keep
confidential and not disclose, to any party or use for any purpose
(other than the performance of this Lease), any proprietary or other
confidential information of the other party which is received pursuant
to this Lease ("Confidential Information"). Confidential Information
shall be subject to the restrictions of this clause only if it is
marked as confidential or proprietary or, if not disclosed in tangible
form, the disclosing party notifies the recipient of its confidential
or proprietary nature prior to its disclosure. For purposes of this
Clause, Confidential Information of a party does not include, and a
party and a party's Group Members will have no obligations under this
clause with respect to, any information of the other party or any Group
Members of the other party (the other party and Group Members of the
other party being referred to as the "receiving party") which:
6.14.1 is already known to the receiving party from a source other than the
disclosing party as evidenced by competent proof thereof; or
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6.14.2 is or becomes publicly known through no wrongful act of the receiving
party (in which event the receiving party's obligations under this
clause in respect thereto shall terminate on the date such information
enters the public domain); or
6.14.3 is rightfully received by the receiving party from a third party
without violation of any obligations of confidentiality owed by the
third party to the disclosing party; or
6.14.4 is disclosed by the disclosing party to a third party without
restrictions on the third party's right to use or disclose such
information; or
6.14.5 is independently developed by employees or consultants of the receiving
party without use of or reference to the disclosing party's
Confidential Information; or
6.14.6 is approved for release by written authorisation of the disclosing
party
6.15 JURISDICTION
6.15.1 This Lease shall be governed by English law
6.15.2 The parties submit to the non-exclusive jurisdiction of the English
courts
6.15.3 The Tenant confirms that any proceedings in the English Courts will be
validly served if served upon Cabot Microelectronics Corporation at Cab
o Sil Site Sully Moors Road, Sully, South Glamorgan, CF64 5RP and
marked for the attention of Clive Jenkins.
6.16 LANDLORD AND TENANT ACT 1954
Having been authorised to do so by an Order of the Mayors & City of
London County Court dated 28th March 2000 the parties hereto agree that
the Landlord and Tenant Act 1954 sections 24 to 28 inclusive shall not
apply to this Lease
IN WITNESS whereof this Lease is executed as a deed and on the day and year
first before written and it has been delivered
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<PAGE> 24
FIRST SCHEDULE
(PARTICULARS OF THE DEMISED PREMISES)
PART I
ALL THAT Leasehold Property known as land on the south side of Cardiff Road
Barry shown edged red on the attached plan together with all buildings now or
hereafter erected or in the course of erection thereon and all conduits
exclusively serving the same so far as the Landlord is able to demise such
together with all Landlord's fixtures and fittings from time to time in and
about the same and all additions and alterations to such premises fixtures and
fittings carried out during the Term
PART II
(RIGHTS GRANTED)
There is granted to the Tenant the following rights (insofar as the Landlord is
able to grant the same).
1. The right for the Tenant and all persons authorised by it (in common
with all other persons entitled thereto) for the purposes of obtaining
access to and egress from the Demised Premises to pass and repass at
all times with or without vehicles over and along the road coloured
brown on the Plan subject to compliance with the Landlord's security
and access arrangements.
2. The free and uninterrupted passage of Utilities from and to any part of
the Demised Premises by and through all Conduits which are now or may
within the Perpetuity Period during the Term be in or upon any
adjoining or neighbouring part of the Property.
3. The right to support as now exists for the Demised Premises from any
adjoining premises and
4. The right subject to space being available from time to time to park up
to twelve private motor vehicles in the car park shown hatched [pink]
on the Plan.
PART III
(EXCEPTIONS AND RESERVATIONS)
DEMISED PREMISES
There is reserved to the Landlord its servants and agents and all other persons
authorised by the landlord the following:
1. The right after reasonable prior written notice (save in emergency) and
at all reasonable times to enter the Demised Premises with or without
workmen for
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the purpose of carrying out any works (whether of construction
installation connection repair or otherwise) of or in respect of any
property adjoining or neighbouring the Demised Premises or any Conduits
the persons so entering to act in a reasonable manner and to make good
any damage to the Demised Premises resulting from the exercise of such
rights
2. The free and uninterrupted passage of Utilities from and to other parts
of the Property or any other adjoining or neighbouring property of the
Landlord by and through all Conduits which are now or may within the
Perpetuity Period be in under or over the Demised Premises
3. The right of support as now exists for the remainder of the Property
from the Demised Premises
4. The right to pass and repass at all times with or without vehicles over
and along the area coloured yellow on the Plan.
5. The unrestricted right at all times to access and maintain all
facilities servicing the Landlord's Treated Plant including the
instrument panels in the instrument room, feed lines through the batch
tank enclosure, feed silo, transfer pump, instruments, piping cabling
and conduits.
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SECOND SCHEDULE
(MATTERS TO WHICH THE DEMISE IS SUBJECT)
Matters referred to in the Property and Charges Registers of title number
WA547039 at H M Land Registry including any rights appertaining to the water
main mentioned in the Deed of Grant dated 4th May 1990 between Cabot Carbon
Limited (1) and ICI Chemicals and Polymers Limited (2) notwithstanding any
variation of the route of the water main therein mentioned.
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THIRD SCHEDULE
(RENT REVIEW)
1. In this Schedule the following expressions have the following meanings:
"REVIEW DATE" means the fifth anniversary of the beginning of
the term
"REVIEW PERIOD" means the period from the Review Date to the
expiry of the term.
"THE CURRENT RENT" means the rent payable by the Tenant immediately
before the beginning of the Review Period in
question
"RACK RENTAL VALUE" means the rent at which the Demised Premises
might be expected to be let as a whole in the
open market without taking a premium at the
beginning of the Review Period in question by a
willing landlord to a willing tenant for a term
equal to the residue of the term of this Lease
(or [10 years] whichever is the longer) with
vacant possession at the commencement of the term
and upon the same terms (other than as to the
amount of the rent and as hereinafter provided)
as this Lease and on the assumption if not a fact
that:
(i) the Tenant has observed and
performed all its covenants
(ii) the demised premises are fit for
immediate use and occupation
(iii) in case the demised premises have
been destroyed or damaged they have
been fully reinstated
(iv) there are no restrictions on
alienation of the whole or any part
of the Demised Premises on the part
of the Tenant
but disregarding:
(i) the fact that the Tenant or its
undertenants have been in
occupation of the demised premises
(ii) any goodwill attached to the
demised premises by reason of the
carrying on there of the business
of the Tenant its undertenants or
their predecessors in their
respective businesses
(iii) any works carried out whether
before or during the term by the
Tenant or its undertenants.
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2. The rent for the Review Period shall be the Current Rent or the Rack
Rental Value whichever is the higher.
3. The Landlord may serve upon the Tenant not earlier than three months
before the Review Date notice seeking to agree the rent with effect
from Review Date for the Review Period.
4. The parties may agree the Rack Rental Value for the Review Period at
any time after the date which is three months before the Review Date.
5. The Rack Rental Value shall be determined in default of agreement by
the Rent Review Date or such later date as the Landlord and Tenant
agree by a surveyor to be appointed in default of agreement by the
President of the Royal Institution of Chartered Surveyors upon the
application of either party who shall act as an arbitrator in
accordance with the Arbitration Acts 1950-1996 and whose costs shall be
in his award.
6. Upon the Rack Rental Value being agreed or determined as aforesaid a
memorandum of the rent then payable shall at the expense of the Tenant
be prepared by the Landlord's solicitors and signed by a duly
authorised officer on behalf of the Landlord and the Tenant.
7. In the event of the Rack Rental Value not being agreed or determined as
aforesaid on or before the relevant Review Date then in respect of the
period of time (hereinafter called "the said interval") beginning with
the relevant Review Date and ending on the quarter day immediately
following the date of such agreement or determination the Tenant shall
make payments on account in manner hereinbefore provided at the rate of
the Current Rent and at the expiration of the said interval there shall
be due as a debt payable by the Tenant to the Landlord forthwith on
demand a sum of money equal to the amount (if any) where by the Rack
Rental Value so agreed or determined shall exceed the Current Rent duly
apportioned on a daily basis in respect of the said interval such duly
apportioned sum shall bear interest calculated on a day-to-day basis at
four per cent below the Prescribed Rate from the relevant Review Date
until the date of actual payment.
8. If at any time by reason of any enactment (which expression shall
include any Act or Parliament now or hereafter in force and any
instrument regulation or order made thereunder or deriving validity
therefore) or for any other reason whatsoever the Landlord shall not be
entitled or not be able either in whole or in part:-
8.1 to increase the rent payable hereunder in accordance with the terms of
this Lease; or
8.2 to recover such increase from the Tenant.
then the Landlord shall be entitled at any time by notice in writing to the
Tenant to require that for all the purposes of this Lease the date on which such
disentitlement or disability shall cease shall be deemed to be a Review Date.
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<PAGE> 29
Exhibit 10.13
THE FOURTH SCHEDULE
PART I
(SERVICE CHARGE)
1. In this Schedule the following expressions have the following
meanings:-
1.1 "the Service Costs" means the costs referred to in paragraph 2 below
1.2 "the Specified Proportion" means as indicated (where appropriate and
without prejudice to paragraph 2 below) in Parts 3 and 4 of this
Schedule either all metered charges and/or or a fair proportion to be
based upon use (if appropriate) of any other Service Costs to be
determined by the Landlord's surveyor whose decision shall be final and
binding on the Tenant and which may differ from one cost to another and
which may be the whole or part of any such cost
1.3 "the Service Charge" means the Specified Proportion of the Service
Costs
2. The costs to be included in the Service Costs are insofar as such
matters are not expressly otherwise provided for in this Lease the
reasonable and proper costs of and incidental to the matters set out in
Parts 3 and 4 of this Schedule together with interest on monies
borrowed by the Landlord (or other expenditure paid or incurred in
connection with such loan) for the purpose of paying any such costs as
aforesaid and any VAT incurred by the Landlord in respect of the
Services set out in Parts 3 and 4
3. The Tenant shall pay the Service Charge during the Term making payment
in respect of each and any service costs within thirty days of demand
being made by the Landlord in respect of the same.
4. Any dispute arising out of the provisions of this clause shall be
referred to the decision of a single arbitrator to be agreed between
the parties hereto or in default of agreement to be appointed on the
application of either party by the President
26
<PAGE> 30
Exhibit 10.13
PART 2
(THE SERVICES WHICH THE LANDLORD MUST PROVIDE WITHOUT ADDITIONAL CHARGE)
1. The provision and maintenance of the following utilities:
1.1 The provision and maintenance of the existing on site radio system with
channel three reserved for the Tenant.
1.2 The provision of 12 car parking spaces in accordance with Part 2 of the
First Schedule.
2. Toilet and washroom facilities upon the part of the Property retained
by the Landlord to a standard and degree as existing at the date of
this Lease
PART 3
(SERVICES WHICH THE LANDLORD MUST PROVIDE SUBJECT TO ADDITIONAL CHARGE)
1 The following utilities:
1.1 11 kV electricity supply from COS sub-station to MMD subject to monthly
metered charge equivalent to cost incurred by Landlord.
1.2 Provision and maintenance of instrument air supply subject (at the
landlords discretion) to payment of metered charges equivalent to cost
incurred by the Landlord.
1.3 Provision and maintenance of natural gas supply subject (at the
landlords discretion) to payment of metered charges equivalent to cost
incurred by the Landlord.
1.4 Provision and maintenance of process feed water supply subject (at the
landlords discretion) to payment of metered charges equivalent to cost
incurred by the Landlord.
1.5 Provision and maintenance of potable water supply subject (at the
landlords discretion) to payment of metered charges equivalent to cost
incurred by the Landlord.
1.6 Maintenance and allowing shared use of main site sewer subject to
payment by the Tenant of metered discharge costs.
and in each case subject to payment by the Tenant of a fair proportion
according to use of any standing charge or maintenance or other
associated cost.
2. The provision of fire, gas and other safety systems subject to payment
by the Tenant of a
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<PAGE> 31
fair and reasonable proportion of the costs incurred by the Landlord.
3. The provision of shower and locker room facilities subject to payment
by the Tenant of a fair and reasonable proportion of the expense to the
Landlord including any internal costings.
4. The provision of reasonable security systems and arrangements for the
Property.
5. The making available to the Tenant the shared use of the Landlord's
canteen facilities existing from time to time.
6. The provision installation inspection repair rebuilding improvement
renewal lighting and cleaning of all roads car parks loading bays
structures fences walls signs stairways paths pavements yards gardens
landscaped areas open spaces Conduits and Plant in or about the
Property and all other things whatsoever the use of which is common to
the Demised Premises and other premises near or adjoining thereto
(whether or not under the ownership or control of the Landlord)
PART 4
(SERVICES WHICH THE LANDLORD MAY PROVIDE AND CHARGE AT LANDLORD'S OPTION)
1. The provision of waste disposal services subject to payment by the
Tenant of a monthly fair and reasonable charge together with a fair
proportion of the expenses payable by the Landlord to any outside waste
disposal service provider.
2. The provision and maintenance of telephone exchange system subject to
payment by the Tenant of all itemised call charges and a fair and
reasonable service fee.
3. Maintenance by the Landlord of plant and equipment of the Tenant at the
Demised Premises subject to payment by the Tenant of such service cost
and hourly charge out rate as may be agreed from time to time between
Landlord and Tenant.
4. Provision and maintenance of DCS automatic control by the Landlord
subject to payment by the Tenant of such service cost and hourly charge
out rate as may be agreed from time to time between Landlord and
Tenant.
5. The provision of such office space and conference room facilities as
the Landlord may in its discretion from time to time provide (if any).
6. The provision by the Landlord for use by the Tenant of one Nissan
Storage Shed numbered 6 so long as the Landlord in its discretion shall
provide the same or such other alternative storage.
7. Incurring fees of any professional person (including without limitation
any
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<PAGE> 32
accountant solicitor barrister or surveyor) engaged in connection with
the matters set out in this Schedule including without limitation the
cost of valuations of the Demised Premises or the Property in order to
determine the cost of reinstatement for insurance purposes
8. The carrying out by the Landlord of any work in or about the Property
in pursuance of any requirement of any Act of Parliament or of any
local or public authority
9. Preparing accounts and certificates relating to the calculation of the
Service Charge
10. Office support by way of reception services and the making of travel
arrangements
11. The provision of cleaning services
12. Vending machine access and use
13. Such other services things or works whatsoever as may be provided by
the Landlord from time to time which the Landlord reasonably considers
to be for the benefit of or any part or parts thereof
SIGNED as a DEED by )
CABOT CARBON LIMITED )
acting by )
)
)
Director - David Jayne
Secretary - Bob Longworth
SIGNED as a DEED by )
CABOT MICROELECTRONICS )
CORPORATION )
acting by )
DANIEL PIKE )
VICE PRESIDENT OF OPERATIONS )
29
<PAGE> 1
Exhibit 10.16
REVOLVING CREDIT AGREEMENT
Dated as of March 29, 2000
among
CABOT MICROELECTRONICS CORPORATION
FLEET NATIONAL BANK
and the other lending institutions which may become a party thereto
and
FLEET NATIONAL BANK, as Agent
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C>
1. DEFINITIONS AND RULES OF INTERPRETATION......................................................... 1
1.1. Definitions.......................................................................... 1
1.2. Rules of Interpretation.............................................................. 13
2. THE REVOLVING CREDIT FACILITY................................................................... 15
2.1. Commitment to Lend................................................................... 15
2.2. Commitment Fee....................................................................... 15
2.3. Reduction of Total Commitment........................................................ 15
2.4. The Notes............................................................................ 15
2.5. Interest on Loans.................................................................... 16
2.6. Requests for Loans................................................................... 16
2.6.1. General................................................................... 16
2.6.2. Swing Line................................................................ 16
2.7. Conversion Options................................................................... 18
2.7.1. Conversion to Different Type of Loan...................................... 18
2.7.2. Continuation of Type of Loan.............................................. 18
2.7.3. LIBOR Rate Loans.......................................................... 18
2.8. Funds for Loan....................................................................... 18
2.8.1. Funding Procedures........................................................ 18
2.8.2. Advances by Agent......................................................... 19
2.9. Settlements.......................................................................... 19
2.9.1. General................................................................... 19
2.9.2. Failure to Make Funds Available........................................... 20
2.9.3. No Effect on Other Banks.................................................. 20
3. REPAYMENT OF THE LOANS.......................................................................... 20
3.1. Maturity............................................................................. 20
3.2. Mandatory Repayments of Loans........................................................ 20
3.3. Optional Repayments of Loans......................................................... 21
4. LETTERS OF CREDIT............................................................................... 21
4.1. Letter of Credit Commitments......................................................... 21
4.1.1. Commitment to Issue Letters of Credit..................................... 21
4.1.2. Letter of Credit Applications............................................. 22
4.1.3. Terms of Letters of Credit................................................ 22
4.1.4. Reimbursement Obligations of Banks........................................ 22
4.1.5. Participations of Banks................................................... 22
4.2. Reimbursement Obligation of the Borrower............................................. 22
4.3. Letter of Credit Payments............................................................ 23
4.4. Obligations Absolute................................................................. 23
4.5. Reliance by Issuer................................................................... 23
4.6. Letter of Credit Fee................................................................. 24
5. CERTAIN GENERAL PROVISIONS...................................................................... 24
5.1. Closing Fees......................................................................... 24
5.2. Funds for Payments................................................................... 24
5.2.1. Payments to Agent......................................................... 24
5.2.2. No Offset, etc............................................................ 24
5.3. Computations......................................................................... 25
5.4. Inability to Determine LIBOR Rate.................................................... 25
</TABLE>
<PAGE> 3
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<TABLE>
<S> <C>
5.5. Illegality........................................................................... 25
5.6. Additional Costs, etc................................................................ 26
5.7. Capital Adequacy..................................................................... 26
5.8. Certificate.......................................................................... 26
5.9. Indemnity............................................................................ 26
5.10. Interest After Default.............................................................. 26
6. GUARANTIES...................................................................................... 28
6.1. Guaranties of Subsidiaries........................................................... 28
7. REPRESENTATIONS AND WARRANTIES.................................................................. 28
7.1. Corporate Authority.................................................................. 28
7.1.1. Incorporation; Good Standing.............................................. 28
7.1.2. Authorization............................................................. 28
7.1.3. Enforceability............................................................ 28
7.2. Governmental Approvals............................................................... 28
7.3. Title to Properties; Leases.......................................................... 28
7.4. Financial Statements and Projections................................................. 29
7.4.1. Fiscal Year............................................................... 29
7.4.2. Financial Statements...................................................... 29
7.4.3. Projections............................................................... 29
7.4.4. Solvency.................................................................. 29
7.5. No Material Changes, etc............................................................. 29
7.6. Franchises, Patents, Copyrights, etc................................................. 29
7.7. Litigation........................................................................... 30
7.8. No Materially Adverse Contracts, etc................................................. 30
7.9. Compliance with Other Instruments, Laws, etc......................................... 30
7.10. Tax Status.......................................................................... 30
7.11. No Event of Default................................................................. 30
7.12. Holding Company and Investment Company Acts......................................... 30
7.13. Absence of Financing Statements, etc................................................ 31
7.14. Certain Transactions................................................................ 31
7.15. Employee Benefit Plans.............................................................. 31
7.15.1. In General............................................................... 31
7.15.2. Terminability of Welfare Plans........................................... 31
7.15.3. Guaranteed Pension Plans................................................. 31
7.15.4. Multiemployer Plans...................................................... 32
7.16. Use of Proceeds..................................................................... 32
7.16.1. General.................................................................. 32
7.16.2. Regulations U and X...................................................... 32
7.16.3. Ineligible Securities.................................................... 32
7.17. Environmental Compliance............................................................ 32
7.18. Subsidiaries, etc................................................................... 34
7.19. Disclosure.......................................................................... 34
8. AFFIRMATIVE COVENANTS OF THE BORROWER........................................................... 34
8.1. Punctual Payment..................................................................... 34
8.2. Maintenance of Office................................................................ 34
8.3. Records and Accounts................................................................. 34
8.4. Financial Statements, Certificates and Information................................... 34
8.5. Notices.............................................................................. 35
</TABLE>
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<TABLE>
<S> <C>
8.5.1. Defaults.................................................................. 35
8.5.2. Environmental Events...................................................... 36
8.5.3. Notification of Claim against Assets...................................... 36
8.5.4. Notice of Litigation and Judgments........................................ 36
8.6. Corporate Existence; Maintenance of Properties....................................... 36
8.7. Insurance............................................................................ 37
8.8. Taxes................................................................................ 37
8.9. Inspection of Properties and Books, etc.............................................. 37
8.9.1. General................................................................... 37
8.9.2. Communications with Accountants........................................... 37
8.10. Compliance with Laws, Contracts, Licenses, and Permits.............................. 37
8.11. Employee Benefit Plans.............................................................. 37
8.12. Use of Proceeds..................................................................... 38
8.13. Replacement Instruments............................................................. 38
8.14. New Guarantors...................................................................... 38
8.15. Additional Subsidiaries............................................................. 38
8.16. Further Assurances.................................................................. 38
9. CERTAIN NEGATIVE COVENANTS OF THE BORROWER...................................................... 38
9.1. Restrictions on Indebtedness......................................................... 38
9.2. Restrictions on Liens................................................................ 39
9.3. Restrictions on Investments.......................................................... 40
9.4. Restricted Payments.................................................................. 41
9.5. Merger, Consolidation and Disposition of Assets...................................... 41
9.5.1. Mergers and Acquisitions.................................................. 41
9.5.2. Disposition of Assets..................................................... 42
9.6. Sale and Leaseback................................................................... 42
9.7. Compliance with Environmental Laws................................................... 42
9.8. Employee Benefit Plans............................................................... 43
9.9. Business Activities.................................................................. 43
9.10. Fiscal Year......................................................................... 43
9.11. Transactions with Affiliates........................................................ 43
9.12. Upstream Limitations................................................................ 43
9.13. Inconsistent Agreements............................................................. 44
9.14. Modification of Documents........................................................... 44
10. FINANCIAL COVENANTS OF THE BORROWER............................................................ 44
10.1. Leverage Ratio...................................................................... 44
10.2. Quarterly Net Income................................................................ 44
10.3. Debt Service Coverage Ratio......................................................... 44
10.4. Quick Ratio......................................................................... 44
11. CLOSING CONDITIONS............................................................................. 44
11.1. Loan Documents...................................................................... 44
11.2. Certified Copies of Charter Documents............................................... 44
11.3. Corporate Action.................................................................... 45
11.4. Incumbency Certificate.............................................................. 45
11.5. UCC Search Results.................................................................. 45
11.6. Certificates of Insurance........................................................... 45
11.7. Solvency Certificate................................................................ 45
11.8. Audited Financials.................................................................. 45
</TABLE>
<PAGE> 5
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<TABLE>
<S> <C>
11.9. Completion of IPO................................................................... 45
11.10. Pro Forma Balance Sheet............................................................ 45
11.11. Opinion of Counsel................................................................. 45
11.12. Payment of Fees.................................................................... 45
12. CONDITIONS TO ALL BORROWINGS................................................................... 46
12.1. Representations True; No Event of Default........................................... 46
12.2. No Legal Impediment................................................................. 46
12.3. Governmental Regulation............................................................. 46
12.4. Proceedings and Documents........................................................... 46
13. EVENTS OF DEFAULT; ACCELERATION; ETC........................................................... 46
13.1. Events of Default and Acceleration.................................................. 46
13.2. Termination of Commitments.......................................................... 49
13.3. Remedies............................................................................ 49
13.4. Distribution of Proceeds............................................................ 50
14. SETOFF......................................................................................... 50
15. THE AGENT...................................................................................... 51
15.1. Authorization....................................................................... 51
15.2. Employees and Agents................................................................ 51
15.3. No Liability........................................................................ 51
15.4. No Representations.................................................................. 51
15.4.1. General.................................................................. 52
15.4.2. Closing Documentation, etc............................................... 52
15.5. Payments............................................................................ 52
15.5.1. Payments to Agent........................................................ 52
15.5.2. Distribution by Agent.................................................... 52
15.5.3. Delinquent Banks......................................................... 53
15.6. Holders of Notes.................................................................... 53
15.7. Indemnity........................................................................... 53
15.8. Agent as Bank....................................................................... 53
15.9. Resignation......................................................................... 53
15.10. Notification of Defaults and Events of Default..................................... 54
15.11. Duties in the Case of Enforcement.................................................. 54
16. EXPENSES AND INDEMNIFICATION................................................................... 54
16.1. Expenses............................................................................ 54
16.2. Indemnification..................................................................... 55
16.3. Survival............................................................................ 55
17. USURY.......................................................................................... 55
18. SURVIVAL OF COVENANTS, ETC..................................................................... 56
19. ASSIGNMENT AND PARTICIPATION................................................................... 56
19.1. Conditions to Assignment by Banks................................................... 56
19.2. Certain Representations and Warranties; Limitations; Covenants...................... 56
19.3. Register............................................................................ 57
19.4. New Notes........................................................................... 58
19.5. Participations...................................................................... 58
19.6. Disclosure.......................................................................... 58
19.7. Assignee or Participant Affiliated with the Borrower................................ 58
19.8. Miscellaneous Assignment Provisions................................................. 59
19.9. Assignment by Borrower.............................................................. 59
</TABLE>
<PAGE> 6
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<TABLE>
<S> <C>
20. NOTICES, ETC................................................................................... 59
21. GOVERNING LAW.................................................................................. 60
22. HEADINGS....................................................................................... 60
23. COUNTERPARTS................................................................................... 60
24. ENTIRE AGREEMENT, ETC.......................................................................... 60
25. WAIVER OF JURY TRIAL........................................................................... 61
26. CONSENTS, AMENDMENTS, WAIVERS, ETC............................................................. 61
27. SEVERABILITY................................................................................... 61
</TABLE>
<PAGE> 7
REVOLVING CREDIT AGREEMENT
This REVOLVING CREDIT AGREEMENT is made as of March 29, 2000, by and
among CABOT MICROELECTRONICS CORPORATION (the "Borrower"), a Delaware
corporation having its principal place of business at 870 Commons Drive, Aurora,
Illinois 60504 and FLEET NATIONAL BANK, a national banking association, and the
other lending institutions listed on Schedule 1 and FLEET NATIONAL BANK, as
agent for itself and such other lending institutions.
1. DEFINITIONS AND RULES OF INTERPRETATION.
1.1. DEFINITIONS. The following terms shall have the meanings set forth
in this Section 1 or elsewhere iN the provisions of this Credit Agreement
referred to below:
Accounts Receivable. All rights of the Borrower or any of the
Guarantors to payment for goods sold, leased, licensed or otherwise marketed in
the ordinary course of business or services rendered in the ordinary course of
business and all sums of money or other proceeds due thereon pursuant to
transactions with account debtors, net of any credits, rebates, offsets,
holdbacks or other adjustments or commissions payable to third parties that are
adjustments to such accounts receivable, and except for that portion of the sum
of money or other proceeds due thereon that relate to sales, use or property
taxes in conjunction with such transactions, recorded on books of account in
accordance with generally accepted accounting principles.
Adjustment Date. The first day of the month immediately following the
month in which a Compliance Certificate is to be delivered by the Borrower
pursuant to Section 8.4(c).
Affiliate. Any Person that would be considered to be an affiliate of
the Borrower under Rule 144(a) of the Rules and Regulations of the Securities
and Exchange Commission, as in effect on the date hereof, if the Borrower were
issuing securities.
Agent's Head Office. The Agent's head office located at 100 Federal
Street, Boston, Massachusetts 02110, or at such other location as the Agent may
designate from time to time.
Agent. Fleet National Bank acting as agent for the Banks.
Agent's Special Counsel. Bingham Dana LLP or such other counsel as may
be approved by the Agent.
Applicable Margin. For each period commencing on an Adjustment Date
through the date immediately preceding the next Adjustment Date (each a "Rate
Adjustment Period"), the Applicable Margin shall be the applicable margin set
forth below with respect to the Borrower's Leverage Ratio, as determined for the
fiscal period of the Borrower and its Subsidiary ending on the fiscal quarter
ended immediately prior to the applicable Rate Adjustment Period.
<PAGE> 8
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<TABLE>
<CAPTION>
BASE RATE LIBOR RATE
TIER LEVERAGE RATIO LOANS LOANS COMMITMENT FEE
---------- ------------------------------------ -------------- ------------- -------------------
<S> <C> <C> <C> <C>
1 Greater than or equal to 2.00:1.00 0.50% 2.00% 0.50%
2 Greater than or equal to 1.25:1.00 0.25% 1.75% 0.40%
but less than 2.00:1.00
3 Less than 1.25:1.00 0.0% 1.50% 0.30%
</TABLE>
Notwithstanding the foregoing, (a) for Loans outstanding and the
Commitment Fee payable during the period commencing on the Closing Date through
the date immediately preceding the first Adjustment Date to occur after June 30,
2000, the Applicable Margin shall be the Applicable Margin set forth in Tier 3
above, and (b) if the Borrower fails to deliver any Compliance Certificate
pursuant to Section 8.4(c) hereof then, for the period commencing on the
Adjustment Date to occur subsequent to such failure through the date immediately
following the date on which such Compliance Certificate is delivered, the
Applicable Margin shall be the highest Applicable Margin set forth above.
Assignment and Acceptance. See Section 19.1.
Balance Sheet Date. September 30, 1999.
Banks. Fleet and the other lending institutions listed on Schedule 1
hereto and any other Person who becomes an assignee of any rights and
obligations of a Bank pursuant to Section 19.
Base Rate. The higher of (a) the annual rate of interest announced from
time to time by Fleet at its head office in Boston, Massachusetts, as its "base
rate" or "prime rate" and (b) one-half of one percent (1/2%) above the Federal
Funds Effective Rate. For the purposes of this definition, "Federal Funds
Effective Rate" shall mean for any day, the rate per annum equal to the weighted
average of the rates on overnight federal funds transactions with members of the
Federal Reserve System arranged by federal funds brokers, as published for such
day (or, if such day is not a Business Day, for the next preceding Business Day)
by the Federal Reserve Bank of New York, or, if such rate is not so published
for any day that is a Business Day, the average of the quotations for such day
on such transactions received by the Agent from three funds brokers of
recognized standing selected by the Agent. The Base Rate is a reference rate and
does not necessarily represent the lowest or best rate being charged to any
customer. Changes in the rate of interest resulting from changes in the Base
Rate shall take place immediately without notice or demand of any kind.
Base Rate Loans. Loans bearing interest calculated by reference to the
Base Rate.
Borrower. As defined in the preamble hereto.
Business Day. Any day on which banking institutions in Boston,
Massachusetts, are open for the transaction of banking business and, in the case
of LIBOR Rate Loans, also a day which is a LIBOR Business Day.
<PAGE> 9
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Cabot Dividend. The Distributions made by the Borrower to Cabot
Corporation in an aggregate amount not to exceed the sum of (a) the aggregate
amount of all advances made to the Borrower by LaSalle Bank National Association
under the LaSalle Loan Agreement plus (b) the lesser of (i) the net proceeds
received by the Borrower from the consummation of its IPO and (ii) the aggregate
amount of Cabot Corporation's estimated tax basis in the Borrower's capital
stock as of the date of the consummation of the IPO.
Capital Assets. Fixed assets, both tangible (such as land, buildings,
fixtures, machinery and equipment) and intangible (such as patents, copyrights,
trademarks, franchises and good will); provided that Capital Assets shall not
include any item customarily charged directly to expense or depreciated over a
useful life of twelve (12) months or less in accordance with generally accepted
accounting principles.
Capital Expenditures. Amounts paid or Indebtedness incurred by the
Borrower or any of its Subsidiaries in connection with (a) the purchase or lease
by the Borrower or any of its Subsidiaries of Capital Assets that would be
required to be capitalized and shown on the balance sheet of such Person in
accordance with generally accepted accounting principles or (b) the lease of any
assets by the Borrower or any of its Subsidiaries as lessee under any Synthetic
Lease to the extent that such assets would have been Capital Assets had the
synthetic lease been treated for accounting purposes as a Capitalized Lease.
Capitalization Documents. Collectively, the formation documents
(including without limitation any certificate of incorporation and by-laws) of
the Borrower and its Subsidiaries.
Capitalized Leases. Leases under which the Borrower or any of its
Subsidiaries is the lessee or obligor, the discounted future rental payment
obligations under which are required to be capitalized on the balance sheet of
the lessee or obligor in accordance with generally accepted accounting
principles.
Cash Equivalents. As to the Borrower and its Subsidiaries, (a)
securities issued or directly and fully guaranteed or insured by the United
States government or any agency or instrumentality thereof having maturities of
not more than six (6) months from the date of acquisition; (b) certificates of
deposit and eurodollar time deposits with maturities of six (6) months or less
from the date of acquisition, bankers' acceptances with maturities not exceeding
six (6) months and overnight bank deposits, in each case (i) with any Bank, or
(ii) with any domestic commercial bank having capital and surplus in excess of
$300,000,000 or any commercial bank organized under the laws of any OECD country
and having total assets in excess of $1,000,000,000; (c) repurchase obligations
with a term of not more than seven (7) days for underlying securities of the
types described in clauses (a) and (b) entered into with any financial
institution meeting the qualifications specified in clause (b) above, (d) any
commercial paper issued by any Bank, the parent corporation of any Bank or any
Subsidiary of such Bank's parent corporation and which matures within six (6)
months after the date of acquisition thereof, and (e) any commercial paper or
other security which constitutes an Investment permitted under Section 10.3(c)
and whicH matures within six (6) months after the date of acquisition thereof.
CERCLA. See Section 7.17(a).
Closing Date. The first date on which the conditions set forth in
Section 11 have been satisfied and any Loans are to be made or any Letter of
Credit is to be issued hereunder.
Code. The Internal Revenue Code of 1986.
<PAGE> 10
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Commitment. With respect to each Bank, the amount set forth on Schedule
1 hereto as the amount of such Bank's commitment to make Loans to, and to
participate in the issuance, extension and renewal of Letters of Credit for the
account of, the Borrower, as the same may be reduced from time to time; or if
such commitment is terminated pursuant to the provisions hereof, zero.
Commitment Fee. See Section 2.2.
Commitment Percentage. With respect to each Bank, the percentage set
forth on Schedule 1 hereto as such Bank's percentage of the aggregate
Commitments of all of the Banks.
Compliance Certificate. See Section 8.4(c).
Consolidated or consolidated. With reference to any term defined
herein, shall mean that term as applied to the accounts of the Borrower and its
Subsidiaries, consolidated in accordance with generally accepted accounting
principles.
Consolidated Current Liabilities. All liabilities and other
Indebtedness of the Borrower and its Subsidiaries on a consolidated basis
maturing on demand or within one (1) year from the date as of which Consolidated
Current Liabilities are to be determined, (including, without limitation, the
outstanding amount of all Loans as of the date of determination) and such other
liabilities as may properly be classified as current liabilities in accordance
with generally accepted accounting principles.
Consolidated EBIT. With respect to any fiscal period, an amount equal
to the sum of (a) Consolidated Net Income (or Deficit) of the Borrower and its
Subsidiaries for such fiscal period, plus (b) in each case to the extent
deducted in the calculation of such Person's Consolidated Net Income (or
Deficit) and without duplication (i) tax expense for such period, plus (ii)
Consolidated Total Interest Expense paid or accrued during such period, plus
(iii) other noncash charges for such period, and minus (c) to the extent added
in computing Consolidated Net Income, and without duplication, all noncash gains
(including income tax benefits) for such period, all as determined in accordance
with generally accepted accounting principles.
Consolidated EBITDA. With respect to any fiscal period, an amount equal
to the sum of (a) Consolidated EBIT of the Borrower and its Subsidiaries for
such fiscal period, plus (b) to the extent deducted in the calculation of such
Person's Consolidated Net Income (or Deficit) and without duplication,
depreciation and amortization for such period, all as determined in accordance
with generally accepted accounting principles.
Consolidated Net Income (or Deficit). The consolidated net income (or
deficit) of the Borrower and its Subsidiaries, after deduction of all expenses,
taxes, and other proper charges, determined in accordance with generally
accepted accounting principles, after eliminating therefrom all extraordinary
nonrecurring items of income.
Consolidated Quick Assets. All cash, Cash Equivalents and Accounts
Receivable of the Borrower and its Subsidiaries on a consolidated basis that, in
accordance with generally accepted accounting principles, are properly
classified as current assets, provided that accounts receivable shall be
included only if good and collectible as determined by the Borrower in
accordance with established practice consistently applied, and only if payable
and outstanding (a) not more than one hundred eighty (180) days after the date
of the shipment of goods or other transactions out of which any such account
receivable arose and (b) are not outstanding for more than sixty (60) days past
due; and such accounts
<PAGE> 11
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receivable shall be taken at their face value less reserves determined to be
sufficient in accordance with generally accepted accounting principles.
Consolidated Total Interest Expense. For any period, the aggregate
amount of interest required to be paid or accrued by the Borrower and its
Subsidiaries during such period on all Indebtedness of the Borrower and its
Subsidiaries outstanding during all or any part of such period, whether such
interest was or is required to be reflected as an item of expense or
capitalized, including payments consisting of interest in respect of any
Capitalized Lease, or any Synthetic Lease and including commitment fees, agency
fees, facility fees, balance deficiency fees and similar fees or expenses in
connection with the borrowing of money.
Conversion Request. A notice given by the Borrower to the Agent of the
Borrower's election to convert or continue a Loan in accordance with Section
2.7.
Credit Agreement. This Revolving Credit Agreement, including the
Schedules and Exhibits hereto.
Debt Service Coverage Ratio. As at any date of determination, the ratio
of (a) Consolidated EBIT of the Borrower and its Subsidiaries for the Reference
Period most recently ended, to (b) Consolidated Total Interest Expense of the
Borrower and its Subsidiaries for such Reference Period.
Default. See Section 13.1.
Delinquent Bank. See Section 15.5.3.
Derivative Contract. Every obligation of any Person under any forward
contract, futures contract, swap, option or other financing agreement or
arrangement (including, without limitation, caps, floors, collars and similar
agreements), the value of which is dependent upon interest rates, currency
exchange rates, commodities or other indices.
Distribution. The declaration or payment of any dividend on or in
respect of any shares of any class of capital stock of the Borrower, other than
dividends payable solely in shares of common stock of the Borrower; the
purchase, redemption, or other retirement of any shares of any class of capital
stock of the Borrower, directly or indirectly through a Subsidiary of the
Borrower or otherwise; the return of capital by the Borrower to its shareholders
as such; or any other distribution on or in respect of any shares of any class
of capital stock of the Borrower.
Dollars or $. Dollars in lawful currency of the United States of
America.
Domestic Lending Office. Initially, the office of each Bank designated
as such in Schedule 1 hereto; thereafter, such other office of such Bank, if
any, located within the United States that will be making or maintaining Base
Rate Loans.
Domestic Subsidiary. Any Subsidiary (direct or indirect, existing on
the date hereof or acquired or formed hereafter in accordance with the
provisions hereof) of the Borrower which is organized under the laws of the
United States of America or a state or other subdivision of the United States of
America.
Drawdown Date. The date on which any Loan is made or is to be made, and
the date on which any Loan is converted or continued in accordance with
Section 2.7.
<PAGE> 12
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Eligible Assignee. Any of (a) a commercial bank or finance company
organized under the laws of the United States, or any State thereof or the
District of Columbia, and having total assets in excess of $1,000,000,000; (b) a
savings and loan association or savings bank organized under the laws of the
United States, or any State thereof or the District of Columbia, and having a
net worth of at least $100,000,000, calculated in accordance with generally
accepted accounting principles; (c) a commercial bank organized under the laws
of any other country which is a member of the Organization for Economic
Cooperation and Development (the "OECD"), or a political subdivision of any such
country, and having total assets in excess of $1,000,000,000, provided that such
bank is acting through a branch or agency located in the country in which it is
organized or another country which is also a member of the OECD; (d) the central
bank of any country which is a member of the OECD; (e) any investment company,
investment fund or other institutional lender (other than a commercial bank,
finance company, or savings and loan association or savings bank) approved by
the Agent which is an "accredited investor" (as defined in Regulation D of the
federal Securities and Exchange Commission) engaged in making, purchasing or
otherwise investing in commercial loans in the ordinary course of business; and
(f) if, but only if, any Event of Default has occurred and is continuing, any
other bank, insurance company, commercial finance company or other financial
institution or other Person approved by the Agent, such approval not to be
unreasonably withheld.
Employee Benefit Plan. Any employee benefit plan within the meaning of
Section 3(3) of ERISA maintained oR contributed to by the Borrower or any ERISA
Affiliate, other than a Guaranteed Pension Plan or a Multiemployer Plan.
Environmental Laws. See Section 7.17(a).
EPA. See Section 7.17(b).
ERISA. The Employee Retirement Income Security Act of 1974.
ERISA Affiliate. Any Person which is treated as a single employer with
the Borrower under Section 414 of The Code.
ERISA Reportable Event. A reportable event with respect to a Guaranteed
Pension Plan within the meaning of Section 4043 of ERISA and the regulations
promulgated thereunder.
Eurocurrency Reserve Rate. For any day with respect to a LIBOR Rate
Loan, the maximum rate (expressed as a decimal) at which any lender subject
thereto would be required to maintain reserves under Regulation D of the Board
of Governors of the Federal Reserve System (or any successor or similar
regulations relating to such reserve requirements) against "Eurocurrency
Liabilities" (as that term is used in Regulation D), if such liabilities were
outstanding. The Eurocurrency Reserve Rate shall be adjusted automatically on
and as of the effective date of any change in the Eurocurrency Reserve Rate.
Event of Default. See Section 13.1.
Fee Letter. The fee letter agreement between the Borrower and the Agent
dated on or prior to the Closing Date.
Fleet. Fleet National Bank, a national banking association in its
individual capacity.
