<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 13, 1996
REGISTRATION NO. 33-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------
PLASMA & MATERIALS TECHNOLOGIES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
CALIFORNIA 95-4054321
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER IDENTIFICATION
INCORPORATION OR ORGANIZATION) NUMBER)
9255 DEERING AVENUE, CHATSWORTH, CALIFORNIA 91311 (818) 886-8000
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
---------------
JOHN W. LAVALLE
VICE PRESIDENT, CHIEF FINANCIAL OFFICER AND SECRETARY
PLASMA & MATERIALS TECHNOLOGIES, INC.
9255 DEERING AVENUE, CHATSWORTH, CALIFORNIA 91311 (818) 886-8000
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
COPIES TO:
LAWRENCE C. WEEKS, ESQ. ROBERT B. KNAUSS, ESQ.
TIMOTHY F. SYLVESTER, ESQ. MARY ANN LYMAN, ESQ.
RIORDAN & MCKINZIE MUNGER, TOLLES & OLSON
300 SO. GRAND AVE., 29TH FLOOR 355 SOUTH GRAND AVENUE
LOS ANGELES, CA 90071 LOS ANGELES, CA 90071
(213) 629-4824 (213) 683-9100
---------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: From time
to time after this Registration Statement becomes effective.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the
following box. [_]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, as amended (the "Securities Act"), other than securities offered only in
connection with dividend or interest reinvestment plans, check the following
box. [X]
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 delivery of the prospectus is expected to be made pursuant to Rule 434,
check the following box. [_]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
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PROPOSED
PROPOSED MAXIMUM
TITLE OF EACH CLASS OF MAXIMUM AGGREGATE AMOUNT OF
SECURITIES AMOUNT TO BE OFFERING PRICE OFFERING REGISTRATION
TO BE REGISTERED REGISTERED PER NOTE(1) PRICE(1) FEE
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<S> <C> <C> <C> <C>
7 1/8% Convertible Subordinated
Notes Due 2001............... $86,250,000 100% $86,250,000 $26,137
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Common Stock.................. 5,516,470 Shares(2) -- -- --
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</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457 (i) of Regulation C under the Securities Act.
(2) Represents the maximum number of shares of Common Stock issuable upon
conversion of the 7 1/8% Convertible Subordinated Notes Due 2001 being
registered hereunder (the "Convertible Notes") at a conversion price of
$15.635 per share. If issued, such shares of Common Stock will be issued
for no additional consideration and, therefore, no registration fee is
required with respect to such shares.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(A), MAY DETERMINE.
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<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED DECEMBER 13, 1996
PROSPECTUS
$86,250,000
PLASMA & MATERIALS TECHNOLOGIES, INC.
7 1/8% CONVERTIBLE SUBORDINATED NOTES DUE 2001
AND
5,516,470 SHARES OF COMMON STOCK
[LOGO OF PLASMA & MATERIALS TECHNOLOGIES, INC.]
This Prospectus relates to the 7 1/8% Convertible Subordinated Notes Due 2001
(the "Convertible Notes") of Plasma & Materials Technologies, Inc., a
California corporation ("PMT" or the "Company"), and the shares of the
Company's common stock, no par value per share ("Common Stock"), issuable upon
conversion of the Convertible Notes. The Convertible Notes were issued and sold
on October 7, 1996 (the "Original Offering") in transactions exempt from the
registration requirements of the Securities Act of 1933, as amended (the
"Securities Act"), to persons reasonably believed by Salomon Brothers Inc and
Unterberg Harris, as the initial purchasers (the "Initial Purchasers") of the
Convertible Notes, to be "qualified institutional buyers" (as defined by Rule
144A under the Securities Act), other institutional "accredited investors" (as
defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act) or in
transactions complying with the provisions of Regulation S under the Securities
Act. The Convertible Notes and the Common Stock issuable upon conversion
thereof may be offered and sold from time to time by the holders named herein
or by their transferees, pledgees, donees or successors (collectively, the
"Selling Holders") pursuant to this Prospectus. The Registration Statement (as
defined) of which this Prospectus is a part has been filed with the Securities
and Exchange Commission (the "Commission") pursuant to a registration agreement
dated as of October 7, 1996 (the "Registration Agreement") between the Company
and the Initial Purchasers, entered into in connection with the Original
Offering.