<PAGE> 13
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generally accepted accounting principles. (a) When used in Section 10,
whether directly or indirectly thrOugh reference to a capitalized term used
therein, means (i) principles that are consistent with the principles
promulgated or adopted by the Financial Accounting Standards Board and its
predecessors, in effect for the fiscal year ended on the Balance Sheet Date, and
(ii) to the extent consistent with such principles, the accounting practice of
the Borrower reflected in its financial statements for the year ended on the
Balance Sheet Date, and (b) when used in general, other than as provided above,
means principles that are (i) consistent with the principles promulgated or
adopted by the Financial Accounting Standards Board and its predecessors, as in
effect from time to time, and (ii) consistently applied with past financial
statements of the Borrower adopting the same principles, provided that in each
case referred to in this definition of "generally accepted accounting
principles" a certified public accountant would, insofar as the use of such
accounting principles is pertinent, be in a position to deliver an unqualified
opinion (other than a qualification regarding changes in generally accepted
accounting principles) as to financial statements in which such principles have
been properly applied.
Guaranteed Pension Plan. Any employee pension benefit plan within the
meaning of Section 3(2) of ERISA maintained or contributed to by the Borrower or
any ERISA Affiliate the benefits of which are guaranteed on termination in full
or in part by the PBGC pursuant to Title IV of ERISA, other than a Multiemployer
Plan.
Guarantor. Each Domestic Subsidiary of the Borrower existing on the
Closing Date (if any) and each other Domestic Subsidiary of the Borrower which
is required to be or become a Guarantor from time to time pursuant to
Section 8.13 hereof. Each such Person shall be a party to a Guaranty.
Guaranty. Collectively, each Guaranty dated on or after the Closing
Date which is required to be delivered by Section 8.13, made by each Guarantor
in favor of the Banks and the Agent pursuant to which each GuaranTor guaranties
to the Banks and the Agent the payment and performance of the Obligations and in
form and substance satisfactory to the Banks and the Agent.
Hazardous Substances. See Section 8.18(b).
Indebtedness. As to any Person and whether recourse is secured by or is
otherwise available against all or only a portion of the assets of such Person
and whether or not contingent, but without duplication:
(a) every obligation of such Person for money borrowed,
(b) every obligation of such Person evidenced by bonds,
debentures, notes or other similar instruments, including obligations
incurred in connection with the acquisition of property, assets or
businesses,
(c) every reimbursement obligation of such Person with respect
to letters of credit, bankers' acceptances or similar facilities issued
for the account of such Person,
(d) every obligation of such Person issued or assumed as the
deferred purchase price of property or services (including securities
repurchase agreements but excluding trade accounts payable or accrued
liabilities arising in the ordinary course of business which are not
overdue or which are being contested in good faith),
(e) every obligation of such Person under any Capitalized
Lease,
<PAGE> 14
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(f) every obligation of such Person under any lease (a
"Synthetic Lease") treated as an operating lease under generally
accepted accounting principles and as a loan or financing for U.S.
income tax purposes,
(g) all sales by such Person of (i) accounts or general
intangibles for money due or to become due, (ii) chattel paper,
instruments or documents creating or evidencing a right to payment of
money or (iii) other receivables (collectively "receivables"), whether
pursuant to a purchase facility or otherwise, other than (x) in
connection with the disposition of the business operations of such
Person relating thereto, (y) the disposition of any receivables where
there is no recourse to the Person consummating such disposition or (z)
a disposition of defaulted receivables for collection and not as a
financing arrangement, and together with any obligation of such Person
to pay any discount, interest, fees, indemnities, penalties, recourse,
expenses or other amounts in connection therewith,
(h) every obligation of such Person (an "equity related
purchase obligation") to purchase, redeem, retire or otherwise acquire
for value (i) any shares of capital stock of any class issued by such
Person, (ii) any warrants, options or other rights to acquire any such
shares, or (iii) any rights measured by the value of such shares,
warrants, options or other rights, other than any equity related
purchase obligation which is satisfied solely by the issuance of the
capital stock of such Person and not cash,
(i) every obligation in respect of Indebtedness of any other
entity (including any partnership in which such Person is a general
partner) to the extent that such Person is liable therefor as a result
of such Person's ownership interest in or other relationship with such
entity, except to the extent that the terms of such Indebtedness
provide that such Person is not liable therefor and such terms are
enforceable under applicable law,
(j) every obligation, contingent or otherwise, of such Person
guaranteeing, or otherwise acting as surety for, any obligation of a
type described in any of clauses (a) through (i) (the "primary
obligation") of another Person (the "primary obligor"), in any manner,
whether directly or indirectly, and including, without limitation, any
obligation of such Person (i) to purchase or pay (or advance or supply
funds for the purchase of) any security for the payment of such primary
obligation, (ii) to purchase property, securities or services for the
purpose of assuring the payment of such primary obligation, or (iii) to
maintain working capital, equity capital or other financial statement
condition or liquidity of the primary obligor so as to enable the
primary obligor to pay such primary obligation.
The "amount" or "principal amount" of any Indebtedness at any time of
determination represented by (v) any Indebtedness, issued at a price that is
less than the principal amount at maturity thereof, shall be the amount of the
liability in respect thereof determined in accordance with generally accepted
accounting principles, (w) any Capitalized Lease shall be the principal
component of the aggregate of the rentals obligation under such Capitalized
Lease payable over the term thereof that is not subject to termination by the
lessee, (x) any sale of receivables shall be the amount of unrecovered capital
or principal investment of the purchaser (other than the Borrower or any of its
wholly-owned Subsidiaries) thereof, excluding amounts representative of yield or
interest earned on such investment, (y) any Synthetic Lease shall be the
stipulated loss value, termination value or other equivalent amount, and (z) any
equity related purchase obligation shall be the maximum fixed redemption or
purchase price
<PAGE> 15
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thereof inclusive of any accrued and unpaid dividends to be comprised in such
redemption or purchase price.
Ineligible Securities. Securities which may not be underwritten or
dealt in by member banks of the Federal Reserve System under Section 16 of the
Banking Act of 1933 (12 U.S.C. Section 24, Seventh), as amended.
Interest Payment Date. (a) As to any Base Rate Loan, the last day of
the calendar quarter with respect to interest accrued during such calendar
quarter, including, without limitation, the calendar quarter which includes the
Drawdown Date of such Base Rate Loan and; (b) as to any LIBOR Rate Loan in
respect of which the Interest Period is (i) three (3) months or less, the last
day of such Interest Period and (ii) more than three (3) months, the date that
is three (3) months from the first day of such Interest Period and, in addition,
the last day of such Interest Period.
Interest Period. With respect to each Loan, (a) initially, the period
commencing on the Drawdown Date of such Loan and ending on the last day of one
of the periods set forth below, as selected by the Borrower in a Loan Request or
as otherwise required by the terms of this Credit Agreement (i) for any Base
Rate Loan, the last day of the calendar quarter; (ii) for any Money Market Rate
Loan, 1, 2, 3, 4, 5, 6 or 7 days; and (iii) for any LIBOR Rate Loan, 1, 2, 3, or
6 months; and (b) thereafter, each period commencing on the day immediately
following the end of the next preceding Interest Period applicable to such Loan
and ending on the last day of one of the periods set forth above, as selected by
the Borrower in a Conversion Request; provided that all of the foregoing
provisions relating to Interest Periods are subject to the following:
(a) if any Interest Period with respect to a LIBOR Rate Loan
would otherwise end on a day that is not a LIBOR Business Day, that
Interest Period shall be extended to the next succeeding LIBOR Business
Day unless the result of such extension would be to carry such Interest
Period into another calendar month, in which event such Interest Period
shall end on the immediately preceding LIBOR Business Day;
(b) if any Interest Period with respect to a Base Rate Loan or
a Money Market Rate Loan would end on a day that is not a Business Day,
that Interest Period shall end on the next succeeding Business Day;
(c) if the Borrower shall fail to give notice as provided in
Section 2.7, the Borrower shall be deemed to have requested a
conversion of the affected LIBOR Rate Loan to a Base Rate Loan and the
continuance of all Base Rate Loans as Base Rate Loans on the last day
of the then current Interest Period with respect thereto;
(d) any Interest Period relating to any LIBOR Rate Loan that
begins on the last LIBOR Business Day of a calendar month (or on a day
for which there is no numerically corresponding day in the calendar
month at the end of such Interest Period) shall end on the last LIBOR
Business Day of a calendar month; and
(e) any Interest Period that would otherwise extend beyond the
Maturity Date shall end on the Maturity Date.
International Standby Practices. With respect to any standby Letter of
Credit, International Standby Practices (ISP98), International Chamber of
Commerce Publication No. 590, or any successor
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code of standby letter of credit practices among banks adopted by the Agent in
the ordinary course of its business as a standby letter of credit issuer and in
effect at the time of issuance of such Letter of Credit.
Investments. All expenditures made and all liabilities incurred
(contingently or otherwise) for the acquisition of stock or Indebtedness of, or
for loans, advances, capital contributions or transfers of property to, or in
respect of any guaranties (or other commitments as described under
Indebtedness), or obligations of, any Person. In determining the aggregate
amount of Investments outstanding at any particular time: (a) the amount of any
Investment represented by a guaranty shall be taken at not less than the
principal amount of the obligations guaranteed and still outstanding; (b) there
shall be included as an Investment all interest accrued with respect to
Indebtedness constituting an Investment unless and until such interest is paid;
(c) there shall be deducted in respect of each such Investment any amount
received as a return of capital (but only by repurchase, redemption, retirement,
repayment, liquidating dividend or liquidating distribution); (d) there shall
not be deducted in respect of any Investment any amounts received as earnings on
such Investment, whether as dividends, interest or otherwise, except that
accrued interest included as provided in the foregoing clause (b) may be
deducted when paid; and (e) there shall not be deducted from the aggregate
amount of Investments any decrease in the value thereof.
IPO. The initial public offering of the common stock of the Borrower.
LaSalle Loan Agreement. The Credit Agreement, dated as of March 31,
2000, between the Borrower and LaSalle Bank National Association, pursuant to
which LaSalle Bank National Association has agreed to lend to the Borrower
$17,000,000.
LaSalle Loan Documents. The LaSalle Loan Agreement and all agreements
and documents required to be entered into or delivered in connection therewith,
each in the form delivered to the Agent prior to the Closing Date.
Letter of Credit. See Section 4.1.1.
Letter of Credit Application. See Section 4.1.1.
Letter of Credit Fee. See Section 4.6.
Letter of Credit Participation. See Section 4.1.4.
Leverage Ratio. As at any date of determination, the ratio of (a) Total
Funded Indebtedness of the Borrower and its Subsidiaries outstanding on such
date, to (b) Consolidated EBITDA of the Borrower and its Subsidiaries for the
Reference Period ending on such date.
LIBOR Business Day. Any day on which commercial banks are open for
international business (including dealings in Dollar deposits) in London or such
other eurodollar interbank market as may be selected by the Agent in its sole
discretion acting in good faith.
LIBOR Lending Office. Initially, the office of each Bank designated as
such in Schedule 1 hereto; thereafter, such other office of such Bank, if any,
that shall be making or maintaining LIBOR Rate Loans.
LIBOR Rate. For any Interest Period with respect to a LIBOR Rate Loan,
the rate of interest equal to (a) the rate determined by the Agent at which
Dollar deposits for such Interest Period are offered
<PAGE> 17
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based on information presented on Telerate Page 3750 as of 11:00 a.m. London
time on the second LIBOR Business Day prior to the first day of such Interest
Period, divided by (b) a number equal to 1.00 minus the Eurocurrency Reserve
Rate, if applicable.
LIBOR Rate Loans. Loans bearing interest calculated by reference to the
LIBOR Rate.
Loan Documents. This Credit Agreement, the Notes, the Letter of Credit
Applications, the Letters of Credit and the Guaranty.
Loan Request. See Section 2.6.
Loans. Revolving credit loans made or to be made by the Banks to the
Borrower pursuant to Section 2.
Majority Banks. As of any date, the Banks holding at least fifty-one
percent (51%) of the outstanding principal amount of the Notes on such date; and
if no such principal is outstanding, the Banks whose aggregate Commitments
constitutes at least fifty-one percent (51%) of the Total Commitment.
Maturity Date. March 29, 2003.
Maximum Drawing Amount. The maximum aggregate amount that the
beneficiaries may at any time draw under outstanding Letters of Credit, as such
aggregate amount may be reduced from time to time pursuant to the terms of the
Letters of Credit.
Money Market Rate. The fixed rate of interest quoted by the Agent on
the first day of any Interest Period which is the rate the Agent is willing to
charge with respect to a Money Market Rate Loan to be made by the Agent during
such period.
Money Market Rate Loan. Loans being interest calculated by reference to
the Money Market Rate.
Multiemployer Plan. Any multiemployer plan within the meaning of
Section 3(37) of ERISA maintained or contributed to by the Borrower or any ERISA
Affiliate.
Note Record. The grid attached to a Note, or the continuation of such
grid, or any other similar record, including computer records, maintained by any
Bank with respect to any Loan referred to in such Note.
Notes. See Section 2.4.
Obligations. All indebtedness, obligations and liabilities of any of
the Borrower and its Subsidiaries to any of the Banks and the Agent,
individually or collectively, existing on the date of this Credit Agreement or
arising thereafter, direct or indirect, joint or several, absolute or
contingent, matured or unmatured, liquidated or unliquidated, secured or
unsecured, arising by contract, operation of law or otherwise, arising or
incurred under this Credit Agreement or any of the other Loan Documents or in
respect of any of the Loans made or Reimbursement Obligations incurred or any of
the Notes, Letter of Credit Application, Letter of Credit or other instruments
at any time evidencing any thereof.
<PAGE> 18
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outstanding. With respect to the Loans, the aggregate unpaid principal
thereof as of any date of determination.
PBGC. The Pension Benefit Guaranty Corporation created by Section 4002
of ERISA and any successor entity Or entities having similar responsibilities.
Permitted Acquisition. See Section 9.5.1.
Permitted Liens. Liens, security interests and other encumbrances
permitted by Section 9.2.
Person. Any individual, corporation, partnership, trust, unincorporated
association, business, or other legal entity, and any government or any
governmental agency or political subdivision thereof.
Purchase Price. See Section 9.5.1.
Quick Ratio. As at any date of determination, the ratio of (a)
Consolidated Quick Assets of the Borrower and its Subsidiaries on such date, to
(b) Consolidated Current Liabilities of the Borrower and its Subsidiaries on
such date.
Rate Adjustment Period. As defined in the definition of "Applicable
Margin."
RCRA. See Section 7.17(a).
Real Estate. All real property at any time owned or leased (as lessee
or sublessee) by the Borrower or any of its Subsidiaries.
Reference Period. As of any date of determination, the period of four
(4) consecutive fiscal quarters of the Borrower and its Subsidiaries ending on
such date, or if such date is not a fiscal quarter end date, the period of four
(4) consecutive fiscal quarters most recently ended.
Register. See Section 19.3.
Reimbursement Obligation. The Borrower's obligation to reimburse the
Agent and the Banks on account of any drawing under any Letter of Credit as
provided in Section 4.2.
Restricted Payment. In relation to the Borrower and its Subsidiaries,
any (a) Distribution or (b) payment or prepayment by the Borrower or its
Subsidiaries to the Borrower's shareholders or to any Affiliate of the Borrower
or the Borrower's shareholders.
SARA. See Section 7.17(a).
Section 20 Subsidiary. A Subsidiary of the bank holding company
controlling any Bank, which Subsidiary has been granted authority by the Federal
Reserve Board to underwrite and deal in certain Ineligible Securities.
Settlement. The making or receiving of payments, in immediately
available funds, by the Banks, to the extent necessary to cause each Bank's
actual share of the outstanding amount of Loans (after giving effect to any Loan
Request) to be equal to such Bank's Commitment Percentage of the
<PAGE> 19
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outstanding amount of such Loans (after giving effect to any Loan Request), in
any case where, prior to such event or action, the actual share is not so equal.
Settlement Amount. See Section 2.9.1.
Settlement Date. (a) The date which is seven (7) days from the Drawdown
Date of any Money Market Rate Loan made pursuant to Section 2.6.2 hereof, or if
such day is not a Business Day, the Business Day immediately follOwing such
Business Day, (b) at the option of the Agent, on any Business Day following a
day on which the account officers of the Agent active upon the Borrower's
account become aware of the existence of an Event of Default, (c) any Business
Day on which the amount of Loans outstanding from Fleet plus Fleet's Commitment
Percentage of the sum of the Maximum Drawing Amount and any Unpaid Reimbursement
Obligations is equal to or greater than Fleet's Commitment Percentage of the
Total Commitment, or (d) any day on which any conversion of a Money Market Rate
Loan to a Base Rate Loan or a Eurodollar Rate Loan occurs.
Settling Bank. See Section 2.9.1.
Subsidiary. Any corporation, association, trust, or other business
entity of which the designated parent shall at any time own directly or
indirectly through a Subsidiary or Subsidiaries at least a majority (by number
of votes) of the outstanding Voting Stock.
Synthetic Lease. As defined in paragraph (f) of the definition of
"Indebtedness."
Total Commitment. The sum of the Commitments of the Banks, as in effect
from time to time.
Total Funded Indebtedness. All Indebtedness of the Borrower and its
Subsidiaries for borrowed money, purchase money Indebtedness and with respect to
Capitalized Leases and Synthetic Leases, determined on a consolidated basis in
accordance with generally accepted accounting principles.
Type. As to any Loan, its nature as a Base Rate Loan, a Money Market
Rate Loan or a LIBOR Rate Loan.
Uniform Customs. With respect to any Letter of Credit, the Uniform
Customs and Practice for Documentary Credits (1993 Revision), International
Chamber of Commerce Publication No. 500 or any successor version thereto adopted
by the Agent in the ordinary course of its business as a letter of credit issuer
and in effect at the time of issuance of such Letter of Credit.
Unpaid Reimbursement Obligation. Any Reimbursement Obligation for which
the Borrower does not reimburse the Agent and the Banks on the date specified
in, and in accordance with, Section 4.2.
Voting Stock. Stock or similar interests, of any class or classes
(however designated), the holders of which are at the time entitled, as such
holders, to vote for the election of a majority of the directors (or persons
performing similar functions) of the corporation, association, trust or other
business entity involved, whether or not the right so to vote exists by reason
of the happening of a contingency.
1.2. RULES OF INTERPRETATION.
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(a) A reference to any document or agreement shall include
such document or agreement as amended, modified or supplemented from
time to time in accordance with its terms and the terms of this Credit
Agreement.
(b) The singular includes the plural and the plural includes
the singular.
(c) A reference to any law includes any amendment or
modification to such law.
(d) A reference to any Person includes its permitted
successors and permitted assigns.
(e) Accounting terms not otherwise defined herein have the
meanings assigned to them by generally accepted accounting principles
applied on a consistent basis by the accounting entity to which they
refer.
(f) The words "include", "includes" and "including" are not
limiting.
(g) All terms not specifically defined herein or by generally
accepted accounting principles, which terms are defined in the Uniform
Commercial Code as in effect in the Commonwealth of Massachusetts, have
the meanings assigned to them therein, with the term "instrument" being
that defined under Article 9 of the Uniform Commercial Code.
(h) Reference to a particular "Section" refers to that section
of this Credit Agreement unlEss otherwise indicated.
(i) The words "herein", "hereof", "hereunder" and words of
like import shall refer to this Credit Agreement as a whole and not to
any particular section or subdivision of this Credit Agreement.
(j) Unless otherwise expressly indicated, in the computation
of periods of time from a specified date to a later specified date, the
word "from" means "from and including," the words "to" and "until" each
mean "to but excluding," and the word "through" means "to and
including."
(k) This Credit Agreement and the other Loan Documents may use
several different limitations, tests or measurements to regulate the
same or similar matters. All such limitations, tests and measurements
are, however, cumulative and are to be performed in accordance with the
terms thereof.
(l) This Credit Agreement and the other Loan Documents are the
result of negotiation among, and have been reviewed by counsel to,
among others, the Agent and the Borrower and are the product of
discussions and negotiations among all parties. Accordingly, this
Credit Agreement and the other Loan Documents are not intended to be
construed against the Agent or any of the Banks merely on account of
the Agent's or any Bank's involvement in the preparation of such
documents.
(m) All pro forma computations required to be made hereunder
giving effect to any acquisition, investment, sale, disposition, merger
or similar event shall reflect on a pro forma basis such event and, to
the extent applicable, the historical earnings and cash flows
associated with the assets acquired or disposed of and any related
incurrence or reduction of Indebtedness,
<PAGE> 21
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but shall not take into account any projected synergies or similar benefits
expected to be realized as a result of such event.
2. THE REVOLVING CREDIT FACILITY.
2.1. COMMITMENT TO LEND. Subject to the terms and conditions set forth
in this Credit Agreement, each of the Banks severally agrees to lend to the
Borrower and the Borrower may borrow, repay, and reborrow from time to time from
the Closing Date up to but not including the Maturity Date upon notice by the
Borrower to the Agent given in accordance with Section 2.6, such sums as are
requested by the Borrower up to a maximum aggregate amount outstanding (after
giving effect to all amounts requested) at any one time equal to such Bank's
Commitment minus such Bank's Commitment Percentage of the sum of the Maximum
Drawing Amount and all Unpaid Reimbursement Obligations, provided that the sum
of the outstanding amount of the Loans (after giving effect to all amounts
requested) plus the Maximum Drawing Amount and all Unpaid Reimbursement
Obligations shall not at any time exceed the Total Commitment. The Loans shall
be made pro rata in accordance with each Bank's Commitment Percentage. Each
request for a Loan hereunder shall constitute a representation and warranty by
the Borrower that the conditions set forth in Section 11 and Section 12, in the
case of the initial Loans to be made on the Closing Date, And Section 12, in the
case of all other Loans, have been satisfied on the date of such request.
2.2. COMMITMENT FEE. The Borrower agrees to pay to the Agent for the
accounts of the Banks in accordance with their respective Commitment Percentages
a commitment fee (the "Commitment Fee") calculated in accordance with the
pricing grid contained in the definition of "Applicable Margin" for the
Commitment Fee on a per annum basis on the average daily amount during each
calendar quarter or portion thereof from the date hereof to the Maturity Date by
which the Total Commitment minus the sum of the Maximum Drawing Amount and all
Unpaid Reimbursement Obligations exceeds the outstanding amount of Loans during
such calendar quarter. The commitment fee shall be payable quarterly in arrears
on the first day of each calendar quarter for the immediately preceding calendar
quarter commencing on the first such date following the date hereof, with a
final payment on the Maturity Date or any earlier date on which the Commitments
shall terminate.
2.3. REDUCTION OF TOTAL COMMITMENT. The Borrower shall have the right
at any time and from time to time upon five (5) Business Days prior written
notice to the Agent to reduce by $1,000,000 or an integral multiple thereof or
terminate entirely the Total Commitment, whereupon the Commitments of the Banks
shall be reduced pro rata in accordance with their respective Commitment
Percentages of the amount specified in such notice or, as the case may be,
terminated. Promptly after receiving any notice of the Borrower delivered
pursuant to this Section 2.3, the Agent will notify the Banks of the substance
thereof. Upon the effective date of any such reduction or termination, the
Borrower shall pay to the Agent for the respective accounts of the Banks the
full amount of any Commitment Fee then accrued on the amount of the reduction.
No reduction or termination of the Commitments may be reinstated.
2.4. THE NOTES. The Loans shall be evidenced by separate promissory
notes of the Borrower in substantially the form of Exhibit A hereto (each a
"Note"), dated as of the Closing Date and completed with appropriate insertions.
One Note shall be payable to the order of each Bank in a principal amount equal
to such Bank's Commitment or, if less, the outstanding amount of all Loans made
by such Bank, plus interest accrued thereon, as set forth below. The Borrower
irrevocably authorizes each Bank to make or cause to be made, at or about the
time of the Drawdown Date of any Loan or at the time of receipt of any payment
of principal on such Bank's Note, an appropriate notation on such Bank's Note
<PAGE> 22
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Record reflecting the making of such Loan or (as the case may be) the receipt of
such payment. The outstanding amount of the Loans set forth on such Bank's Note
Record shall be prima facie evidence of the principal amount thereof owing and
unpaid to such Bank, but the failure to record, or any error in so recording,
any such amount on such Bank's Note Record shall not limit or otherwise affect
the obligations of the Borrower hereunder or under any Note to make payments of
principal of or interest on any Note when due.
2.5. INTEREST ON LOANS. Except as otherwise provided in Section 5.10,
(a) Each Base Rate Loan shall bear interest for the period
commencing with the Drawdown Date thereof and ending on the last day of
the Interest Period with respect thereto at the rate per annum equal to
the Base Rate plus the Applicable Margin for Base Rate Loans.
(b) Each LIBOR Rate Loan shall bear interest for the period
commencing with the Drawdown Date thereof and ending on the last day of
the Interest Period with respect thereto at the rate of per annum equal
to the LIBOR Rate determined for such Interest Period, plus the
Applicable Margin for LIBOR Rate Loans.
(c) Each Money Market Rate Loan shall bear interest for the
period commencing with the Drawdown Date thereof and ending on the last
day of the Interest Period with respect thereto at the rate per annum
equal to the Money Market Rate.
(d) The Borrower promises to pay interest on each Loan in
arrears on each Interest Payment Date with respect thereto.
2.6. REQUESTS FOR LOANS.
2.6.1. GENERAL. The Borrower shall give to the Agent written
notice in the form of Exhibit B hereto (or telephonic notice confirmed
in a writing in the form of Exhibit B hereto) of each Loan requested
hereunder (a "Loan Request") no less than (a) one (1) Business Day
prior to the proposed Drawdown Date of any Base Rate Loan and (b) three
(3) LIBOR Business Days prior to the proposed Drawdown Date of any
LIBOR Rate Loan. Each such notice shall specify (i) the principal
amount of the Loan requested, (ii) the proposed Drawdown Date of such
Loan, (iii) the Interest Period for such Loan and (iv) the Type of such
Loan. Promptly upon receipt of any such notice, the Agent shall notify
each of the Banks thereof. Each Loan Request shall be irrevocable and
binding on the Borrower and shall obligate the Borrower to accept the
Loan requested from the Banks on the proposed Drawdown Date. Each Loan
Request shall be in a minimum aggregate amount of $1,000,000 or an
integral multiple thereof.
2.6.2. SWING LINE. Notwithstanding the notice and minimum
amount requirements set forth in Section 2.6.1 but otherwise in
accordance with the terms and conditions of this Credit Agreement, the
Agent may, in its sole discretion and without conferring with the
Banks, make Money Market Rate Loans to the Borrower in an amount
requested by the Borrower, but in no event shall the aggregate amount
of all Money Market Rate Loans outstanding at any one time exceed
$5,000,000. The Borrower hereby requests and authorizes the Agent to
make from time to time such Money Market Rate Loan so requested. The
Borrower acknowledges and agrees that the making of such Money Market
Rate Loans shall, in each case, be subject in all respects to the
provisions of this Credit Agreement as if they were Loans covered by a
Loan Request including, without limitation, the limitations set forth
in Section 2.1 and the requirements that the
<PAGE> 23
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applicable provisions of Section 11 (in the case of Loans made on the Closing
Date) and Section 12 be satisfied. All actions taken by the Agent pursuant to
the provisions of this Section 2.6.2 shall be conclusive and binding on the
Borrower and the Banks absent the Agent's gross negligence or willful
misconduct. Loans made pursuant to this Section 2.6.2 shall be Money Market
Rate Loans until converted in accordance with the provisions of the Credit
Agreement and, prior to a Settlement, such interest shall be for the account
of the Agent.
2.6.2.1. PROCEDURAL REQUIREMENT. Money Market Rate
Loans shall be requested and funded in accordance with the
procedures set forth below. Each request for a Money Market
Rate Loan shall be referred to as an "Advance Request".
2.6.2.2. ADVANCE REQUESTS. In the event the Borrower
desires to borrow any Money Market Rate Loan, the Borrower may
request by telephone (a "Rate Request") that the Agent on any
Business Day give the Borrower a firm quotation of the Money
Market Rate Loan which would be applicable to a Money Market
Rate Loan to be made on such day for an Interest Period
commencing on the date of such Rate Request. Each Rate Request
shall (a) specify the aggregate principal amount of the Money
Market Rate Loan to which such rate quotation would apply
(which shall be in integral multiples of $100,000), (b) the
Interest Period being requested for such Money Market Rate
Loan and (c) be received by the Agent not later than 11:00
a.m., Boston time, on such day. At or before 12:00 noon,
Boston time, the Agent shall notify the Borrower by telephone,
telex or telecopier of the Money Market Rate which would apply
to such Money Market Rate Loan; provided, however, that the
Agent may, in its sole and absolute discretion, decline to
give any such quotation. Such rate quotation shall remain in
effect for one hour on such day. If the Borrower wishes to
accept the rate quotation from the Agent, and thereby request
such Money Market Rate Loan, the Borrower shall give the Agent
written notice of acceptance (a "M/M Rate Acceptance"), no
later than the expiration of such one hour period. Each M/M
Rate Acceptance may be given by telex or telecopier (confirmed
by letter), and shall confirm the Borrower's acceptance of
such rate quotation and the aggregate principal amount of the
Money Market Rate Loan requested. Each Advance Request made by
the Borrower shall
(a) obligate the Borrower to borrow the
principal amount of the Money Market Rate Loan requested
thereby; and
(b) constitute a representation and warranty
by the Borrower to the Agent that all of the conditions set
forth in Section 11 and Section 12 hereof have been satisfied.
An Advance Request made by the Borrower shall be
valid if given by an officer or other agent of the Borrower
identified as being an officer or agent authorized by the
Borrower to give such notices in a certificate executed by the
Secretary of the Borrower and delivered to the Agent. The
Agent is authorized to accept any telephonic Advance Requests
or Rate Requests if, in good faith, it believes them to have
been given by such an authorized person, and the Borrower
shall be obligated to borrow the amount of the Money Market
Rate Loan requested thereby and repay all such Money Market
Rate Loans made by the Agent. Any Advance Request or Rate
Request made by an officer or other agent of the Borrower
identified as being an officer or agent authorized by the
Borrower shall be binding upon the Borrower until such time as
the Agent has received
<PAGE> 24
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written notification from the Borrower in the form of a
certificate executed by the Secretary of the Borrower and
delivered to the Agent that such officer or agent, as the case
may be, is no longer authorized by the Borrower to give such
notice.
2.7. CONVERSION OPTIONS.
2.7.1. CONVERSION TO DIFFERENT TYPE OF LOAN. The Borrower may
elect from time to time to convert any outstanding Loan to a Loan of
another Type, provided that (a) with respect to any such conversion of
a Loan to a Base Rate Loan, the Borrower shall give the Agent at least
one (1) Business Day prior written notice of such election; (b) with
respect to any such conversion of a Money Market Rate Loan or a Base
Rate Loan to a LIBOR Rate Loan, the Borrower shall give the Agent at
least three (3) LIBOR Business Days prior written notice of such
election; (c) with respect to any such conversion of a LIBOR Rate Loan
into a Base Rate Loan, such conversion shall only be made on the last
day of the Interest Period with respect thereto and (d) no Loan may be
converted into a LIBOR Rate Loan when any Default or Event of Default
has occurred and is continuing. On the date on which such conversion is
being made each Bank shall take such action as is necessary to transfer
its Commitment Percentage of such Loans to its Domestic Lending Office
or its LIBOR Lending Office, as the case may be. All or any part of
outstanding Loans of any Type may be converted into a Loan of another
Type as provided herein, provided that any partial conversion shall be
in an aggregate principal amount of $1,000,000 or an integral multiple
thereof plus an integral multiple of $100,000 in excess thereof. Each
Conversion Request relating to the conversion of a Loan to a LIBOR Rate
Loan shall be irrevocable by the Borrower.
2.7.2. CONTINUATION OF TYPE OF LOAN. Any Loan of any Type may
be continued as a Loan of the same Type upon the expiration of an
Interest Period with respect thereto by compliance by the Borrower with
the notice provisions contained in Section 2.7.1; provided that no
Money Market Rate Loan or LIBOR Rate Loan may be continued as such when
any Default or Event of Default has occurred and is continuing, but
shall be automatically converted to a Base Rate Loan on the last day of
the first Interest Period relating thereto ending during the
continuance of any Default or Event of Default of which officers of the
Agent active upon the Borrower's account have actual knowledge. In the
event that the Borrower fails to provide any such notice with respect
to the continuation of any Money Market Rate Loan or LIBOR Rate Loan as
such, then such Money Market Rate Loan or LIBOR Rate Loan, as the case
may be, shall be automatically converted to a Base Rate Loan on the
last day of the first Interest Period relating thereto. The Agent shall
notify the Banks promptly when any such automatic conversion
contemplated by this Section 2.7 is scheduled to occur.
2.7.3. LIBOR RATE LOANS. Any conversion to or from LIBOR Rate
Loans shall be in such amounts and be made pursuant to such elections
so that, after giving effect thereto, the aggregate principal amount of
all LIBOR Rate Loans having the same Interest Period shall not be less
than $1,000,000 or an integral multiple of $1,000,000 in excess
thereof. In addition, there shall be more than five (5) LIBOR Rate
Loans outstanding at any one time.
2.8. FUNDS FOR LOAN.
2.8.1. FUNDING PROCEDURES. Not later than 11:00 a.m. (Boston
time) on the proposed Drawdown Date of any Loans, each of the Banks
will make available to the Agent, at the Agent's Head Office, in
immediately available funds, the amount of such Bank's Commitment
<PAGE> 25
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Percentage of the amount of the requested Loans. Upon receipt from each
Bank of such amount, and upon receipt of the documents required by
Sections 11 and 12 and the satisfaction of the other conditions
set forth therein, to the extent applicable, the Agent will make
available to the Borrower the aggregate amount of such Loans made
available to the Agent by the Banks. The failure or refusal of any Bank
to make available to the Agent at the aforesaid time and place on any
Drawdown Date the amount of its Commitment Percentage of the requested
Loans shall not relieve any other Bank from its several obligation
hereunder to make available to the Agent the amount of such other
Bank's Commitment Percentage of any requested Loans.
2.8.2. ADVANCES BY AGENT. The Agent may, unless notified to
the contrary by any Bank prior to a Drawdown Date, assume that such
Bank has made available to the Agent on such Drawdown Date the amount
of such Bank's Commitment Percentage of the Loans to be made on such
Drawdown Date, and the Agent may (but it shall not be required to), in
reliance upon such assumption, make available to the Borrower a
corresponding amount. If any Bank makes available to the Agent such
amount on a date after such Drawdown Date, such Bank shall pay to the
Agent on demand an amount equal to the product of (a) the average
computed for the period referred to in clause (c) below, of the
weighted average interest rate paid by the Agent for federal funds
acquired by the Agent during each day included in such period, times
(b) the amount of such Bank's Commitment Percentage of such Loans,
times (c) a fraction, the numerator of which is the number of days that
elapse from and including such Drawdown Date to the date on which the
amount of such Bank's Commitment Percentage of such Loans shall become
immediately available to the Agent, and the denominator of which is
365. A statement of the Agent submitted to such Bank with respect to
any amounts owing under this paragraph shall be prima facie evidence of
the amount due and owing to the Agent by such Bank. If the amount of
such Bank's Commitment Percentage of such Loans is not made available
to the Agent by such Bank within three (3) Business Days following such
Drawdown Date, the Agent shall be entitled to recover such amount from
the Borrower on demand, with interest thereon at the rate per annum
applicable to the Loans made on such Drawdown Date.
2.9. SETTLEMENTS.
2.9.1. GENERAL. On each Settlement Date, the Agent shall, not
later than 11:00 a.m. (Boston time), give telephonic or facsimile
notice (a) to the Banks and the Borrower of the respective outstanding
amount of Money Market Rate Loans made by the Agent on behalf of the
Banks from the immediately preceding Settlement Date through the close
of business on the prior day and the amount of any Base Rate Loan or
LIBOR Rate Loans to be made (following the giving of notice pursuant to
Section 2.6.1(b)) on such date pursuant to a Loan Request and (b) to
the Banks of the amount (a "Settlement Amount") that each Bank (a
"Settling Bank") shall pay to effect a Settlement of any Money Market
Rate Loan. A statement of the Agent submitted to the Banks and the
Borrower or to the Banks with respect to any amounts owing under this
Section 2.9 shall be prima facie evidence of the amount due and owing.
Each Settling Bank shall, not later than 3:00 p.m. (Boston time) on
such Settlement Date, effect a wire transfer of immediately available
funds to the Agent in the amount of the Settlement Amount for such
Settling Bank. On the Settlement Date, all outstanding Money Market
Rate Loans shall automatically be converted into Base Rate Loans. All
funds advanced by any Bank as a Settling Bank pursuant to this Section
2.9 shall for all purposes be treated as a Base Rate Loan made by such
Settling Bank to the Borrower and all funds received by any Bank
pursuant to this Section 2.9 shall for all purposes be treated as
repayment of amounts owed with respect to Loans made by such Bank. In
the event that any
<PAGE> 26
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bankruptcy, reorganization, liquidation, receivership or similar cases
or proceedings in which the Borrower is a debtor prevent a Settling
Bank from making any Loan to effect a Settlement as contemplated
hereby, such Settling Bank will make such dispositions and arrangements
with the other Banks with respect to such Money Market Rate Loans,
either by way of purchase of participations, distribution, pro tanto
assignment of claims, subrogation or otherwise as shall result in each
Bank's share of the outstanding Loans being equal, as nearly as may be,
to such Bank's Commitment Percentage of the outstanding amount of the
Loans.
2.9.2. FAILURE TO MAKE FUNDS AVAILABLE. The Agent may, unless
notified to the contrary by any Settling Bank prior to a Settlement
Date, assume that such Settling Bank has made or will make available to
the Agent on such Settlement Date the amount of such Settling Bank's
Settlement Amount, and the Agent may (but it shall not be required to),
in reliance upon such assumption, make available to the Borrower a
corresponding amount. If any Settling Bank makes available to the Agent
such amount on a date after such Settlement Date, such Settling Bank
shall pay to the Agent on demand an amount equal to the product of (a)
the average computed for the period referred to in clause (c) below, of
the weighted average interest rate paid by the Agent for federal funds
acquired by the Agent during each day included in such period, times
(b) the amount of such Settlement Amount, times (c) a fraction, the
numerator of which is the number of days that elapse from and including
such Settlement Date to the date on which the amount of such Settlement
Amount shall become immediately available to the Agent, and the
denominator of which is 360. A statement of the Agent submitted to such
Settling Bank with respect to any amounts owing under this Section
2.10.2 shall be prima facie evidence of the amount due and owing to the
Agent by such Settling Bank. If such Settling Bank's Settlement Amount
is not made available to the Agent by such Settling Bank within three
(3) Business Days following such Settlement Date, the Agent shall be
entitled to recover such amount from the Borrower on demand, with
interest thereon at the rate per annum applicable to the Loans as of
such Settlement Date.
2.9.3. NO EFFECT ON OTHER BANKS. The failure or refusal of any
Settling Bank to make available to the Agent at the aforesaid time and
place on any Settlement Date the amount of such Settling Bank's
Settlement Amount shall not (a) relieve any other Settling Bank from
its several obligations hereunder to make available to the Agent the
amount of such other Settling Bank's Settlement Amount or (b) impose
upon any Bank, other than the Settling Bank so failing or refusing, any
liability with respect to such failure or refusal or otherwise increase
the Commitment of such other Bank.
3. REPAYMENT OF THE LOANS.
3.1. MATURITY. The Borrower promises to pay on the Maturity Date, and
there shall become absolutely due and payable on the Maturity Date, all of the
Loans outstanding on such date, together with any and all accrued and unpaid
interest thereon.
3.2. MANDATORY REPAYMENTS OF LOANS. If at any time the sum of the
outstanding amount of the Loans, the Maximum Drawing Amount and all Unpaid
Reimbursement Obligations exceeds the Total Commitment, then the Borrower shall
immediately pay the amount of such excess to the Agent for the respective
accounts of the Banks for application: first, to any Unpaid Reimbursement
Obligations; second, to the Loans; and third, to provide to the Agent cash
collateral for Reimbursement Obligations as contemplated by Section 4.2(b) and
(c). Each payment of any Unpaid Reimbursement Obligations or
<PAGE> 27
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prepayment of Loans shall be allocated among the Banks, in proportion, as nearly
as practicable, to each Reimbursement Obligation or (as the case may be) the
respective unpaid principal amount of each Bank's Note, with adjustments to the
extent practicable to equalize any prior payments or repayments not exactly in
proportion.
3.3. OPTIONAL REPAYMENTS OF LOANS. The Borrower shall have the right,
at its election, to repay the outstanding amount of the Loans, as a whole or in
part, at any time without penalty or premium, provided that any full or partial
prepayment of the outstanding amount of any LIBOR Rate Loans pursuant to this
Section 3.3 may be made only on the last day of the Interest Period relating
thereto. The Borrower shall give the Agent, no later than 10:00 a.m., Boston
time, at least one (1) Business Day prior written notice of any proposed
prepayment pursuant to this Section 3.3 of Base Rate Loans, and three (3) LIBOR
Business Days notice of any proposed prepayment pursuant to this Section 3.3 of
LIBOR Rate Loans, in each case specifying the proposed date of prepayment of
Loans and the principal amount to be prepaid. Each such partial prepayment of
the Loans shall be in an integral multiple of $1,000,000, shall be accompanied
by the payment of accrued interest on the principal prepaid to the date of
prepayment and shall be applied, in the absence of instruction by the Borrower,
first to the principal of Base Rate Loans and then to the principal of LIBOR
Rate Loans, at the Agent's option. Each partial prepayment shall be allocated
among the Banks, in proportion, as nearly as practicable, to the respective
unpaid principal amount of each Bank's Note, with adjustments to the extent
practicable to equalize any prior repayments not exactly in proportion.
4. LETTERS OF CREDIT.
4.1. LETTER OF CREDIT COMMITMENTS.
4.1.1. COMMITMENT TO ISSUE LETTERS OF CREDIT. Subject to the
terms and conditions hereof and the execution and delivery by the
Borrower of a letter of credit application on the Agent's customary
form (a "Letter of Credit Application"), the Agent on behalf of the
Banks and in reliance upon the agreement of the Banks set forth in
Section 4.1.4 and upon the representations and warranties of the
Borrower contained herein, agrees, in its individual capacity, to
issue, extend and renew for the account of the Borrower one or more
standby or documentary letters of credit (individually, a "Letter of
Credit"), in such form as may be requested from time to time by the
Borrower and agreed to by the Agent; provided, however, that, after
giving effect to such request, (a) the sum of the aggregate Maximum
Drawing Amount and all Unpaid Reimbursement Obligations shall not
exceed $5,000,000 at any one time and (b) the sum of (i) the Maximum
Drawing Amount on all Letters of Credit, (ii) all Unpaid Reimbursement
Obligations, and (iii) the amount of all Loans outstanding shall not
exceed the Total Commitment. Notwithstanding the foregoing, the Agent
shall have no obligation to issue any Letter of Credit to support or
secure any Indebtedness of the Borrower or any of its Subsidiaries to
the extent that such Indebtedness was incurred prior to the proposed
issuance date of such Letter of Credit, unless in any such case the
Borrower demonstrates to the satisfaction of the Agent that (x) such
prior incurred Indebtedness was then fully secured by a prior perfected
and unavoidable security interest in collateral provided by the
Borrower or such Subsidiary to the proposed beneficiary of such Letter
of Credit or (y) such prior incurred Indebtedness was then secured or
supported by a letter of credit issued for the account of the Borrower
or such Subsidiary and the reimbursement obligation with respect to
such letter of credit was fully secured by a prior perfected and
unavoidable security interest in collateral provided to the issuer of
such letter of credit by the Borrower or such Subsidiary.
<PAGE> 28
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4.1.2. LETTER OF CREDIT APPLICATIONS. Each Letter of Credit
Application shall be completed to the satisfaction of the Agent. In the
event that any provision of any Letter of Credit Application shall be
inconsistent with any provision of this Credit Agreement, then the
provisions of this Credit Agreement shall, to the extent of any such
inconsistency, govern.
4.1.3. TERMS OF LETTERS OF CREDIT. Each Letter of Credit
issued, extended or renewed hereunder shall, among other things, (a)
provide for the payment of sight drafts for honor thereunder when
presented in accordance with the terms thereof and when accompanied by
the documents described therein, and (b) have an expiry date no later
than the date which is fourteen (14) days (or, if the Letter of Credit
is confirmed by a confirmer or otherwise provides for one or more
nominated persons, forty-five (45) days) prior to the Maturity Date.
Each Letter of Credit so issued, extended or renewed shall be subject
to the Uniform Customs or, in the case of a standby Letter of Credit,
either the Uniform Customs or the International Standby Practices.
4.1.4. REIMBURSEMENT OBLIGATIONS OF BANKS. Each Bank severally
agrees that it shall be absolutely liable, without regard to the
occurrence of any Default or Event of Default or any other condition
precedent whatsoever, to the extent of such Bank's Commitment
Percentage, to reimburse the Agent on demand for the amount of each
draft paid by the Agent under each Letter of Credit to the extent that
such amount is not reimbursed by the Borrower pursuant to Section 4.2
(such agreement for a Bank being called herein the "Letter of Credit
Participation" of such Bank).
4.1.5. PARTICIPATIONS OF BANKS. Each such payment made by a
Bank shall be treated as the purchase by such Bank of a participating
interest in the Borrower's Reimbursement Obligation under Section 4.2
in an amount equal to such payment. Each Bank shall share in accordance
with its participating interest in any interest which accrues pursuant
to Section 4.2.
4.2. REIMBURSEMENT OBLIGATION OF THE BORROWER. In order to induce the
Agent to issue, extend and renew each Letter of Credit and the Banks to
participate therein, the Borrower hereby agrees to reimburse or pay to the
Agent, for the account of the Agent or (as the case may be) the Banks, with
respect to each Letter of Credit issued, extended or renewed by the Agent
hereunder,
(a) except as otherwise expressly provided in Section 4.2(b)
and (c), on each date that any draft presented under such Letter of
Credit is honored by the Agent, or the Agent otherwise makes a payment
with respect thereto, (i) the amount paid by the Agent under or with
respect to such Letter of Credit, and (ii) the amount of any taxes,
fees, charges or other costs and expenses whatsoever incurred by the
Agent or any Bank in connection with any payment made by the Agent or
any Bank under, or with respect to, such Letter of Credit,
(b) upon the reduction (but not termination) of the Total
Commitment to an amount less than the Maximum Drawing Amount, an amount
equal to such difference, which amount shall be held by the Agent for
the benefit of the Banks and the Agent as cash collateral for all
Reimbursement Obligations, and
(c) upon the termination of the Total Commitment, or the
acceleration of the Reimbursement Obligations with respect to all
Letters of Credit in accordance with Section 13, an amount equal to the
then Maximum Drawing Amount on all Letters of Credit, which amount
shall be held by the Agent for the benefit of the Banks and the Agent
as cash collateral for all Reimbursement Obligations.
<PAGE> 29
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Each such payment shall be made to the Agent at the Agent's Head Office in
immediately available funds. Interest on any and all amounts remaining unpaid by
the Borrower under this Section 4.2 at any time from the date such amounts
become due and payable (whether as stated in this Section 4.2, by acceleration
or otherwise) until payment in full (whether before or after judgment) shall be
payable to the Agent on demand at the rate specified in Section 5.10 for overdue
principal on the Loans.
4.3. LETTER OF CREDIT PAYMENTS. If any draft shall be presented or
other demand for payment shall be made under any Letter of Credit, the Agent
shall notify the Borrower of the date and amount of the draft presented or
demand for payment and of the date and time when it expects to pay such draft or
honor such demand for payment. If the Borrower fails to reimburse the Agent as
provided in Section 4.2 on or before the date that such draft is paid or other
payment is made by the Agent, the Agent may at any time thereafter notify the
Banks of the amount of any such Unpaid Reimbursement Obligation. No later than
3:00 p.m. (Boston time) on the Business Day next following the receipt of such
notice, each Bank shall make available to the Agent, at the Agent's Head Office,
in immediately available funds, such Bank's Commitment Percentage of such Unpaid
Reimbursement Obligation, together with an amount equal to the product of (a)
the average, computed for the period referred to in clause (c) below, of the
weighted average interest rate paid by the Agent for federal funds acquired by
the Agent during each day included in such period, times (b) the amount equal to
such Bank's Commitment Percentage of such Unpaid Reimbursement Obligation, times
(c) a fraction, the numerator of which is the number of days that elapse from
and including the date the Agent paid the draft presented for honor or otherwise
made payment to the date on which such Bank's Commitment Percentage of such
Unpaid Reimbursement obligation shall become immediately available to the Agent,
and the denominator of which is 360. The responsibility of the Agent to the
Borrower and the Banks shall be only to determine that the documents (including
each draft) delivered under each Letter of Credit in connection with such
presentment shall be in conformity in all material respects with such Letter of
Credit.
4.4. OBLIGATIONS ABSOLUTE. The Borrower's obligations under this
Section 4 shall be absolute and unconditional under any and all circumstances
and irrespective of the occurrence of any Default or Event of Default or any
condition precedent whatsoever or any setoff, counterclaim or defense to payment
which the Borrower may have or have had against the Agent, any Bank or any
beneficiary of a Letter of Credit. The Borrower further agrees with the Agent
and the Banks that the Agent and the Banks shall not be responsible for, and the
Borrower's Reimbursement Obligations under Section 4.2 shall not be affected by,
among other things, the validity or genuineness of documents or of any
endorsements thereon, even if such documents should in fact prove to be in any
or all respects invalid, fraudulent or forged, or any dispute between or among
the Borrower, the beneficiary of any Letter of Credit or any financing
institution or other party to which any Letter of Credit may be transferred or
any claims or defenses whatsoever of the Borrower against the beneficiary of any
Letter of Credit or any such transferee. The Agent and the Banks shall not be
liable for any error, omission, interruption or delay in transmission, dispatch
or delivery of any message or advice, however transmitted, in connection with
any Letter of Credit. The Borrower agrees that any action taken or omitted by
the Agent or any Bank under or in connection with each Letter of Credit and the
related drafts and documents, if done in good faith, shall be binding upon the
Borrower and shall not result in any liability on the part of the Agent or any
Bank to the Borrower.
4.5. RELIANCE BY ISSUER. To the extent not inconsistent with Section
4.4, the Agent shall be entitled to rely, and shall be fully protected in
relying upon, any Letter of Credit, draft, writing, resolution, notice, consent,
certificate, affidavit, letter, cablegram, telegram, telecopy, telex or teletype
message, statement, order or other document believed by it to be genuine and
correct and to have been signed, sent or made
<PAGE> 30
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by the proper Person or Persons and upon advice and statements of legal counsel,
independent accountants and other experts selected by the Agent. The Agent shall
be fully justified in failing or refusing to take any action under this Credit
Agreement unless it shall first have received such advice or concurrence of the
Majority Banks as it reasonably deems appropriate or it shall first be
indemnified to its reasonable satisfaction by the Banks against any and all
liability and expense which may be incurred by it by reason of taking or
continuing to take any such action. The Agent shall in all cases be fully
protected in acting, or in refraining from acting, under this Credit Agreement
in accordance with a request of the Majority Banks, and such request and any
action taken or failure to act pursuant thereto shall be binding upon the Banks
and all future holders of the Notes or of a Letter of Credit Participation.
4.6. LETTER OF CREDIT FEE. The Borrower shall, on the date of issuance
or any extension or renewal of any Letter of Credit pay a fee (in each case, a
"Letter of Credit Fee") to the Agent (a) in respect of each standby Letter of
Credit, calculated at the Applicable Margin per annum for LIBOR Rate Loans on
the face amount of such standby Letter of Credit, plus, to the extent there is
more than one Bank party to the Credit Agreement, a fee equal to one-eighth of
one percent (1/8%) per annum of the face amount of such standby Letter of Credit
(the "Standby Fronting Fee"), which Standby Fronting Fee shall be for the
account of the Agent, as a fronting fee, and the balance of which Letter of
Credit Fee shall be for the accounts of the Banks in accordance with their
respective Commitment Percentages and (b) in respect of each documentary Letter
of Credit calculated at the Applicable Margin per annum for LIBOR Rate Loans on
the face amount of such documentary Letter of Credit, plus to the extent there
is more than one Bank party to the Credit Agreement, a fee equal to one-eighth
of one percent (1/8%) per annum on the face amount of such documentary Letter of
Credit (the "Documentary Fronting Fee"), which Documentary Fronting Fee shall be
for the account of the Agent, as a fronting fee, and the balance of which Letter
of Credit Fee shall be for the accounts of the Banks in accordance with their
respective Commitment Percentages. The Letter of Credit Fee, the Standby
Fronting Fee and the Documentary Fronting Fee shall be payable quarterly in
arrears on the last Business Day of each calendar quarter for the calendar
quarter then ending. In respect of each Letter of Credit, the Borrower shall
also pay to the Agent for the Agent's own account, at such other time or times
as such charges are customarily made by the Agent, the Agent's customary
issuance, amendment, negotiation or document examination and other
administrative fees as in effect from time to time.
5. CERTAIN GENERAL PROVISIONS.
5.1. CLOSING FEES. The Borrower agrees to pay to the Agent for the pro
rata accounts of the Banks on the Closing Date a closing fee in the amount of
and at the times set forth in the Fee Letter.
5.2. FUNDS FOR PAYMENTS.
5.2.1. PAYMENTS TO AGENT. All payments of principal, interest,
Reimbursement Obligations, Commitment Fees, Letter of Credit Fees and
any other amounts due hereunder or under any of the other Loan
Documents shall be made on the due date thereof to the Agent in
Dollars, for the respective accounts of the Banks and the Agent, at the
Agent's Head Office or at such other place that the Agent may from time
to time designate, in each case at or about 11:00 a.m. (Boston,
Massachusetts, time or other local time at the place of payment) and in
immediately available funds.
5.2.2. NO OFFSET, ETC. All payments by the Borrower hereunder
and under any of the other Loan Documents shall be made without
recoupment, setoff or counterclaim and free and clear of and without
deduction for any taxes, levies, imposts, duties, charges, fees,
deductions,
<PAGE> 31
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withholdings, compulsory loans, restrictions or conditions of any
nature now or hereafter imposed or levied by any jurisdiction or any
political subdivision thereof or taxing or other authority therein
unless the Borrower is compelled by law to make such deduction or
withholding. If any such obligation is imposed upon the Borrower with
respect to any amount payable by it hereunder or under any of the other
Loan Documents, the Borrower will pay to the Agent, for the account of
the Banks or (as the case may be) the Agent, on the date on which such
amount is due and payable hereunder or under such other Loan Document,
such additional amount in Dollars as shall be necessary to enable the
Banks or the Agent to receive the same net amount which the Banks or
the Agent would have received on such due date had no such obligation
been imposed upon the Borrower. The Borrower will deliver promptly to
the Agent certificates or other valid vouchers for all taxes or other
charges deducted from or paid with respect to payments made by the
Borrower hereunder or under such other Loan Document.
5.3. COMPUTATIONS. All computations of interest on Base Rate Loans
shall be based on a 365-day year and paid for the actual number of days elapsed.
All computations of interest on LIBOR Rate Loans and of Commitment Fees, Letter
of Credit Fees or other fees shall, unless otherwise expressly provided herein,
be based on a 360-day year and paid for the actual number of days elapsed.
Except as otherwise provided in the definition of the term "Interest Period"
with respect to LIBOR Rate Loans, whenever a payment hereunder or under any of
the other Loan Documents becomes due on a day that is not a Business Day, the
due date for such payment shall be extended to the next succeeding Business Day,
and interest shall accrue during such extension. The outstanding amount of the
Loans as reflected on the Note Records from time to time shall be considered
correct and binding on the Borrower unless within five (5) Business Days after
receipt of any notice by the Agent or any of the Banks of such outstanding
amount, the Agent or such Bank shall notify the Borrower to the contrary.
5.4. INABILITY TO DETERMINE LIBOR RATE. In the event, prior to the
commencement of any Interest Period relating to any LIBOR Rate Loan, the Agent
shall determine or be notified by the Majority Banks that adequate and
reasonable methods do not exist for ascertaining the LIBOR Rate that would
otherwise determine the rate of interest to be applicable to any LIBOR Rate Loan
during any Interest Period, the Agent shall forthwith give notice of such
determination (which shall be conclusive and binding on the Borrower and the
Banks) to the Borrower and the Banks. In such event (a) any Loan Request or
Conversion Request with respect to LIBOR Rate Loans shall be automatically
withdrawn and shall be deemed a request for Base Rate Loans, (b) each LIBOR Rate
Loan will automatically, on the last day of the then current Interest Period
relating thereto, become a Base Rate Loan, and (c) the obligations of the Banks
to make LIBOR Rate Loans shall be suspended until the Agent or the Majority
Banks determines that the circumstances giving rise to such suspension no longer
exist, whereupon the Agent or, as the case may be, the Agent upon the
instruction of the Majority Banks, shall so notify the Borrower and the Banks.
5.5. ILLEGALITY. Notwithstanding any other provisions herein, if any
present or future law, regulation, treaty or directive or in the interpretation
or application thereof shall make it unlawful for any Bank to make or maintain
LIBOR Rate Loans, such Bank shall forthwith give notice of such circumstances to
the Borrower and the other Banks and thereupon (a) the commitment of such Bank
to make LIBOR Rate Loans or convert Loans of another Type to LIBOR Rate Loans
shall forthwith be suspended and (b) such Bank's Loans then outstanding as LIBOR
Rate Loans, if any, shall be converted automatically to Base Rate Loans on the
last day of each Interest Period applicable to such LIBOR Rate Loans or within
such earlier period as may be required by law. The Borrower hereby agrees
promptly to pay the Agent for the account of such Bank, upon demand by such
Bank, any additional amounts
<PAGE> 32
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necessary to compensate such Bank for any costs incurred by such Bank in making
any conversion in accordance with this Section 5.5, including any interest or
fees payable by such Bank to lenders of funds obtained by it in order to make or
maintain its LIBOR Rate Loans hereunder.
5.6. ADDITIONAL COSTS, ETC. If any present or future applicable law,
which expression, as used herein, includes statutes, rules and regulations
thereunder and interpretations thereof by any competent court or by any
governmental or other regulatory body or official charged with the
administration or the interpretation thereof and requests, directives,
instructions and notices at any time or from time to time hereafter made upon or
otherwise issued to any Bank or the Agent by any central bank or other fiscal,
monetary or other authority (whether or not having the force of law), shall:
(a) subject any Bank or the Agent to any tax, levy, impost,
duty, charge, fee, deduction or withholding of any nature with respect
to this Credit Agreement, the other Loan Documents, any Letters of
Credit, such Bank's Commitment or the Loans (other than taxes based
upon or measured by the income or profits of such Bank or the Agent),
or
(b) materially change the basis of taxation (except for
changes in taxes on income or profits) of payments to any Bank of the
principal of or the interest on any Loans or any other amounts payable
to any Bank or the Agent under this Credit Agreement or any of the
other Loan Documents, or
(c) impose or increase or render applicable (other than to the
extent specifically provided for elsewhere in this Credit Agreement)
any special deposit, reserve, assessment, liquidity, capital adequacy
or other similar requirements (whether or not having the force of law)
against assets held by, or deposits in or for the account of, or loans
by, or letters of credit issued by, or commitments of an office of any
Bank, or
(d) impose on any Bank or the Agent any other conditions or
requirements with respect to this Credit Agreement, the other Loan
Documents, any Letters of Credit, the Loans, such Bank's Commitment, or
any class of loans, letters of credit or commitments of which any of
the Loans or such Bank's Commitment forms a part, and the result of any
of the foregoing is
(i) to increase the cost to any Bank of making,
funding, issuing, renewing, extending or maintaining any of
the Loans or such Bank's Commitment or any Letter of Credit,
or
(ii) to reduce the amount of principal, interest,
Reimbursement Obligation or other amount payable to such Bank
or the Agent hereunder on account of such Bank's Commitment,
any Letter of Credit or any of the Loans, or
(iii) to require such Bank or the Agent to make any
payment or to forego any interest or Reimbursement Obligation
or other sum payable hereunder, the amount of which payment or
foregone interest or Reimbursement Obligation or other sum is
calculated by reference to the gross amount of any sum
receivable or deemed received by such Bank or the Agent from
the Borrower hereunder,
then, and in each such case, the Borrower will, upon demand made by such Bank or
(as the case may be) the Agent at any time and from time to time and as often as
the occasion therefor may arise, pay to such Bank or the Agent such additional
amounts as will be sufficient to compensate such Bank or the Agent
<PAGE> 33
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for such additional cost, reduction, payment or foregone interest or
Reimbursement Obligation or other sum. Each Bank shall allocate such cost
increases among its customers in good faith and on an equitable basis.
5.7. CAPITAL ADEQUACY. If after the date hereof any Bank or the Agent
determines that (a) the adoption of or change in any law, governmental rule,
regulation, policy, guideline or directive (whether or not having the force of
law) regarding capital requirements for banks or bank holding companies or any
change in the interpretation or application thereof by a court or governmental
authority with appropriate jurisdiction, or (b) compliance by such Bank or the
Agent or any corporation controlling such Bank or the Agent with any law,
governmental rule, regulation, policy, guideline or directive (whether or not
having the force of law) of any such entity regarding capital adequacy, has the
effect of reducing the return on such Bank's or the Agent's commitment with
respect to any Loans to a level below that which such Bank or the Agent could
have achieved but for such adoption, change or compliance (taking into
consideration such Bank's or the Agent's then existing policies with respect to
capital adequacy and assuming full utilization of such entity's capital) by any
amount deemed by such Bank or (as the case may be) the Agent to be material,
then such Bank or the Agent may notify the Borrower of such fact. To the extent
that the amount of such reduction in the return on capital is not reflected in
the Base Rate, the Borrower and such Bank shall thereafter attempt to negotiate
in good faith, within thirty (30) days of the day on which the Borrower receives
such notice, an adjustment payable hereunder that will adequately compensate
such Bank in light of these circumstances. If the Borrower and such Bank are
unable to agree to such adjustment within thirty (30) days of the date on which
the Borrower receives such notice, then commencing on the date of such notice
(but not earlier than the effective date of any such increased capital
requirement), the fees payable hereunder shall increase by an amount that will,
in such Bank's reasonable determination, provide adequate compensation. Each
Bank shall allocate such cost increases among its customers in good faith and on
an equitable basis.
5.8. CERTIFICATE. A certificate setting forth any additional amounts
payable pursuant to Sections 5.6 or 5.7 and a brief explanation of such
amounts which are due, submitted by any Bank or the Agent to the Borrower, shall
be conclusive, absent manifest error, that such amounts are due and owing.
5.9. INDEMNITY. The Borrower agrees to indemnify each Bank and to hold
each Bank harmless from and against any loss, cost or expense (including loss of
anticipated profits) that such Bank may sustain or incur as a consequence of (a)
default by the Borrower in payment of the principal amount of or any interest on
any LIBOR Rate Loans as and when due and payable, including any such loss or
expense arising from interest or fees payable by such Bank to lenders of funds
obtained by it in order to maintain its LIBOR Rate Loans, (b) default by the
Borrower in making a borrowing or conversion after the Borrower has given (or is
deemed to have given) a Loan Request or a Conversion Request relating thereto in
accordance with Section 2.6 or Section 2.7 or (c) the making of any payment of a
LIBOR Rate Loan or the making of any conversion of any such Loan to a Base Rate
Loan on a day that is not the last day of the applicable Interest Period with
respect thereto, including interest or fees payable by such Bank to lenders of
funds obtained by it in order to maintain any such Loans.
5.10. INTEREST AFTER DEFAULT. Overdue principal and (to the extent
permitted by applicable law) interest on the Loans and all other overdue amounts
payable hereunder or under any of the other Loan Documents shall bear interest
compounded monthly and payable on demand at a rate per annum equal to two
percent (2.0%) above the rate of interest otherwise applicable to such Loans
pursuant to Section 2.5 until such amount shall be paid in full (after as well
as before judgment)
<PAGE> 34
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6. GUARANTIES.
6.1. GUARANTIES OF SUBSIDIARIES. The Obligations shall be guaranteed
pursuant to the terms of the Guaranty.
7. REPRESENTATIONS AND WARRANTIES.
The Borrower represents and warrants to the Banks and the Agent as
follows:
7.1. CORPORATE AUTHORITY.
7.1.1. INCORPORATION; GOOD STANDING. Each of the Borrower and
its Subsidiaries (a) is a corporation duly organized, validly existing
and in good standing under the laws of its state of incorporation, (b)
has all requisite corporate power to own its property and conduct its
business as now conducted and as presently contemplated, and (c) is in
good standing as a foreign corporation and is duly authorized to do
business in each jurisdiction where such qualification is necessary
except where a failure to be so qualified would not have a materially
adverse effect on the business, assets or financial condition of the
Borrower or such Subsidiary.
7.1.2. AUTHORIZATION. The execution, delivery and performance
of this Credit Agreement and the other Loan Documents to which the
Borrower or any of its Subsidiaries is or is to become a party and the
transactions contemplated hereby and thereby (a) are within the
corporate authority of such Person, (b) have been duly authorized by
all necessary corporate proceedings, (c) do not conflict with or result
in any breach or contravention of any provision of law, statute, rule
or regulation to which the Borrower or any of its Subsidiaries is
subject or any judgment, order, writ, injunction, license or permit
applicable to the Borrower or any of its Subsidiaries and (d) do not
conflict with any provision of the corporate charter or bylaws of, or
any agreement or other instrument binding upon, the Borrower or any of
its Subsidiaries.
7.1.3. ENFORCEABILITY. The execution and delivery of this
Credit Agreement and the other Loan Documents to which the Borrower or
any of its Subsidiaries is or is to become a party will result in valid
and legally binding obligations of such Person enforceable against it
in accordance with the respective terms and provisions hereof and
thereof, except as enforceability is limited by bankruptcy, insolvency,
reorganization, moratorium or other laws relating to or affecting
generally the enforcement of creditors' rights and except to the extent
that availability of the remedy of specific performance or injunctive
relief is subject to the discretion of the court before which any
proceeding therefor may be brought.
7.2. GOVERNMENTAL APPROVALS. The execution, delivery and performance by
the Borrower and any of its Subsidiaries of this Credit Agreement and the other
Loan Documents to which the Borrower or any of its Subsidiaries is or is to
become a party and the transactions contemplated hereby and thereby do not
require the approval or consent of, or filing with, any governmental agency or
authority other than those already obtained.
7.3. TITLE TO PROPERTIES; LEASES. Except as indicated on Schedule 7.3
hereto, the Borrower and its Subsidiaries own all of the assets reflected in the
consolidated balance sheet of the Borrower and its Subsidiaries as at the
Balance Sheet Date or acquired since that date (except property and assets sold
or otherwise disposed of in the ordinary course of business since that date),
subject to no rights of others,
<PAGE> 35
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including any mortgages, leases, conditional sales agreements, title retention
agreements, liens or other encumbrances except Permitted Liens.
7.4. FINANCIAL STATEMENTS AND PROJECTIONS.
7.4.1. FISCAL YEAR. The Borrower and each of its Subsidiaries
has a fiscal year which is the twelve months ending on September 30 of
each calendar year.
7.4.2. FINANCIAL STATEMENTS. There has been furnished to each
of the Banks a consolidated balance sheet of the Borrower and its
Subsidiaries as at the Balance Sheet Date, and a consolidated statement
of income of the Borrower and its Subsidiaries for the fiscal year then
ended, certified by PricewaterhouseCoopers LLP. Such balance sheet and
statement of income have been prepared in accordance with generally
accepted accounting principles and fairly present the financial
condition of the Borrower as at the close of business on the date
thereof and the results of operations for the fiscal year then ended.
There are no contingent liabilities of the Borrower or any of its
Subsidiaries as of such date involving material amounts, known to the
officers of the Borrower, which were not disclosed in such balance
sheet and the notes related thereto.
7.4.3. PROJECTIONS. The projections of the annual operating
budgets of the Borrower and its Subsidiaries on a consolidated basis,
balance sheets and cash flow statements for the 2000 to 2002 fiscal
years, copies of which have been delivered to each Bank, disclose all
assumptions made with respect to general economic, financial and market
conditions used in formulating such projections. To the knowledge of
the Borrower or any of its Subsidiaries, no facts exist that
(individually or in the aggregate) would result in any material change
in any of such projections. The projections are based upon reasonable
estimates and assumptions, have been prepared on the basis of the
assumptions stated therein and reflect the reasonable estimates of the
Borrower and its Subsidiaries of the results of operations and other
information projected therein.
7.4.4. SOLVENCY. The Borrower and its Subsidiaries, on a
consolidated and consolidating basis, both before and after giving
effect to the transactions contemplated by this Credit Agreement and
the other Loan Documents (a) are solvent; (b) have assets having a fair
value in excess of their liabilities; (c) have assets having a fair
value in excess of the amount required to pay their liabilities on
existing debts as such debts become due and payable, and (d) have, and
expect to continue to have, access to adequate capital for the conduct
of their business and the ability to pay their debts from time to time
incurred in connection with the operation of their business as such
debts mature.
7.5. NO MATERIAL CHANGES, ETC. Since the Balance Sheet Date there has
occurred no materially adverse change in the financial condition or business of
the Borrower and its Subsidiaries as shown on or reflected in the consolidated
balance sheet of the Borrower and its Subsidiaries as at the Balance Sheet Date,
or the consolidated statement of income for the fiscal year then ended, other
than changes in the ordinary course of business that have not had any materially
adverse effect either individually or in the aggregate on the business or
financial condition of the Borrower or any of its Subsidiaries. Since the
Balance Sheet Date, the Borrower has not made any Distributions.
7.6. FRANCHISES, PATENTS, COPYRIGHTS, ETC. Except as set forth in
Schedule 7.7, neither the Borrower nor any Subsidiary has received written
notice from any Person alleging or claiming that the Borrower or any Subsidiary
is infringing any patent, trademark, copyright or any other intellectual
<PAGE> 36
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property rights of such Person, and, in addition, neither the Borrower nor any
Subsidiary has any actual knowledge of any claim by any Person that would
preclude the Borrower or such Subsidiary from possessing and otherwise using all
franchises, patents (if any), copyrights, trademarks, trade names, licenses and
permits, and rights in respect of the foregoing, which are adequate for the
conduct of its business substantially as now conducted.
7.7. LITIGATION. Except as set forth in Schedule 7.7 hereto, there are
no actions, suits, proceedings or investigations of any kind pending or, to the
best of the Borrower's knowledge, threatened against the Borrower or any of its
Subsidiaries before any court, tribunal or administrative agency or board that,
if adversely determined, might, either in any case or in the aggregate,
materially adversely affect the properties, assets, financial condition or
business of the Borrower and its Subsidiaries or materially impair the right of
the Borrower and its Subsidiaries, considered as a whole, to carry on business
substantially as now conducted by them, or result in any substantial liability
not adequately covered by insurance, or for which adequate reserves are not
maintained on the consolidated balance sheet of the Borrower and its
Subsidiaries, or which question the validity of this Credit Agreement or any of
the other Loan Documents, or any action taken or to be taken pursuant hereto or
thereto.
7.8. NO MATERIALLY ADVERSE CONTRACTS, ETC. Neither the Borrower nor any
of its Subsidiaries is subject to any charter, corporate or, to the best of the
Borrower's knowledge, other legal restriction, or any judgment, decree, order,
rule or regulation that has or is expected in the future to have a materially
adverse effect on the business, assets or financial condition of the Borrower or
any of its Subsidiaries. Neither the Borrower nor any of its Subsidiaries is a
party to any contract or agreement that has or is expected, in the judgment of
the Borrower's officers, to have any materially adverse effect on the business
of the Borrower or any of its Subsidiaries.
7.9. COMPLIANCE WITH OTHER INSTRUMENTS, LAWS, ETC. Neither the Borrower
nor any of its Subsidiaries is in violation of any provision of its charter
documents, bylaws, or any agreement or instrument to which it may be subject or
by which it or any of its properties may be bound or, to the best of the
Borrower's knowledge, any decree, order, judgment, statute, license, rule or
regulation, in any of the foregoing cases in a manner that could result in the
imposition of substantial penalties or materially and adversely affect the
financial condition, properties or business of the Borrower or any of its
Subsidiaries.
7.10. TAX STATUS. The Borrower and its Subsidiaries (a) have made or
filed all federal and state income and all other tax returns, reports and
declarations required by any jurisdiction to which any of them is subject, (b)
have paid all taxes and other governmental assessments and charges shown or
determined to be due on such returns, reports and declarations, except those
being contested in good faith and by appropriate proceedings and (c) have set
aside on their books provisions reasonably adequate for the payment of all taxes
for periods subsequent to the periods to which such returns, reports or
declarations apply. There are no unpaid taxes in any material amount claimed to
be due by the taxing authority of any jurisdiction, and the officers of the
Borrower know of no basis for any such claim.
7.11. NO EVENT OF DEFAULT. No Default or Event of Default has occurred
and is continuing.
7.12. HOLDING COMPANY AND INVESTMENT COMPANY ACTS. Neither the Borrower
nor any of its Subsidiaries is a "holding company", or a "subsidiary company" of
a "holding company", or an "affiliate" of a "holding company", as such terms are
defined in the Public Utility Holding Company Act of 1935; nor is it an
"investment company", or an "affiliated company" or a "principal underwriter" of
an "investment company", as such terms are defined in the Investment Company Act
of 1940.
<PAGE> 37
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7.13. ABSENCE OF FINANCING STATEMENTS, ETC. Except with respect to
Permitted Liens, there is no financing statement, security agreement, chattel
mortgage, real estate mortgage or other document filed or recorded with any
filing records, registry or other public office, that purports to cover, affect
or give notice of any present or possible future lien on, or security interest
in, any assets or property of the Borrower or any of its Subsidiaries or any
rights relating thereto.
7.14. CERTAIN TRANSACTIONS. Except for arm's length transactions
pursuant to which the Borrower or any of its Subsidiaries makes payments in the
ordinary course of business upon terms no less favorable than the Borrower or
such Subsidiary could obtain from third parties, none of the officers,
directors, or employees of the Borrower or any of its Subsidiaries is presently
a party to any transaction with the Borrower or any of its Subsidiaries (other
than for services as employees, officers and directors), including any contract,
agreement or other arrangement providing for the furnishing of services to or
by, providing for rental of real or personal property to or from, or otherwise
requiring payments to or from any officer, director or such employee or, to the
knowledge of the Borrower, any corporation, partnership, trust or other entity
in which any officer, director, or any such employee has a substantial interest
or is an officer, director, trustee or partner.
7.15. EMPLOYEE BENEFIT PLANS.
7.15.1. IN GENERAL. Each Employee Benefit Plan and each
Guaranteed Pension Plan of the Borrower and its Subsidiaries has been
maintained and operated and is being maintained and operated in
compliance in all material respects with the provisions of ERISA and,
to the extent applicable, the Code, including but not limited to the
provisions thereunder respecting prohibited transactions and the
bonding of fiduciaries and other persons handling plan funds as
required by Section 412 of ERISA. The Borrower has heretofore delivered
to the Agent the most recently completed annual report, Form 5500, with
all required attachments, and actuarial statement required to be
submitted under Section 103(d) of ERISA, with respect to each
Guaranteed Pension Plan.
7.15.2. TERMINABILITY OF WELFARE PLANS. No Employee Benefit
Plan of the Borrower or any Subsidiary, which is an employee welfare
benefit plan within the meaning of Section 3(1) or Section 3(2)(B) of
ERISA, provides benefit coverage subsequent to termination of
employment, except as required by Title I, Part 6 of ERISA or the
applicable state insurance laws and certain retiree medical and life
insurance benefits. The Borrower may terminate each such Plan at any
time (or at any time subsequent to the expiration of any applicable
bargaining agreement) in the discretion of the Borrower without
liability to any Person other than for claims arising prior to
termination.
7.15.3. GUARANTEED PENSION PLANS. Each contribution required
to be made to a Guaranteed Pension Plan by the Borrower or any
Subsidiary, whether required to be made to avoid the incurrence of an
accumulated funding deficiency, the notice or lien provisions of
Section 302(f) of ERISA, or otherwise, has been timely made. No waiver
of an accumulated funding deficiency or extension of amortization
periods has been received with respect to any Guaranteed Pension Plan,
and neither the Borrower nor any ERISA Affiliate is obligated to or has
posted security in connection with an amendment to a Guaranteed Pension
Plan pursuant to Section 307 of ERISA or Section 401(a)(29) of the
Code. No liability to the PBGC (other than required insurance premiums,
all of which have been paid) has been incurred by the Borrower or any
ERISA Affiliate with respect to any Guaranteed Pension Plan and there
has not been any ERISA Reportable Event (other than an ERISA Reportable
Event as to which the requirement of 30 days
<PAGE> 38
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notice has been waived), or any other event or condition which presents
a material risk of termination of any Guaranteed Pension Plan by the
PBGC. Based on the latest valuation of each Guaranteed Pension Plan
(which in each case occurred within twelve months of the date of this
representation), and on the actuarial methods and assumptions employed
for that valuation, the aggregate benefit liabilities of all such
Guaranteed Pension Plans within the meaning of Section 4001 of ERISA
did not exceed the aggregate value of the assets of all such Guaranteed
Pension Plans.
7.15.4. MULTIEMPLOYER PLANS. Neither the Borrower nor any
ERISA Affiliate has incurred any material liability (including
secondary liability) to any Multiemployer Plan as a result of a
complete or partial withdrawal from such Multiemployer Plan under
Section 4201 of ERISA or as a result of a sale of assets described in
Section 4204 of ERISA. Neither the Borrower nor any ERISA Affiliate has
been notified that any Multiemployer Plan is in reorganization or
insolvent under and within the meaning of Section 4241 or Section 4245
of ERISA or is at risk of entering reorganization or becoming
insolvent, or that any Multiemployer Plan intends to terminate or has
been terminated under Section 4041A of ERISA.
7.16. USE OF PROCEEDS.
7.16.1. GENERAL. The proceeds of the Loans shall be used for
working capital, general corporate purposes (including, without
limitation, financing all or any portion of any Permitted Acquisition)
and capital expenditures. The Borrower will obtain Letters of Credit
solely for working capital and general corporate purposes.
7.16.2. REGULATIONS U AND X. No portion of any Loan is to be
used, and no portion of any Letter of Credit is to be obtained, for the
purpose of purchasing or carrying any "margin security" or "margin
stock" as such terms are used in Regulations U and X of the Board of
Governors of the Federal Reserve System, 12 C.F.R. Parts 221 and 224.
7.16.3. INELIGIBLE SECURITIES. No portion of the proceeds of
any Loans is to be used, and no portion of any Letter of Credit is to
be obtained, for the purpose of knowingly purchasing, or providing
credit support for the purchase of, during the underwriting or
placement period or within thirty (30) days thereafter, any Ineligible
Securities underwritten or privately placed by a Section 20 Subsidiary.
7.17. ENVIRONMENTAL COMPLIANCE. The Borrower has taken all necessary
steps to investigate the past and present condition and usage of the Real Estate
and the operations conducted thereon and, based upon such diligent
investigation, has determined that:
(a) none of the Borrower, its Subsidiaries or any operator of
the Real Estate or any operations thereon is in violation, or, to the
best of the Borrower's knowledge, alleged violation, of any judgment,
decree, order, law, license, rule or regulation pertaining to
environmental matters, including without limitation, those arising
under the Resource Conservation and Recovery Act ("RCRA"), the
Comprehensive Environmental Response, Compensation and Liability Act of
1980 as amended ("CERCLA"), the Superfund Amendments and
Reauthorization Act of 1986 ("SARA"), the Federal Clean Water Act, the
Federal Clean Air Act, the Toxic Substances Control Act, or any state
or local statute, regulation, ordinance, order or decree relating to
health, safety or the environment (hereinafter "Environmental Laws"),
which violation would have a material adverse effect on the environment
or the business, assets or financial condition of the Borrower or any
of its Subsidiaries;
<PAGE> 39
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(b) neither the Borrower nor any of its Subsidiaries has
received notice from any third party including, without limitation, any
federal, state or local governmental authority, (i) that any one of
them has been identified by the United States Environmental Protection
Agency ("EPA") as a potentially responsible party under CERCLA with
respect to a site listed on the National Priorities List, 40 C.F.R.
Part 300 Appendix B; (ii) that any hazardous waste, as defined by 42
U.S.C. Section 6903(5), any hazardous substances as defined by 42
U.S.C. Section 9601(14), any pollutant or contaminant as defined by 42
U.S.C. Section 9601(33) and any toxic substances, oil or hazardous
materials or other chemicals or substances regulated by any
Environmental Laws ("Hazardous Substances") which any one of them has
generated, transported or disposed of has been found at any site at
which a federal, state or local agency or other third party has
conducted or has ordered that any Borrower or any of its Subsidiaries
conduct a remedial investigation, removal or other response action
pursuant to any Environmental Law; or (iii) that it is or shall be a
named party to any claim, action, cause of action, complaint, or legal
or administrative proceeding (in each case, contingent or otherwise)
arising out of any third party's incurrence of costs, expenses, losses
or damages of any kind whatsoever in connection with the release of
Hazardous Substances;
(c) except as set forth on Schedule 7.17 attached hereto: (i)
no portion of the Real Estate has been used for the handling,
processing, storage or disposal of Hazardous Substances except in
accordance with applicable Environmental Laws; and no underground tank
or other underground storage receptacle for Hazardous Substances is
located on any portion of the Real Estate; (ii) in the course of any
activities conducted by the Borrower, its Subsidiaries or operators of
its properties, no Hazardous Substances have been generated or are
being used on the Real Estate except in accordance with applicable
Environmental Laws; (iii) there have been no releases (i.e. any past or
present releasing, spilling, leaking, pumping, pouring, emitting,
emptying, discharging, injecting, escaping, disposing or dumping) or
threatened releases of Hazardous Substances on, upon, into or from the
properties of the Borrower or its Subsidiaries, which releases would
have a material adverse effect on the value of any of the Real Estate
or adjacent properties or the environment; (iv) to the best of the
Borrower's knowledge, there have been no releases on, upon, from or
into any real property in the vicinity of any of the Real Estate which,
through soil or groundwater contamination, may have come to be located
on, and which would have a material adverse effect on the value of, the
Real Estate; and (v) in addition, any Hazardous Substances that have
been generated on any of the Real Estate have been transported offsite
only by carriers having an identification number issued by the EPA,
treated or disposed of only by treatment or disposal facilities
maintaining valid permits as required under applicable Environmental
Laws, which transporters and facilities have been and are, to the best
of the Borrower's knowledge, operating in compliance with such permits
and applicable Environmental Laws; and
(d) None of the Borrower and its Subsidiaries or any of the
Real Estate is subject to any applicable environmental law requiring
the performance of Hazardous Substances site assessments, or the
removal or remediation of Hazardous Substances, or the giving of notice
to any governmental agency or the recording or delivery to other
Persons of an environmental disclosure document or statement by virtue
of the transactions set forth herein and contemplated hereby, or to the
effectiveness of any other transactions contemplated hereby.
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7.18. SUBSIDIARIES, ETC. Except as set forth on Schedule 7.18(a)
hereto, the Borrower has no Subsidiaries. Except as set forth on Schedule
7.18(b) hereto, neither the Borrower nor any Subsidiary of the Borrower is
engaged in any joint venture or partnership with any other Person.
7.19. DISCLOSURE. None of this Credit Agreement or any of the other
Loan Documents contains any untrue statement of a material fact or omits to
state a material fact (known to the Borrower or any of its Subsidiaries in the
case of any document or information not furnished by it or any of its
Subsidiaries) necessary in order to make the statements herein or therein not
misleading. There is no fact known to the Borrower or any of its Subsidiaries
which materially adversely affects, or which is reasonably likely in the future
to materially adversely affect, the business, assets, financial condition or
prospects of the Borrower or any of its Subsidiaries, exclusive of effects
resulting from changes in general economic conditions, legal standards or
regulatory conditions.