The Convertible Notes will mature on October 15, 2001 unless earlier redeemed,
repurchased or converted. Interest on the Convertible Notes will be paid
semiannually on April 15 and October 15 of each year, commencing April 15,
1997. The Convertible Notes are convertible, at the option of the holder
thereof, at any time after January 5, 1997 and prior to maturity, unless
previously redeemed or repurchased, into a maximum of 5,516,470 shares of
Common Stock at a conversion price of $15.635 per share, subject to adjustment
in certain events. On December 12, 1996, the last reported sale price of the
Common Stock on the Nasdaq National Market ("Nasdaq") (symbol "PMAT") was $15
per share.
The Convertible Notes are redeemable, in whole or in part, at the option of the
Company at any time on and after October 15, 1999, at the redemption prices set
forth herein together with accrued interest. The Convertible Notes do not
provide for any sinking fund. Upon a Designated Event (as defined), holders of
the Convertible Notes will have the right, subject to certain restrictions and
conditions, to require the Company to purchase all or any part of the
Convertible Notes at a purchase price equal to 101% of the principal amount
thereof together with accrued interest to the date of purchase. See
"Description of Convertible Notes--Repurchase at the Option of Holders."
The Convertible Notes are unsecured obligations of the Company and are
subordinate in right of payment to all existing and future Senior Debt (as
defined) of the Company. In addition, the Convertible Notes are structurally
subordinated to all existing and future indebtedness and other liabilities of
the Company's subsidiaries. See "Description of Convertible Notes--
Subordination of Convertible Notes." As of September 30, 1996, after giving
effect to the sale of the Convertible Notes sold in the Original Offering and
the consummation of the Acquisition (as defined), on a pro forma basis PMT
would have had $800,000 of Senior Debt outstanding and the Company's
subsidiaries would have had approximately $33.7 million of indebtedness that
effectively would have ranked senior in right of payment to the Convertible
Notes. In addition, as of December 13, 1996, the Company and its subsidiaries
had in place the Working Capital Facility (as defined), which indebtedness
constitutes Designated Senior Debt (as defined). As of such date, there were no
borrowings under the Working Capital Facility. The ability of the Company and
its subsidiaries to incur additional indebtedness and liabilities is not
limited by the terms of the Indenture (as defined) pursuant to which the
Convertible Notes were issued.
The Convertible Notes and the Common Stock issuable upon conversion of the
Convertible Notes may be sold by the Selling Holders from time to time directly
to purchasers or through agents, underwriters or dealers. See "Plan of
Distribution." If required, the names of any such agents or underwriters
involved in the sale of the Convertible Notes and the Common Stock issuable
upon conversion thereof in respect of which this Prospectus is being delivered
and the applicable agent's commission, dealer's purchase price or underwriter's
discount, if any, will be set forth in an accompanying supplement to this
Prospectus (the "Prospectus Supplement").
The Selling Holders will receive all of the net proceeds from the sale of the
Convertible Notes and the Common Stock issuable upon conversion thereof and
will pay all underwriting discounts and selling commissions, if any, applicable
to the sale of the Convertible Notes and the Common Stock issuable upon
conversion thereof. The Company is responsible for payment of all other
expenses incident to the offer and sale of the Convertible Notes and the Common
Stock issuable upon conversion of the Convertible Notes.
The Selling Holders and any broker-dealers, agents or underwriters that
participate in the distribution of the Convertible Notes and the Common Stock
issuable upon conversion of the Convertible Notes may be deemed to be
"underwriters" within the meaning of the Securities Act, and any commission
received by them and any profit on the resale of the Convertible Notes and
Common Stock issuable upon conversion of the Convertible Notes purchased by
them may be deemed to be underwriting commissions or discounts under the
Securities Act. See "Plan of Distribution" for a description of indemnification
arrangements.
PROSPECTIVE INVESTORS SHOULD CONSIDER CAREFULLY THE MATTERS DISCUSSED UNDER THE
CAPTION "RISK FACTORS" ON PAGE 10.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
The date of this Prospectus is December , 1996.