8. AFFIRMATIVE COVENANTS OF THE BORROWER.
The Borrower covenants and agrees that, so long as any Loan, Unpaid
Reimbursement Obligation, Letter of Credit or Note is outstanding or any Bank
has any obligation to make any Loans or the Agent has any obligation to issue,
extend or renew any Letters of Credit:
8.1. PUNCTUAL PAYMENT. The Borrower will duly and punctually pay or
cause to be paid the principal and interest on the Loans, all Reimbursement
Obligations, the Letter of Credit Fees, the Commitment Fees and all other
amounts provided for in this Credit Agreement and the other Loan Documents to
which the Borrower or any of its Subsidiaries is a party, all in accordance with
the terms of this Credit Agreement and such other Loan Documents.
8.2. MAINTENANCE OF OFFICE. The Borrower will maintain its chief
executive office in Aurora, Illinois, or at such other place in the United
States of America as the Borrower shall designate upon written notice to the
Agent, where notices, presentations and demands to or upon the Borrower in
respect of the Loan Documents to which the Borrower is a party may be given or
made.
8.3. RECORDS AND ACCOUNTS. The Borrower will (a) keep, and cause each
of its Subsidiaries to keep, true and accurate records and books of account in
which full, true and correct entries will be made in accordance with generally
accepted accounting principles, (b) maintain adequate accounts and reserves for
all taxes (including income taxes), depreciation, depletion, obsolescence and
amortization of its properties and the properties of its Subsidiaries,
contingencies, and other reserves, and (c) at all times engage
PricewaterhouseCoopers LLP or other independent certified public accountants
satisfactory to the Agent as the independent certified public accountants of the
Borrower and its Subsidiaries and will not permit more than thirty (30) days to
elapse between the cessation of such firm's (or any successor firm's) engagement
as the independent certified public accountants of the Borrower and its
Subsidiaries and the appointment in such capacity of a successor firm as shall
be satisfactory to the Agent.
8.4. FINANCIAL STATEMENTS, CERTIFICATES AND INFORMATION. The Borrower
will deliver to each of the Banks:
(a) as soon as practicable, but in any event not later than
ninety (90) days after the end of each fiscal year of the Borrower, the
consolidated balance sheet of the Borrower and its Subsidiaries and the
consolidating balance sheet of the Borrower and its Subsidiaries, each
as at the end of such year, and the related consolidated statement of
income and consolidated statement of
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cash flow and consolidating statement of income and consolidating
statement of cash flow for such year, each setting forth in comparative
form the figures for the previous fiscal year and all such consolidated
and consolidating statements to be in reasonable detail, prepared in
accordance with generally accepted accounting principles, and certified
without qualification by PricewaterhouseCoopers LLP or by other
independent certified public accountants satisfactory to the Agent,
together with a written statement from such accountants to the effect
that they have read a copy of this Credit Agreement, and that, in
making the examination necessary to said certification, they have
obtained no knowledge of any Default or Event of Default, or, if such
accountants shall have obtained knowledge of any then existing Default
or Event of Default they shall disclose in such statement any such
Default or Event of Default; provided that such accountants shall not
be liable to the Banks for failure to obtain knowledge of any Default
or Event of Default;
(b) as soon as practicable, but in any event not later than
forty-five (45) days after the end of each of the fiscal quarters of
the Borrower, copies of the unaudited consolidated balance sheet of the
Borrower and its Subsidiaries and the unaudited consolidating balance
sheet of the Borrower and its Subsidiaries, each as at the end of such
quarter, and the related consolidated statement of income and
consolidated statement of cash flow and consolidating statement of
income and consolidating statement of cash flow for the portion of the
Borrower's fiscal year then elapsed, all in reasonable detail and
prepared in accordance with generally accepted accounting principles,
together with a certification by the principal financial or accounting
officer of the Borrower that the information contained in such
financial statements fairly presents the financial position of the
Borrower and its Subsidiaries on the date thereof (subject to year-end
adjustments);
(c) simultaneously with the delivery of the financial
statements referred to in subsections (a) and (b) above, a statement
certified by the principal financial or accounting officer of the
Borrower (the "Compliance Certificate") in substantially the form of
Exhibit C hereto and setting forth in reasonable detail computations
evidencing compliance with the covenants contained in Section 11 and
(if applicable) reconciliations to reflect changes in generally
accepted accounting principles since the Balance Sheet Date;
(d) contemporaneously with the filing or mailing thereof,
copies of all material of a financial nature filed with the Securities
and Exchange Commission or sent to the stockholders of the Borrower;
(e) from time to time upon request of the Agent, projections
of the Borrower and its Subsidiaries updating those projections
delivered to the Banks and referred to in Section 7.4.2 or, if
applicable, updating any later such projections delivered in response
to a request pursuant to this Section 8.4(e); and
(f) from time to time such other financial data and
information (including accountants, management letters) as the Agent or
any Bank may reasonably request.
8.5. NOTICES.
8.5.1. DEFAULTS. The Borrower will promptly notify the Agent
and each of the Banks in writing of the occurrence of any Default or
Event of Default. If any Person shall give any notice or take any other
action in respect of a claimed default (whether or not constituting an
Event of Default) under this Credit Agreement or any other note,
evidence of indebtedness, indenture or
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other obligation to which or with respect to which the Borrower or any
of its Subsidiaries is a party or obligor, whether as principal,
guarantor, surety or otherwise, the Borrower shall forthwith give
written notice thereof to the Agent and each of the Banks, describing
the notice or action and the nature of the claimed default.
8.5.2. ENVIRONMENTAL EVENTS. The Borrower will promptly give
notice to the Agent and each of the Banks (a) of any violation of any
Environmental Law that the Borrower or any of its Subsidiaries reports
in writing or is reportable by such Person in writing (or for which any
written report supplemental to any oral report is made) to any federal,
state or local environmental agency and (b) upon becoming aware
thereof, of any inquiry, proceeding, investigation, or other action,
including a notice from any agency of potential environmental
liability, of any federal, state or local environmental agency or
board, that has the potential to materially affect the assets,
liabilities, financial conditions or operations of the Borrower or any
of its Subsidiaries.
8.5.3. NOTIFICATION OF CLAIM AGAINST ASSETS. The Borrower
will, immediately upon becoming aware thereof, notify the Agent and
each of the Banks in writing of any setoff, claims (including, with
respect to the Real Estate, environmental claims), withholdings or
other defenses to which any of the Borrower's or any Subsidiary assets
are subject.
8.5.4. NOTICE OF LITIGATION AND JUDGMENTS. The Borrower will,
and will cause each of its Subsidiaries to, give notice to the Agent
and each of the Banks in writing within fifteen (15) days of becoming
aware of any litigation or proceedings threatened in writing or any
pending litigation and proceedings affecting the Borrower or any of its
Subsidiaries or to which the Borrower or any of its Subsidiaries is or
becomes a party involving an uninsured claim against the Borrower or
any of its Subsidiaries that could reasonably be expected to have a
materially adverse effect on the Borrower or any of its Subsidiaries
and stating the nature and status of such litigation or proceedings.
The Borrower will, and will cause each of its Subsidiaries to, give
notice to the Agent and each of the Banks, in writing, in form and
detail satisfactory to the Agent, within ten (10) days of any judgment
not covered by insurance, final or otherwise, against the Borrower or
any of its Subsidiaries in an amount in excess of $5,000,000.
8.6. CORPORATE EXISTENCE; MAINTENANCE OF PROPERTIES. The Borrower will
do or cause to be done all things necessary to preserve and keep in full force
and effect its corporate existence, rights and franchises and those of its
Subsidiaries and will not, and will not cause or permit any of its Subsidiaries
to, convert to a limited liability company. It (a) will cause all of its
properties and those of its Subsidiaries used or useful in the conduct of its
business or the business of its Subsidiaries to be maintained and kept in good
condition, repair and working order and supplied with all necessary equipment,
(b) will cause to be made all necessary repairs, renewals, replacements,
betterments and improvements thereof, all as in the judgment of the Borrower may
be necessary so that the business carried on in connection therewith may be
properly and advantageously conducted at all times, and (c) will, and will cause
each of its Subsidiaries to, continue to engage primarily in the businesses now
conducted by them and in related businesses; provided that nothing in this
Section 8.6 shall prevent the Borrower from discontinuing the operation and
maintenance of any of its properties or any of those of its Subsidiaries if such
discontinuance is, in the judgment of the Borrower, desirable in the conduct of
its or their business and that do not in the aggregate materially adversely
affect the business of the Borrower and its Subsidiaries on a consolidated
basis.
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8.7. INSURANCE. The Borrower will, and will cause each of its
Subsidiaries to, maintain with financially sound and reputable insurers
insurance with respect to its properties and business against such casualties
and contingencies as shall be in accordance with the general practices of
businesses engaged in similar activities in similar geographic areas and in
amounts, containing such terms, in such forms and for such periods as may be
reasonable and prudent.
8.8. TAXES. The Borrower will, and will cause each of its Subsidiaries
to, duly pay and discharge, or cause to be paid and discharged, before the same
shall become overdue, all taxes, assessments and other governmental charges
imposed upon it and its real properties, sales and activities, or any part
thereof, or upon the income or profits therefrom, as well as all claims for
labor, materials, or supplies that if unpaid might by law become a lien or
charge upon any of its property; provided that any such tax, assessment, charge,
levy or claim need not be paid if the validity or amount thereof shall currently
be contested in good faith by appropriate proceedings and if the Borrower or
such Subsidiary shall have set aside on its books adequate reserves with respect
thereto; and provided further that the Borrower and each Subsidiary of the
Borrower will pay all such taxes, assessments, charges, levies or claims
forthwith upon the commencement of proceedings to foreclose any lien that may
have attached as security therefor.
8.9. INSPECTION OF PROPERTIES AND BOOKS, ETC.
8.9.1. GENERAL. The Borrower shall permit the Banks, through
the Agent or any of the Banks' other designated representatives, to
visit and inspect any of the properties of the Borrower or any of its
Subsidiaries, to examine the books of account of the Borrower and its
Subsidiaries (and to make copies thereof and extracts therefrom), and
to discuss the affairs, finances and accounts of the Borrower and its
Subsidiaries with, and to be advised as to the same by, its and their
officers, all at such reasonable times and intervals as the Agent or
any Bank may reasonably request.
8.9.2. COMMUNICATIONS WITH ACCOUNTANTS. The Borrower
authorizes the Agent and, if accompanied by the Agent, the Banks to
communicate directly with the Borrower's independent certified public
accountants with respect to the business, financial condition and other
affairs of the Borrower or any of its Subsidiaries. At the request of
the Agent, the Borrower shall deliver a letter addressed to such
accountants instructing them to comply with the provisions of this
Section 8.9.2.
8.10. COMPLIANCE WITH LAWS, CONTRACTS, LICENSES, AND PERMITS. The
Borrower will, and will cause each of its Subsidiaries to, comply with (a) the
applicable laws and regulations wherever its business is conducted, including
all Environmental Laws, (b) the provisions of its charter documents and by-laws,
(c) all agreements and instruments by which it or any of its properties may be
bound and (d) all applicable decrees, orders, and judgments. If any
authorization, consent, approval, permit or license from any officer, agency or
instrumentality of any government shall become necessary or required in order
that the Borrower or any of its Subsidiaries may fulfill any of its obligations
hereunder or any of the other Loan Documents to which the Borrower or such
Subsidiary is a party, the Borrower will, or (as the case may be) will cause
such Subsidiary to, immediately take or cause to be taken all reasonable steps
within the power of the Borrower or such Subsidiary to obtain such
authorization, consent, approval, permit or license and furnish the Agent and
the Banks with evidence thereof.
8.11. EMPLOYEE BENEFIT PLANS. The Borrower will (a) promptly upon
filing the same with the Department of Labor or Internal Revenue Service upon
request of the Agent, furnish to the Agent a copy
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of the most recent actuarial statement required to be submitted under
Section 103(d) of ERISA and Annual Report, Form 5500, with all required
attachments, in respect of each Guaranteed Pension Plan and (b) promptly upon
receipt or dispatch, furnish to the Agent any notice, report or demand sent or
received in respect of a Guaranteed Pension Plan under Sections 302, 4041,
4042, 4043, 4063, 4065, 4066 and 4068 of ERISA, or in respect of a Multiemployer
Plan, under Sections 4041A, 4202, 4219, 4242, or 4245 of ERISA.
8.12. USE OF PROCEEDS. The Borrower will use the proceeds of the Loans
solely for the purposes specified in Section 7.16.1. The Borrower will obtain
Letters of Credit solely for general corporate purposes.
8.13. REPLACEMENT INSTRUMENTS. Upon receipt of an affidavit of an
officer of the Agent or any Bank as to the loss, theft, destruction or
mutilation of any Note, and, in the case of any such loss, theft, destruction or
mutilation, upon cancellation of such Note, the Borrower shall issue, in lieu
thereof, a replacement Note in the same principal amount thereof and otherwise
of like tenor.
8.14. NEW GUARANTORS. The Borrower will cause each Domestic Subsidiary
created, acquired or otherwise existing, on or after the Closing Date to
immediately become a Guarantor on the Closing Date or on the date of its
acquisition or formation, as the case may be, and shall cause such Domestic
Subsidiary to execute and deliver to the Agent, for the benefit of the Agent and
the Banks, a Guaranty, together with legal opinions in form and substance
satisfactory to the Agent to be delivered to the Agent and the Banks opining as
to authorization validity and enforceability of such Guaranty and as to the due
incorporation, and legal existence of such Domestic Subsidiary.
8.15. ADDITIONAL SUBSIDIARIES. If, after the Closing Date, the Borrower
or any of its Subsidiaries creates or acquires, either directly or indirectly,
any Subsidiary, it will immediately notify the Agent of such creation or
acquisition, as the case may be, and provide the Agent with an updated Schedule
7.18(a) hereof and take all other actions required by Section 8.14 and
Section 9.5.1 hereof.
8.16. FURTHER ASSURANCES. The Borrower will, and will cause each of its
Subsidiaries to, cooperate with the Banks and the Agent and execute such further
instruments and documents as the Banks or the Agent shall reasonably request to
carry out to their satisfaction the transactions contemplated by this Credit
Agreement and the other Loan Documents.
9. CERTAIN NEGATIVE COVENANTS OF THE BORROWER.
The Borrower covenants and agrees that, so long as any Loan, Unpaid
Reimbursement Obligation, Letter of Credit or Note is outstanding or any Bank
has any obligation to make any Loans or the Agent has any obligations to issue,
extend or renew any Letters of Credit:
9.1. RESTRICTIONS ON INDEBTEDNESS. The Borrower will not, and will not
permit any of its Subsidiaries to, create, incur, assume, guarantee or be or
remain liable, contingently or otherwise, with respect to any Indebtedness other
than:
(a) Indebtedness to the Banks and the Agent arising under any
of the Loan Documents;
(b) endorsements for collection, deposit or negotiation and
warranties of products or services, in each case incurred in the
ordinary course of business;
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(c) Indebtedness incurred in connection with the acquisition
after the date hereof of any real or personal property by the Borrower
or such Subsidiary or under any Capitalized Lease or Synthetic Lease,
provided that the aggregate principal amount of such Indebtedness of
the Borrower and its Subsidiaries shall not exceed the aggregate amount
of $5,000,000 at any one time;
(d) Indebtedness existing on the date hereof and listed and
described on Schedule 9.1 hereto;
(e) Indebtedness of a Subsidiary of the Borrower to the
Borrower or a Guarantor so long as such Subsidiary is a Guarantor
hereunder and remains a Subsidiary;
(f) unsecured Indebtedness of the Borrower evidenced by the
LaSalle Loan Documents in an aggregate principal amount not to exceed
$17,000,000 outstanding at any time;
(g) unsecured Indebtedness of the Borrower or any Subsidiary
not otherwise permitted by this Section 9.1, provided that the
aggregate amount of such Indebtedness permitted by this Section 9.1(g)
does not exceed $5,000,000 outstanding at any time; and
(g) unsecured Indebtedness in respect of any Derivative
Contracts, provided that such Derivative Contracts are entered into in
the ordinary course of business and not for speculative purposes.
9.2. RESTRICTIONS ON LIENS. The Borrower will not, and will not permit
any of its Subsidiaries to, (a) create or incur or suffer to be created or
incurred or to exist any lien, encumbrance, mortgage, pledge, charge,
restriction or other security interest of any kind upon any of its property or
assets of any character whether now owned or hereafter acquired, or upon the
income or profits therefrom; (b) transfer any of such property or assets or the
income or profits therefrom for the purpose of subjecting the same to the
payment of Indebtedness or performance of any other obligation in priority to
payment of its general creditors; (c) acquire, or agree or have an option to
acquire, any property or assets upon conditional sale or other title retention
or purchase money security agreement, device or arrangement; (d) suffer to exist
for a period of more than thirty (30) days after the same shall have been
incurred any Indebtedness or claim or demand against it that if unpaid might by
law or upon bankruptcy or insolvency, or otherwise, be given any priority
whatsoever over its general creditors; or (e) sell, assign, pledge or otherwise
transfer any "receivables" as defined in clause (g) of the definition of the
term "Indebtedness," with or without recourse; provided that the Borrower or any
of its Subsidiaries may create or incur or suffer to be created or incurred or
to exist:
(a) liens in favor of the Borrower on all or part of the
assets of Subsidiaries of the Borrower securing Indebtedness owing by
Subsidiaries of the Borrower to the Borrower;
(b) liens to secure taxes, assessments and other government
charges in respect of obligations not overdue or liens on properties to
secure claims for labor, material or supplies in respect of obligations
not overdue;
(c) deposits or pledges made in connection with, or to secure
payment of, workmen's compensation, unemployment insurance, old age
pensions or other social security obligations;
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(d) liens on properties in respect of judgments or awards that
have been in force for less than the applicable period for taking an
appeal so long as execution is not levied thereunder or in respect of
which the Borrower or such Subsidiary shall at the time in good faith
be prosecuting an appeal or proceedings for review and in respect of
which a stay of execution shall have been obtained pending such appeal
or review;
(e) liens of carriers, warehousemen, mechanics and
materialmen, and other like liens on properties in existence less than
120 days from the date of creation thereof in respect of obligations
not overdue;
(f) encumbrances on Real Estate consisting of easements,
rights of way, zoning restrictions, restrictions on the use of real
property and defects and irregularities in the title thereto,
landlord's or lessor's liens under leases to which the Borrower or a
Subsidiary of the Borrower is a party, and other minor liens or
encumbrances none of which in the opinion of the Borrower interferes
materially with the use of the property affected in the ordinary
conduct of the business of the Borrower and its Subsidiaries, which
defects do not individually or in the aggregate have a materially
adverse effect on the business of the Borrower individually or of the
Borrower and its Subsidiaries on a consolidated basis;
(g) liens existing on the date hereof and listed on Schedule
9.2 hereto; and
(h) purchase money security interests in or purchase money
mortgages on real or personal property acquired after the date hereof
to secure purchase money Indebtedness of the type and amount permitted
by Section 9.1(c), incurred in connection with the acquisition of such
property, which security interests or mortgages cover only the real or
personal property so acquired.
9.3. RESTRICTIONS ON INVESTMENTS. The Borrower will not, and will not
permit any of its Subsidiaries to, make or permit to exist or to remain
outstanding any Investment except Investments in:
(a) marketable direct or guaranteed obligations of the United
States of America or any OECD country that mature within one (1) year
from the date of purchase by the Borrower;
(b) demand deposits, certificates of deposit, bankers
acceptances and time deposits of United States banks or any other
commercial banks organized under the laws of any other country which is
a member of the OECD having total assets in excess of $1,000,000,000;
(c) securities commonly known as "commercial paper" issued by
a corporation organized and existing under the laws of the United
States of America or any state thereof or any OECD country that at the
time of purchase have been rated and the ratings for which are not less
than "P 1" if rated by Moody's Investors Service, Inc., and not less
than "A 1" if rated by Standard and Poor's Rating Group;
(d) Investments existing on the date hereof and listed on
Schedule 9.3 hereto;
(e) Investments with respect to Indebtedness permitted by
Section 9.1(e) so long as such entities remain Subsidiaries of the
Borrower and remain Guarantors;
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(f) Investments consisting of the Guaranty or Investments by
the Borrower or any Guarantor in Subsidiaries of the Borrower which are
also Guarantors; and
(g) Investments consisting of promissory notes received as
proceeds of asset dispositions permitted by Section 9.5.2.
9.4. RESTRICTED PAYMENTS. Neither the Borrower nor any Subsidiary will
make any Restricted Payment, provided, however, notwithstanding anything to the
contrary contained in this Credit Agreement, so long as no Default or Event of
Default has occurred and is continuing or would exist as a result thereof, (a)
any Subsidiary of the Borrower shall be permitted to make a Restricted Payment
to the Borrower or a Guarantor, (b) the Borrower shall be permitted to make the
Cabot Dividend, (c) the Borrower shall be permitted Restricted Payments to Cabot
Corporation pursuant to the terms of the various agreements between the Borrower
and Cabot Corporation, as described in the preliminary prospectus relating to
the IPO dated March 15, 2000 (under the section entitled "Relationship between
our Company and Cabot Corporation"), which agreements are in place on or before
the date of the completion of the IPO; and (d) the Borrower shall be permitted
to make Distributions (including, without limitation, any repurchase by the
Borrower of any of its capital stock so long as such purchase price is not
greater than the fair market value of such capital stock), provided, that the
aggregate amount of such Distributions made over the life of this Credit
Agreement does not exceed the amount equal to the lesser of (i) fifty percent
(50%) of the Consolidated Net Income of the Borrower and its Subsidiaries
(calculated on a cumulative basis from the Closing Date through and including
the date of any such Distribution) and (ii) $25,000,000.
9.5. MERGER, CONSOLIDATION AND DISPOSITION OF ASSETS.
9.5.1. MERGERS AND ACQUISITIONS. The Borrower will not, and
will not permit any of its Subsidiaries to, become a party to any
merger or consolidation, or agree to or effect any asset acquisition or
stock acquisition (other than the acquisition of assets in the ordinary
course of business consistent with past practices) except (a) the
merger or consolidation of one or more of the Subsidiaries of the
Borrower with and into the Borrower, (b) the merger or consolidation of
two or more Subsidiaries of the Borrower provided, however, to the
extent any Subsidiary is a Guarantor, the survivor of such merger or
consolidation shall be a Guarantor; and (c) any merger or asset or
stock acquisition by the Borrower or any of its Subsidiaries of Persons
in the same or similar line of business as the Borrower, or such
Person's line of business is incidental to the Borrower's existing line
of business (a "Permitted Acquisition") where (i) the Borrower has
provided the Agent with written notice of such Permitted Acquisition,
which notice shall include a reasonably detailed description of such
Permitted Acquisition; (ii) the business to be acquired would not
subject the Agent or the Banks to any additional regulatory or third
party approvals in connection with the exercise of its rights and
remedies under this Credit Agreement or any other Loan Document; (iii)
any Indebtedness incurred or assumed in connection with such Permitted
Acquisition shall have been permitted to be incurred or assumed
pursuant to Section 9.1 hereof; (iv) the Borrower has provided the
Agent with such other information as was reasonably requested by the
Agent; (v) after the consummation of the Permitted Acquisition, to the
extent such acquisition was a stock acquisition, either (A) the Person
so acquired is merged with and into the Borrower or its Subsidiary,
with the Borrower or such Subsidiary, as the case may be, being the
survivor of such merger or (B) to the extent such Person is not merged
with and into the Borrower or a Subsidiary, such Person shall become a
Guarantor hereunder to the extent such Person is a Domestic Subsidiary;
(vi) the aggregate amount of the Purchase Price for all Permitted
Acquisitions (or series of related acquisitions) shall not exceed
$60,000,000 during the life of the Credit Agreement and, in addition
the aggregate amount of the Purchase Price for all Permitted
Acquisitions (or series of related acquisitions) which are payable in
anything other than the capital stock of the Borrower shall not exceed
$30,000,000 in the aggregate; (vii) no more than $15,000,000 in the
aggregate of the Purchase Price for all Permitted Acquisitions (or
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series of related acquisitions) may be funded with borrowings
hereunder; (viii) the board of directors and the shareholders (if
required by applicable law), or the equivalent, of each of the Borrower
and the Person to be acquired has approved such merger, consolidation
or acquisition and such Permitted Acquisition is otherwise considered
"friendly"; (ix) no Default or Event of Default has occurred and is
continuing hereunder or will occur as a result of the Permitted
Acquisition; (x) the Borrower has demonstrated to the satisfaction of
the Agent that the Borrower is in compliance, on a pro forma basis,
with the financial covenants contained in Section 10 hereof both before
and after giving effect to such Permitted Acquisition; and (xi) the
Borrower has delivered to the Agent a certificate of the chief
financial officer of the Borrower to the effect that (A) the Borrower
and its Subsidiaries, on a consolidated and consolidating basis, will
be solvent upon the consummation of the Permitted Acquisition; (B) the
pro forma Compliance Certificate fairly presents the financial
condition of the Borrower and its Subsidiaries as of the date thereof
and after giving effect to such Permitted Acquisition; and (C) no
Default or Event of Default then exists or would result after giving
effect to the Permitted Acquisition. For purposes of this Section
9.5.1, the Purchase Price shall be defined as the aggregate amount of
consideration paid by the Borrower to the seller on the closing date of
any Permitted Acquisition (including, without limitation, the aggregate
amount of all potential earn-out payments and the aggregate amount of
Indebtedness incurred or assumed in connection therewith regardless of
the maturity date thereof). In addition, when valuing the capital stock
component of the Purchase Price, the value of the Borrower's capital
stock shall be valued in the manner consistent with the purchase
agreement pertaining to the Permitted Acquisition, and, to the extent
no such purchase agreement exists, or a valuation method is not
detailed therein, then the value shall equal the average of the fair
market value of the Borrower's capital stock for the ten (10) Business
Days immediately preceding the date on which such Permitted Acquisition
is consummated.
In the event any new Domestic Subsidiary is formed or acquired as a
result of or in connection with any acquisition, the Loan Documents shall be
amended and/or supplemented as necessary to make the terms and conditions of the
Loan Documents applicable to such Domestic Subsidiary. Such Domestic Subsidiary
shall, immediately upon its formation, creation or acquisition, become a
Guarantor hereunder and shall execute and deliver to the Agent a Guaranty.
9.5.2. DISPOSITION OF ASSETS. The Borrower will not, and will
not permit any of its Subsidiaries to, become a party to or agree to or
effect any disposition of assets, other than (a) the sale of inventory,
the licensing of intellectual property and the disposition of obsolete
assets, in each case in the ordinary course of business consistent with
past practices and (b) the disposition or other transfer of assets from
the Borrower to any wholly-owned Domestic Subsidiary (which such
Domestic Subsidiary complying with the conditions set forth in
Section 8.14 hereof).
9.6. SALE AND LEASEBACK. Except as permitted by Section 9.5.1, the
Borrower will not, and will not permit any of its Subsidiaries to, enter into
any arrangement, directly or indirectly, whereby the Borrower or any Subsidiary
of the Borrower shall sell or transfer any property owned by it in order then or
thereafter to lease such property or lease other property that the Borrower or
any Subsidiary of the Borrower intends to use for substantially the same purpose
as the property being sold or transferred.
9.7. COMPLIANCE WITH ENVIRONMENTAL LAWS. The Borrower will not, and
will not permit any of its Subsidiaries to, (a) use any of the Real Estate or
any portion thereof for the handling, processing, storage or disposal of
Hazardous Substances, (b) cause or permit to be located on any of the Real
Estate
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any underground tank or other underground storage receptacle for Hazardous
Substances, (c) generate any Hazardous Substances on any of the Real Estate, (d)
conduct any activity at any Real Estate or use any Real Estate in any manner so
as to cause a release (i.e. releasing, spilling, leaking, pumping, pouring,
emitting, emptying, discharging, injecting, escaping, leaching, disposing or
dumping) or threatened release of Hazardous Substances on, upon or into the Real
Estate or (e) otherwise conduct any activity at any Real Estate or use any Real
Estate in any manner that would violate any Environmental Law or bring such Real
Estate in violation of any Environmental Law.
9.8. EMPLOYEE BENEFIT PLANS. Neither the Borrower nor any ERISA
Affiliate will
(a) engage in any "prohibited transaction" within the meaning
of Section 406 of ERISA or Section 4975 of the Code which could result
in a material liability for the Borrower or any of its Subsidiaries; or
(b) permit any Guaranteed Pension Plan to incur an
"accumulated funding deficiency", as such term is defined in Section
302 of ERISA, whether or not such deficiency is or may be waived; or
(c) fail to contribute to any Guaranteed Pension Plan to an
extent which, or terminate any Guaranteed Pension Plan in a manner
which, could result in the imposition of a lien or encumbrance on the
assets of the Borrower or any of its Subsidiaries pursuant to
Section 302(f) or Section 4068 of ERISA; or
(d) amend any Guaranteed Pension Plan in circumstances
requiring the posting of security pursuant to Section 307 of ERISA or
Section 401(a)(29) of the Code; or
(e) permit or take any action which would result in the
aggregate benefit liabilities (with the meaning of Section 4001 of
ERISA) of all Guaranteed Pension Plans exceeding the value of the
aggregate assets of such Plans, disregarding for this purpose the
benefit liabilities and assets of any such Plan with assets in excess
of benefit liabilities.
9.9. BUSINESS ACTIVITIES. The Borrower will not, and will not permit
any of its Subsidiaries to, engage directly or indirectly (whether through
Subsidiaries or otherwise) in any type of business other than the businesses
conducted by them on the Closing Date and in related businesses.
9.10. FISCAL YEAR. The Borrower will not, and will not permit any of it
Subsidiaries to, change the date of the end of its fiscal year from that set
forth in Section 7.4.1.
9.11. TRANSACTIONS WITH AFFILIATES. Except in respect of the agreements
between the Borrower and Cabot Corporation described in section 9.4(c) hereof,
the Borrower will not, and will not permit any of its Subsidiaries to, engage in
any transaction with any Affiliate (other than for services as employees,
officers and directors), including any contract, agreement or other arrangement
providing for the furnishing of services to or by, providing for rental of real
or personal property to or from, or otherwise requiring payments to or from any
such Affiliate or, to the knowledge of the Borrower, any corporation,
partnership, trust or other entity in which any such Affiliate has a substantial
interest or is an officer, director, trustee or partner, on terms more favorable
to such Person than would have been obtainable on an arm's-length basis in the
ordinary course of business.
9.12. UPSTREAM LIMITATIONS. The Borrower will not, and will not permit
any of its Subsidiaries to, enter into any agreement, contract or arrangement
(other than the Credit Agreement and the other
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Loan Documents) restricting the ability of any Subsidiary to pay or make
dividends or distributions in cash or kind to the Borrower, to make loans,
advances or other payments of whatsoever nature to the Borrower, or to make
transfer or distributions of all or any part of its assets to the Borrower.
9.13. INCONSISTENT AGREEMENTS. The Borrower will not, and will not
permit any of its Subsidiaries to, enter into any agreement containing any
provision which would be violated or breached by the performance by the Borrower
or any of its Subsidiaries of their respective obligations hereunder or under
any of the Loan Documents.
9.14. MODIFICATION OF DOCUMENTS. The Borrower will not, nor will it
permit any of its Subsidiaries to, consent to or agree to any amendment,
supplement or other modification to the Capitalization Documents or the LaSalle
Loan Documents without the prior written consent of the Agent unless such
amendment, supplement or modification would not have any material adverse effect
on the Agent's or the Bank's rights under the Loan Documents or the Borrower's
or any of its Subsidiaries' obligations under the Loan Documents.
10. FINANCIAL COVENANTS OF THE BORROWER.
The Borrower covenants and agrees that, so long as any Loan, Unpaid
Reimbursement Obligation, Letter of Credit or Note is outstanding or any Bank
has any obligation to make any Loans or the Agent has any obligation to issue,
extend or renew any Letters of Credit:
10.1. LEVERAGE RATIO. The Borrower will not at any time permit the
Leverage Ratio to exceed 2.25:1.00.
10.2. QUARTERLY NET INCOME. The Borrower will not permit Consolidated
Net Income (or Deficit) (a) for any single fiscal quarter to be greater than
($7,500,000) and (b) for any two (2) consecutive fiscal quarters to be greater
than ($10,000,000).
10.3. DEBT SERVICE COVERAGE RATIO. The Borrower will not permit the
Debt Service Coverage Ratio as at the end of any fiscal quarter for the
Reference Period ending on such date to be less than 3.00:1.00.
10.4. QUICK RATIO. The Borrower will not permit the Quick Ratio to be
less than 1.25:1.00 at any time.
11. CLOSING CONDITIONS.
The obligations of the Banks to make the initial Loans and of the Agent
to issue any initial Letters of Credit shall be subject to the satisfaction of
the following conditions precedent on or prior to the Closing Date:
11.1. LOAN DOCUMENTS. Each of the Loan Documents shall have been duly
executed and delivered by the respective parties thereto, shall be in full force
and effect and shall be in form and substance satisfactory to each of the Banks.
Each Bank shall have received a fully executed copy of each such document.
11.2. CERTIFIED COPIES OF CHARTER DOCUMENTS. Each of the Banks shall
have received from the Borrower and each Guarantor a copy, certified by a duly
authorized officer of such Person to be true and
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complete on the Closing Date, of each of (a) its charter or other incorporation
documents as in effect on such date of certification, and (b) its by-laws as in
effect on such date.
11.3. CORPORATE ACTION. All corporate action necessary for the valid
execution, delivery and performance by the Borrower and each of the Guarantors
of this Credit Agreement and the other Loan Documents to which it is or is to
become a party shall have been duly and effectively taken, and evidence thereof
satisfactory to the Banks shall have been provided to each of the Banks.
11.4. INCUMBENCY CERTIFICATE. Each of the Banks shall have received
from the Borrower and each Guarantor an incumbency certificate, dated as of the
Closing Date, signed by a duly authorized officer of the Borrower or such
Guarantor, and giving the name and bearing a specimen signature of each
individual who shall be authorized: (a) to sign, in the name and on behalf of
each of the Borrower of such Guarantor, each of the Loan Documents to which the
Borrower or such Guarantor is or is to become a party; (b) in the case of the
Borrower, to make Loan Requests and Conversion Requests and to apply for Letters
of Credit; and (c) to give notices and to take other action on its behalf under
the Loan Documents.
11.5. UCC SEARCH RESULTS. The Agent shall have received from each of
the Borrower and its Subsidiaries the results of UCC searches, indicating no
liens other than Permitted Liens and otherwise in form and substance
satisfactory to the Agent.
11.6. CERTIFICATES OF INSURANCE. The Agent shall have received a
certificate of insurance from an independent insurance broker dated as of the
Closing Date, identifying insurers, types of insurance, insurance limits, and
policy terms.
11.7. SOLVENCY CERTIFICATE. Each of the Banks shall have received an
officer's certificate of the Borrower dated as of the Closing Date as to the
solvency of the Borrower and its Subsidiaries following the consummation of the
transactions contemplated herein and in form and substance satisfactory to the
Banks.
11.8. AUDITED FINANCIALS. The Agent shall have received from the
Borrower, the consolidated balance sheet of the Borrower and its Subsidiaries
for the fiscal year ended September 30, 1999, and the related consolidated
statement of income and statement of cash flow for such year, such financials to
be in reasonable detail, prepared in accordance with generally accepted
accounting principles and certified without qualification by
PricewaterhouseCoopers LLP.
11.9. COMPLETION OF IPO. The IPO shall have been completed on terms and
conditions satisfactory to the Agent.
11.10. PRO FORMA BALANCE SHEET. The Agent shall have received from the
Borrower, a pro forma balance sheet demonstrating that on the Closing Date, on a
pro forma basis after giving effect to the IPO, and after giving effect to the
borrowings hereunder, Indebtedness of the Borrower is less than $22,000,000.
11.11. OPINION OF COUNSEL. Each of the Banks and the Agent shall have
received a favorable legal opinion addressed to the Banks and the Agent, dated
as of the Closing Date, in form and substance satisfactory to the Banks and the
Agent, from counsel to the Borrower and its Subsidiaries.
11.12. PAYMENT OF FEES. The Borrower shall have paid to the Banks or
the Agent, as appropriate, the closing fees pursuant to Section 5.1
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12. CONDITIONS TO ALL BORROWINGS.
The obligations of the Banks to make any Loan, including the initial
Loan, and of the Agent to issue, extend or renew any Letter of Credit, in each
case whether on or after the Closing Date, shall also be subject to the
satisfaction of the following conditions precedent:
12.1. REPRESENTATIONS TRUE; NO EVENT OF DEFAULT. Each of the
representations and warranties of any of the Borrower and its Subsidiaries
contained in this Credit Agreement, the other Loan Documents or in any document
or instrument delivered pursuant to or in connection with this Credit Agreement
shall be true as of the date as of which they were made and shall also be true
at and as of the time of the making of such Loan or the issuance, extension or
renewal of such Letter of Credit, with the same effect as if made at and as of
that time (except to the extent of changes resulting from transactions
contemplated or permitted by this Credit Agreement and the other Loan Documents
and changes occurring in the ordinary course of business that singly or in the
aggregate are not materially adverse, and to the extent that such
representations and warranties relate expressly to an earlier date) and no
Default or Event of Default shall have occurred and be continuing.
12.2. NO LEGAL IMPEDIMENT. No change shall have occurred in any law or
regulations thereunder or interpretations thereof that in the reasonable opinion
of any Bank would make it illegal for such Bank to make such Loan or to
participate in the issuance, extension or renewal of such Letter of Credit or in
the reasonable opinion of the Agent would make it illegal for the Agent to
issue, extend or renew such Letter of Credit.
12.3. GOVERNMENTAL REGULATION. Each Bank shall have received such
statements in substance and form reasonably satisfactory to such Bank as such
Bank shall require for the purpose of compliance with any applicable regulations
of the Comptroller of the Currency or the Board of Governors of the Federal
Reserve System.
12.4. PROCEEDINGS AND DOCUMENTS. All proceedings in connection with the
transactions contemplated by this Credit Agreement, the other Loan Documents and
all other documents incident thereto shall be satisfactory in substance and in
form to the Banks and to the Agent and the Agent's Special Counsel, and the
Banks, the Agent and such counsel shall have received all information and such
counterpart originals or certified or other copies of such documents as the
Agent may reasonably request.
13. EVENTS OF DEFAULT; ACCELERATION; ETC.
13.1. EVENTS OF DEFAULT AND ACCELERATION. If any of the following
events ("Events of Default" or, if the giving of notice or the lapse of time or
both is required, then, prior to such notice or lapse of time, "Defaults") shall
occur:
(a) the Borrower shall fail to pay any principal of the Loans
or any Reimbursement Obligation when the same shall become due and
payable, whether at the stated date of maturity or any accelerated date
of maturity or at any other date fixed for payment;
(b) the Borrower shall fail to pay any interest on the Loans,
the Commitment Fee, any Letter of Credit Fee, the Agent's fee, or other
sums due hereunder or under any of the other Loan Documents, within
three (3) days of when the same shall become due and payable, whether
at the stated date of maturity or any accelerated date of maturity or
at any other date fixed for payment;
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(c) the Borrower shall fail to comply with any of its
covenants contained in Section 8.1, 8.3, 8.4, 8.5.1, 8.6, 8.9, 8.12,
8.13, 8.14, 8.15, 9 and 10;
(d) the Borrower or any of its Subsidiaries shall fail to
perform any term, covenant or agreement contained herein or in any of
the other Loan Documents (other than those specified elsewhere in this
Section 13.1) for fifteen (15) days after written notice of such
failure has been given to the Borrower by the Agent;
(e) any representation or warranty of the Borrower or any of
its Subsidiaries in this Credit Agreement or any of the other Loan
Documents or in any other document or instrument delivered pursuant to
or in connection with this Credit Agreement shall prove to have been
false in any material respect upon the date when made or deemed to have
been made or repeated;
(f) the Borrower or any of its Subsidiaries shall fail to pay
at maturity, or within any applicable period of grace, any obligation
for borrowed money or credit received or in respect of any Capitalized
Leases in an amount in excess of $5,000,000, or fail to observe or
perform any material term, covenant or agreement contained in any
agreement by which it is bound, evidencing or securing borrowed money
or credit received or in respect of any Capitalized Leases in an amount
in excess of $5,000,000, for such period of time as would permit
(assuming the giving of appropriate notice if required) the holder or
holders thereof or of any obligations issued thereunder to accelerate
the maturity thereof, or any such holder or holders shall rescind or
shall have a right to rescind the purchase of any such obligations;
(g) the Borrower or any of its Subsidiaries shall make an
assignment for the benefit of creditors, or admit in writing its
inability to pay or generally fail to pay its debts as they mature or
become due, or shall petition or apply for the appointment of a trustee
or other custodian, liquidator or receiver of the Borrower or any of
its Subsidiaries or of any substantial part of the assets of the
Borrower or any of its Subsidiaries or shall commence any case or other
proceeding relating to the Borrower or any of its Subsidiaries under
any bankruptcy, reorganization, arrangement, insolvency, readjustment
of debt, dissolution or liquidation or similar law of any jurisdiction,
now or hereafter in effect, or shall take any action to authorize or in
furtherance of any of the foregoing, or if any such petition or
application shall be filed or any such case or other proceeding shall
be commenced against the Borrower or any of its Subsidiaries and the
Borrower or any of its Subsidiaries shall indicate its approval
thereof, consent thereto or acquiescence therein or such petition or
application shall not have been dismissed within forty-five (45) days
following the filing thereof;
(h) a decree or order is entered appointing any such trustee,
custodian, liquidator or receiver or adjudicating the Borrower or any
of its Subsidiaries bankrupt or insolvent, or approving a petition in
any such case or other proceeding, or a decree or order for relief is
entered in respect of the Borrower or any Subsidiary of the Borrower in
an involuntary case under federal bankruptcy laws as now or hereafter
constituted;
(i) there shall remain in force, undischarged, unsatisfied and
unstayed, for more than thirty days, whether or not consecutive, any
final judgment against the Borrower or any of its Subsidiaries that,
with other outstanding final judgments, undischarged, against the
Borrower or any of its Subsidiaries exceeds in the aggregate
$5,000,000;
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(j) if any of the Loan Documents shall be cancelled,
terminated, revoked or rescinded otherwise than in accordance with the
terms thereof or with the express prior written agreement, consent or
approval of the Banks, or any action at law, suit or in equity or other
legal proceeding to cancel, revoke or rescind any of the Loan Documents
shall be commenced by or on behalf of the Borrower or any of its
Subsidiaries party thereto or any of their respective stockholders, or
any court or any other governmental or regulatory authority or agency
of competent jurisdiction shall make a determination that, or issue a
judgment, order, decree or ruling to the effect that, any one or more
of the Loan Documents is illegal, invalid or unenforceable in
accordance with the terms thereof;
(k) the Borrower or any ERISA Affiliate incurs any liability
to the PBGC or a Guaranteed Pension Plan pursuant to Title IV of ERISA
in an aggregate amount exceeding $5,000,000, or the Borrower or any
ERISA Affiliate is assessed withdrawal liability pursuant to Title IV
of ERISA by a Multiemployer Plan requiring aggregate annual payments
exceeding $5,000,000, or any of the following occurs with respect to a
Guaranteed Pension Plan: (i) an ERISA Reportable Event, or a failure to
make a required installment or other payment (within the meaning of
Section 302(f)(1) of ERISA), provided that the Agent determines in its
reasonable discretion that such event (A) could be expected to result
in liability of the Borrower or any of its Subsidiaries to the PBGC or
such Guaranteed Pension Plan in an aggregate amount exceeding
$5,000,000 and (B) could constitute grounds for the termination of such
Guaranteed Pension Plan by the PBGC, for the appointment by the
appropriate United States District Court of a trustee to administer
such Guaranteed Pension Plan or for the imposition of a lien in favor
of such Guaranteed Pension Plan; or (ii) the appointment by a United
States District Court of a trustee to administer such Guaranteed
Pension Plan; or (iii) the institution by the PBGC of proceedings to
terminate such Guaranteed Pension Plan;
(l) the Borrower or any of its Subsidiaries shall be enjoined,
restrained or in any way prevented by the order of any court or any
administrative or regulatory agency from conducting any material part
of its business and such order shall continue in effect for more than
thirty (30) days;
(m) there shall occur any material damage to, or loss, theft
or destruction of, any Collateral, whether or not insured, or any
strike, lockout, labor dispute, embargo, condemnation, act of God or
public enemy, or other casualty, which in any such case causes, for
more than fifteen (15) consecutive days, the cessation or substantial
curtailment of revenue producing activities at any facility of the
Borrower or any of its Subsidiaries if such event or circumstance is
not covered by business interruption insurance and would have a
material adverse effect on the business or financial condition of the
Borrower or such Subsidiary;
(n) there shall occur the loss, suspension or revocation of,
or failure to renew, any license or permit now held or hereafter
acquired by the Borrower or any of its Subsidiaries if such loss,
suspension, revocation or failure to renew would have a material
adverse effect on the business or financial condition of the Borrower
or such Subsidiary;
(o) the Borrower or any of its Subsidiaries shall be indicted
for a state or federal crime, or any civil or criminal action shall
otherwise have been brought or threatened against the Borrower or any
of its Subsidiaries, a punishment for which in any such case could
include the
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forfeiture of any assets of the Borrower or such Subsidiary having a
fair market value in excess of $5,000,000; or
(p) any person or group of persons (within the meaning of
Section 13 or 14 of the Securities Exchange Act of 1934, as amended)
other than Cabot Corporation shall have acquired beneficial ownership
(within the meaning of Rule 13d-3 promulgated by the Securities and
Exchange Commission under said Act) of 20% or more of the outstanding
shares of common stock of the Borrower; or, during any period of twelve
consecutive calendar months, individuals who were directors of the
Borrower on the first day of such period shall cease to constitute a
majority of the board of directors of the Borrower;
then, and in any such event, so long as the same may be continuing, the Agent
may, and upon the request of the Majority Banks shall, by notice in writing to
the Borrower declare all amounts owing with respect to this Credit Agreement,
the Notes and the other Loan Documents and all Reimbursement Obligations to be,
and they shall thereupon forthwith become, immediately due and payable without
presentment, demand, protest or other notice of any kind, all of which are
hereby expressly waived by the Borrower; provided that in the event of any Event
of Default specified in Section 13.1(g) or 13.1(h), all such amounts shall
become immediately due and payable automatically and without any requirement of
notice from the Agent or any Bank.
13.2. TERMINATION OF COMMITMENTS. If any one or more of the Events of
Default specified in Section 13.1(g) or Section 13.1(h) shall occur, any unused
portion of the credit hereunder shall forthwith terminate and each of the Banks
shall be relieved of all further obligations to make Loans to the Borrower and
the Agent shall be relieved of all further obligations to issue, extend or renew
Letters of Credit. If any other Event of Default shall have occurred and be
continuing, or if on any Drawdown Date or other date for issuing, extending or
renewing any Letter of Credit the conditions precedent to the making of the
Loans to be made on such Drawdown Date or (as the case may be) to issuing,
extending or renewing such Letter of Credit on such other date are not
satisfied, the Agent may and, upon the request of the Majority Banks, shall, by
notice to the Borrower, terminate the unused portion of the credit hereunder,
and upon such notice being given such unused portion of the credit hereunder
shall terminate immediately and each of the Banks shall be relieved of all
further obligations to make Loans and the Agent shall be relieved of all further
obligations to issue, extend or renew Letters of Credit. No termination of the
credit hereunder shall relieve the Borrower or any of its Subsidiaries of any of
the Obligations.
13.3. REMEDIES. In case any one or more of the Events of Default shall
have occurred and be continuing, and whether or not the Banks shall have
accelerated the maturity of the Loans pursuant to Section 13.1, each Bank, if
owed any amount with respect to the Loans or the Reimbursement Obligations, may,
with the consent of the Majority Banks but not otherwise, proceed to protect and
enforce its rights by suit in equity, action at law or other appropriate
proceeding, whether for the specific performance of any covenant or agreement
contained in this Credit Agreement and the other Loan Documents or any
instrument pursuant to which the Obligations to such Bank are evidenced,
including as permitted by applicable law the obtaining of the ex parte
appointment of a receiver, and, if such amount shall have become due, by
declaration or otherwise, proceed to enforce the payment thereof or any other
legal or equitable right of such Bank. No remedy herein conferred upon any Bank
or the Agent or the holder of any Note or purchaser of any Letter of Credit
Participation is intended to be exclusive of any other remedy and each and every
remedy shall be cumulative and shall be in addition to every other remedy given
hereunder or now or hereafter existing at law or in equity or by statute or any
other provision of law.
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13.4. DISTRIBUTION OF PROCEEDS. In the event that, following the
occurrence or during the continuance of any Default or Event of Default, the
Agent or any Bank, as the case may be, receives any monies in connection with
the enforcement of its rights hereunder or under any of the other Loan
Documents, such monies shall be distributed for application as follows:
(a) First, to the payment of, or (as the case may be) the
reimbursement of the Agent for or in respect of all reasonable costs,
expenses, disbursements and losses which shall have been incurred or
sustained by the Agent in connection with the collection of such monies
by the Agent, for the exercise, protection or enforcement by the Agent
of all or any of the rights, remedies, powers and privileges of the
Agent under this Credit Agreement or any of the other Loan Documents or
in support of any provision of adequate indemnity to the Agent against
any taxes or liens which by law shall have, or may have, priority over
the rights of the Agent to such monies;
(b) Second, to all other Obligations in such order or
preference as the Majority Banks may determine; provided, however, that
(i) distributions shall be made with respect to each type of Obligation
owing to the Banks, such as interest, principal, fees and expenses,
among the Banks pro rata, and (ii) the Agent may in its discretion make
proper allowance to take into account any Obligations not then due and
payable;
(c) Third, upon payment and satisfaction in full or other
provisions for payment in full satisfactory to the Banks and the Agent
of all of the Obligations, to the payment of any obligations required
to be paid pursuant to Section 9-504(1)(c) of the Uniform Commercial
Code of the Commonwealth of Massachusetts; and
(d) Fourth, the excess, if any, shall be returned to the
Borrower or to such other Persons as are entitled thereto.
14. SETOFF.
During the continuance of any Event of Default, any deposits or other
sums credited by or due from any of the Banks to the Borrower and any securities
or other property of the Borrower in the possession of such Bank may be applied
to or set off by such Bank against the payment of Obligations and any and all
other liabilities, direct, or indirect, absolute or contingent, due or to become
due, now existing or hereafter arising, of the Borrower to such Bank. Each of
the Banks agrees with each other Bank that (a) if an amount to be set off is to
be applied to Indebtedness of the Borrower to such Bank, other than Indebtedness
evidenced by the Notes held by such Bank or constituting Reimbursement
Obligations owed to such Bank, such amount shall be applied ratably to such
other Indebtedness and to the Indebtedness evidenced by all such Notes held by
such Bank or constituting Reimbursement Obligations owed to such Bank, and (b)
if such Bank shall receive from the Borrower, whether by voluntary payment,
exercise of the right of setoff, counterclaim, cross action, enforcement of the
claim evidenced by the Notes held by, or constituting Reimbursement Obligations
owed to, such Bank by proceedings against the Borrower at law or in equity or by
proof thereof in bankruptcy, reorganization, liquidation, receivership or
similar proceedings, or otherwise, and shall retain and apply to the payment of
the Note or Notes held by, or Reimbursement Obligations owed to, such Bank any
amount in excess of its ratable portion of the payments received by all of the
Banks with respect to the Notes held by, and Reimbursement Obligations owed to,
all of the Banks, such Bank will make such disposition and arrangements with the
other Banks with respect to such excess, either by way of distribution, pro
tanto assignment of claims, subrogation or otherwise as shall result in each
Bank receiving in respect of the
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Notes held by it or Reimbursement obligations owed it, its proportionate payment
as contemplated by this Credit Agreement; provided that if all or any part of
such excess payment is thereafter recovered from such Bank, such disposition and
arrangements shall be rescinded and the amount restored to the extent of such
recovery, but without interest.
15. THE AGENT.
15.1. AUTHORIZATION.
(a) The Agent is authorized to take such action on behalf of
each of the Banks and to exercise all such powers as are hereunder and
under any of the other Loan Documents and any related documents
delegated to the Agent, together with such powers as are reasonably
incident thereto, provided that no duties or responsibilities not
expressly assumed herein or therein shall be implied to have been
assumed by the Agent.
(b) The relationship between the Agent and each of the Banks
is that of an independent contractor. The use of the term "Agent" is
for convenience only and is used to describe, as a form of convention,
the independent contractual relationship between the Agent and each of
the Banks. Nothing contained in this Credit Agreement nor the other
Loan Documents shall be construed to create an agency, trust or other
fiduciary relationship between the Agent and any of the Banks.
(c) As an independent contractor empowered by the Banks to
exercise certain rights and perform certain duties and responsibilities
hereunder and under the other Loan Documents, the Agent is nevertheless
a "representative" of the Banks, as that term is defined in Article 1
of the Uniform Commercial Code, for purposes of actions for the benefit
of the Banks and the Agent with respect to all collateral security and
guaranties contemplated by the Loan Documents. Such actions include the
designation of the Agent as "secured party", "mortgagee" or the like on
all financing statements and other documents and instruments, whether
recorded or otherwise, relating to the attachment, perfection, priority
or enforcement of any security interests, mortgages or deeds of trust
in collateral security intended to secure the payment or performance of
any of the Obligations, all for the benefit of the Banks and the Agent.
15.2. EMPLOYEES AND AGENTS. The Agent may exercise its powers and
execute its duties by or through employees or agents and shall be entitled to
take, and to rely on, advice of counsel concerning all matters pertaining to its
rights and duties under this Credit Agreement and the other Loan Documents. The
Agent may utilize the services of such Persons as the Agent in its sole
discretion may reasonably determine, and all reasonable fees and expenses of any
such Persons shall be paid by the Borrower.
15.3. NO LIABILITY. Neither the Agent nor any of its shareholders,
directors, officers or employees nor any other Person assisting them in their
duties nor any agent or employee thereof, shall be liable for any waiver,
consent or approval given or any action taken, or omitted to be taken, in good
faith by it or them hereunder or under any of the other Loan Documents, or in
connection herewith or therewith, or be responsible for the consequences of any
oversight or error of judgment whatsoever, except that the Agent or such other
Person, as the case may be, may be liable for losses due to its willful
misconduct or gross negligence.
15.4. NO REPRESENTATIONS.
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15.4.1. GENERAL. The Agent shall not be responsible for the
execution or validity or enforceability of this Credit Agreement, the
Notes, the Letters of Credit, any of the other Loan Documents or any
instrument at any time constituting, or intended to constitute,
collateral security for the Notes, or for the value of any such
collateral security or for the validity, enforceability or
collectability of any such amounts owing with respect to the Notes, or
for any recitals or statements, warranties or representations made
herein or in any of the other Loan Documents or in any certificate or
instrument hereafter furnished to it by or on behalf of the Borrower or
any of its Subsidiaries, or be bound to ascertain or inquire as to the
performance or observance of any of the terms, conditions, covenants or
agreements herein or in any instrument at any time constituting, or
intended to constitute, collateral security for the Notes or to inspect
any of the properties, books or records of the Borrower or any of its
Subsidiaries. The Agent shall not be bound to ascertain whether any
notice, consent, waiver or request delivered to it by the Borrower or
any holder of any of the Notes shall have been duly authorized or is
true, accurate and complete. The Agent has not made nor does it now
make any representations or warranties, express or implied, nor does it
assume any liability to the Banks, with respect to the credit
worthiness or financial conditions of the Borrower or any of its
Subsidiaries. Each Bank acknowledges that it has, independently and
without reliance upon the Agent or any other Bank, and based upon such
information and documents as it has deemed appropriate, made its own
credit analysis and decision to enter into this Credit Agreement.
15.4.2. CLOSING DOCUMENTATION, ETC. For purposes of
determining compliance with the conditions set forth in Section 11,
each Bank that has executed this Credit Agreement shall be deemed to
have consented to, approved or accepted, or to be satisfied with, each
document and matter either sent, or made available, by the Agent to
such Bank for consent, approval, acceptance or satisfaction, or
required thereunder to be to be consent to or approved by or acceptable
or satisfactory to such Bank, unless an officer of the Agent active
upon the Borrower's account shall have received notice from such Bank
prior to the Closing Date specifying such Bank's objection thereto and
such objection shall not have been withdrawn by notice to the Agent to
such effect on or prior to the Closing Date.
15.5. PAYMENTS.
15.5.1. PAYMENTS TO AGENT. A payment by the Borrower to the
Agent hereunder or any of the other Loan Documents for the account of
any Bank shall constitute a payment to such Bank. The Agent agrees
promptly to distribute to each Bank such Bank's pro rata share of
payments received by the Agent for the account of the Banks except as
otherwise expressly provided herein or in any of the other Loan
Documents.
15.5.2. DISTRIBUTION BY AGENT. If in the opinion of the Agent
the distribution of any amount received by it in such capacity
hereunder, under the Notes or under any of the other Loan Documents
might involve it in liability, it may refrain from making distribution
until its right to make distribution shall have been adjudicated by a
court of competent jurisdiction. If a court of competent jurisdiction
shall adjudge that any amount received and distributed by the Agent is
to be repaid, each Person to whom any such distribution shall have been
made shall either repay to the Agent its proportionate share of the
amount so adjudged to be repaid or shall pay over the same in such
manner and to such Persons as shall be determined by such court.
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15.5.3. DELINQUENT BANKS. Notwithstanding anything to the
contrary contained in this Credit Agreement or any of the other Loan
Documents, any Bank that fails (a) to make available to the Agent its
pro rata share of any Loan or to purchase any Letter of Credit
Participation or (b) to comply with the provisions of Section 14 with
respect to making dispositions and arrangements with the other Banks,
where such Bank's share of any payment received, whether by setoff or
otherwise, is in excess of its pro rata share of such payments due and
payable to all of the Banks, in each case as, when and to the full
extent required by the provisions of this Credit Agreement, shall be
deemed delinquent (a "Delinquent Bank") and shall be deemed a
Delinquent Bank until such time as such delinquency is satisfied. A
Delinquent Bank shall be deemed to have assigned any and all payments
due to it from the Borrower, whether on account of outstanding Loans,
Unpaid Reimbursement Obligations, interest, fees or otherwise, to the
remaining nondelinquent Banks for application to, and reduction of,
their respective pro rata shares of all outstanding Loans and Unpaid
Reimbursement Obligations. The Delinquent Bank hereby authorizes the
Agent to distribute such payments to the nondelinquent Banks in
proportion to their respective pro rata shares of all outstanding Loans
and Unpaid Reimbursement Obligations. A Delinquent Bank shall be deemed
to have satisfied in full a delinquency when and if, as a result of
application of the assigned payments to all outstanding Loans and
Unpaid Reimbursement Obligations of the nondelinquent Banks, the Banks'
respective pro rata shares of all outstanding Loans and Unpaid
Reimbursement Obligations have returned to those in effect immediately
prior to such delinquency and without giving effect to the nonpayment
causing such delinquency.
15.6. HOLDERS OF NOTES. The Agent may deem and treat the payee of any
Note or the purchaser of any Letter of Credit Participation as the absolute
owner or purchaser thereof for all purposes hereof until it shall have been
furnished in writing with a different name by such payee or by a subsequent
holder, assignee or transferee.
15.7. INDEMNITY. The Banks ratably agree hereby to indemnify and hold
harmless the Agent and its affiliates from and against any and all claims,
actions and suits (whether groundless or otherwise), losses, damages, costs,
expenses (including any expenses for which the Agent or such affiliate has not
been reimbursed by the Borrower as required by Section 16), and liabilities of
every nature and character arising out of or related to this Credit Agreement,
the Notes, or any of the other Loan Documents or the transactions contemplated
or evidenced hereby or thereby, or the Agent's actions taken hereunder or
thereunder, except to the extent that any of the same shall be directly caused
by the Agent's willful misconduct or gross negligence.
15.8. AGENT AS BANK. In its individual capacity, Fleet shall have the
same obligations and the same rights, powers and privileges in respect to its
Commitment and the Loans made by it, and as the holder of any of the Notes and
as the purchaser of any Letter of Credit Participations, as it would have were
it not also the Agent.
15.9. RESIGNATION. The Agent may resign at any time by giving sixty
(60) days prior written notice thereof to the Banks and the Borrower. Upon any
such resignation, the Majority Banks shall have the right to appoint a successor
Agent. Unless a Default or Event of Default shall have occurred and be
continuing, such successor Agent shall be reasonably acceptable to the Borrower.
If no successor Agent shall have been so appointed by the Majority Banks and
shall have accepted such appointment within thirty (30) days after the retiring
Agent's giving of notice of resignation, then the retiring Agent may, on behalf
of the Banks, appoint a successor Agent, which shall be a financial institution
having a rating of not less than A or its equivalent by Standard & Poor's
Corporation. Upon the acceptance of any
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appointment as Agent hereunder by a successor Agent, such successor Agent shall
thereupon succeed to and become vested with all the rights, powers, privileges
and duties of the retiring Agent, and the retiring Agent shall be discharged
from its duties and obligations hereunder. After any retiring Agent's
resignation, the provisions of this Credit Agreement and the other Loan
Documents shall continue in effect for its benefit in respect of any actions
taken or omitted to be taken by it while it was acting as Agent.
15.10. NOTIFICATION OF DEFAULTS AND EVENTS OF DEFAULT. Each Bank hereby
agrees that, upon learning of the existence of a Default or an Event of Default,
it shall promptly notify the Agent thereof. The Agent hereby agrees that upon
receipt of any notice under this Section 15.10 it shall promptly notify the
other Banks of the existence of such Default or Event of Default.
15.11. DUTIES IN THE CASE OF ENFORCEMENT. In case one of more Events of
Default have occurred and shall be continuing, and whether or not acceleration
of the Obligations shall have occurred, the Agent shall, if (a) so requested by
the Majority Banks and (b) the Banks have provided to the Agent such additional
indemnities and assurances against expenses and liabilities as the Agent may
reasonably request, proceed to enforce the provisions of the Security Documents
authorizing the sale or other disposition of all or any part of the Collateral
and exercise all or any such other legal and equitable and other rights or
remedies as it may have in respect of such Collateral. The Majority Banks may
direct the Agent in writing as to the method and the extent of any such sale or
other disposition, the Banks hereby agreeing to indemnify and hold the Agent,
harmless from all liabilities incurred in respect of all actions taken or
omitted in accordance with such directions, provided that the Agent need not
comply with any such direction to the extent that the Agent reasonably believes
the Agent's compliance with such direction to be unlawful or commercially
unreasonable in any applicable jurisdiction.
16. EXPENSES AND INDEMNIFICATION.
16.1. EXPENSES. The Borrower agrees to pay (a) the reasonable costs of
producing and reproducing this Credit Agreement, the other Loan Documents and
the other agreements and instruments mentioned herein, (b) any taxes (including
any interest and penalties in respect thereto) payable by the Agent or any of
the Banks (other than taxes based upon the Agent's or any Bank's net income) on
or with respect to the transactions contemplated by this Credit Agreement (the
Borrower hereby agreeing to indemnify the Agent and each Bank with respect
thereto), (c) the reasonable fees, expenses and disbursements of the Agent's
Special Counsel or any local counsel to the Agent incurred in connection with
the preparation, syndication, administration or interpretation of the Loan
Documents and other instruments mentioned herein, each closing hereunder, any
amendments, modifications, approvals, consents or waivers hereto or hereunder,
or the cancellation of any Loan Document upon payment in full in cash of all of
the Obligations or pursuant to any terms of such Loan Document for providing for
such cancellation, (d) the fees, expenses and disbursements of the Agent or any
of its affiliates incurred by the Agent or such affiliate in connection with the
preparation, syndication, administration or interpretation of the Loan Documents
and other instruments mentioned herein, including all title insurance premiums
and surveyor, engineering and appraisal charges, (e) all reasonable
out-of-pocket expenses (including without limitation reasonable attorneys' fees
and costs, which attorneys may be employees of any Bank or the Agent, and
reasonable consulting, accounting, appraisal, investment banking and similar
professional fees and charges) incurred by any Bank or the Agent in connection
with (i) the enforcement of or preservation of rights under any of the Loan
Documents against the Borrower or any of its Subsidiaries or the administration
thereof after the occurrence of a Default or Event of Default and (ii) any
litigation, proceeding or dispute whether arising hereunder or otherwise, in any
way related to any Bank's or the
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Agent's relationship with the Borrower or any of its Subsidiaries and (f) all
reasonable fees, expenses and disbursements of any Bank or the Agent incurred in
connection with UCC searches.
16.2. INDEMNIFICATION. The Borrower agrees to indemnify and hold
harmless the Agent, its affiliates and the Banks from and against any and all
claims, actions and suits whether groundless or otherwise, and from and against
any and all liabilities, losses, damages and expenses of every nature and
character arising out of this Credit Agreement or any of the other Loan
Documents or the transactions contemplated hereby including, without limitation,
(a) any actual or proposed use by the Borrower or any of its Subsidiaries of the
proceeds of any of the Loans or Letters of Credit, (b) the Borrower or any of
its Subsidiaries entering into or performing this Credit Agreement or any of the
other Loan Documents or (c) with respect to the Borrower and its Subsidiaries
and their respective properties and assets, the violation of any Environmental
Law, the presence, disposal, escape, seepage, leakage, spillage, discharge,
emission, release or threatened release of any Hazardous Substances or any
action, suit, proceeding or investigation brought or threatened with respect to
any Hazardous Substances (including, but not limited to, claims with respect to
wrongful death, personal injury or damage to property), in each case including,
without limitation, the reasonable fees and disbursements of counsel and
allocated costs of internal counsel incurred in connection with any such
investigation, litigation or other proceeding, except to the extent that any of
the foregoing are directly caused by the gross negligence or willful misconduct
of the otherwise indemnified party. In litigation, or the preparation therefor,
in the event in the opinion of counsel to the Banks and the Agent the interests
of the Borrower, on the one hand and the interests of the Banks and the Agent,
on the other hand are not sufficiently the same or a conflict exists or could
arise as a result of the Borrower, the Agent and the Banks using one counsel,
the Banks and the Agent and its affiliates shall be entitled to select their own
counsel and, in addition to the foregoing indemnity, the Borrower agrees to pay
promptly the reasonable fees and expenses of such counsel, provided, the
Borrower shall only be required to pay the reasonable fees and expenses of one
such counsel so selected by the Agent, unless the Agent or any Bank reasonably
believes a conflict exists or could arise as a result of the Agent and/or the
Banks using one counsel, in which case each of the Banks making such a
determination and the Agent shall be entitled to select their own counsel, and
in addition to the foregoing indemnity, the Borrower agrees to pay promptly the
reasonable fees and expenses of such counsel. If, and to the extent that the
obligations of the Borrower under this Section 16.2 are unenforceable for any
reason, the Borrower hereby agrees to make the maximum contribution to the
payment in satisfaction of such obligations which is permissible under
applicable law.
16.3. SURVIVAL. The covenants contained in this Section 16 shall
survive payment or satisfaction in full of all other Obligations.
17. USURY.
All agreements between the Borrower and the Agent and the Banks are
hereby expressly limited so that in no contingency or event whatsoever, whether
by reason of acceleration of the maturity of the Notes or otherwise, shall the
amount paid or agreed to be paid to the Agent or any Bank for the use or the
forbearance of the Indebtedness represented by any Note exceed the maximum
permissible under applicable law. In this regard, it is expressly agreed that it
is the intent of the Borrower, the Agent and the Banks, in the execution,
delivery and acceptance of the Notes, to contract in strict compliance with the
laws of the Commonwealth of Massachusetts. If, under any circumstances
whatsoever, performance or fulfillment of any provision of any of the Notes or
any of the other Loan Documents at the time such provision is to be performed or
fulfilled shall involve exceeding the limit of validity prescribed by applicable
law, then the obligation so to be performed or fulfilled shall be reduced
automatically to the
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limits of such validity, and if under any circumstances whatsoever the Agent or
any Banks should ever receive as interest an amount which would exceed the
highest lawful rate, such amount which would be excessive interest shall be
applied to the reduction of the principal balance evidenced by the Notes and not
to the payment of interest. The provisions of this Section 27 shall control
every other provision of this Credit Agreement and each of the Notes.
18. SURVIVAL OF COVENANTS, ETC.
All covenants, agreements, representations and warranties made herein,
in the Notes, in any of the other Loan Documents or in any documents or other
papers delivered by or on behalf of the Borrower or any of its Subsidiaries
pursuant hereto shall be deemed to have been relied upon by the Banks and the
Agent, notwithstanding any investigation heretofore or hereafter made by any of
them, and shall survive the making by the Banks of any of the Loans and the
issuance, extension or renewal of any Letters of Credit, as herein contemplated,
and shall continue in full force and effect so long as any Letter of Credit or
any amount due under this Credit Agreement or the Notes or any of the other Loan
Documents remains outstanding or any Bank has any obligation to make any Loans
or the Agent has any obligation to issue, extend or renew any Letter of Credit,
and for such further time as may be otherwise expressly specified in this Credit
Agreement. All statements contained in any certificate or other paper delivered
to any Bank or the Agent at any time by or on behalf of the Borrower or any of
its Subsidiaries pursuant hereto or in connection with the transactions
contemplated hereby shall constitute representations and warranties by the
Borrower or such Subsidiary hereunder.
19. ASSIGNMENT AND PARTICIPATION.
19.1. CONDITIONS TO ASSIGNMENT BY BANKS. Except as provided herein,
each Bank may assign to one or more Eligible Assignees all or a portion of its
interests, rights and obligations under this Credit Agreement (including all or
a portion of its Commitment Percentage and Commitment and the same portion of
the Loans at the time owing to it, the Notes held by it and its participating
interest in the risk relating to any Letters of Credit); provided that (a) each
of the Agent and, unless a Default or Event of Default shall have occurred and
be continuing, the Borrower shall have given its prior written consent to such
assignment, which consent, in the case of the Borrower, will not be unreasonably
withheld, (b) each such assignment shall be of a constant, and not a varying,
percentage of all the assigning Bank's rights and obligations under this Credit
Agreement, (c) each assignment shall be in an amount that is a whole multiple of
$5,000,000 and (d) the parties to such assignment shall execute and deliver to
the Agent, for recording in the Register (as hereinafter defined), an Assignment
and Acceptance, substantially in the form of Exhibit D hereto (an "Assignment
and Acceptance"), together with any Notes subject to such assignment. Upon such
execution, delivery, acceptance and recording, from and after the effective date
specified in each Assignment and Acceptance, which effective date shall be at
least five (5) Business Days after the execution thereof, (i) the assignee
thereunder shall be a party hereto and, to the extent provided in such
Assignment and Acceptance, have the rights and obligations of a Bank hereunder,
and (ii) the assigning Bank shall, to the extent provided in such assignment and
upon payment to the Agent of the registration fee referred to in Section 19.3,
be released from its obligations under this Credit Agreement.
19.2. CERTAIN REPRESENTATIONS AND WARRANTIES; LIMITATIONS; COVENANTS.
By executing and delivering an Assignment and Acceptance, the parties to the
assignment thereunder confirm to and agree with each other and the other parties
hereto as follows:
(a) other than the representation and warranty that it is the
legal and beneficial owner of the interest being assigned thereby free
and clear of any adverse claim, the assigning
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Bank makes no representation or warranty, express or implied, and
assumes no responsibility with respect to any statements, warranties or
representations made in or in connection with this Credit Agreement or
the execution, legality, validity, enforceability, genuineness,
sufficiency or value of this Credit Agreement, the other Loan Documents
or any other instrument or document furnished pursuant hereto or the
attachment, perfection or priority of any security interest or
mortgage,
(b) the assigning Bank makes no representation or warranty and
assumes no responsibility with respect to the financial condition of
the Borrower and its Subsidiaries or any other Person primarily or
secondarily liable in respect of any of the Obligations, or the
performance or observance by the Borrower and its Subsidiaries or any
other Person primarily or secondarily liable in respect of any of the
Obligations of any of their obligations under this Credit Agreement or
any of the other Loan Documents or any other instrument or document
furnished pursuant hereto or thereto;
(c) such assignee confirms that it has received a copy of this
Credit Agreement, together with copies of the most recent financial
statements referred to in Section 7.4 and Section 8.4 and such other
documents and information as it has deemed appropriate to make its own
credit analysis and decision to enter into such Assignment and
Acceptance;
(d) such assignee will, independently and without reliance
upon the assigning Bank, the Agent or any other Bank and based on such
documents and information as it shall deem appropriate at the time,
continue to make its own credit decisions in taking or not taking
action under this Credit Agreement;
(e) such assignee represents and warrants that it is an
Eligible Assignee;
(f) such assignee appoints and authorizes the Agent to take
such action as agent on its behalf and to exercise such powers under
this Credit Agreement and the other Loan Documents as are delegated to
the Agent by the terms hereof or thereof, together with such powers as
are reasonably incidental thereto;
(g) such assignee agrees that it will perform in accordance
with their terms all of the obligations that by the terms of this
Credit Agreement are required to be performed by it as a Bank;
(h) such assignee represents and warrants that it is legally
authorized to enter into such Assignment and Acceptance; and
(i) such assignee acknowledges that it has made arrangements
with the assigning Bank satisfactory to such assignee with respect to
its pro rata share of Letter of Credit Fees in respect of outstanding
Letters of Credit.
19.3. REGISTER. The Agent shall maintain a copy of each Assignment and
Acceptance delivered to it and a register or similar list (the "Register") for
the recordation of the names and addresses of the Banks and the Commitment
Percentage of, and principal amount of the Loans owing to and Letter of Credit
Participations purchased by, the Banks from time to time. The entries in the
Register shall be conclusive, in the absence of manifest error, and the
Borrower, the Agent and the Banks may treat each Person whose name is recorded
in the Register as a Bank hereunder for all purposes of this Credit
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Agreement. The Register shall be available for inspection by the Borrower and
the Banks at any reasonable time and from time to time upon reasonable prior
notice. Upon each such recordation, the assigning Bank agrees to pay to the
Agent a registration fee in the sum of $3,500.
19.4. NEW NOTES. Upon its receipt of an Assignment and Acceptance
executed by the parties to such assignment, together with each Note subject to
such assignment, the Agent shall (a) record the information contained therein in
the Register, and (b) give prompt notice thereof to the Borrower and the Banks
(other than the assigning Bank). Within five (5) Business Days after receipt of
such notice, the Borrower, at its own expense, shall execute and deliver to the
Agent, in exchange for each surrendered Note, a new Note to the order of such
Eligible Assignee in an amount equal to the amount assumed by such Eligible
Assignee pursuant to such Assignment and Acceptance and, if the assigning Bank
has retained some portion of its obligations hereunder, a new Note to the order
of the assigning Bank in an amount equal to the amount retained by it hereunder.
Such new Notes shall provide that they are replacements for the surrendered
Notes, shall be in an aggregate principal amount equal to the aggregate
principal amount of the surrendered Notes, shall be dated the effective date of
such Assignment and Acceptance and shall otherwise be in substantially the form
of the assigned Notes. Within five (5) days of issuance of any new Notes
pursuant to this Section 19.4, the Borrower shall deliver an opinion of counsel,
addressed to the Banks and the Agent, relating to the due authorization,
execution and delivery of such new Notes and the legality, validity and binding
effect thereof, in form and substance satisfactory to the Banks. The surrendered
Notes shall be cancelled and returned to the Borrower.
19.5. PARTICIPATIONS. Each Bank may sell participations to one or more
banks or other entities in all or a portion of such Bank's rights and
obligations under this Credit Agreement and the other Loan Documents; provided
that (a) each such participation shall be in an amount of not less than
$5,000,000, (b) any such sale or participation shall not affect the rights and
duties of the selling Bank hereunder to the Borrower and (c) the only rights
granted to the participant pursuant to such participation arrangements with
respect to waivers, amendments or modifications of the Loan Documents shall be
the rights to approve waivers, amendments or modifications that would reduce the
principal of or the interest rate on any Loans, extend the term or increase the
amount of the Commitment of such Bank as it relates to such participant, reduce
the amount of any commitment fees or Letter of Credit Fees to which such
participant is entitled or extend any regularly scheduled payment date for
principal or interest.
19.6. DISCLOSURE. The Borrower agrees that in addition to disclosures
made in accordance with standard and customary banking practices any Bank may
disclose information obtained by such Bank pursuant to this Credit Agreement to
assignees or participants and potential assignees or participants hereunder;
provided that such assignees or participants or potential assignees or
participants shall agree (a) to treat in confidence such information unless such
information otherwise becomes public knowledge, (b) not to disclose such
information to a third party, except as required by law or legal process and (c)
not to make use of such information for purposes of transactions unrelated to
such contemplated assignment or participation. For purposes of this Section 19.6
an assignee or participant or potential assignee or participant may include a
counterparty with whom such Bank has entered into or potentially might enter
into a derivative contract referenced to credit or other risks or events arising
under this Credit Agreement or any other Loan Document.
19.7. ASSIGNEE OR PARTICIPANT AFFILIATED WITH THE BORROWER. If any
assignee Bank is an Affiliate of the Borrower, then any such assignee Bank shall
have no right to vote as a Bank hereunder or under any of the other Loan
Documents for purposes of granting consents or waivers or for purposes of
agreeing to amendments or other modifications to any of the Loan Documents or
for purposes of making
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requests to the Agent pursuant to Section 13.1 or Section 13.2, and the
determination of the Majority Banks shall for all purposes of this Credit
Agreement and the other Loan Documents be made without regard to such assignee
Bank's interest in any of the Loans or Reimbursement Obligations. If any Bank
sells a participating interest in any of the Loans or Reimbursement Obligations
to a participant, and such participant is the Borrower or an Affiliate of the
Borrower, then such transferor Bank shall promptly notify the Agent of the sale
of such participation. A transferor Bank shall have no right to vote as a Bank
hereunder or under any of the other Loan Documents for purposes of granting
consents or waivers or for purposes of agreeing to amendments or modifications
to any of the Loan Documents or for purposes of making requests to the Agent
pursuant to Section 13.1 or Section 13.2 to the extent that such participation
is beneficially owned by the Borrower or any Affiliate of the Borrower, and the
determination of the Majority Banks shall for all purposes of this Credit
Agreement and the other Loan Documents be made without regard to the interest of
such transferor Bank in the Loans or Reimbursement Obligations to the extent of
such participation.
19.8. MISCELLANEOUS ASSIGNMENT PROVISIONS. Any assigning Bank shall
retain its rights to be indemnified pursuant to Section 16 with respect to any
claims or actions arising prior to the date of such assignment. If any assignee
Bank is not incorporated under the laws of the United States of America or any
state thereof, it shall, prior to the date on which any interest or fees are
payable hereunder or under any of the other Loan Documents for its account,
deliver to the Borrower and the Agent certification as to its exemption from
deduction or withholding of any United States federal income taxes. If any
Reference Bank transfers all of its interest, rights and obligations under this
Credit Agreement, the Agent shall, in consultation with the Borrower and with
the consent of the Borrower and the Majority Banks, appoint another Bank to act
as a Reference Bank hereunder. Anything contained in this Section 19 to the
contrary notwithstanding, any Bank may at any time pledge all or any portion of
its interest and rights under this Credit Agreement (including all or any
portion of its Notes) to any of the twelve Federal Reserve Banks organized under
Section 4 of the Federal Reserve Act, 12 U.S.C. Section 341, provided that any
foreclosure or similar action by such trustee or other representative shall be
subject to the other provisions of this Section 19. No such pledge or the
enforcement thereof shall release the pledgor Bank from its obligations
hereunder or under any of the other Loan Documents.
19.9. ASSIGNMENT BY BORROWER. The Borrower shall not assign or transfer
any of its rights or obligations under any of the Loan Documents without the
prior written consent of each of the Banks.
20. NOTICES, ETC.
Except as otherwise expressly provided in this Credit Agreement, all
notices and other communications made or required to be given pursuant to this
Credit Agreement or the Notes or any Letter of Credit Applications shall be in
writing and shall be delivered in hand, mailed by United States registered or
certified first class mail, postage prepaid, sent by overnight courier, or sent
by telegraph, telecopy, facsimile or telex and confirmed by delivery via courier
or postal service, addressed as follows:
(a) if to the Borrower, at 870 Commons Drive, Aurora, Illinois
60504, Attention: Mack McCarthy, Chief Financial Officer, or at such
other address for notice as the Borrower shall last have furnished in
writing to the Person giving the notice;
(b) if to the Agent, at 100 Federal Street, Boston,
Massachusetts 02110, USA, Attention: Harvey H. Thayer, Jr., Director or
such other address for notice as the Agent shall last have furnished in
writing to the Person giving the notice; and
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(c) if to any Bank, at such Bank's address set forth on
Schedule 1 hereto, or such other address for notice as such Bank shall
have last furnished in writing to the Person giving the notice.
Any such notice or demand shall be deemed to have been duly given or
made and to have become effective (i) if delivered by hand, overnight courier or
facsimile to a responsible officer of the party to which it is directed, at the
time of the receipt thereof by such officer or the sending of such facsimile and
(ii) if sent by registered or certified first-class mail, postage prepaid, on
the third Business Day following the mailing thereof.
21. GOVERNING LAW.
THIS CREDIT AGREEMENT AND, EXCEPT AS OTHERWISE SPECIFICALLY PROVIDED
THEREIN, EACH OF THE OTHER LOAN DOCUMENTS ARE CONTRACTS UNDER THE LAWS OF THE
COMMONWEALTH OF MASSACHUSETTS AND SHALL FOR ALL PURPOSES BE CONSTRUED IN
ACCORDANCE WITH AND GOVERNED BY THE LAWS OF SAID COMMONWEALTH OF MASSACHUSETTS
(EXCLUDING THE LAWS APPLICABLE TO CONFLICTS OR CHOICE OF LAW). THE BORROWER
AGREES THAT ANY SUIT FOR THE ENFORCEMENT OF THIS CREDIT AGREEMENT OR ANY OF THE
OTHER LOAN DOCUMENTS MAY BE BROUGHT IN THE COURTS OF THE COMMONWEALTH OF
MASSACHUSETTS OR ANY FEDERAL COURT SITTING THEREIN AND CONSENTS TO THE
NONEXCLUSIVE JURISDICTION OF SUCH COURT AND SERVICE OF PROCESS IN ANY SUCH SUIT
BEING MADE UPON THE BORROWER BY MAIL AT THE ADDRESS SPECIFIED IN SECTION 20. THE
BORROWER HEREBY WAIVES ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE
VENUE OF ANY SUCH SUIT OR ANY SUCH COURT OR THAT SUCH SUIT IS BROUGHT IN AN
INCONVENIENT COURT.
22. HEADINGS.
The captions in this Credit Agreement are for convenience of reference
only and shall not define or limit the provisions hereof.
23. COUNTERPARTS.
This Credit Agreement and any amendment hereof may be executed in
several counterparts and by each party on a separate counterpart, each of which
when executed and delivered shall be an original, and all of which together
shall constitute one instrument. In proving this Credit Agreement it shall not
be necessary to produce or account for more than one such counterpart signed by
the party against whom enforcement is sought.
24. ENTIRE AGREEMENT, ETC.
The Loan Documents and any other documents executed in connection
herewith or therewith express the entire understanding of the parties with
respect to the transactions contemplated hereby. Neither this Credit Agreement
nor any term hereof may be changed, waived, discharged or terminated, except as
provided in Section 26.