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and, in accordance
therewith files reports, proxy statements and other information with the
Commission. Copies of such reports, proxy statements and other information
filed by PMT can be inspected and copied at the Commission's Public Reference
Room, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549 and at
public reference facilities maintained by the Commission at its regional
offices located at 500 West Madison Street, Suite 1450, Chicago, Illinois
60661 and at Seven World Trade Center, 13th Floor, New York, New York 10048.
Copies of such materials can be obtained from the Commission at prescribed
rates from the Public Reference Section of the Commission at 450 Fifth Street,
N.W., Washington, D.C. 20549. Such reports, proxy statements and other
information concerning the Company are also available for inspection at the
library of Nasdaq at 1735 K Street, N.W., Washington, D.C. 20006. The
Commission maintains a web site at http://www.sec.gov that contains reports,
proxy statements and other information concerning the Company, which the
Company files electronically with the Commission.
The Company has filed with the Commission a Registration Statement on Form
S-3 (together with all amendments and exhibits thereto, referred to as the
"Registration Statement") under the Securities Act with respect to the
securities offered by this Prospectus. This Prospectus does not contain all of
the information set forth or incorporated by reference in the Registration
Statement and the exhibits and schedules relating thereto, certain portions of
which have been omitted as permitted by the rules and regulations of the
Commission. For further information with respect to the Company and the
securities offered by this Prospectus, reference is made to the Registration
Statement and the exhibits filed or incorporated as a part thereof, which are
on file at the offices of the Commission and may be obtained upon payment of
the fee prescribed by the Commission, or may be examined without charge at the
offices of the Commission. Statements contained in this Prospectus as to the
contents of any documents referred to are not necessarily complete, and, in
each such instance, are qualified in all respects by reference to the
applicable documents filed with the Commission.
----------------
The following companies are mentioned in this Prospectus: Applied Materials,
Inc. ("Applied Materials"), AT&T Corp. ("AT&T"), Dallas Semiconductor
Corporation ("Dallas Semiconductor"), Daewoo Corp. ("Daewoo"), Fujitsu Ltd.
("Fujitsu"), GEC Plessey Semiconductor Ltd. ("GEC Plessey"), Hitachi, Ltd.
("Hitachi"), Hyundai Corp. ("Hyundai"), International Business Machines
Corporation ("IBM"), Lam Research Corporation ("Lam Research"), LG
International America ("LG Semicon"), LSI Logic Corporation ("LSI Logic"),
Matsushita Electronics Industrial Co. Ltd. ("Matsushita"), Micron Technology,
Inc. ("Micron Technology"), Mitsubishi Electric ("Mitsubishi"), Motorola, Inc.
("Motorola"), Material Resources Corp. ("MRC"), NEC Corporation ("NEC"),
Novellus Systems, Inc. ("Novellus"), OKI Electric Industry Co., Ltd. ("OKI"),
Olivetti SpA ("Olivetti"), Philips Electronics NG ("Philips"), Ricoh Co. Ltd.
("Ricoh"), Samsung Co. Ltd. ("Samsung"), Siemens AG ("Siemens"), Sharp Corp.
("Sharp"), Sony Corporation ("Sony"), TEMIC Group ("TEMIC"), Texas Instruments
Incorporated ("Texas Instruments"), Tokyo Electron Ltd. ("Tokyo Electron"),
Toshiba Corporation ("Toshiba"), Tower Semiconductor ("Tower Semiconductor"),
TriQuint Semiconductor, Inc. ("TriQuint"), Varian Associates, Inc. ("Varian"),
Ulvac Japan, Ltd. ("Ulvac") and Watkins-Johnson ("Watkins-Johnson").
2
<PAGE>
INFORMATION INCORPORATED BY REFERENCE
The following documents filed by the Company with the Commission pursuant to
the Exchange Act (File No. 0-26482) and the Securities Act are incorporated
herein by reference:
(a) The description of the Company's capital stock contained on pages 49
and 50 of the Company's Registration Statement on Form S-1
(Registration No. 33-94450) as filed with the Commission on August 22,
1995 and as incorporated by reference by the Company's Registration
Statement on Form 8-A as filed with the Commission on August 21, 1995.