<PAGE> 67
-61-
25. WAIVER OF JURY TRIAL.
The Borrower hereby waives its right to a jury trial with respect to
any action or claim arising out of any dispute in connection with this Credit
Agreement, the Notes or any of the other Loan Documents, any rights or
obligations hereunder or thereunder or the performance of such rights and
obligations. Except as prohibited by law, the Borrower hereby waives any right
it may have to claim or recover in any litigation referred to in the preceding
sentence any special, exemplary, punitive or consequential damages or any
damages other than, or in addition to, actual damages. The Borrower (a)
certifies that no representative, agent or attorney of any Bank or the Agent has
represented, expressly or otherwise, that such Bank or the Agent would not, in
the event of litigation, seek to enforce the foregoing waivers and (b)
acknowledges that the Agent and the Banks have been induced to enter into this
Credit Agreement, the other Loan Documents to which it is a party by, among
other things, the waivers and certifications contained herein.
26. CONSENTS, AMENDMENTS, WAIVERS, ETC.
Any consent or approval required or permitted by this Credit Agreement
to be given by the Banks may be given, and any term of this Credit Agreement,
the other Loan Documents or any other instrument related hereto or mentioned
herein may be amended, and the performance or observance by the Borrower or any
of its Subsidiaries of any terms of this Credit Agreement, the other Loan
Documents or such other instrument or the continuance of any Default or Event of
Default may be waived (either generally or in a particular instance and either
retroactively or prospectively) with, but only with, the written consent of the
Borrower and the written consent of the Majority Banks. Notwithstanding the
foregoing, the rate of interest on the Notes (other than interest accruing
pursuant to Section 5.10 following the effective date of any waiver by the
Majority Banks of the Default or Event of Default relating thereto) or the
amount of the Commitment Fee or Letter of Credit Fees may not be decreased
without the written consent of each Bank affected thereby; the amount of the
Commitments may not be increased without the written consent of the Borrower and
of each Bank affected thereby; the Maturity Date may not be postponed without
the written consent of each Bank affected thereby; this Section 26 and the
definition of Majority Banks may not be amended, without the written consent of
all of the Banks; and the amount of the Letter of Credit Fees payable for the
Agent's account and Section 15 may not be amended without the written consent of
the Agent. No waiver shall extend to or affect any obligation not expressly
waived or impair any right consequent thereon. No course of dealing or delay or
omission on the part of the Agent or any Bank in exercising any right shall
operate as a waiver thereof or otherwise be prejudicial thereto. No notice to or
demand upon the Borrower shall entitle the Borrower to other or further notice
or demand in similar or other circumstances.
27. SEVERABILITY.
The provisions of this Credit Agreement are severable and if any one
clause or provision hereof shall be held invalid or unenforceable in whole or in
part in any jurisdiction, then such invalidity or unenforceability shall affect
only such clause or provision, or part thereof, in such jurisdiction, and shall
not in any manner affect such clause or provision in any other jurisdiction, or
any other clause or provision of this Credit Agreement in any jurisdiction.
<PAGE> 68
IN WITNESS WHEREOF, the undersigned have duly executed this Credit
Agreement as a sealed instrument as of the date first set forth above.
CABOT MICROELECTRONICS CORPORATION
By: /s/ William C. McCarthy
____________________________________
Name: William C. McCarthy
Title: CFO, Treasurer and Secretary
FLEET NATIONAL BANK, individually and as
Agent
By: /s/ Harvey H. Thayer, Jr.
____________________________________
Name: Harvey H. Thayer, Jr.
Title: Director
<PAGE> 69
SCHEDULE 1
Banks and Commitments
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
COMMITMENT
BANK COMMITMENT PERCENTAGE
- --------------------------------------------------------------------------------
<S> <C> <C>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
FLEET NATIONAL BANK $25,000,000 100%
Domestic and Eurodollar Lending Office:
100 Federal Street
Boston, MA 02110
Attn: Harvey H. Thayer
- --------------------------------------------------------------------------------
TOTAL: $25,000,000 100%
- --------------------------------------------------------------------------------
</TABLE>
<PAGE> 70
-2-
Schedule 7.3
UCC SEARCH SUMMARY
FLEET NATIONAL BANK/CABOT MICROELECTRONICS
1000/104351
DEBTOR: CABOT CORPORATION
<TABLE>
<CAPTION>
Secured Party Jurisdiction File Number Date Filed Collateral Comments
------------- ------------ ----------- ---------- ---------- --------
<S> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------------------
GTE Leasing Corporation SOS, IL 3057196 12/1/92 Equipment Lease UCCs searched through 2/29/00
3764377 11/18/97 Continue
United Financial of Illinois, Inc.; 3209576 1/11/94 Equipment Lease
assigned to Drexel National Bank
3969673 1/8/99 Continue
Citicorp Leasing, Inc. 3464437 10/31/95 Equipment Lease
Citicorp Leasing, Inc. 3473996 11/29/93 Equipment Lease
Bennett Telecom Funding Corporation 3499392 1/30/96 Equipment Lease
Vanguard Financial Service Corp. 3590566 9/23/96 Equipment Lease
IBM Credit Corporation (Lessor) 3674604 4/8/97 Equipment Lease
Vanguard Financial Service Corp. 3697633 6/4/97 Equipment Lease
Vanguard Financial Service Corp. 3731102 8/22/97 Equipment Lease
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 71
-3-
<TABLE>
<S> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------------------
IBM Credit Corporation (Lessor) 3794513 1/29/98 Equipment Lease
NTFC Capital Corporation 4050736 6/14/99 Equipment Lease
Fleet Leasing Corporation 4072755 7/30/99 Equipment Lease
Illinois Material Handling; assigned 4113081 10/25/99 Equipment Lease
to Illinois Material Handling
Lessor, Caterpillar Financial SOS, MA 468344 5/13/97 Equipment Lease UCCs searched through 3/13/00
Services Corporation
500029 9/29/97 Amend collateral description
StorageTek Distributed Systems 306156 4/18/95 Equipment Lease
Division, Inc.
345995 10/23/95 Amend collateral description
General Electric Capital Corp. 689158 1/18/00 Equipment Lease
Beckwith Machinery Company; assigned 284450 1/5/95 Equipment Lease
to Toyota Motor Credit Corporation
Citicorp Leasing, Inc. 292417 2/13/95 Equipment Lease
Citicorp Leasing, Inc. 347929 10/30/95 Equipment Lease
Citicorp Leasing, Inc. 352632 11/21/95 Equipment Lease
Caterpillar Financial Services 435930 12/16/96 Equipment Lease
Corporation
El Camino Resources, Ltd. 438549 12/26/96 Equipment Lease
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 72
-4-
<TABLE>
<S> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------------------
Lessor: NTEC Capital Corporation 441356 1/9/97 Equipment Lease
Sanwa Leasing Corporation 466157 5/5/97 Equipment Lease
Citicorp Leasing Inc. 478777 6/25/97 Equipment Lease
Citicorp Del Lease, Inc. 575444 9/3/98 Equipment Lease
Saleco Credit Co., Inc. 633844 5/24/99 Equipment Lease
Newcourt Financial USA, Inc. 636776 6/4/99 Equipment Lease
Lessor: General Electric Capital 652360 8/9/99 Equipment Lease
Corp.
General Electric Capital Corp. 680122 12/9/99 Equipment Lease
Citicorp Del Lease, Inc. 684850 12/29/99 Equipment Lease
Lessor: NTFC Capital Corporation 052265 10/10/91 Equipment Lease
415639 9/10/96 Amend collateral
Beckwith Machinery Company; assigned Boston, MA 379588 1/5/95 Equipment Lease UCCs searched through 3/10/00
to Toyota Motor Credit Corporation (EXPIRED)
Citicorp Leasing, Inc. 380565 2/21/95 Equipment Lease
(EXPIRED)
Citicorp Leasing, Inc. 386095 10/30/95 Equipment Lease
Citicorp Leasing, Inc. 3866629 11/22/95 Equipment Lease
El Camino Resources, Ltd. 395799 12/26/96 Equipment Lease
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 73
-5-
<TABLE>
<S> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------------------
Lessor: NTFC Capital Corporation 396136 1/9/97 Equipment Lease
Citicorp Del Lease, Inc. 410714 9/9/98 Equipment Lease
Safeco Credit Co. Inc. 416994 5/24/99 Equipment Lease
Newcourt Financial USA Inc. 417301 6/7/99 Equipment Lease
General Electric Capital Corporation 421825 12/9/99 Equipment Lease
Citicorp Del Lease, Inc. 422354 12/29/99 Equipment Lease
General Electric Capital Corp. 422770 1/18/00 Equipment Lease
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
DEBTOR: CABOT MICROELECTRONICS
<TABLE>
<CAPTION>
Secured Party Jurisdiction File Number Date Filed Collateral Comments
------------- ------------ ----------- ---------- ---------- --------
<S> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------------------
SOS, IL UCCs clear through 2/21/00
SOS, MA UCCs clear through 3/13/00
Boston, MA UCCs clear through 3/10/00
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 74
-6-
Schedule 7.7
LEGAL PROCEEDINGS
In June 1998, one of our major competitors, Rodel Inc., filed a lawsuit
against Cabot in the United States District Court for the District of Delaware
entitled Rodel, Inc. v. Cabot Corporation (Civil Action No. 98-352). In this
lawsuit, Rodel has requested a jury trial and is seeking a permanent injunction
and an award of compensatory, punitive, and other damages relating to
allegations that Cabot is infringing United States Patent No. 4,959,113
(entitled "Method and Composition for Polishing Metal Surfaces"), which is owned
by an affiliate of Rodel. We refer to this patent as the Roberts patent and this
lawsuit as the Roberts lawsuit. Cabot filed an answer and counterclaim seeking
dismissal of the Roberts lawsuit with prejudice, a judgment that Cabot is not
infringing the Roberts patent and/or that the Roberts patent is invalid, and
other relief. Cabot subsequently filed a motion for a summary judgment that the
Rodel patent is invalid because all of the claims contained in the patent were
not sufficiently different under applicable patent law from subject matter
contained in previously granted patents, specifically United States Patents Nos.
4,705,566, 4,956,015 and 4,929,257, each of which is owned by a third party not
affiliated with Rodel or us. This motion was denied on September 30, 1999 based
on the court's finding that there were genuine issues of material fact to be
determined at trial. Although the Roberts lawsuit is presently in the discovery
stage and trial is scheduled to begin in November 2000, the trial date has not
yet been scheduled. After the ruling on the summary judgment motion, Rodel filed
a request for reexamination of the Roberts patent with the United States Patent
and Trademark Office, which was granted on November 12, 1999.
In April 1999, Rodel commenced a second lawsuit against Cabot in the United
States District Court for the District of Delaware entitled Rodel, Inc. v. Cabot
Corporation (Civil Action No. 99-256). In this lawsuit, Rodel has requested a
jury trial and is seeking a permanent injunction and an award of compensatory,
punitive, and other damages relating to allegations that Cabot is infringing two
other patents owned by an affiliate of Rodel. These two patents are United
States Patent No. 5,391,258 (entitled "Compositions and Methods for Polishing")
and United States Patent No. 5,476,606 (entitled "Compositions and Methods for
Polishing"). We refer to these patents as the Brancaleoni patents and this
lawsuit as the Brancaleoni lawsuit. Cabot has filed an answer and counterclaim
to the complaint seeking dismissal of the complaint with prejudice, a judgment
that Cabot is not infringing the Brancaleoni patents and/or that the Brancaleoni
patents are invalid, and other relief. The Brancaleoni lawsuit is presently in
the discovery stage which is currently to be completed by February 25, 2000.
Trial is presently currently scheduled to commence on December 4, 2000.
The parties have jointly requested that the court extend these dates.
In the Roberts lawsuit, the only product that Rodel to date has alleged
infringes the Roberts patent is our W2000 slurry, which is used to polish
tungsten and which currently accounts for a significant portion of our total
revenue. In the Brancaleoni lawsuit, Rodel has not alleged that any specific
product infringes the Brancaleoni patents; instead, Rodel alleges that our
United States Patent No. 5,858,813 (entitled "Chemical Mechanical Polishing
Slurry for Metal Layers and Films" and which relates to a CMP polishing slurry
for metal surfaces including, among other things, aluminum and copper) is
evidence that Cabot is infringing the Brancaleoni patents through the
manufacture and sales of unspecified products. At this stage, we cannot predict
whether or to what extent Rodel will make specific infringement claims with
respect to any of our products other than W2000 in these or any future
proceedings. It is possible that Rodel will claim that many of our products
infringe its patents.
Although Cabot is the only named defendant in these lawsuits, we will agree
to indemnify Cabot for any and all losses and expenses arising out of this
litigation as well as any other litigation arising out of our business. While we
believe there are meritorious defenses to the pending actions and intend to
defend them vigorously, these defenses may not be successful. If Rodel wins
either of these cases, we may have to pay damages and, in the future, may be
prohibited from producing any products found to infringe or required to pay
Rodel royalty and licensing fees with respect to sales of those products. In
addition, we may be subject to future infringement claims by Rodel or others
with respect to our products and processes. Such claims, even if they are
without merit, could be expensive and time consuming to defend and if we were to
lose any future infringement claims we could be subject to injunctions, damages
and/or royalty or licensing agreements. Royalty or licensing agreements, if
required as a result of any pending or future claims, may not be available to
use on acceptable terms or at all. Successful claims or infringements against us
could adversely affect our business, financial condition and results of
operations.
<PAGE> 75
-7-
Schedule 7.17
None
<PAGE> 76
-8-
Schedule 7.18
None
<PAGE> 77
-9-
Schedule 9.1
None
<PAGE> 78
-10-
Schedule 9.2
Same as Schedule 7.3
<PAGE> 79
-11-
Schedule 9.3
None
<PAGE> 1
Exhibit 10.17
CREDIT AGREEMENT
This Credit Agreement, dated as of March 29, 2000 (this "Agreement"),
is between Cabot Microelectronics Corporation, a Delaware corporation (the
"Borrower"), and LaSalle Bank National Association, a national banking
association (the "Lender").
PRELIMINARY STATEMENTS:
1. The Borrower has requested that the Lender provide the Borrower with
an unsecured credit facility under which the Lender would make term loans to the
Borrower in an aggregate amount of $17,000,000.
2. The Lender has agreed to provide such a credit facility on the terms
and subject to the conditions set forth in this Agreement.
AGREEMENT:
In consideration of the premises and the mutual agreements herein
contained, the Borrower and the Lender hereby agree as follows:
SECTION 1: INTERPRETATION
1.1 Definitions. When used in this Agreement the following terms have
the indicated meanings:
Affiliate of any Person means (i) any other Person that, directly or
indirectly, controls or is controlled by or is under common control with such
Person and (ii) any officer or director of such Person. A Person shall be deemed
to be "controlled by" any other Person if such Person possesses, directly or
indirectly, power to vote 5% or more of the securities (on a fully diluted
basis) having ordinary voting power for the election of directors or managers or
power to direct or cause the direction of the management and policies of such
Person whether by contract or otherwise. Unless the context otherwise requires,
each reference to an Affiliate in this Agreement is a reference to an Affiliate
of the Borrower.
Agreement has the meaning set forth in the Preamble.
Applicable Margin means, as of any date of determination, a percentage
per annum determined by reference to the Level in effect at such time, as set
forth below:
<TABLE>
<CAPTION>
Applicable Margin:
Level Eurodollar Rate (Reserve Adjusted)
- ----- ----------------------------------
<S> <C>
Level I 1.50%
Level II 1.75%
Level III 2.00%
</TABLE>
<PAGE> 2
The Applicable Margin shall change on the effective date of any change in the
applicable Level.
Base Rate means, for any day, the rate of interest in effect for such
day as publicly announced from time to time by the Lender at its principal place
of business in Chicago, Illinois as its prime, base or equivalent rate of
interest (whether or not such rate is actually charged by the Lender), which
rate is not necessarily the lowest rate of interest charged by the Lender with
respect to commercial loans. Any change in the Base Rate announced by the Lender
is effective as of the effective date specified in the public announcement by
the Lender of such change.
Base Rate Loan means any Loan bearing interest at the Base Rate.
Borrower has the meaning set forth in the Preamble.
Business Day means any day on which the Lender is open for commercial
banking business in Chicago, Illinois and, in the case of a Business Day that
relates to a Eurodollar Loan, on which dealings are carried on in the London
interbank eurodollar market.
Cabot Dividend means the dividends to be declared and paid by the
Borrower to Cabot Corporation in an aggregate amount equal to the lesser of (i)
the borrowings under the Loans plus the net proceeds of the Borrower's initial
public offering and (ii) Cabot's Corporation's estimated tax basis in the
Borrower's capital stock as of the completion of the Borrower's initial public
offering.
Capital Lease means, with respect to any Person, any lease of (or other
agreement conveying the right to use) any real or personal property by such
Person that, in conformity with GAAP, is or should be accounted for as a capital
lease on the balance sheet of such Person.
CERCLA means the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, any amendments thereto, any regulations promulgated
thereunder and any successor statutes or regulations.
Change in Control means (i) the acquisition by any individual, entity or
group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities
Exchange Act of 1934, as amended, a "Controlling Person"), other than Cabot
Corporation, of beneficial ownership (within the meaning of Rule 13d-3
promulgated under the Securities Exchange Act of 1934, as amended) of more than
30% of the combined voting power of the then-outstanding voting securities
entitled to vote generally in the election of directors of the Borrower or (ii)
during any period of up to 24 consecutive months, commencing before or after the
Closing Date, individuals who at the beginning of such 24-month period were
directors of the Borrower shall cease for any reason (other than due to death,
disability or previously established mandatory retirement) to constitute a
majority of the board of directors of the Borrower.
Closing Date means the later of (i) March 29, 2000, and (ii) the date
that each of the conditions precedent set forth in Section 9 have been satisfied
in full, which date will be set forth in the certificate described in Section
9.1(g).
2
<PAGE> 3
Code means the Internal Revenue Code of 1986, any amendments thereto,
any regulations promulgated thereunder and any successor statutes or
regulations.
Consolidated Net Income (or Loss) means, with respect to the Borrower
and its Subsidiaries for any period, the net income (or loss) of the Borrower
and its Subsidiaries for such period, computed without giving effect to
extraordinary losses or extraordinary gains and any related tax effect.
Controlled Group means all members of a controlled group of corporations
and all members of a controlled group of trades or businesses (whether or not
incorporated) under common control which, together with the Borrower, are
treated as a single employer under Section 414 of the Code or Section 4001 of
ERISA.
Disposal has the meaning set forth in the definition of "Release".
EBITDA means, for any period, (i) Consolidated Net Income (or Loss) for
such period plus (ii) to the extent deducted in determining such Consolidated
Net Income (or Loss), (a) consolidated gross interest expense (including all
commissions, discounts, fees and other charges in connection with standby
letters of credit and similar instruments) accrued or paid by the Borrower and
its Subsidiaries for such period (including all imputed interest on Capital
Leases), determined in accordance with GAAP, (b) provisions for any income or
similar taxes paid or accrued by the Borrower and its Subsidiaries, (c) all
amounts treated as expenses for depreciation and the amortization of intangibles
of any kind and (d) any other non-cash charges minus (iii) non-cash gains
received by the Borrower during such period, in each case determined on a
consolidated basis in accordance with GAAP. For purposes of this definition,
EBITDA shall be calculated for any period by including the actual amount for
such period ending on the date of determination, including the EBITDA
attributable to any Person acquired pursuant to a Permitted Acquisition
occurring during such period on a pro forma basis for the period from the first
day of the applicable period through the date of the closing of each such
Permitted Acquisition, utilizing (a) where available or required pursuant to the
terms of this Agreement, historical audited or reviewed unaudited financial
statements obtained from such acquired Person (and prepared by an accounting
firm of national recognition or otherwise reasonably acceptable to the Lender),
broken down by fiscal quarter using methodology consistent with GAAP or (b)
where audited or reviewed financial statements are unavailable and not required
pursuant to the terms of this Agreement, unaudited financial statements reviewed
internally by the Borrower, broken down by fiscal quarter using methodology
consistent with GAAP.
Environmental Claims means all claims, however asserted, by any
governmental, regulatory or judicial authority or other Person alleging
potential liability or responsibility for violation of any Environmental Law, or
for release or injury to the environment.
Environmental Laws means all present or future federal, state or local
laws, statutes, common law duties, rules, regulations, ordinances and codes,
together with all administrative orders, directed duties, requests, licenses,
authorizations and permits of, and agreements with, any governmental authority,
in each case relating to Environmental Matters.
3
<PAGE> 4
Environmental Matters means any matter arising out of or relating to
health and safety, or pollution or protection of the environment or workplace,
including, without limitation, any of the foregoing relating to the presence,
use, production, generation, handling, transport, treatment, storage, disposal,
distribution, discharge, release, control or cleanup of any Hazardous Substance.
ERISA means the Employee Retirement Income Security Act of 1974, any
amendments thereto, any regulations promulgated thereunder and any successor
statutes or regulations.
Eurocurrency Reserve Percentage means, with respect to any Eurodollar
Loan for any Interest Period, a percentage (expressed as a decimal) equal to the
daily average during such Interest Period of the percentage in effect on each
day of such Interest Period, as prescribed by the Board of Governors of the
Federal Reserve System (or any successor), for determining the aggregate maximum
reserve requirements applicable to "Eurocurrency Liabilities" pursuant to
Regulation D or any other then applicable regulation of such Board of Governors
which prescribes reserve requirements applicable to "Eurocurrency Liabilities"
as presently defined in Regulation D.
Eurodollar Loan means any Loan bearing interest at the Eurodollar Rate
(Reserve Adjusted).
Eurodollar Office means with respect to the Lender the office or offices
of the Lender that shall be making or maintaining the Eurodollar Loans of the
Lender hereunder or such other office or offices through which the Lender
determines its Eurodollar Rate. A Eurodollar Office of the Lender may be, at the
option of the Lender, either a domestic or foreign office.
Eurodollar Rate means, with respect to any Eurodollar Loan for any
Interest Period, a rate per annum equal to the offered rate for deposits in
Dollars for a period equal or comparable to such Interest Period that appears on
Telerate Page 3750 as of 11:00 A.M. (London time) three Business Days prior to
the first day of such Interest Period. "Telerate Page 3750 " means the display
designated as "Page 3750 " on the Telerate Service (or such other page as may
replace page 3750 on that service or such other service as may be nominated by
the British Bankers' Association as the information vendor for the purpose of
displaying British Bankers' Association Interest Settlement Rates for Dollar
deposits).
Eurodollar Rate (Reserve Adjusted) means, with respect to any Eurodollar
Loan for any Interest Period, a rate per annum (rounded upwards, if necessary,
to the nearest 1/16th of 1%) determined pursuant to the following formula:
Eurodollar Rate = Eurodollar Rate
---------------
(Reserve Adjusted) 1-Eurocurrency Reserve Percentage
Event of Default means any of the events described in Section 10.1.
Funded Debt means, as of the date of determination, Indebtedness for
borrowed money and with respect to Capital Leases of the Borrower and its
Subsidiaries, determined on a consolidated basis in accordance with GAAP.
GAAP means generally accepted accounting principles set forth from time
to time in the opinions and pronouncements of the Accounting Principles Board
and the American Institute of
4
<PAGE> 5
Certified Public Accountants and statements and pronouncements of the Financial
Accounting Standards Board (or agencies with similar functions of comparable
stature and authority within the U.S. accounting profession), which are
applicable to the circumstances as of the date of determination; provided that
for purposes of determining compliance with the covenants set forth in Section
8.4, "GAAP" means such accounting principles as in effect on the Closing Date.
Hazardous Substance has the meaning set forth in Section 7.20(b).
Indebtedness of any Person means, without duplication, (i) all
indebtedness of such Person for borrowed money, whether or not evidenced by
bonds, debentures, notes or similar instruments, (ii) all obligations of such
Person as lessee under Capital Leases which have been or should be recorded as
liabilities on a balance sheet of such Person in accordance with GAAP, (iii) all
obligations of such Person to pay the deferred purchase price of property or
services (excluding trade accounts payable in the ordinary course of business),
(iv) all indebtedness secured by a Lien on the property of such Person, whether
or not such indebtedness shall have been assumed by such Person, (v) all
obligations, contingent or otherwise, with respect to the face amount of all
letters of credit (whether or not drawn) and banker's acceptances issued for the
account of such Person and s(vi) all liabilities of such Person under any
agreement, undertaking or arrangement by which such Person guarantees, endorses
or otherwise becomes or is contingently liable upon (by direct or indirect
agreement, contingent or otherwise, to provide funds for payment, to supply
funds to or otherwise to invest in a debtor, or otherwise to assure a creditor
against loss) any indebtedness, obligation or other liability of any other
Person (other than by endorsements of instruments in the course of collection),
or guarantees the payment of dividends or other distributions upon the shares of
any other Person.
Interest Period means, as to any Eurodollar Loan, the period commencing
on the date such loan is borrowed or continued as a Eurodollar Loan and ending
on the date one, two, three or six months thereafter as selected by the Borrower
pursuant to Section 2.2.1; provided that:
(i) if any Interest Period would otherwise end on a day that is not a
Business Day, such Interest Period shall be extended to the
following Business Day unless the result of such extension would
be to carry such Interest Period into another calendar month, in
which event such Interest Period shall end on the preceding
Business Day;
(ii) any Interest Period that begins on a day for which there is no
numerically corresponding day in the calendar month at the end of
such Interest Period shall end on the last Business Day of the
calendar month at the end of such Interest Period; and
(iii) the Borrower may not select an interest period that would extend
beyond the Termination Date.
Lender has the meaning set forth in the Preamble.
Level means any of Level I, Level II and Level III. "Level I" means that
the Company's Leverage Ratio is less than 1.25 to 1.00 as of the end of the
fiscal quarter most recently ended. "Level II" means that the Company's Leverage
Ratio is greater than or equal to 1.25 to 1.00 and less than 2.00 to 1.00 as of
the end of the fiscal quarter most recently ended. "Level III" means that the
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Company's Leverage Ratio is greater than or equal to 2.00 to 1.00 as of the end
of the fiscal quarter most recently ended. Any change in a Level will be made
upon receipt by the Lender of the applicable compliance certificate delivered
under Section 8.1(c) and will be effective three Business Days thereafter.
Leverage Ratio means the ratio of (i) Funded Debt to (ii) EBITDA.
Liabilities means all of the Borrower's liabilities, obligations and
indebtedness to the Lender for monetary amounts, whether now or hereafter owing,
arising, due or payable under this Agreement and any other Loan Document
howsoever evidenced, created, incurred, acquired or owing.
Lien means any lien, security interest or other charge or encumbrance of
any kind, or any other type of preferential arrangement, including, without
limitation, the lien or retained security title of a conditional vendor and any
easement, right of way or other encumbrance on title to real property.
Loan Documents means this Agreement, the Notes and such other documents
as the Borrower or any Subsidiary delivers to the Lender pursuant to the terms
of this Agreement.
Loans means Term Loan A and Term Loan B.
Margin Stock means any "margin stock" as defined in Regulation U of the
Board of Governors of the Federal Reserve System.
Material Adverse Effect means any event that has had or could be
reasonably likely to have (i) a material adverse change in, or a material
adverse effect upon, the condition (financial or otherwise), operations, assets,
business or properties of the Borrower and its Subsidiaries taken as a whole,
(ii) a material impairment on the ability of the Borrower or any Subsidiary to
perform any of its obligations under any Loan Document or (iii) a material
adverse effect upon the legality, validity, binding effect or enforceability
against the Borrower or any other Person (other than the Lender) of any Loan
Document.
Multiemployer Pension Plan means a multiemployer plan, as such term is
defined in Section 4001(a)(3) of ERISA, and to which the Borrower or any member
of the Controlled Group may have any liability.
Notes means Term Note A and Term Note B.
PBGC means the Pension Benefit Guaranty Corporation and any entity
succeeding to any or all of its functions under ERISA.
Pension Plan means a "pension plan", as such term is defined in Section
3(2) of ERISA, which is subject to Title IV of ERISA (other than a Multiemployer
Pension Plan), and to which the Borrower or any member of the Controlled Group
may have any liability, including any liability by reason of having been a
substantial employer within the meaning of Section 4063 of ERISA at any time
during the preceding five years, or by reason of being deemed to be a
contributing sponsor under Section 4069 of ERISA.
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Permitted Acquisitions means the purchase or other acquire all or
substantially all of the assets or any stock of any class of, or any partnership
or joint venture interest in, any Person, so long as (i) the purchase price of
which, together with the aggregate purchase price all other purchases and
acquisitions consummated after the Closing Date, does not exceed $60,000,000,
(ii) the purchase price (payable in anything other than capital stock of the
Borrower) of which, together with the aggregate purchase price (payable in
anything other than capital stock of the Borrower) all other purchases and
acquisitions consummated after the Closing Date, does not exceed $30,000,000,
(iii) the Borrower has notified the Lender in writing of such acquisition and
such notice gives a reasonably detailed description of the acquisition, (iv) the
Borrower has provided the Lender with such other information as the Lender
reasonably requests, (v) such acquisition would not subject the Lender to any
additional regulatory or third party approvals in connection with the exercise
of its rights under this Agreement and the other Loan Documents, (vi) the board
of directors and, if required, the shareholders of the Borrower and the Person
so acquired have approved the acquisition and such acquisition is otherwise
considered "friendly," (vii) to the extent such acquisition is a stock or other
equity acquisition, the Person so acquired either guarantees the Liabilities in
a manner satisfactory to the Lender or is immediately merged with and into the
Borrower or another Person who has guaranteed the Liabilities (with the Borrower
or such other Person being the surviving entity), (viii) the Borrower has
demonstrated to the satisfaction of the Lender that it is in compliance with the
financial covenants and restrictions contained in Section 8.6 both before and
immediately after the consummation of such acquisition, (ix) no Event of Default
or Unmatured Event of Default has occurred and is continuing or would result
from the consummation of such acquisition and (x) the representations and
warranties of the Borrower set forth in Section 7 will be true and correct both
before and immediately after the consummation of such acquisition. For purposes
of this definition, (a) "purchase price" means the aggregate amount of
consideration to be paid to the seller upon the consummation of a Permitted
Acquisition (including, without limitation, Indebtedness incurred or assumed in
connection therewith and the aggregate amount of all potential earn-out
payments, but excluding the aggregate amount of such earn-out payments to the
extent determined by the post-acquisition performance of the applicable acquired
Person) and (b) capital stock of the Borrower will be valued in a manner
consistent with the purchase agreement relating to the Permitted Acquisition or,
if no such valuation method exists, the average of the fair market value of such
capital stock for the ten Business Days immediately preceding the consummation
date of the Permitted Acquisition.
Person means any natural person, corporation, partnership, trust,
limited liability company, association, governmental authority or unit, or any
other entity, whether acting in an individual, fiduciary or other capacity.
RCRA means the Resource Conservation and Recovery Act, any amendments
thereto, any regulations promulgated thereunder and any successor statutes or
regulations.
Release has the meaning specified in CERCLA and the term "Disposal" (or
"Disposed") has the meaning specified in RCRA; provided that in the event either
CERCLA or RCRA is amended so as to broaden the meaning of any term defined
thereby, such broader meaning shall apply as of the effective date of such
amendment; and provided, further that to the extent that the laws of a state
wherein any affected property lies establish a meaning for "Release" or
"Disposal" which is broader than is specified in either CERCLA or RCRA, such
broader meaning shall apply.
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Responsible Officer means any executive officer of the Borrower, or any
other officer of the Borrower designated in writing by the chief executive
officer or chief financial officer of the Borrower to the Lender as responsible
for overseeing or reviewing compliance with this Agreement or any other Loan
Document.
Revolving Credit Facility means the revolving credit facility provided
to the Borrower under a credit agreement to be entered into among the Borrower,
certain lending institutions and Fleet National Bank, a national banking
association, as agent, or any other revolving credit facility entered into in
substitution thereof.
STEP means the State of Illinois' State Treasurer's Economic Program.
STEP Rate means a fixed interest rate equal to 1.75% plus (i) until the
second anniversary of the Closing Date, 70% of the "two year treasury rate" and
(ii) after the second anniversary of the Closing Date and before the Termination
Date, 70% of the "three year treasury rate." For purposes of this definition,
(a) "two year treasury rate" means the rate for U.S. Treasury Bonds maturing
over a two year period announced in the Wall Street Journal or any similar
publication on the Closing Date and (b) "three year treasury rate" means the
rate for U.S. Treasury Bonds maturing over a three year period announced in the
Wall Street Journal or any similar publication on the second anniversary of the
Closing Date.
Subsidiary means, with respect to any Person, a corporation,
partnership, limited liability company or other entity of which such Person
and/or its other Subsidiaries own, directly or indirectly, such number of
outstanding shares or other ownership interests as have at least 50% of the
ordinary voting power for the election of directors or other managers or such
corporation, partnership, limited liability company or other entity. Unless the
context otherwise requires, each reference to a Subsidiary in this Agreement is
a reference to a Subsidiary of the Borrower.
Term Loan A has the meaning set forth in Section 2.1.
Term Loan B has the meaning set forth in Section 2.2.
Term Note A has the meaning set forth in Section 2.1.
Term Note B has the meaning set forth in Section 2.2.
Termination Date means the earlier of (i) the fifth anniversary of the
Closing Date (unless extended in writing by the Lender and the Borrower) and
(ii) the date the Liabilities become due and payable under Section 10.2.
Unmatured Event of Default means any event that, if it continues
uncured, will with lapse of time or the giving of notice or both constitute an
Event of Default.
Welfare Plan means a "welfare plan", as such term is defined in Section
3(1) of ERISA.
1.2 Computation of Time Periods. In this Agreement in the computation of
periods of time from a specified date to a later specified date, the words
"from" or "commencing on" means
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"from and including" and the words "to," "through," "ending on" and "until" each
mean "to but excluding."
1.3 Accounting Terms. Except as otherwise indicated, all accounting
terms not specifically defined in this Agreement shall be construed in
accordance with, and certificates of compliance with covenants shall be based
upon, GAAP.
1.4 Headings and References. Section and other headings are for
reference only, and shall not affect the interpretation or meaning of any
provision of this Agreement. Any Section or clause references are to this
Agreement, unless otherwise specified. References to an annex, schedule or
exhibit are, unless otherwise specified, to an Annex, Schedule or Exhibit
attached to this Agreement. References in this Agreement and the other Loan
Documents or any other agreement include this Agreement and the other Loan
Documents and other agreements as the same may be amended, restated,
supplemented or otherwise modified from time to time pursuant to the provisions
hereof or thereof. A reference to any law, statute or regulation shall mean that
law, statute or regulation as it may be amended, supplemented or otherwise
modified from time to time, and any successor law, statute or regulation. A
reference to a Person includes the successors and assigns of such Person, but
such reference shall not increase, decrease or otherwise modify in any way the
provisions in this Agreement or any other Loan Document governing the assignment
of rights and obligations under or the binding effect of any provision of this
Agreement or any other Loan Document. The provisions of this Agreement relating
to Subsidiaries shall apply only during such times as the Borrower has one or
more Subsidiaries.
1.5 Construction. Each covenant contained in this Agreement shall be
construed (absent express provision to the contrary) as being independent of
each other covenant contained herein, so that compliance with any one covenant
shall not (absent such an express contrary provision) be deemed to excuse
compliance with any other covenant. Where any provision herein refers to action
to be taken by any Person, or which such Person is prohibited from taking, such
provision shall be applicable whether such action is taken directly or
indirectly by such Person. The term "including" is not limiting and means
"including without limitation."
SECTION 2: CREDIT
2.1 Term Loan A. Subject to Section 9, on the Closing Date the Lender
will make a term loan ("Term Loan A") to the Borrower in the principal amount of
$3,500,000. The obligations in connection with Term Loan A will be evidenced by
and payable in accordance with the terms of a promissory note ("Term Note A")
made in favor of the Lender, dated as of the Closing Date and in the form of
Exhibit A. Term Loan A shall be repaid in full, together with any accrued and
unpaid interest thereon, on the Termination Date. Notwithstanding anything in
Term Note A or this Agreement to the contrary, the obligations in connection
with Term Loan A shall become immediately due and payable as provided in Section
10. No portion of Term Loan A that has been repaid may be reborrowed.
2.2 Term Loan B. Subject to Section 9, on the Closing Date the Lender
will make a term loan ("Term Loan B") to the Borrower in the principal amount of
$13,500,000. The obligations in connection with Term Loan B will be evidenced by
and payable in accordance with the terms of a promissory note ("Term Note B")
made in favor of the Lender, dated as of the Closing Date and in
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the form of Exhibit A. Term Loan B shall be repaid in quarterly installments of
$337,500 on the last Business Day of each calendar quarter (commencing on June
30, 2000), with all remaining outstanding principal of Term Loan B, together
with any accrued and unpaid interest thereon, payable on the Termination Date.
Notwithstanding anything in Term Note B or this Agreement to the contrary, the
obligations in connection with Term Loan B shall become immediately due and
payable as provided in Section 10. No portion of Term Loan B that has been
repaid may be reborrowed.
2.3 Various Types of Loans. Unless eligible for the STEP Rate as
described in Section 3.1(i)(a), each Loan shall be either a Base Rate Loan or a
Eurodollar Loan (each a "type" of Loan), as the Borrower shall specify on the
Closing Date or in a related notice of conversion pursuant to Section 2.4.
Eurodollar Loans having the same Interest Period are sometimes called a "group"
or collectively "groups". Base Rate Loans and Eurodollar Loans may be
outstanding at the same time; provided that (i) not more than seven different
groups of Eurodollar Loans shall be outstanding at any one time and (ii) the
aggregate principal amount of each group of Eurodollar Loans shall at all times
be at least $1,000,000 and an integral multiple of $500,000.
2.4 Conversion and Continuation Procedures. (a) Subject to Section 2.3,
the Borrower may, upon irrevocable written notice to the Agent in accordance
with Section 2.4(b):
(i) elect, as of any Business Day, to convert any Loans (or, in the
case of Loans being converted into Eurodollar Loans, any part
thereof in an aggregate amount not less than $1,000,000 or a
higher integral multiple of $500,000) into Loans of the other
type; or
(ii) elect, as of the last day of the applicable Interest Period, to
continue any Eurodollar Loans having Interest Periods expiring on
such day (or any part thereof in an aggregate amount not less
than $1,000,000 or a higher integral multiple of $500,000) for a
new Interest Period.
(b) The Borrower shall give written or telephonic (followed immediately
by written confirmation thereof) notice to the Lender of each proposed
conversion or continuation not later than (i) in the case of conversion into
Base Rate Loans, 11:00 A.M., Chicago time, on the proposed date of such
conversion and (ii) in the case of conversion into or continuation of Eurodollar
Loans, 11:00 A.M., Chicago time, at least three Business Days prior to the
proposed date of such conversion or continuation, specifying in each case:
(i) the proposed date of conversion or continuation;
(ii) the aggregate amount of Loans to be converted or continued;
(iii) the type of Loans resulting from the proposed conversion or
continuation; and
(iv) in the case of conversion into, or continuation of, Eurodollar
Loans, the duration of the requested Interest Period therefor.
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(c) If upon the expiration of any Interest Period applicable to
Eurodollar Loans, the Borrower has failed to select timely a new Interest Period
to be applicable to such Eurodollar Loans, the Borrower shall be deemed to have
elected to convert such Eurodollar Loans into Base Rate Loans effective on the
last day of such Interest Period.
(d) Any conversion of a Eurodollar Loan on a day other than the last day
of an Interest Period therefor shall be subject to Section 6.4.
SECTION 3: INTEREST; FEES
3.1 Interest Rates. The Borrower promises to pay interest on the unpaid
principal amount of the Loans for the period commencing on the Closing Date
until the Loans are paid in full as follows:
(i) with respect to Term Loan A, (a) so long as the Borrower remains
eligible to receive funds from STEP and so long as funds in an
amount at least equal to the then outstanding principal amount of
the Term Loan remain on deposit with the Lender at the interest
rates contemplated by STEP on the Closing Date for purposes of
funding the Borrower under STEP, at the STEP Rate or (b) during
any period of Term Loan A that the Borrower is ineligible, as
determined by the State of Illinois' State Treasurer's Economic
Program, to receive funds from STEP or the State of Illinois
ceases to maintain funds on deposit with the Lender in the
amounts and at the rates contemplated by clause (i)(a) above for
purposes of funding the Borrower under STEP, at the rate set
forth for Term Loan B in clause (ii) below;
(ii) with respect to Term Loan B, (a) for such portion of such Loan
that is a Base Rate Loan, at a rate per annum equal to the Base
Rate from time to time in effect and (b) for such portion of such
Loan that is a Eurodollar Loan, at a rate per annum equal to the
sum of the Eurodollar Rate (Reserve Adjusted) from time to time
in effect plus the Applicable Margin;
provided that at any time an Event of Default exists the interest rate
applicable to the Loans shall be increased by 2.00%.
3.2 Interest Payment Dates. Accrued interest on Term Loan A (to the
extent calculated at the STEP Rate) and each Base Rate Loan shall be payable in
arrears on the last Business Day of each calendar quarter and at the Termination
Date. Accrued interest on each Eurodollar Loan shall be payable on the last day
of each Interest Period relating to such Loan (and, in the case of a Eurodollar
Loan with a six-month Interest Period, on the three-month anniversary of the
first day of such Interest Period) and at the Termination Date. After the
Termination Date, accrued interest on all Loans shall be payable on demand.
3.3 Setting and Notice of Eurodollar Rates. The applicable Eurodollar
Rate for each Interest Period shall be determined by the Lender. Each
determination of the applicable Eurodollar Rate by the Lender shall be
conclusive and binding upon the Borrower in the absence of demonstrable error.
The Lender shall upon written request of the Borrower deliver to the Borrower
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a statement showing the computations used by the Lender in determining any
applicable Eurodollar Rate hereunder.
3.4 Computation of Interest. All computations of interest shall be
computed for the actual number of days elapsed on the basis of a year of 360
days. The applicable interest rate for each Base Rate Loan shall change
simultaneously with each change in the Base Rate.
3.5 Closing Fee. On the Closing Date, the Borrower will pay to the
Lender a fully earned and nonrefundable closing fee of $25,000.
SECTION 4: PREPAYMENTS
The Borrower may from time to time prepay the Loans in whole or in part;
provided that the Borrower shall give the Lender notice thereof not later than
11:00 A.M., Chicago time, on the day of such prepayment (which shall be a
Business Day), specifying the Loans to be prepaid and the date and amount of
prepayment.
SECTION 5: MAKING OF PAYMENTS; SETOFF; TAXES
5.1 Making of Payments. All payments on the Liabilities (including any
costs and expenses arising under Section 6) shall be made by the Borrower to the
Lender in immediately available funds at the office specified by the Lender not
later than 11:00 A.M., Chicago time, on the date due; and funds received after
that hour shall be deemed to have been received by the Lender on the next
following Business Day.
5.2 Application of Certain Payments. Each payment of principal shall be
applied to the Loans as the Borrower shall direct by notice to be received by
the Lender on or before the date of such payment or, in the absence of such
notice, as the Lender shall determine in its discretion. After an Event of
Default has occurred and is continuing, the Lender may apply any payments as the
Lender shall determine in its sole discretion.
5.3 Due Date Extension. If any payment on the Liabilities falls due on a
day that is not a Business Day, then such due date shall be extended to the
immediately following Business Day (unless, in the case of a Eurodollar Loan,
such immediately following Business Day is the first Business Day of a calendar
month, in which case such date shall be the immediately preceding Business Day)
and, in the case of principal, additional interest shall accrue and be payable
for the period of any such extension.
5.4 Setoff. The Borrower agrees that the Lender has all rights of
set-off and bankers' lien provided by applicable law, and in addition thereto,
the Borrower agrees that at any time any Event of Default exists, the Lender may
apply to the payment of any obligations of the Borrower hereunder, whether or
not then due, any and all balances, credits, deposits, accounts or moneys of the
Borrower then or thereafter with the Lender.
5.5 Taxes. All payments of principal of and interest on the Loans and
all other amounts payable hereunder shall be made free and clear of and without
deduction for any present or future
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income, excise, stamp or franchise taxes and other taxes, fees, duties,
withholdings or other charges of any nature whatsoever imposed by any taxing
authority, but excluding franchise taxes and taxes imposed on or measured by the
Lender's net income or receipts (all nonexcluded items being called "Taxes"). If
any withholding or deduction from any payment to be made by the Borrower
hereunder is required in respect of any Taxes pursuant to any applicable law,
rule or regulation, then the Borrower will:
(i) pay directly to the relevant authority the full amount required
to be so withheld or deducted;
(ii) promptly forward to the Lender an official receipt or other
documentation satisfactory to the Lender evidencing such payment
to such authority; and
(iii) pay to the Lender such additional amount or amounts as is
necessary to ensure that the net amount actually received by the
Lender will equal the full amount the Lender would have received
had no such withholding or deduction been required.
Moreover, if any Taxes are directly asserted against the Lender with respect to
any payment received by the Lender hereunder, the Lender may pay such Taxes and
the Borrower will promptly pay such additional amounts (including any penalty,
interest and expense) as is necessary so that the net amount received by the
Lender after the payment of such Taxes (including any Taxes on such additional
amount) shall equal the amount the Lender would have received had such Taxes not
been asserted. If the Borrower fails to pay any Taxes when due to the
appropriate taxing authority or fails to remit to the Lender the required
receipts or other required documentary evidence, the Borrower shall indemnify
the Lender for any incremental Taxes, interest or penalties that may become
payable by the Lender as a result of any such failure.
SECTION 6: INCREASED COSTS;
SPECIAL PROVISIONS FOR EURODOLLAR LOANS
6.1 Increased Costs. (a) If, after the Closing Date, the adoption of any
applicable law, rule or regulation, or any change therein, or any change in the
interpretation or administration thereof by any governmental authority, central
bank or comparable agency charged with the interpretation or administration
thereof, or compliance by the Lender (or any Eurodollar Office of the Lender)
with any request or directive (whether or not having the force of law) of any
such authority, central bank or comparable agency:
(i) shall subject the Lender (or any Eurodollar Office of the Lender)
to any tax, duty or other charge with respect to the Eurodollar
Loans, the Notes or the Lender's obligation to make Eurodollar
Loans, or shall change the basis of taxation of payments to the
Lender of the principal of or interest on the Eurodollar Loans or
any other amounts due under this Agreement in respect of the
Eurodollar Loans or the Lender's obligation to make Eurodollar
Loans (except for changes in the rate of tax on the overall net
income of the Lender or its Eurodollar Office imposed by the
jurisdiction in which the Lender's principal executive office or
Eurodollar Office is located);
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(ii) shall impose, modify or deem applicable any reserve (including
any reserve imposed by the Board of Governors of the Federal
Reserve System, but excluding any reserve included in the
determination of interest rates pursuant to Section 3), special
deposit or similar requirement against assets of, deposits with
or for the account of, or credit extended by the Lender (or any
Eurodollar Office of the Lender); or
(iii) shall impose on the Lender (or its Eurodollar Office) any other
condition affecting the Eurodollar Loans, the Notes or the
Lender's obligation to make Eurodollar Loans;
and the result of any of the foregoing is to increase the cost to or to impose a
cost on the Lender (or any Eurodollar Office of the Lender) of making or
maintaining any Eurodollar Loan, or to reduce the amount of any sum received or
receivable by the Lender (or its Eurodollar Office) under this Agreement or
under any Note, then upon demand by the Lender, the Borrower shall pay directly
to the Lender such additional amount as will compensate the Lender for such
increased cost or such reduction.
(b) If the Lender shall determine that the adoption or phase-in of any
applicable law, rule or regulation regarding capital adequacy, or any change
therein, or any change in the interpretation or administration thereof by any
governmental authority, central bank or comparable agency charged with the
interpretation or administration thereof, or compliance by the Lender or any
Person controlling the Lender with any request or directive regarding capital
adequacy (whether or not having the force of law) of any such authority, central
bank or comparable agency, has or would have the effect of reducing the rate of
return on the Lender's or such controlling Person's capital as a consequence of
the Lender's obligations hereunder to a level below that which the Lender or
such controlling Person could have achieved but for such adoption, change or
compliance (taking into consideration the Lender's or such controlling Person's
policies with respect to capital adequacy) by an amount deemed by the Lender or
such controlling Person to be material, then from time to time, upon demand by
the Lender, the Borrower shall pay to the Lender such additional amount or
amounts as will compensate the Lender or such controlling Person for such
reduction.
6.2 Basis for Determining Interest Rate Inadequate or Unfair. If with
respect to any Interest Period:
(i) deposits in Dollars (in the applicable amounts) are not being
offered to the Lender in the interbank eurodollar market for such
Interest Period, or the Lender otherwise determines (which
determination, if made in good faith, shall be binding and
conclusive on the Borrower) that by reason of circumstances
affecting the interbank eurodollar market adequate and reasonable
means do not exist for ascertaining the applicable Eurodollar
Rate; or
(ii) the Eurodollar Rate (Reserve Adjusted) as determined by the
Lender will not adequately and fairly reflect the cost to the
Lender of maintaining or funding such Eurodollar Loans for such
Interest Period or that the making or funding of Eurodollar Loans
has become impracticable as a result of an event occurring after
the date of this Agreement;
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then the Lender shall promptly notify the other parties thereof and, so long as
such circumstances shall continue, (a) the Lender shall be under no obligation
to make Eurodollar Loans and (b) on the last day of the current Interest Period
for each Eurodollar Loan, such Loan shall, unless then repaid in full,
automatically convert to a Base Rate Loan.
6.3 Changes in Law Rendering Eurodollar Loans Unlawful. If any change in
(including the adoption of any new) applicable law or regulation, or any change
in the interpretation of applicable law or regulation by any governmental or
other regulatory body charged with the administration thereof, should make it
(or in the good faith judgment of the Lender cause a substantial question as to
whether it is) unlawful for the Lender to make, maintain or fund Eurodollar
Loans, then the Lender shall promptly notify the Borrower and, so long as such
circumstances shall continue, (i) the Lender shall have no obligation to make or
convert into Eurodollar Loans and (ii) on the last day of the current Interest
Period for each Eurodollar Loan of the Lender (or, in any event, on such earlier
date as may be required by the relevant law, regulation or interpretation), such
Eurodollar Loan shall, unless then repaid in full, automatically convert to a
Base Rate Loan.
6.4 Funding Losses. The Borrower hereby agrees that upon demand by the
Lender, the Borrower will indemnify the Lender against any net loss or expense
that the Lender may sustain or incur (including any net loss or expense incurred
by reason of the liquidation or reemployment of deposits or other funds acquired
by the Lender to fund or maintain any Eurodollar Loan) as a result of any
payment or prepayment of any Eurodollar Loan (including any conversion of any
such Eurodollar Loan into a Base Rate Loan) on a date other than the last day of
an Interest Period for such Loan. For this purpose, all notices to the Lender
pursuant to this Agreement shall be deemed to be irrevocable.
6.5 Right of Lender to Fund through Other Offices. The Lender may, if it
so elects, fulfill its commitment as to any Eurodollar Loan by causing a foreign
branch or affiliate of the Lender to make such Loan; provided that in such event
for the purposes of this Agreement such Loan shall be deemed to have been made
by the Lender and the obligation of the Borrower to repay such Loan shall
nevertheless be to the Lender and shall be deemed held by it, to the extent of
such Loan, for the account of such branch or affiliate.
6.6 Discretion of Lender as to Manner of Funding. Notwithstanding any
provision of this Agreement to the contrary, the Lender shall be entitled to
fund and maintain its funding of the Loans in any manner it sees fit, it being
understood, however, that for the purposes of this Agreement all determinations
hereunder shall be made as if the Lender had actually funded and maintained each
Eurodollar Loan during each Interest Period for such Loan through the purchase
of deposits having a maturity corresponding to such Interest Period and bearing
an interest rate equal to the Eurodollar Rate for such Interest Period.
6.7 Conclusiveness of Statements; Survival of Provisions. Determinations
and statements of the Lender pursuant to Section 6.1, 6.2, 6.3 or 6.4 shall be
conclusive absent manifest error. The Lender may use reasonable averaging and
attribution methods in determining compensation under Sections 6.1 and 6.4, and
the provisions of such Sections shall survive repayment of the Loans,
cancellation of the Notes and any termination of this Agreement.
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SECTION 7: REPRESENTATIONS AND WARRANTIES
To induce the Lender to enter into this Agreement and to induce the
Lender to make the Loans, the Borrower represents and warrants to the Lender
that, as of the Closing Date:
7.1 Organization. The Borrower is a corporation duly incorporated,
validly existing and in good standing under the laws of its jurisdiction of
incorporation. The Borrower is in good standing and is duly qualified to do
business in the States of California, Colorado, Illinois, Indiana and Texas, the
Commonwealth of Massachusetts and each other jurisdiction where, because of the
nature of its activities or properties, such qualification is required, except
for such jurisdictions where the failure so to qualify would not have a Material
Adverse Effect.
7.2 Authorization; No Conflict. The Borrower is duly authorized to
execute and deliver each Loan Document to which it is a party, the Borrower is
duly authorized to borrow monies under this Agreement and the Borrower is and
will continue to be duly authorized to perform its obligations under each Loan
Document to which it is a party. The execution, delivery and performance by the
Borrower of this Agreement and of each Loan Document to which it is a party, and
the borrowings by the Borrower under this Agreement, do not and will not (i)
require any consent or approval of any governmental agency or authority that has
not been obtained or (ii) conflict with (a) any provision of law, (b) the
articles of incorporation or by-laws of the Borrower, (c) any material agreement
binding upon the Borrower or its properties or assets or (d) any court or
administrative order or decree applicable to the Borrower, and do not and will
not require, or result in, the creation or imposition of any Lien on any asset
of the Borrower or any of its Subsidiaries.
7.3 Validity and Binding Nature. Each of this Agreement and each other
Loan Document to which the Borrower is a party is the legal, valid and binding
obligation of the Borrower, enforceable against the Borrower in accordance with
its terms.
7.4 Financial Condition. The audited financial statements of the
Borrower as of and for the fiscal years ended September 30, 1998, and September
30, 1999, and unaudited financial statements of the Borrower for the portion of
fiscal year 2000 up to and including December 31, 1999, copies of which have
been furnished prior to the Closing Date to the Lender, fairly present in all
material respects the assets, liabilities, revenues, expenses and cash flows of
the Borrower as of the dates thereof and the results of operations for the
periods covered thereby. The Borrower has no liability or unusual or long-term
commitment that might have a Material Adverse Effect and that is not reflected
in the financial statements referred to above.
7.5 No Material Adverse Change. Since September 30, 1999, there has been
no event that has had or could be reasonably likely to have a Material Adverse
Effect.
7.6 Litigation and Contingent Liabilities. Except as set forth in
Schedule 7.6, no litigation (including derivative actions), arbitration
proceeding or governmental investigation or proceeding is pending or, to the
Borrower's knowledge, threatened against the Borrower or any Subsidiary which
might reasonably be expected to have a Material Adverse Effect. There are no
injunctions or temporary restraining orders (either pending or, to the
Borrower's knowledge, threatened) that would prohibit the making of Loans. Other
than any liability incident to such
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litigation or proceedings, neither the Borrower nor any Subsidiary has any
contingent liabilities not listed on Schedule 7.6 or permitted by Section 8.7.
7.7 Taxes. The Borrower has filed, has caused to be filed or has been
included in all tax returns (federal, state, local, foreign and other material
tax returns) required to be filed by or on behalf of the Borrower and has paid
or caused to be paid all taxes and other governmental charges due for the
periods covered thereby, including interest and penalties, other than any such
taxes or charges (i) for which a timely and proper extension has been obtained
and (ii) that are being contested in good faith and by proper proceedings and as
to which appropriate reserves (in the reasonable judgment of the Lender) are
being maintained, unless and until any Lien resulting therefrom attaches to its
property and becomes enforceable against its other creditors. The reserves for
taxes reflected on the balance sheets of the Borrower submitted to the Lender in
accordance with the terms of Section 8.1 will be adequate in amount in
accordance with GAAP for the payment of all liabilities for all taxes (whether
or not disputed) of the Borrower accrued through the date of such balance sheet.
7.8 Information. All information heretofore or contemporaneously with
this Agreement furnished in writing by the Borrower to the Lender for purposes
of or in connection with this Agreement and the transactions contemplated by
this Agreement is, and all written information hereafter furnished by or on
behalf of the Borrower or any Subsidiary to the Lender pursuant to this
Agreement or any other Loan Document or in connection with this Agreement will
be, true and accurate in every material respect on the date as of which such
information is dated or certified, and none of such information is or will be
incomplete by omitting to state any material fact necessary to make such
information not misleading in light of the circumstances under which made (it
being recognized by the Lender that any projections and forecasts provided by
the Borrower are based on good faith estimates and assumptions believed by the
Borrower to be reasonable as of the date of the applicable projections or
assumptions and that actual results during the period or periods covered by any
such projections and forecasts may differ from projected or forecasted results).
7.9 Solvency. On the Closing Date, and immediately prior to and after
giving effect to the issuance of the Loans and the use of the proceeds thereof,
(i) the Borrower's assets will exceed its liabilities and (ii) the Borrower will
be solvent, will be able to pay its debts as they mature, will own property with
fair saleable value greater than the amount required to pay its debts and will
have capital sufficient to carry on its business as then constituted.
7.10 No Default. No Event of Default or Unmatured Event of Default
exists or would result from the incurring by the Borrower of any Indebtedness
under this Agreement or under any other Loan Document. No contract or other
agreement to which the Borrower or any Subsidiary is a party has been terminated
or breached by the Borrower or any Subsidiary if such termination or breach
could have a Material Adverse Effect.
7.11 Use of Proceeds. The Borrower will apply the proceeds of the Loans
under this Agreement to (i) partially finance the construction of a
manufacturing and distribution center in Aurora, Illinois and (ii) make the
Cabot Dividend.
7.12 Subsidiaries. The Borrower has no Subsidiaries.
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7.13 Ownership of Properties; Liens. Except as permitted pursuant to
Section 8.8, each of the Borrower and each Subsidiary owns good title to all of
its personal properties and assets, tangible and intangible, of any nature
whatsoever (including patents, trademarks, trade names, service marks and
copyrights), free and clear of all Liens, charges and claims (including
infringement claims with respect to patents, trademarks, service marks,
copyrights and the like).
7.14 Intellectual Property. Except as set forth in Schedule 7.14, the
Borrower and each of its Subsidiaries owns and possesses or has a license or
other right to use all such patents, patent rights, trademarks, trademark
rights, trade names, trade name rights, service marks, service mark rights and
copyrights as are necessary for the conduct of the business of the Borrower and
its Subsidiaries as conducted on the Closing Date, without any infringement upon
rights of others which could reasonably be expected to have a Material Adverse
Effect.
7.15 Insurance. Set forth on Schedule 7.15 is a complete and accurate
summary of the property and casualty insurance program of the Borrower and its
Subsidiaries as of the Closing Date (including the names of all insurers, policy
numbers, expiration dates, amounts and types of coverage, annual premiums,
exclusions, deductibles, self-insured retention and a description in reasonable
detail of any self-insurance program, retrospective rating plan, fronting
arrangement or other risk assumption arrangement involving the Borrower or any
Subsidiary).
7.16 Investment Company Act; Public Utility Holding Company Act. Neither
the Borrower nor any Subsidiary is an "investment company" or a company
"controlled" by an "investment company", within the meaning of the Investment
Company Act of 1940. Neither the Borrower nor any Subsidiary is a "holding
company", or a "subsidiary company" of a "holding company", or an "affiliate" of
a "holding company" or of a "subsidiary company" of a "holding company", within
the meaning of the Public Utility Holding Company Act of 1935.
7.17 Regulation U. The Borrower is not engaged principally, or as one of
its important activities, in the business of extending credit for the purpose of
purchasing or carrying Margin Stock.
7.18 Securities Matters. The making of the Loans, the application of the
proceeds and repayment thereof by the Borrower and the consummation of the
transactions contemplated by this Agreement and the other Loan Documents will
not violate any provision of any federal or state securities statutes, rules or
regulations, or any order issued by the Securities and Exchange Commission
(collectively, the "Securities Laws"). The Borrower agrees to indemnify the
Lender and hold the Lender harmless from the claims of any Persons in connection
with any of the Securities Laws and relating to the making of the Loans or the
transactions contemplated by this Agreement and the other Loan Documents.
7.19 Pension and Welfare Plans. (a) Except as set forth in Schedule
7.19, during the twelve-consecutive-month period prior to the date of the
execution and delivery of this Agreement, (i) no steps have been taken to
terminate any Pension Plan and (ii) no contribution failure has occurred with
respect to any Pension Plan sufficient to give rise to a Lien under Section
302(f) of ERISA. No condition exists or event or transaction has occurred with
respect to any Pension Plan which could result in the incurrence by the Borrower
of any material liability, fine or penalty. The Borrower has no contingent
liability with respect to any post-retirement benefit under a Welfare
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Plan, other than liability for continuation coverage described in Part 6 of
Subtitle B of Title I of ERISA.
(b) Except as set forth in Schedule 7.19, all contributions (if any)
have been made to any Multiemployer Pension Plan that are required to be made by
the Borrower or any other member of the Controlled Group under the terms of the
plan or of any collective bargaining agreement or by applicable law; neither the
Borrower nor any member of the Controlled Group has withdrawn or partially
withdrawn from any Multiemployer Pension Plan, incurred any withdrawal liability
with respect to any such plan, received notice of any claim or demand for
withdrawal liability or partial withdrawal liability from any such plan, and no
condition has occurred which, if continued, might result in a withdrawal or
partial withdrawal from any such plan; and neither the Borrower nor any member
of the Controlled Group has received any notice that any Multiemployer Pension
Plan is in reorganization, that increased contributions may be required to avoid
a reduction in plan benefits or the imposition of any excise tax, that any such
plan is or has been funded at a rate less than that required under Section 412
of the Code, that any such plan is or may be terminated, or that any such plan
is or may become insolvent.
7.20 Environmental Matters.
(a) To the best of the Borrower's knowledge, neither the Borrower nor
any Subsidiary, nor any operator of the Borrower's or any Subsidiary's
properties, is in violation, or alleged violation, of any judgment, decree,
order, law, permit, license, rule or regulation pertaining to environmental
matters, including those arising under RCRA, CERCLA, the Superfund Amendments
and Reauthorization Act of 1986 or any other Environmental Law which might
reasonably be expected to have a Material Adverse Effect.
(b) Except for matters arising which would, individually, be expected to
have a Material Adverse Effect, neither the Borrower nor any Subsidiary has
received notice from any third party, including any federal, state or local
governmental authority (i) that any one of them has been identified by the
United States Environmental Protection Agency as a potentially responsible party
under CERCLA with respect to a site listed on the National Priorities List, 40
C.F.R. Part 300 Appendix B, (ii) that any hazardous waste, as defined by 42
U.S.C. Section 6903(5), any hazardous substance as defined by 42 U.S.C.
Section 9601(14), any pollutant or contaminant as defined by 42 U.S.C.
Section 9601(33) or any toxic substance, oil or hazardous material or other
chemical or substance regulated by any Environmental Law (all of the foregoing,
"Hazardous Substances"), which any one of them has generated, transported or
disposed of has been found at any site at which a federal, state or local agency
or other third party has conducted a remedial investigation, removal or other
response action pursuant to any Environmental Law, (iii) that the Borrower or
any Subsidiary must conduct a remedial investigation, removal, response action
or other activity pursuant to any Environmental Law or (iv) of any Environmental
Claim.
(c) Except as set forth on Schedule 7.20, (i) no portion of any real
property or other assets of the Borrower or any Subsidiary has been used for the
handling, processing, storage or disposal of Hazardous Substances except in
accordance in all material respects with applicable Environmental Laws, (ii) in
the course of any activities conducted by the Borrower, any Subsidiary or the
operators of any real property of the Borrower or any Subsidiary, no Hazardous
Substances have been generated or are being used on such properties except in
accordance in all material
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respects with applicable Environmental Laws, (iii) there have been no Releases
or threatened Releases of Hazardous Substances on, upon, into or from any real
property or other assets of the Borrower or any Subsidiary, which might
reasonably be expected to have a Material Adverse Effect, (iv) there have been
no Releases on, upon, from or into any real property in the vicinity of any real
property or other assets of the Borrower or any Subsidiary which, through soil
or groundwater contamination, may have come to be located on, and which might
reasonably be expected to have a Material Adverse Effect and (v) any Hazardous
Substances generated by the Borrower and its Subsidiaries have been transported
offsite only by properly licensed carriers and delivered only to treatment or
disposal facilities maintaining valid permits as required under applicable
Environmental Laws, which transporters and facilities have been and are
operating in compliance in all material respects with such permits and
applicable Environmental Laws.
7.21 Labor Matters. Neither the Borrower nor any Subsidiary is subject
to any labor or collective bargaining agreement. There are no existing or
threatened strikes, lockouts or other labor disputes involving the Borrower or
any Subsidiary that singly or in the aggregate could reasonably be expected to
have a Material Adverse Effect. Hours worked by and payment made to employees of
the Borrower and its Subsidiaries are not in violation of the Fair Labor
Standards Act or any other applicable law, rule or regulation dealing with such
matters.
7.22 Year 2000 Issues. The computer systems in the Borrower's business
are capable of the following before, during or after January 1, 2000 ("Year 2000
Compliant"): (i) handling date information involving all and any dates before,
during and/or after January 1, 2000, including accepting input, providing output
and performing date calculations in whole or in part; (ii) operating accurately
without interruption on and in respect of any and all dates before, during
and/or after January 1, 2000 and without any change in performance; (iii)
responding to and processing two digit year input without creating any ambiguity
as to the century; and (iv) storing and providing date input information without
creating any ambiguity as to the century.
7.23 Survival of Warranties. All representations contained in this
Agreement and the other Loan Documents survive the execution and delivery of
this Agreement.
SECTION 8: COVENANTS
Until the Termination Date and thereafter until all Liabilities of the
Borrower are paid in full, the Borrower agrees that it will:
8.1 Reports, Certificates and Other Information. Furnish to the Lender:
(a) promptly when available and in any event within 120 days after
the close of each fiscal year (i) a copy of the annual audit
report of the Borrower and its Subsidiaries for such fiscal year,
including therein consolidated balance sheets of the Borrower and
its Subsidiaries as of the end of such fiscal year and
consolidated statements of earnings and cash flow of the Borrower
and its Subsidiaries for such fiscal year, audited by an
accounting firm reasonably acceptable to the Lender and (ii)
consolidating balance sheets of the Borrower and its Subsidiaries
as of the end of such fiscal year and a consolidating statement
of earnings for the Borrower and its Subsidiaries for such fiscal
year, together with a comparison of the preceding fiscal year,
certified by a Responsible Officer of the Borrower;
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(b) promptly when available and in any event within 45 days after the
end of each fiscal quarter (except the last fiscal quarter) of
each fiscal year, consolidated balance sheets of the Borrower and
its Subsidiaries as of the end of such fiscal quarter, together
with consolidated statements of earnings for such fiscal quarter
and for the period beginning with the first day of such fiscal
year end ending on the last day of such fiscal quarter, together
with a comparison with the corresponding period of the previous
fiscal year, certified by a Responsible Officer of the Borrower;
(c) contemporaneously with the furnishing of a copy of each annual
audit report pursuant to Section 8.1(a) and each set of quarterly
statements pursuant to Section 8.1(b), so long as any Liabilities
are outstanding at such time, a duly completed compliance
certificate in the form of Exhibit B, with appropriate
insertions, dated the date of such annual report or such
quarterly statement and signed by a Responsible Officer of the
Borrower, containing a computation of each of the financial
ratios and restrictions set forth in Section 8.6 and to the
effect that such officer has not become aware of any Event of
Default or Unmatured Event of Default that has occurred and is
continuing or, if there is any such event, describing it and the
steps, if any, being taken to cure it;
(d) promptly upon the filing or sending thereof, copies of all
regular, periodic or special reports of any Affiliate of the
Borrower filed with the Securities and Exchange Commission (the
"SEC"); copies of all registration statements of any Affiliate of
the Borrower filed with the SEC (other than on Form S-8); and
copies of all proxy statements or other communications made to
security holders generally (in each case only to the extent such
reports or filings include or incorporate the financial results
of the Borrower or any Subsidiary);
(e) promptly upon becoming aware of any of the following, written
notice describing the same and the steps being taken by the
Borrower or the Subsidiary affected thereby with respect thereto:
(i) the occurrence of an Event of Default or an Unmatured Event
of Default;
(ii) any litigation, arbitration or governmental investigation
or proceeding not previously disclosed by the Borrower to
the Lender that has been instituted or, to the knowledge of
the Borrower, is threatened against the Borrower or any
Subsidiary or to which any of the properties of any thereof
is subject that might reasonably be expected to have a
Material Adverse Effect;
(iii) the institution of any steps by any member of the
Controlled Group or any other Person to terminate any
Pension Plan, or the failure of any member of the
Controlled Group to make a required contribution to any
Pension Plan (if such failure is sufficient to give rise to
a Lien under Section 302(f) of ERISA) or to any
Multiemployer Pension Plan, or the taking of any action
with respect to a Pension Plan which could result in the
requirement that the Borrower furnish a bond or other
security to the PBGC or such Pension Plan, or the
occurrence
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of any event with respect to any Pension Plan or
Multiemployer Pension Plan which could result in the
incurrence by any member of the Controlled Group of any
material liability, fine or penalty (including any claim or
demand for withdrawal liability or partial withdrawal from
any Multiemployer Pension Plan), or any material increase
in the contingent liability of the Borrower with respect to
any post-retirement Welfare Plan benefit, or any notice
that any Multiemployer Pension Plan is in reorganization,
that increased contributions may be required to avoid a
reduction in plan benefits or the imposition of an excise
tax, that any such plan is or has been funded at a rate
less than that required under Section 412 of the Code, that
any such plan is or may be terminated, or that any such
plan is or may become insolvent;
(iv) any cancellation or material change in any insurance
maintained by the Borrower or any Subsidiary; or
(v) any event (including (a) any violation of any Environmental
Law or the assertion of any Environmental Claim or (b) the
enactment or effectiveness of any law, rule or regulation)
which might reasonably be expected to have a Material
Adverse Effect;
(f) promptly upon the request of the Lender, copies of all detailed
financial and management reports submitted to the Borrower by
independent auditors in connection with each annual or interim
audit made by such auditors of the books of the Borrower;
(g) promptly from time to time, copies of any notices (including,
without limitation, notices of default or acceleration) received
from any holder or trustee of, under or with respect to any
Indebtedness; and
(h) from time to time such other information concerning the Borrower,
its Subsidiaries and its Affiliates, as the Lender may reasonably
request.
8.2 Maintenance of Existence. Maintain and preserve, and cause each
Subsidiary to maintain and preserve, (i) its existence and good standing in the
jurisdiction of its organization and (ii) its qualification and good standing as
a foreign corporation in each jurisdiction where the nature of its business
makes such qualification necessary (except in those instances in which the
failure to be qualified or in good standing could not have a Material Adverse
Effect).
8.3 Compliance with Laws; Payment of Taxes and Liabilities. (i) Comply,
and cause each Subsidiary to comply, in all material respects with all
applicable laws (including Environmental Laws), rules, regulations, decrees,
orders, judgments, licenses and permits, except where failure to comply could
not reasonably be expected to have a Material Adverse Effect and (ii) pay, and
cause each Subsidiary to pay, prior to delinquency, all taxes and other
governmental charges against it or any of its property, as well as claims of any
kind which, if unpaid, might become a Lien on any of its property; provided that
the foregoing shall not require the Borrower or any Subsidiary to pay any such
tax or charge so long as it shall contest the validity thereof in good faith by
appropriate
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proceedings and shall set aside on its books adequate reserves with respect
thereto in accordance with GAAP.
8.4 Maintenance of Insurance. Maintain, and cause each Subsidiary to
maintain, with responsible insurance companies, such insurance as may be
required by any law or governmental regulation or court decree or order
applicable to it and such other insurance, to such extent and against such
hazards and liabilities (including business interruption insurance), as is
customarily maintained by companies similarly situated, but which shall insure
against all risks and liabilities of the type identified on Schedule 7.15 and
shall have insured amounts no less than, and deductibles no higher than, those
set forth on such schedule; and, upon request of the Lender, furnish to the
Lender a certificate setting forth in reasonable detail the nature and extent of
all insurance maintained by the Borrower and its Subsidiaries.
8.5 Books, Records and Inspections. Keep, and cause each Subsidiary to
keep, its books and records in accordance with sound business practices
sufficient to allow the preparation of financial statements in accordance with
GAAP. The Borrower shall permit, and cause each Subsidiary to permit, at any
reasonable time and with reasonable notice (or at any time without notice if an
Event of Default exists), the Lender or any representative thereof to visit any
or all of its offices, to discuss its financial matters with its officers and
its independent auditors (and the Borrower authorizes such independent auditors
to discuss such financial matters with the Lender or any representative
thereof), and to examine (and, at the expense of the Borrower or the applicable
Subsidiary, photocopy extracts from) any of its books or other records.
8.6 Financial Covenants.
(i) Not permit the ratio of (a) the sum of (i) the Borrower's
investments described in Sections 8.11(ii) and 8.11(iii), plus
(ii) the Borrower's right to payment for goods sold or leased or
for services rendered, whether or not evidenced by an instrument
or chattel paper and whether or not yet earned by performance, in
each case to the extent classified as current assets under GAAP,
to (b) current liabilities (as determined according to GAAP) plus
all outstanding revolving loans under the Revolving Credit
Facility to be, on a consolidated basis, less than 1.25 to 1.00
at any time.
(ii) Not permit its Leverage Ratio to be greater than 2.25 to 1.00 at
any time, as measured on the last day of each fiscal quarter of
the Borrower on a consolidated basis for the four consecutive
fiscal quarters most recently ended.
(iii) Not permit the ratio of (a) the sum of (1) Consolidated Net
Income (or Loss) for such period plus (2) to the extent deducted
in determining such Consolidated Net Income (or Loss), (A)
consolidated gross interest expense (including all commissions,
discounts, fees and other charges in connection with standby
letters of credit and similar instruments) accrued or paid by the
Borrower and its Subsidiaries for such period (including all
imputed interest on Capital Leases), determined in accordance
with GAAP and (B) provisions for any income or similar taxes paid
or accrued by the Borrower and its Subsidiaries minus (3)
non-cash gains received by the Borrower during such period, in
each case determined on a consolidated basis in accordance with
GAAP, to (b) the consolidated gross interest expense (including
all commissions, discounts, fees and other charges in connection
with standby letters of
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credit and similar instruments) accrued or paid by the Borrower
and its Subsidiaries (including all imputed interest on Capital
Leases), determined in accordance with GAAP, to be less than 3.00
to 1.00, as measured on the last day of each fiscal quarter of
the Borrower on a consolidated basis for the four consecutive
fiscal quarters most recently ended.
(iv) Not permit Consolidated Net Income (or Loss) of the Borrower and
its Subsidiaries to be greater than (a) for any fiscal quarter,
($7,500,000) and (b) for any two consecutive fiscal quarters,
($10,000,000); it being understood that, by way of example,
($2,000,000) is greater than ($1,000,000).
8.7 Limitations on Indebtedness. Not, and not permit any Subsidiary to,
create, incur, assume or suffer to exist any Indebtedness, except:
(i) obligations in respect of the Loans;
(ii) (a) Indebtedness incurred in connection with the acquisition
after the Closing Date of any real or personal property by the
Borrower or such Subsidiary or under any Capital Lease; provided
that the aggregate principal amount of such Indebtedness shall
not exceed $5,000,000 outstanding at any time, (b) unsecured
Indebtedness incurred under the Revolving Credit Facility;
provided that the aggregate principal amount of such Indebtedness
shall not exceed $25,000,000 outstanding at any time and (c)
Indebtedness incurred or assumed in connection with Permitted
Acquisitions;
(iii) Indebtedness of Subsidiaries owed to the Borrower and unsecured
Indebtedness of the Borrower to owed to Subsidiaries; and
(iv) Indebtedness listed on Schedule 8.7.
8.8 Liens. Not, and not permit any Subsidiary to, create or permit to
exist any Lien on any of its real or personal properties, assets or rights of
whatsoever nature (whether now owned or hereafter acquired), except:
(i) Liens for taxes or other governmental charges not at the time
delinquent or thereafter payable without penalty or being
contested in good faith by appropriate proceedings and, in each
case, for which it maintains adequate reserves in accordance with
GAAP;
(ii) Liens arising in the ordinary course of business (such as (i)
Liens of carriers, warehousemen, mechanics and materialmen and
other similar Liens imposed by law and (ii) Liens incurred in
connection with worker's compensation, unemployment compensation
and other types of social security (excluding Liens arising under
ERISA) or in connection with surety bonds, bids, performance
bonds and similar obligations) for sums not overdue or being
contested in good faith by appropriate proceedings and not
involving any deposits or advances or borrowed money or the
deferred purchase price of property or services and, in each
case, for which it maintains adequate reserves in accordance with
GAAP;
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(iii) (i) Liens arising in connection with Capital Leases (and
attaching only to the property being leased), (ii) Liens existing
on property at the time of the acquisition thereof by the
Borrower or any Subsidiary (and not created in contemplation of
such acquisition) and (iii) Liens that constitute purchase money
security interests on any property securing debt incurred for the
purpose of financing all or any part of the cost of acquiring
such property; provided that any such Lien attaches to such
property within 60 days of the acquisition thereof and such Lien
attaches solely to the property so acquired;
(iv) attachments, appeal bonds, judgments and other similar Liens, for
sums not exceeding $5,000,000 arising in connection with court
proceedings; provided that the execution or other enforcement of
such Liens is effectively stayed and the claims secured thereby
are being actively contested in good faith and by appropriate
proceedings;
(v) easements, rights of way, restrictions, minor defects or
irregularities in title and other similar Liens not interfering
in any material respect with the ordinary conduct of the business
of the Borrower or any Subsidiary; and
(vi) Liens identified on Schedule 8.8.
8.9 Mergers, Consolidations, Sales. Will not, and not permit any
Subsidiary to, be a party to any merger or consolidation, or purchase or
otherwise acquire all or substantially all of the assets or any stock of any
class of, or any partnership or joint venture interest in, any other Person, or
sell, transfer, convey or lease any of its assets other than (i) sales in the
ordinary course of business of obsolete, damaged or worn-out equipment and
inventory and (ii) Permitted Acquisitions.
8.10 Inconsistent Agreements; Negative Pledge. Not, and not permit any
Subsidiary to, enter into any agreement containing any provision which would (i)
be violated or breached by any borrowing of a Loan under this Agreement or by
the performance by the Borrower or any Subsidiary of any of its obligations
under this Agreement or under any other Loan Document, (ii) prohibit the
Borrower or any Subsidiary from granting to the Lender a Lien on any of its
assets (except in connection with the Revolving Credit Facility) or (iii) create
or otherwise cause or suffer to exist or become effective any encumbrance or
restriction on the ability of any Subsidiary to (a) pay dividends or make other
distributions on its capital stock owned by the Borrower or any other
Subsidiary, or pay any Indebtedness owed to the Borrower or any other
Subsidiary, (b) make loans or advances to the Borrower or (c) transfer any of
its assets or properties to the Borrower.
8.11 Advances and Other Investments. Not, and not permit any Subsidiary
to, make, incur, assume or suffer to exist any investment in another Person,
whether by acquisition of any debt or equity security, by making any loan or
advance or by becoming obligated with respect to Indebtedness in respect of
obligations of such other Person, except (without duplication) the following:
(i) Permitted Acquisitions;
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<PAGE> 26
(ii) (a) any evidence of Indebtedness, maturing not more than one year
after such time, issued or guaranteed by the United States
Government (or, in the case of foreign operations, any country
that is a member of the OECD) or any agency of the foregoing, (b)
commercial paper, maturing not more than one year from the date
of issue, or corporate demand notes, in each case (unless issued
by the Lender or its Affiliates) rated at least A-l by Standard &
Poor's Ratings Group or P-l by Moody's Investors Service, Inc.,
(c) any certificate of deposit (or time deposits represented by
such certificates of deposit) or banker's acceptance, maturing
not more than one year after such time, or overnight federal
funds transactions that are issued or sold by the Lender or its
Affiliates or by a commercial banking institution that is a
member of the Federal Reserve System (or, in the case of foreign
operations, a commercial banking institution organized under the
laws of a country that is a member of the OECD) and has a
combined capital and surplus and undivided profits of not less
than $500,000,000 or (d) any repurchase agreement entered into
with the Lender (or other commercial banking institution of the
stature referred to in clause (c) above) which (1) is secured by
a fully perfected security interest in any obligation of the type
described in any of clauses (a) through (c) above and (2) has a
market value at the time such repurchase agreement is entered
into of not less than 100% of the repurchase obligation of the
Lender (or other commercial banking institution) thereunder;
(iii) bank deposits and balances in the ordinary course of business;
and
(iv) investments in securities of account debtors received pursuant to
any plan of reorganization or similar arrangement upon the
bankruptcy or insolvency of such account debtors.
8.12 Restricted Payments. Not, and not permit any Subsidiary to, without
the prior written consent of the Lender, (i) issue any equity securities of the
Borrower or any Subsidiary in an offering of equity securities registered under
the Securities Act of 1933, (ii) make any distribution to any of its
shareholders, (iii) pay any management fees or similar fees to Cabot Corporation
or any Affiliate thereof or (iv) set aside funds for any of the foregoing, in
each case other than (a) issuance of equity securities of the Borrower in
connection with the initial public offering of such securities, (b) advances to
its employees in connection with expense reimbursements in the ordinary course
of business, (c) management fees to Cabot Corporation or any Affiliate thereof
under the management agreement among such parties as in effect on the Closing
Date, (d) dividends or distributions to the Borrower's shareholders in an
amount, determined in the aggregate for all such dividends or distributions made
in any fiscal year, not to exceed 50% of the Borrower's Consolidated Net Income
(or Loss) for such fiscal year and (e) the Cabot Dividend.
8.13 Transactions with Affiliates. Except as set forth in Schedule 8.13,
not, and not permit any Subsidiary to, enter into, or cause, suffer or permit to
exist any transaction, arrangement or contract with any of its other Affiliates
(other than the Borrower and its Subsidiaries) which is on terms which are less
favorable than are obtainable from any Person which is not one of its
Affiliates.
8.14 Restriction of Amendments to Revolving Credit Facility. Not amend
or otherwise modify, or waive any rights under, any agreement or instrument
relating to the Revolving Credit Facility if any such amendment, modification or
waiver would (i) increase the rate of interest (other
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<PAGE> 27
than with respect to the application of a default rate of interest), the fees
(other than in respect of amendment and waiver fees charged in the ordinary
course of business) or any prepayment premiums payable with respect to the
Revolving Credit Facility, (ii) add or change any covenants or events of default
in a manner materially more restrictive to the Borrower or any Subsidiary, (iii)
impose any express restrictions on the Borrower's ability to make payments on
the Liabilities or (iv) would give the agent or lenders under the Revolving
Credit Facility an express Lien on the assets of the Borrower or any Subsidiary.
8.15 Compliance with STEP. Use its reasonable efforts to comply with the
requirements of STEP and maintain its eligibility to participate in STEP.
8.16 Use of Proceeds. Use the proceeds of the Loans solely to (i)
partially finance the construction of a manufacturing and distribution center in
Aurora, Illinois and (ii) make the Cabot Dividend; and not use or permit any
proceeds of any Loan to be used, either directly or indirectly, for the purpose,
whether immediate, incidental or ultimate, of "purchasing or carrying" any
Margin Stock.
8.17 Employee Benefit Plans. Maintain, and cause each Subsidiary to
maintain, each Pension Plan in substantial compliance with all applicable
requirements of law and regulations.
8.18 Environmental Matters. (a) If any Release or Disposal of Hazardous
Substances shall occur or shall have occurred on any real property or any other
assets of the Borrower or any Subsidiary, the Borrower shall, or shall cause the
applicable Subsidiary to, cause the prompt containment and removal of such
Hazardous Substances and the remediation of such real property or other assets
as necessary to comply in all material respects with all Environmental Laws and
to preserve the value of such real property or other assets. Without limiting
the generality of the foregoing, the Borrower shall, and shall cause each
Subsidiary to, comply in all material respects with any valid federal or state
judicial or administrative order requiring the performance at any real property
of the Borrower or any Subsidiary of activities in response to the Release or
threatened Release of a Hazardous Substance.