(b) The Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1995.
(c) The Company's Quarterly Report on Form 10-Q for the quarter ended
March 31, 1996.
(d) The Company's Quarterly Report on Form 10-Q for the quarter ended June
30, 1996.
(e) The Company's Quarterly Report on Form 10-Q for the quarter ended
September 30, 1996.
(f) The Company's Proxy Statement dated September 11, 1996 (the "Proxy
Statement"), as supplemented by the Supplement to the Proxy Statement
dated October 1, 1996 (the "Supplement").
(g) The Company's Current Report on Form 8-K as filed with the Commission
on November 27, 1996.
In addition, all reports and other documents subsequently filed by the
Company pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act
after the date of this Prospectus and prior to the termination of the offering
of securities hereunder shall be deemed to be incorporated by reference in
this Prospectus and to be a part hereof from the date of filing of such
documents. Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained
herein or in any other subsequently filed document that also is or is deemed
to be incorporated by reference herein modifies or supersedes such statement.
Any such statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of this Prospectus.
The Company will provide without charge to each person, including any
beneficial owner, to whom this Prospectus is delivered, upon the written or
oral request of such person, a copy of any and all of the documents
incorporated herein by reference (other than exhibits not specifically
incorporated by reference into such documents). Requests for such documents
should be directed to John W. LaValle, Vice President, Chief Financial Officer
and Secretary, Plasma & Materials Technologies, Inc., 9255 Deering Avenue,
Chatsworth, California 91311, telephone number (818) 886-8000.
3
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information appearing elsewhere in this Prospectus or incorporated by reference
herein. Prospective investors should carefully consider the information set
forth below in "Risk Factors," together with the other information contained in
this Prospectus. Unless the context otherwise requires, references in this
Prospectus to the "Company" refer to Plasma & Materials Technologies, Inc. and
its consolidated subsidiaries. In light of the Acquisition (as defined),
references to each of "PMT" and "Electrotech" (as defined) contained in the
following summary and elsewhere in this Prospectus shall, where the context so
requires, refer specifically to such entities in their respective capacities
prior to the Acquisition.
PMT
PMT designs, manufactures and markets advanced high density, low pressure
plasma sources, process modules and plasma processing systems. These products
are used for etch and chemical vapor deposition (CVD) applications and are sold
to semiconductor manufacturers worldwide. PMT currently offers a modular line
of equipment which utilizes PMT's proprietary MORI(TM) source for polysilicon
and metal etch applications, CVD of silicon dioxide films and photoresist
stripping applications.
The market demand for higher performance and higher density semiconductor
devices is pushing the limits of semiconductor wafer processing technology. As
customers demand higher processing speeds and greater memory capacity at
reduced costs, semiconductor manufacturers are forced to reduce feature size in
order to provide greater performance on an integrated circuit (IC) of a given
size. ICs are already highly complex, built-up from ten to thirty thin layers,
incorporating submicron (less than 1 micron) feature sizes, and requiring up to
300 separate processing steps. In the next few years, the requirements of
advanced ICs will increase the number of thin film layers, reduce film
thickness, reduce feature sizes to 0.25 micron and smaller and increase the
number of processing steps. Semiconductor manufacturers must be able to deliver
these more advanced devices while maintaining acceptable manufacturing
performance characteristics, such as high yield and throughput.
PMT believes that its products offer advanced semiconductor manufacturers
superior process performance, with lower cost of ownership. The Company
believes that its competitive advantage lies in its technical expertise in the
area of plasma physics, as demonstrated by its development of the patented
MORI(TM) technology. The Company has incorporated its MORI(TM) high density
plasma source technology into its modular systems product line, which includes
the MORI(TM) plasma source, the MORI(TM) process module for etch, strip or CVD
applications, the APEX 7000(R) single module processing system, and the
PINNACLE 8000(R) system and the PINNACLE 8000R(TM) system. The Company believes
that these processing systems enable its customers to optimize various critical
manufacturing performance characteristics, such as etch rate, critical
dimension control, uniformity and throughput, while minimizing damage and
maximizing yield in the production of ICs. These systems are based on a common
flexible platform that incorporates proprietary system control software as well
as commercially available subsystems.