(b) To the extent that the transportation of "hazardous waste" as
defined by RCRA is permitted by this Agreement, the Borrower shall, and shall
cause its Subsidiaries to, dispose of such hazardous waste only at licensed
disposal facilities operating in compliance with Environmental Laws.
8.19 Further Assurances. Take, and cause each Subsidiary to take, such
actions as are necessary, or as the Lender may reasonably request.
SECTION 9: EFFECTIVENESS; CONDITIONS OF LENDING
The obligation of the Lender to make any Loan is subject to the
following conditions precedent (which conditions precedent must be satisfied by
no later than April 30, 2000):
9.1 Documentation. The Lender shall have received all of the following,
each duly executed and dated the Closing Date (or such earlier date as shall be
satisfactory to the Lender), in form and substance satisfactory to the Lender:
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<PAGE> 28
(a) each Loan Document;
(b) certified copies of the Borrower's articles of incorporation and
by-laws and long form good standing certificates and, if
applicable, tax certificates, for all states where the nature and
extent of the business transacted by the Borrower or the
ownership of the Borrower's assets makes such qualification
necessary;
(c) certified copies of resolutions of the board of directors of the
Borrower authorizing the execution, delivery and performance by
the Borrower of this Agreement and the Loan Documents to which
the Borrower is a party;
(d) certified copies of all documents evidencing any necessary
corporate or partnership action, consents and governmental
approvals (if any) required for the execution, delivery and
performance by the Borrower of the documents referred to in this
Section 9.1;
(e) a certificate of the secretary or an assistant secretary of the
Borrower certifying the names of the officer or officers of such
entity authorized to sign the Loan Documents to which such entity
is a party, together with a sample of the true signature of each
such officer (it being understood that the Lender may
conclusively rely on each such certificate until formally advised
by a like certificate of any changes therein);
(f) a solvency certificate, substantially in the form of Exhibit C,
executed by a Responsible Officer of the Borrower executed on
behalf of such officer;
(g) a certificate signed by a Responsible Officer of the Borrower on
behalf of the Borrower dated as of the Closing Date, affirming
the matters set forth in Section 9.4 as of the Closing Date;
(h) Lien search results certified by a party acceptable to the
Lender, dated a date reasonably near to the Closing Date, listing
all effective financing statements that name the Borrower (under
its present name and any previous names) as debtor and that are
filed in the jurisdictions deemed necessary and appropriate by
the Lender, together with (i) copies of such financing statements
and (ii) executed copies of proper termination statements, if
any, necessary to release all Liens and other rights of any
Person described in such financing statements (other than Liens
permitted by Section 8.8); and
(i) the opinion of Borrower's counsel covering such matters as are
described on Exhibit D.
9.2 Payment of Fees. The Borrowers will provide the Lender with evidence
of payment by the Borrower of all accrued and unpaid fees, costs and expenses to
the extent then due and payable on the Closing Date, together with all fees and
expenses of counsel to the Lender.
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<PAGE> 29
9.3 Insurance. The Borrower will provide the Lender with evidence
satisfactory to the Lender of the existence of insurance required to be
maintained pursuant to Section 8.4.
9.4 Compliance with Representations and Warranties, No Default. Both
before and after giving effect to the making of the Loans the following
statements shall be true and correct:
(i) the representations and warranties of the Borrower set
forth in this Agreement and the other Loan Documents shall
be true and correct in all material respects with the same
effect as if then made (except to the extent stated to
relate to a specific earlier date, in which case such
representations and warranties shall be true and correct as
of such earlier date); and
(ii) no Event of Default or Unmatured Event of Default shall
have then occurred and be continuing.
9.5 Compliance with STEP. The Borrower will provide the Lender with
evidence satisfactory to the Lender that the Borrower qualifies for STEP and the
State of Illinois has deposited an amount equal to the original principal amount
of Term Loan A with the Lender at an interest rate equal to the STEP rate in
effect on the Closing Date.
9.6 Other. The Borrowers will provide the Lender with such other
documents or information as the Lender may reasonably request.
SECTION 10: EVENTS OF DEFAULT AND THEIR EFFECT
10.1 Events of Default. Each of the following shall constitute an Event
of Default under this Agreement:
(a) default in the payment of any principal or interest on the Loans
when such principal and interest is due or declared due (whether
by scheduled maturity, acceleration, demand or otherwise) or
other Liabilities remain unpaid for five Business Days after
notice to the Borrower;
(b) any default shall occur under the terms applicable to any
indebtedness of the Borrower or any Subsidiary in an aggregate
amount (for all such indebtedness so affected) exceeding
$5,000,000 and such default shall (i) consist of the failure to
pay such indebtedness when due, whether by acceleration or
otherwise or (ii) accelerate the maturity of such indebtedness or
permit the holder or holders thereof, or any trustee or agent for
such holder or holders, to cause such indebtedness to become due
and payable prior to its expressed maturity;
(c) the Borrower or any Subsidiary becomes insolvent or generally
fails to pay, or admits in writing its inability or refusal to
pay, debts as they become due; or the Borrower or any Subsidiary
applies for, consents to, or acquiesces in the appointment of a
trustee, receiver or other custodian for the Borrower or such
Subsidiary or any property thereof, or makes a general assignment
for the benefit of creditors; or, in the absence of such
application, consent or acquiescence, a trustee, receiver or
other
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<PAGE> 30
custodian is appointed for the Borrower or any Subsidiary or for
a substantial part of the property of any thereof and is not
discharged within 30 days; or the bankruptcy, reorganization,
debt arrangement, or other case or proceeding under the
bankruptcy or insolvency law, or any dissolution or liquidation
proceeding, is commenced in respect of the Borrower or any
Subsidiary, and if such case or proceeding is not commenced by
the Borrower or such Subsidiary, it is consented to or acquiesced
in by the Borrower or such Subsidiary, or remains for 30 days
undismissed; or the Borrower or any Subsidiary takes any action
to authorize, or in furtherance of, any of the foregoing;
(d) failure by the Borrower to comply with or to perform any covenant
(i) under Sections 8.2, 8.3, 8.4 and 8.17 and such failure
remains unremedied for ten days after the earlier of (A) the
Borrower's knowledge of such failure or (B) written notice of
such failure by the Lender to the Borrower or (ii) under any
other Section of this Agreement or any other Loan Document;
(e) any representation and warranty made by the Borrower herein or
any other Loan Document is breached or is false or misleading in
any material respect, or any schedule, certificate, financial
statement, report, notice or other writing furnished by the
Borrower to the Lender in connection herewith is false or
misleading in any material respect on the date as of which the
facts therein set forth are stated or certified;
(f) final judgments which exceed an aggregate of $5,000,000 shall be
rendered against the Borrower or any Subsidiary and shall not
have been paid, discharged or vacated or had execution thereof
stayed pending appeal within 30 days after entry or filing of
such judgments;
(g) (i) institution of any steps by the Borrower or any other Person
to terminate a Pension Plan if as a result of such termination
the Borrower could be required to make a contribution to such
Pension Plan, or could incur a liability or obligation to such
Pension Plan, in excess of $5,000,000, (ii) a contribution
failure occurs with respect to any Pension Plan sufficient to
give rise to a Lien under Section 302(f) of ERISA or (iii) there
shall occur any withdrawal or partial withdrawal from a
Multiemployer Pension Plan and the withdrawal liability (without
unaccrued interest) to Multiemployer Pension Plans as a result of
such withdrawal (including any outstanding withdrawal liability
that the Borrower and the Controlled Group have incurred on the
date of such withdrawal) exceeds $5,000,000; or
(h) a Change in Control shall occur.
10.2 Effect of Event of Default. If any Event of Default described in
Section 10.1(c) shall occur, the Loans (if they have not theretofore terminated)
shall immediately terminate and all obligations hereunder shall become
immediately due and payable, all without presentment, demand, protest or notice
of any kind; and, if any other Event of Default shall occur and be continuing,
the Lender may declare the Loans (if they have not theretofore terminated) to be
terminated or declare all obligations hereunder to be due and payable, whereupon
the Loans (if they have not theretofore
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<PAGE> 31
terminated) shall immediately terminate and all obligations hereunder shall
become immediately due and payable, all without presentment, demand, protest or
notice of any kind. The Lender shall promptly advise the Borrower of any such
declaration, but failure to do so shall not impair the effect of such
declaration.
SECTION 11: GENERAL
11.1 Waiver; Amendments. No delay on the part of the Lender in the
exercise of any right, power or remedy shall operate as a waiver thereof, nor
shall any single or partial exercise by any of them of any right, power or
remedy preclude other or further exercise thereof, or the exercise of any other
right, power or remedy. No amendment, modification or waiver of, or consent with
respect to, any provision of this Agreement or any Note shall in any event be
effective unless the same shall be in writing and signed and delivered by the
Lender and then any such amendment, modification, waiver or consent shall be
effective only in the specific instance and for the specific purpose for which
given.
11.2 Notices. All notices hereunder shall be in writing (including
facsimile transmission) and shall be sent to the applicable party at its address
shown on Schedule 11.2 or at such other address as such party may, by written
notice received by the other parties, have designated as its address for such
purpose. Notices sent by facsimile transmission shall be deemed to have been
given when sent; notices sent by mail shall be deemed to have been given three
Business Days after the date when sent by registered or certified mail, postage
prepaid; and notices sent by hand delivery or overnight courier service shall be
deemed to have been given when received.
11.3 Costs, Expenses and Taxes. The Borrower agrees to pay on demand all
reasonable out-of-pocket costs and expenses of the Lender (including the
reasonable fees and charges of counsel for the Lender and of local counsel, if
any, who may be retained by said counsel) in connection with the preparation,
execution, syndication, delivery and administration of this Agreement, the other
Loan Documents and all other documents provided for herein or delivered or to be
delivered hereunder or in connection herewith (including any amendments,
supplements or waivers to any Loan Documents), and all reasonable out-of-pocket
costs and expenses (including reasonable attorneys' fees, court costs and other
legal expenses and allocated costs of staff counsel) incurred by the Lender in
connection with the enforcement of this Agreement, the other Loan Documents or
any such other documents. In addition, the Borrower agrees to pay, and to save
the Lender harmless from all liability for, any stamp or other taxes (excluding
income taxes and franchise taxes based on net income) that may be payable in
connection with the execution and delivery of this Agreement, the borrowings
hereunder, the issuance of the Notes or the execution and delivery of any other
Loan Document or any other document provided for herein or delivered or to be
delivered hereunder or in connection herewith. All obligations provided for in
this Section 11.3 shall survive repayment of the Loans and any termination of
this Agreement.
11.4 Governing Law; Severability. This Agreement shall be a contract
made under and governed by the internal laws of the State of Illinois. Whenever
possible each provision of this Agreement shall be interpreted in such manner as
to be effective and valid under applicable law, but if any provision of this
Agreement shall be prohibited by or invalid under applicable law, such provision
shall be ineffective to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions of this
Agreement. All obligations of the
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<PAGE> 32
Borrower and rights of the Lender expressed herein or in any other Loan Document
shall be in addition to and not in limitation of those provided by applicable
law.
11.5 Counterparts. This Agreement may be executed in any number of
counterparts and by the different parties hereto on separate counterparts and
each such counterpart shall be deemed to be an original, but all such
counterparts shall together constitute but one and the same Agreement.
11.6 Successors and Assigns. This Agreement shall be binding upon the
Borrower, the Lender and their respective successors and assigns, and shall
inure to the benefit of the Borrower and the Lender and the successors and
assigns of the Lender. If the Lender transfers or assigns any portion of its
rights under this Agreement to any Person then the Lender must transfer such
corresponding portion of STEP deposits made by the State of Illinois Treasury
Department to such assignee or transferee.
11.7 Indemnification by the Borrower. In consideration of the execution
and delivery of this Agreement by the Lender and the agreement to make the Loans
under this Agreement, the Borrower hereby agrees to indemnify, exonerate and
hold the Lender and each of the officers, directors, employees, Affiliates and
agents of the Lender (each a "Lender Party") free and harmless from and against
any and all actions, causes of action, suits, losses, liabilities, damages and
expenses, including reasonable attorneys' fees and charges and allocated costs
of staff counsel (collectively, the "Indemnified Liabilities"), incurred by the
Lender Parties or any of them as a result of, or arising out of, or relating to
(i) any tender offer, merger, purchase of stock, purchase of assets (including,
without limitation, the Acquisition) or other similar transaction financed or
proposed to be financed in whole or in part, directly or indirectly, with the
proceeds of any of the Loans, (ii) the use, handling, release, emission,
discharge, transportation, storage, treatment or disposal of any hazardous
substance at any property owned or leased by the Borrower or any Subsidiary,
(iii) any violation of any Environmental Laws with respect to conditions at any
property owned or leased by the Borrower or any Subsidiary or the operations
conducted thereon, (iv) the investigation, cleanup or remediation of offsite
locations at which the Borrower or any Subsidiary or their respective
predecessors are alleged to have directly or indirectly disposed of hazardous
substances or (v) the execution, delivery, performance or enforcement of this
Agreement or any other Loan Document by any of the Lender Parties, except for
any such Indemnified Liabilities arising on account of any the Lender Party's
gross negligence or willful misconduct. If and to the extent that the foregoing
undertaking may be unenforceable for any reason, the Borrower hereby agrees to
make the maximum contribution to the payment and satisfaction of each of the
Indemnified Liabilities which is permissible under applicable law. Nothing set
forth above shall be construed to relieve the Lender Party from any obligation
it may have under this Agreement. All obligations provided for in this Section
11.7 shall survive repayment of the Loans, any foreclosure under, or any
modification, release or discharge of any or all of the Loan Documents and any
termination of this Agreement.
11.8 FORUM SELECTION AND CONSENT TO JURISDICTION. ANY LITIGATION BASED
HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH THIS AGREEMENT, THE
NOTES OR ANY OTHER LOAN DOCUMENT, SHALL BE BROUGHT AND MAINTAINED EXCLUSIVELY IN
THE COURTS OF THE STATE
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<PAGE> 33
OF ILLINOIS OR IN THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF
ILLINOIS. THE BORROWER HEREBY EXPRESSLY AND IRREVOCABLY SUBMITS TO THE
JURISDICTION OF THE COURTS OF THE STATE OF ILLINOIS AND OF THE UNITED STATES
DISTRICT COURT FOR THE NORTHERN DISTRICT OF ILLINOIS FOR THE PURPOSE OF ANY SUCH
LITIGATION AS SET FORTH ABOVE. THE BORROWER FURTHER IRREVOCABLY CONSENTS TO THE
SERVICE OF PROCESS BY REGISTERED MAIL, POSTAGE PREPAID, OR BY PERSONAL SERVICE
WITHIN OR WITHOUT THE STATE OF ILLINOIS. THE BORROWER HEREBY EXPRESSLY AND
IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION THAT
IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY SUCH LITIGATION
BROUGHT IN ANY SUCH COURT REFERRED TO ABOVE AND ANY CLAIM THAT ANY SUCH
LITIGATION HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. TO THE EXTENT THAT THE
BORROWER HAS OR HEREAFTER MAY ACQUIRE ANY IMMUNITY FROM JURISDICTION OF ANY
COURT OR FROM ANY LEGAL PROCESS (WHETHER THROUGH SERVICE OR NOTICE, ATTACHMENT
PRIOR TO JUDGMENT, ATTACHMENT IN AID OF EXECUTION OR OTHERWISE) WITH RESPECT TO
ITSELF OR ITS PROPERTY, THE BORROWER HEREBY IRREVOCABLY WAIVES SUCH IMMUNITY IN
RESPECT OF ITS OBLIGATIONS UNDER THIS AGREEMENT, THE NOTE AND THE OTHER LOAN
DOCUMENTS.
11.9 WAIVER OF JURY TRIAL. EACH OF THE BORROWER AND THE LENDER HEREBY
WAIVES ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO ENFORCE OR
DEFEND ANY RIGHTS UNDER THIS AGREEMENT, THE NOTES, ANY OTHER LOAN DOCUMENT AND
ANY AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED OR THAT MAY IN THE
FUTURE BE DELIVERED IN CONNECTION HEREWITH OR THEREWITH OR ARISING FROM ANY
BANKING RELATIONSHIP EXISTING IN CONNECTION WITH ANY OF THE FOREGOING, AND
AGREES THAT ANY SUCH ACTION OR PROCEEDING SHALL BE TRIED BEFORE A COURT AND NOT
BEFORE A JURY.
[The remainder of this page intentionally is left blank.]
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Delivered at Chicago, Illinois, as of the day and year first above
written.
CABOT MICROELECTRONICS CORPORATION
By
----------------------------
Title:
LASALLE BANK NATIONAL ASSOCIATION
By
----------------------------
Title: First Vice President
<PAGE> 35
SCHEDULE 11.2
ADDRESSES FOR NOTICES
BORROWER
Cabot Microelectronics Corporation
870 Commons Drive
Aurora, Illinois 60504
Attention:
Telephone:
Facsimile:
LENDER
Jeffrey A. Raider
LaSalle Bank National Association
135 South LaSalle Street
Chicago, Illinois 60603
Telephone: (312) 904-2766
Facsimile: (312) 904-6546
<PAGE> 36
EXHIBIT A
FORM OF NOTE
[date]
$[amount] Chicago, Illinois
The undersigned, Cabot Microelectronics Corporation, a Delaware
corporation (the "Borrower"), for value received, promises to pay to the order
of LaSalle Bank National Association, a national banking association (the
"Lender"), at the office of the Lender in Chicago, Illinois, in immediately
available funds the principal amount of $[amount], such principal amount to be
payable on the dates set forth in the Credit Agreement dated as of March 29,
2000 (as amended or otherwise modified from time to time, the "Credit
Agreement"), between the Borrower and the Lender.
The Borrower further promises to pay interest on the unpaid principal
amount evidenced by this promissory note (this "Note") from the date of this
Note until such indebtedness is paid in full, payable at the rates and at the
times set forth in the Credit Agreement. Payments of both principal and interest
are to be made in lawful money of the United States of America.
This Note evidences indebtedness incurred under, and is subject to the
terms and provisions of, the Credit Agreement, to which reference is hereby made
for a statement of the terms and provisions under which this Note may or must be
paid prior to its due date or its due date accelerated.
This Note is made under and governed by the internal laws of the State
of Illinois without regard to the conflict provisions thereof.
CABOT MICROELECTRONICS CORPORATION
By:
-------------------------------------
Title:
A-1
<PAGE> 37
EXHIBIT B
FORM OF COMPLIANCE CERTIFICATE
Reference is made to the Credit Agreement dated as of March 29, 2000
(as amended or otherwise modified from time to time, the "Credit Agreement"),
between Cabot Microelectronics Corporation, a Delaware corporation (the
"Borrower"), and LaSalle Bank National Association, a national banking
association (the "Lender"). Capitalized terms used in this certificate and not
otherwise defined have the meanings assigned to such terms in the Credit
Agreement.
The undersigned certifies to the Lender that he or she is a duly
elected, qualified and acting Responsible Officer of the Borrower and further
certifies as follows:
1. Reports. Enclosed herewith is a copy of the [annual
audited/quarterly report] of the Borrower as at _____________ (the "Computation
Date"), which report fairly presents in all material respects the financial
condition and results of operations [(subject to normal year-end adjustments)]
of the Borrower as of the Computation Date and has been prepared in accordance
with GAAP consistently applied.
2. Financial Tests. The Borrower hereby certifies and warrants to you
that the attached Schedule I contains the true and correct computations required
to establish whether the Borrower is in compliance with each of the financial
covenants and restrictions set forth in Section 8.6 of the Credit Agreement.
3. No Event of Default or Unmatured Event of Default. The Borrower
hereby certifies that no Event of Default or Unmatured Event of Default has
occurred and is continuing[, except: describe the nature of each Event of
Default or Unmatured Event of Default, the period of existence thereof and the
action taken or proposed to be taken with respect thereto].
Dated:
-------------------
CABOT MICROELECTRONICS CORPORATION
By:
-------------------------------------
Title:
B-1
<PAGE> 38
SCHEDULE 1
Schedule 1 to Compliance Certificate
dated as of:
<TABLE>
<S> <C> <C>
A. SECTION 8.6(A) - QUICK RATIO:
1. Cash and Cash Equivalents ______________
2. Accounts Receivable ______________
3. Item A1 plus item A2 ______________
4. Current Liabilities (including outstanding revolving
loans under the Revolving Credit Facility) ______________
5. Item A3 divided by item A4 (not to be less than
1.25 to 1.00) ______________
B. SECTION 8.6(B) - LEVERAGE RATIO:
1. Funded Debt ______________
2. Consolidated Net Income (or Loss) ______________
3. Interest Expense ______________
4. Taxes ______________
5. Depreciation ______________
6. Amortization ______________
7. Non-cash charges ______________
8. Items B2 through and including B7 ______________
9. Non-Cash Gains ______________
10. Item B8 minus item B9 ______________
11. Item B1 divided by item B10 (not to be greater
than 2.25 to 1.00) ______________
</TABLE>
1
<PAGE> 39
<TABLE>
<S> <C> <C>
C. SECTION 8.6(C) - INTEREST COVERAGE RATIO:
1. Item B10 (above) minus items ______________
B5 and B6 and B7 (above)
2. Item C1 divided by item B3 (above) (not to be less
than 3.00 to 1.00) ______________
D. SECTION 8.6(D) - CONSOLIDATED NET INCOME (OR LOSS):
1. Consolidated Net Income (or Loss) (last quarter) ______________
(not to be greater than ($7,500,000))
2. Consolidated Net Income (or Loss) (penultimate quarter) ______________
3. Item D1 plus item D2 ______________
(not to be greater than ($10,000,000))
</TABLE>
2
<PAGE> 40
EXHIBIT C
FORM OF SOLVENCY CERTIFICATE
Reference is made to the Credit Agreement dated as of March 29, 2000
(as amended or otherwise modified from time to time, the "Credit Agreement"),
between Cabot Microelectronics Corporation, a Delaware corporation (the
"Borrower"), and LaSalle Bank National Association, a national banking
association (the "Lender"). Capitalized terms used in this certificate and not
otherwise defined have the meanings assigned to such terms in the Credit
Agreement.
The undersigned certifies to the Lender that he or she is a duly
elected, qualified and acting Responsible Officer of the Borrower and further
certifies as follows:
1. The Borrower has furnished the undersigned with a true, complete
and executed copy of the Credit Agreement as in effect on the date of this
certificate, and the undersigned has reviewed the Credit Agreement in its
entirety.
2. The undersigned is familiar with all of the Borrower's business
and financial affairs, including, without limitation, all of the matters
described in this certificate.
3. As of the date of this certificate, the Borrower is "solvent," and
the Borrower's incurrence of its obligations under the Credit Agreement will not
render the Borrower insolvent. For purposes of this certificate, a corporation
is "solvent" if:
(a) its assets exceed its liabilities;
(b) it is able to pay its debts as they mature;
(c) it owns property with fair salable value (including intangible
assets) greater than the amount required to pay its debts; and
(d) it has capital sufficient to carry on its business as then
constituted.
Dated:__________ CABOT MICROELECTRONICS CORPORATION
By:
---------------------------------------
Title:
C-0
<PAGE> 41
EXHIBIT D
MATTERS TO BE COVERED BY LEGAL OPINION
The Borrower will furnish to the Lender a legal opinion of counsel
representing the Borrower dated as of the Closing Date in form and substance
satisfactory to Lender to the effect, among other things, that:
- - The Borrower's due incorporation, existence and good standing in its
state of incorporation.
- - The Borrower's due qualification and license to do business in the
States of California, Colorado, Illinois, Indiana and Texas and the
Commonwealth of Massachusetts.
- - The Borrower's requisite power and authority to execute, deliver and
perform the Loan Documents to which it is a party and to own or lease
and operate the properties it has acquired and to carry on its
business, all as described in its constitutive documents.
- - The execution, delivery and performance by the Borrower of the Loan
Documents to which it is a party are within its corporate powers and
have been duly authorized by all necessary action of the Borrower.
- - The Loan Documents to which the Borrower is a party have been duly
executed and delivered.
- - The Loan Documents to which the Borrower is a party are the legal,
valid, binding and enforceable obligations of the Borrower, enforceable
against the Borrower in accordance with their respective terms.
- - The execution, delivery and performance by the Borrower of the Loan
Documents to which it is a party (i) will not conflict with or violate
or constitute a default under (a) the Borrower's constitutive
documents, (b) to the knowledge of such counsel after due inquiry, any
order, judgment, award, decree, license or authorization of any court
or governmental instrumentality, authority, bureau or agency binding on
the Borrower, (c) to the knowledge of such counsel after due inquiry,
any material financing agreement of the Borrower or (d) any provisions
of applicable law and (ii) will not result in or require the creation
or imposition of any Lien upon any property of the Borrower.
- - The execution, delivery and performance by the Borrower of the Loan
Documents to which it is a party do not require any consents of third
parties or governmental approvals of the United States or the State of
Illinois.
- - No pending legal proceeding or threatened litigation against or
directly affecting the Borrower.
- - The Borrower is not an "investment company" or a company "controlled
by" an "investment company" as such terms are defined in the Investment
Company Act of 1940, as amended.
- - The Borrower is not a "holding company" or a "subsidiary" of a "holding
company" or an "affiliate" of a "holding company" as such terms are
defined in the Public Utility Holding Company Act of 1935.
- - The transactions contemplated by the Loan Documents do not violate
Regulation T, U or X of the Board of Governors of the Federal Reserve
System.
D-0
<PAGE> 42
CREDIT AGREEMENT
DATED AS OF MARCH 29, 2000,
BETWEEN
CABOT MICROELECTRONICS CORPORATION
AND
LASALLE BANK NATIONAL ASSOCIATION
<PAGE> 43
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
SECTION 1: INTERPRETATION 1
1.1 Definitions .................................................. 1
1.2 Computation of Time Periods .................................. 8
1.3 Accounting Terms ............................................. 8
1.4 Headings and References ...................................... 9
1.5 Construction. ................................................ 9
SECTION 2: CREDIT ............................................................. 9
2.1 Term Loan A .................................................. 9
2.2 Term Loan B .................................................. 9
2.3 Various Types of Loans ....................................... 10
2.4 Conversion and Continuation Procedures ....................... 10
SECTION 3: INTEREST; FEES ..................................................... 11
3.1 Interest Rates ............................................... 11
3.2 Interest Payment Dates ....................................... 11
3.3 Setting and Notice of Eurodollar Rates ....................... 11
3.4 Computation of Interest ...................................... 11
3.5 Closing Fee .................................................. 11
SECTION 4: PREPAYMENTS ........................................................ 12
SECTION 5: MAKING OF PAYMENTS; SETOFF; TAXES .................................. 12
5.1 Making of Payments ........................................... 12
5.2 Application of Certain Payments .............................. 12
5.3 Due Date Extension ........................................... 12
5.4 Setoff ....................................................... 12
5.5 Taxes ........................................................ 12
SECTION 6: INCREASED COSTS; SPECIAL PROVISIONS
FOR EURODOLLAR LOANS ....................................... 13
6.1 Increased Costs .............................................. 13
6.2 Basis for Determining Interest Rate Inadequate or Unfair ..... 14
6.3 Changes in Law Rendering Eurodollar Loans Unlawful ........... 14
6.4 Funding Losses ............................................... 15
6.5 Right of Lender to Fund through Other Offices ................ 15
6.6 Discretion of Lender as to Manner of Funding ................. 15
6.7 Conclusiveness of Statements; Survival of Provisions ......... 15
SECTION 7: REPRESENTATIONS AND WARRANTIES ..................................... 15
7.1 Organization ................................................. 15
7.2 Authorization; No Conflict ................................... 15
7.3 Validity and Binding Nature .................................. 16
7.4 Financial Condition .......................................... 16
</TABLE>
-i-
<PAGE> 44
<TABLE>
<CAPTION>
<S> <C>
7.5 No Material Adverse Change ................................... 16
7.6 Litigation and Contingent Liabilities ........................ 16
7.7 Taxes ........................................................ 16
7.8 Information .................................................. 17
7.9 Solvency ..................................................... 17
7.10 No Default ................................................... 17
7.11 Use of Proceeds .............................................. 17
7.12 Subsidiaries ................................................. 17
7.13 Ownership of Properties; Liens ............................... 17
7.14 Intellectual Property ........................................ 17
7.15 Insurance .................................................... 17
7.16 Investment Company Act; Public Utility Holding Company Act ... 18
7.17 Regulation U ................................................. 18
7.18 Securities Matters ........................................... 18
7.19 Pension and Welfare Plans .................................... 18
7.20 Environmental Matters. ....................................... 19
7.21 Labor Matters. ............................................... 19
7.22 Year 2000 Issues ............................................. 20
7.23 Survival of Warranties ....................................... 20
SECTION 8: COVENANTS .......................................................... 20
8.1 Reports, Certificates and Other Information .................. 20
8.2 Maintenance of Existence. .................................... 22
8.3 Compliance with Laws; Payment of Taxes and Liabilities ....... 22
8.4 Maintenance of Insurance ..................................... 22
8.5 Books, Records and Inspections ............................... 22
8.6 Financial Covenants .......................................... 23
8.7 Limitations on Indebtedness .................................. 23
8.8 Liens ........................................................ 24
8.9 Mergers, Consolidations, Sales ............................... 24
8.10 Inconsistent Agreements; Negative Pledge ..................... 25
8.11 Advances and Other Investments ............................... 25
8.12 Restricted Payments .......................................... 26
8.13 Transactions with Affiliates ................................. 26
8.14 Restriction of Amendments to Revolving Credit Facility ....... 26
8.15 Compliance with STEP ......................................... 26
8.16 Use of Proceeds .............................................. 26
8.17 Employee Benefit Plans ....................................... 26
8.18 Environmental Matters ........................................ 26
8.19 Further Assurances ........................................... 27
SECTION 9: EFFECTIVENESS; CONDITIONS OF LENDING ............................... 27
9.1 Documentation ................................................ 27
9.2 Payment of Fees .............................................. 28
9.3 Insurance .................................................... 28
9.4 Compliance with Representations and Warranties, No Default ... 28
9.5 Compliance with STEP ......................................... 28
</TABLE>
-ii-
<PAGE> 45
<TABLE>
<CAPTION>
<S> <C>
9.6 Other ........................................................ 28
SECTION 10: EVENTS OF DEFAULT AND THEIR EFFECT ................................ 28
10.1 Events of Default ............................................ 28
10.2 Effect of Event of Default ................................... 30
SECTION 11: GENERAL ........................................................... 30
11.1 Waiver; Amendments ........................................... 30
11.2 Notices ...................................................... 30
11.3 Costs, Expenses and Taxes .................................... 30
11.4 Governing Law; Severability .................................. 31
11.5 Counterparts ................................................. 31
11.6 Successors and Assigns ....................................... 31
11.7 Indemnification by the Borrower .............................. 31
11.8 FORUM SELECTION AND CONSENT TO JURISDICTION .................. 32
11.9 Waiver of Jury Trial ......................................... 32
</TABLE>
-iii-
<PAGE> 46
-iv-
<PAGE> 47
EXHIBITS
EXHIBIT A Form of Note
EXHIBIT B Form of Compliance Certificate
EXHIBIT C Form of Solvency Certificate
EXHIBIT D Matters to be Covered by Legal Opinion
SCHEDULES
SCHEDULE 7.6 Litigation and Contingent Liabilities
SCHEDULE 7.14 Intellectual Property
SCHEDULE 7.15 Insurance
SCHEDULE 7.19 Pension and Welfare Plans
SCHEDULE 7.20 Environmental Matters
SCHEDULE 8.7 Existing Indebtedness
SCHEDULE 8.8 Existing Liens
SCHEDULE 8.13 Transactions with Affiliates
SCHEDULE 11.2 Addresses for Notices
-v-
<PAGE> 48
SCHEDULES TO
CREDIT AGREEMENT
BY AND BETWEEN
LASALLE BANK NATIONAL ASSOCIATION,
AND
CABOT MICROELECTRONICS CORPORATION
DATED AS OF MARCH 31, 2000
<PAGE> 49
SCHEDULES TO CREDIT AGREEMENT
SCHEDULE 7.6
TO
CREDIT AGREEMENT
LITIGATION
In June 1998, one of Borrower's major competitors, Rodel Inc.
("RODEL"), filed a lawsuit against Cabot Corporation in the United States
District Court for the District of Delaware entitled Rodel, Inc. v. Cabot
Corporation (Civil Action No 98-352, the "ROBERTS LAWSUIT"). In this lawsuit,
Rodel has requested a jury trial and is seeking a permanent injunction and an
award of compensatory, punitive, and other damages relating to allegations that
Cabot is infringing United States Patent No. 4,959,113 (the "ROBERTS PATENT"),
which is owned by an affiliate of Rodel. Cabot filed an answer and counterclaim
seeking dismissal of the Roberts Lawsuit with prejudice, a judgment that Cabot
is not infringing the Roberts Patent and/or that the Roberts Patent is invalid,
and other relief. Cabot subsequently filed a motion for a summary judgment that
the Roberts Patent is invalid because all of the claims contained in the patent
were not sufficiently different under applicable patent law from subject matter
contained in previously granted patents, specifically United States Patents Nos.
4,705,566, 4,956,015 and 4, 929,257, each of which is owned by a third party not
affiliated with Rodel, Cabot Corporation or the Borrower. This motion was denied
on September 30, 1999 based on the court's finding that there were genuine
issues of material fact to be determined at trial. Although the Roberts Lawsuit
is presently in the discovery stage and trial is scheduled to begin in November
2000, the trial date has not yet been scheduled. After the ruling on the summary
judgment motion, Rodel filed a request for reexamination of the Roberts Patent
with the United States Patent and Trademark Office, which was granted on
November 12, 1999.
In April 1999, Rodel commenced a second lawsuit (the "BRANCALEONI
LAWSUIT") against Cabot Corporation in the United States District Court for the
District of Delaware entitled Rodel, Inc. v. Cabot Corporation (Civil Action No.
99-256). In this lawsuit, Rodel has requested a jury trial and is seeking a
permanent injunction and an award of compensatory, punitive and other damages
relating to allegations that Cabot Corporation is infringing two other patents
owned by an affiliate of Rodel. These two patents are United States patent No.
5,391,258 and United States patent No. 5,476,606 (collectively, the "BRANCALEONI
PATENTS"). Cabot has filed an answer and counterclaim to the complaint seeking
dismissal of the complaint with prejudice, a judgment that Cabot Corporation is
not infringing the Brancaleoni Patents and/or that the Brancaleoni Patents are
invalid, and other relief. The Brancaleoni Lawsuit is presently in the discovery
stage. Trial is presently scheduled to commence on December 4, 2000. The parties
have jointly requested that the court extend this date.
In the Roberts Lawsuit, the only product that Rodel to date has alleged
infringes the Roberts Patent is the Borrower's W2000 slurry, which is used to
polish tungsten and which currently accounts for a significant portion of our
total revenue. In the Brancaleoni Lawsuit, Rodel has not alleged that any
specific product infringes the Brancaleoni Patents; instead, Rodel alleges that
our United States Patent No. 5,858,813,
Unless otherwise defined herein, terms defined in the Credit Agreement shall
have the same meaning when used herein. Any matter disclosed or referenced in
any schedule to the Credit Agreement shall be deemed to have been disclosed on
all other schedules to the Credit Agreement where the applicability of such
disclosure is reasonably apparent on its face.
<PAGE> 50
SCHEDULES TO CREDIT AGREEMENT
which relates to a CMP polishing slurry for metal surfaces including, among
other things, aluminum and copper, is evidence that Cabot Corporation is
infringing the Brancaleoni Patents through the manufacture and sales of
unspecified products.
Although Cabot Corporation is the only named defendant in these
lawsuits, Borrower has indemnified Cabot Corporation for any and all losses and
expenses arising out of this litigation as well as any other litigation arising
out of our business.
Unless otherwise defined herein, terms defined in the Credit Agreement shall
have the same meaning when used herein. Any matter disclosed or referenced in
any schedule to the Credit Agreement shall be deemed to have been disclosed on
all other schedules to the Credit Agreement where the applicability of such
disclosure is reasonably apparent on its face.
<PAGE> 51
SCHEDULES TO CREDIT AGREEMENT
SCHEDULE 7.14
TO
CREDIT AGREEMENT
INTELLECTUAL PROPERTY
The contents of Schedule 7.6 above is hereby incorporated by reference as if
such the matters being disclosed therein were set forth in this Schedule 7.14 in
its entirety.
Unless otherwise defined herein, terms defined in the Credit Agreement shall
have the same meaning when used herein. Any matter disclosed or referenced in
any schedule to the Credit Agreement shall be deemed to have been disclosed on
all other schedules to the Credit Agreement where the applicability of such
disclosure is reasonably apparent on its face.
<PAGE> 52
SCHEDULES TO CREDIT AGREEMENT
SCHEDULE 7.15
TO
CREDIT AGREEMENT
INSURANCE
An index of the Borrower's existing insurance has been previously provided to
the Lender.
Unless otherwise defined herein, terms defined in the Credit Agreement shall
have the same meaning when used herein. Any matter disclosed or referenced in
any schedule to the Credit Agreement shall be deemed to have been disclosed on
all other schedules to the Credit Agreement where the applicability of such
disclosure is reasonably apparent on its face.
<PAGE> 53
SCHEDULES TO CREDIT AGREEMENT
SCHEDULE 7.19
TO
CREDIT AGREEMENT
PENSION AND WELFARE PLANS
No exceptions.
Unless otherwise defined herein, terms defined in the Credit Agreement shall
have the same meaning when used herein. Any matter disclosed or referenced in
any schedule to the Credit Agreement shall be deemed to have been disclosed on
all other schedules to the Credit Agreement where the applicability of such
disclosure is reasonably apparent on its face.
<PAGE> 54
SCHEDULES TO CREDIT AGREEMENT
SCHEDULE 7.20
TO
CREDIT AGREEMENT
ENVIRONMENTAL
No exceptions.
Unless otherwise defined herein, terms defined in the Credit Agreement shall
have the same meaning when used herein. Any matter disclosed or referenced in
any schedule to the Credit Agreement shall be deemed to have been disclosed on
all other schedules to the Credit Agreement where the applicability of such
disclosure is reasonably apparent on its face.
<PAGE> 55
SCHEDULES TO CREDIT AGREEMENT
SCHEDULE 8.7
TO
CREDIT AGREEMENT
PERMITTED INDEBTEDNESS
None.
Unless otherwise defined herein, terms defined in the Credit Agreement shall
have the same meaning when used herein. Any matter disclosed or referenced in
any schedule to the Credit Agreement shall be deemed to have been disclosed on
all other schedules to the Credit Agreement where the applicability of such
disclosure is reasonably apparent on its face.
<PAGE> 56
SCHEDULES TO CREDIT AGREEMENT
SCHEDULE 8.8
TO
CREDIT AGREEMENT
PERMITTED LIENS
None.
Unless otherwise defined herein, terms defined in the Credit Agreement shall
have the same meaning when used herein. Any matter disclosed or referenced in
any schedule to the Credit Agreement shall be deemed to have been disclosed on
all other schedules to the Credit Agreement where the applicability of such
disclosure is reasonably apparent on its face.
<PAGE> 57
SCHEDULES TO CREDIT AGREEMENT
SCHEDULE 8.13
TO
CREDIT AGREEMENT
TRANSACTIONS WITH AFFILIATES
The following is an index of the various material agreements entered into by the
Borrower in connection with its separation from Cabot Corporation and its
emergence as a stand-alone entity:
1. Assumption of Liabilities Agreement dated as of March 28, 2000 by and between
Cabot Corporation, Cabot Carbon Ltd., Cabot Specialty Chemicals International
Corporation and together with Cabot Carbon and Cabot Microelectronics
Corporation.
2. General Assignment Agreement dated as of March 28, 2000 by and between Cabot
Corporation, Cabot Carbon Ltd., Cabot Specialty Chemicals International
Corporation and together with Cabot Carbon and Cabot Microelectronics
Corporation.
3. Master Separation Agreement dated as of March 28, 2000 by and among Cabot
Corporation and Certain Subsidiaries of Cabot Corporation and Cabot
Microelectronics Corporation.
4. Trademark License Agreement dated as of March 28, 2000 by and between Cabot
Corporation and Cabot Microelectronics Corporation.
5. Confidential Disclosure & License Agreement dated as of March 28, 2000 by and
between Cabot Corporation and Cabot Microelectronics Corporation.
6. Management Services Agreement dated as of March 28, 2000 by and Between Cabot
Corporation and Cabot Microelectronics Corporation.
7. Registration Rights Agreement dated as of March 28, 2000 by and between Cabot
Microelectronics Corporation and Cabot Corporation.
8. Initial Public Offering and Distribution Agreement dated as of March 28, 2000
by and between Cabot Corporation and Cabot Microelectronics Corporation.
9. Employee Matters Agreement dated as of March 28, 2000 by and between Cabot
Corporation and Cabot Microelectronics Corporation.
10. Tax Sharing Agreement by Cabot Corporation and Cabot Microelectronics
Corporation dated as of March 28, 2000
Unless otherwise defined herein, terms defined in the Credit Agreement shall
have the same meaning when used herein. Any matter disclosed or referenced in
any schedule to the Credit Agreement shall be deemed to have been disclosed on
all other schedules to the Credit Agreement where the applicability of such
disclosure is reasonably apparent on its face.
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in this Registration Statement on Form S-1
(No. 333-95093) of our report dated November 5, 1999 relating to the financial
statements of Cabot Microelectronics Materials Division, a division of Cabot
Corporation, which appears in such Registration Statement. We also consent to
the references to us under the headings "Experts" and "Selected Financial Data"
in such Registration Statement.
/s/ PRICEWATERHOUSECOOPERS LLP
Boston, Massachusetts
March 31, 2000