PMT markets and sells its systems through three separate sales channels:
direct sales, distributor arrangements and OEM agreements. Customers who have
purchased or leased PMT products either directly from PMT or through its
distribution and OEM relationships include AT&T, Daewoo, Dallas Semiconductor,
Fujitsu, Hitachi, Hyundai, IBM, LG Semicon, LSI Logic, NEC, OKI, Samsung,
Sharp, Texas Instruments, TriQuint Semiconductor and Toshiba. As of September
30, 1996, PMT had 142 regular employees, including 57 employees in sales,
marketing and customer support and 46 professional and technical personnel in
research, development and engineering.
4
<PAGE>
THE ACQUISITION
On November 15, 1996, PMT completed the acquisition (the "Acquisition") of
100% of the outstanding capital stock of Electrotech Limited, an English
corporation ("ET"), Electrotech Equipments Limited, an English corporation
("ETE" and, collectively with ET, "Electrotech"), and, directly or indirectly,
each subsidiary thereof for an aggregate consideration of $145.7 million
consisting of $75 million in cash and 5.6 million shares of newly issued Common
Stock having a fair market value of $70.7 million, based on the $12.625 per
share closing price for the Common Stock on July 17, 1996, the last day prior
to the public announcement of the Acquisition. The net proceeds from the sale
of the Convertible Notes in the Original Offering were used by PMT to
substantially fund the cash needed with respect to the Acquisition. As a result
of the Acquisition, each of ET and ETE became a direct, wholly-owned subsidiary
of PMT. The Company intends to reorganize its ownership of ET and ETE such that
ET and ETE will become directly owned by one or more newly-created holding
companies that, in turn, will be wholly-owned by PMT.
ELECTROTECH
Electrotech designs, manufactures, markets and services semiconductor
fabrication equipment for the worldwide semiconductor manufacturing industry.
Electrotech offers its customers products that address three major steps in the
semiconductor manufacturing process: the deposition of metallic aluminum layers
(Electrotech's Sigma system), the deposition of insulating dielectric layers
(Electrotech's Planar and Delta systems) and the dry plasma etching of these
deposited layers (Electrotech's Omega(TM) system). In order to leverage
Electrotech's current products into the manufacturing of next generation
semiconductors, Electrotech's customers may purchase Electrotech's Sigma and
Planar deposition systems with Forcefill(TM) and Flowfill(TM) add-on modules,
which utilize Electrotech's advanced proprietary deposition technologies.
Electrotech's advanced deposition products include the Sigma sputtering
system for physical vapor deposition (PVD), with the optional Forcefill(TM)
module, and the Planar 200 Flowfill(TM) system for inter-metal dielectric CVD.
Forcefill(TM) technology addresses the problem of introducing interconnect
wires into very small holes and allows manufacturers to eliminate the use of
traditional multi-step CVD tungsten-plug processes and utilize an entirely
aluminum-based PVD process in sub-0.5 micron IC manufacturing. Electrotech's
Flowfill(TM) process addresses the problem of insulating the resulting closely-
packed interconnect wiring by forming high quality silicon dioxide layers which
possess the properties of both gap fill and planarization in a single step
process, obviating the need for traditional two-step deposition and
planarization processes. Electrotech's Sigma Forcefill(TM) and Planar 200
Flowfill(TM) are currently at the stage of customer review and evaluation;
however, considerable efforts are being applied by Electrotech to attain
product functionality and reliability levels acceptable to Electrotech's target
market.
Electrotech has sales and marketing offices located in the United Kingdom,
the United States, Europe and Asia. Customers who have purchased Electrotech
products include Fujitsu, GEC Plessey, Matsushita, Micron Technology,
Mitsubishi, Motorola, OKI, Olivetti, Philips, Ricoh, Siemens, Sony, TEMIC,
Texas Instruments, Toshiba and Tower Semiconductor. As of September 30, 1996,
Electrotech had approximately 539 employees worldwide, including 155 personnel
in the marketing, sales and customer service areas worldwide and approximately
105 professional and technical personnel in research and development.
CHANGES IN MANAGEMENT
Pursuant to final negotiations between PMT and Electrotech with respect to
the Acquisition, John Rollwagen, formerly the Chairman of the Board of
Directors of the Company, resigned this position and remains as a director of
and senior advisor to the Company. On the closing of the Acquisition,
Christopher Dobson, formerly the principal shareholder of Electrotech, became
Chairman of the Board. Additionally, in connection with the Acquisition, Nigel
Wheeler, formerly the President of Electrotech, joined the Board of Directors
of the Company and assumed the position of Chief Operating Officer and
President of the Company. On December 10, 1996, James Marshall, the Company's
Executive Vice President, Operations and General Manager, Etch, announced his
resignation, effective December 31, 1996.
5
<PAGE>
THE OFFERING
Securities Offered.......... $86,250,000 aggregate principal amount of 7 1/8%
Convertible Subordinated Notes Due 2001 and
5,516,470 shares of Common Stock issuable upon
conversion thereof.
Maturity of Convertible
Notes....................... October 15, 2001, unless earlier redeemed,
repurchased or converted.
Interest Payments on
Convertible Notes........... April 15 and October 15 of each year, commencing
April 15, 1997.
Conversion of Convertible
Notes....................... The Convertible Notes, unless previously redeemed
or repurchased, are convertible at the option of
the holder at any time after January 5, 1997, and
prior to maturity, into 5,516,470 shares of
Common Stock at a conversion price of $15.635 per
share, subject to adjustments in certain events.
See "Description of Convertible Notes--
Conversion."
Optional Redemption of
Convertible Notes........... The Convertible Notes may be redeemed, at the
Company's option, in whole or from time to time
in part, on at least 15 days' but not more than
60 days' prior notice, at any time on and after
October 15, 1999 at the redemption prices set
forth herein together with accrued and unpaid
interest. See "Description of Convertible Notes--
Optional Redemption."
Ranking of Convertible
Notes....................... The Convertible Notes are unsecured obligations
of the Company and are subordinate in right of
payment to all existing and future Senior Debt of
the Company. The Convertible Notes also are
structurally subordinate to all existing and
future indebtedness and other liabilities of the
Company's subsidiaries. As of September 30, 1996,
after giving effect to the sale of the
Convertible Notes sold in the Original Offering
and the consummation of the Acquisition, on a pro
forma basis PMT would have had $800,000 of Senior
Debt outstanding and the Company's subsidiaries,
including Electrotech, would have had
approximately $33.7 million of indebtedness that
effectively would have ranked senior in right of
payment to the Convertible Notes. In addition, as
of December 13, 1996, the Company had in place
the Working Capital Facility, which indebtedness
constitutes Designated Senior Debt. As of such
date, there were no borrowings under the Working
Capital Facility. The Indenture contains no
limitation on the incurrence of Senior Debt or
the incurrence of other indebtedness and other
liabilities by the Company or its subsidiaries.
See "Description of Convertible Notes--
Subordination of Convertible Notes."
Designated Events........... Upon a Designated Event, holders of the
Convertible Notes will have the right, subject to
certain restrictions and conditions, to require
the Company to purchase all or any part of their
Convertible Notes at a purchase price equal to
101% of the principal amount thereof together
with accrued and unpaid interest thereon to the
date of the purchase. See "Description of
Convertible Notes-- Repurchase at the Option of
Holders."
6
<PAGE>
Use of Proceeds............. The Company will not receive any proceeds from
the sale by the Selling Holders of the
Convertible Notes and the Common Stock issuable
upon conversion of the Convertible Notes.
Risk Factors................ An investment in the Convertible Notes or in the
Common Stock issued upon conversion thereof
involves a significant degree of risk. For a
discussion of certain factors that a prospective
investor should consider prior to purchasing any
of such securities, see "Risk Factors."
7
<PAGE>
SUMMARY FINANCIAL AND PRO FORMA DATA
PMT
<TABLE>
<CAPTION>
TEN MONTHS TWELVE NINE MONTHS
ENDED MONTHS YEAR ENDED
YEAR ENDED FEBRUARY 28, DECEMBER 31,(1) ENDED ENDED SEPTEMBER 30,
-------------------------- ---------------- DEC. 31, DEC. 31, ----------------
1992 1993 1994 1993 1994 1994(1) 1995(2) 1995 1996
------- -------- -------- ------- ------- -------- -------- ------- -------
(IN THOUSANDS OF U.S. DOLLARS, EXCEPT SHARE AND RATIO INFORMATION)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENTS OF
OPERATIONS:
Revenues:
Product sales.......... $ 1,376 $ 4,215 $ 6,244 $ 4,435 $ 8,005 $ 9,813 $20,890 $13,597 $25,851
License revenue........ 2,000 -- 1,900 1,900 700 700 400 400 --
Contract revenue....... -- -- -- -- -- -- -- -- 1,767
------- -------- -------- ------- ------- ------- ------- ------- -------
Total revenue.......... 3,376 4,215 8,144 6,335 8,705 10,513 21,290 13,997 27,618
Income (loss) from
operations............. 325 (2,251) (1,151) (757) (3,665) (4,058) (364) (772) 2,053
Net income (loss)....... 128 (2,319) (1,397) (1,006) (3,740) (4,128) 118 (806) 3,122
Net income (loss) per
share(3)............... $ (0.75) $ (0.82) $ 0.02 $ (0.15) $ 0.34
Number of shares used in
per share computation,
in thousands(3)........ 5,013 5,013 6,593 5,495 9,121
Ratio of earnings to
fixed charges(4)....... 9.73 (13.96) (3.51) -- (14.21) -- 1.29 -- 15.26
</TABLE>
<TABLE>
<CAPTION>
SEPTEMBER 30, 1996
------------------------------
(IN THOUSANDS OF U.S. DOLLARS)
<S> <C>
BALANCE SHEET DATA:
Working capital................................. $44,117
Total assets.................................... 70,155
Long-term debt (capital lease obligations), less
current portion................................ 336
Shareholders' equity............................ 56,668
</TABLE>
- -------
(1) During 1994, PMT changed its fiscal year end from the last day of February
to December 31. Information for the twelve months ended December 31, 1994
(unaudited) is provided for comparison to the information for the year
ended December 31, 1995. Information for the ten months ended December 31,
1993 (unaudited) is provided for comparison to the information for the ten
months ended December 31, 1994.
(2) On August 29, 1995, PMT completed its initial public offering, resulting in
approximately $40,093,235 of net proceeds to PMT. The funds have been used
to cover PMT's working capital needs, its investment in evaluation systems
and capital expenditures, and to continue to expand its research and
development and operational activities.
(3) See Note 1 of Notes to Consolidated Financial Statements in the Proxy
Statement for an explanation of the method used to determine the number of
shares used to compute per share amounts.
(4) For purposes of computing the ratio of earnings to fixed charges,
"earnings" consist of income from operations before income taxes plus fixed
charges, and "fixed charges" consist of interest expense plus an allocation
of a portion of rent expense representing interest.
ELECTROTECH(1)
<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED JUNE 30, ENDED SEPTEMBER 30,
--------------------------------------------------------------------------- ----------------------------
1992 1993 1994 1995 1996 1995 1996
-------------- -------------- -------------- -------------- -------------- ------------- --------------
(IN THOUSANDS OF BRITISH POUNDS)
<S> <C> <C> <C> <C> <C> <C> <C>
PROFIT AND LOSS
ACCOUNT DATA:
Revenues.......... (Pounds)13,919 (Pounds)16,547 (Pounds)23,807 (Pounds)34,496 (Pounds)49,012 (Pounds)7,761 (Pounds)10,197
Income (loss) from
operations....... (1,842) 1,556 1,818 4,446 10,637 901 956
Net income(2)..... 1,324 834 989 5,518 6,307 411 413
</TABLE>
<TABLE>
<CAPTION>
SEPTEMBER 30, 1996
--------------------------------
(IN THOUSANDS OF BRITISH POUNDS)
<S> <C>
BALANCE SHEET DATA:
Working capital................................ (Pounds)15,847
Total assets................................... 47,427
Long-term debt, less current portion........... 977
Shareholders' equity........................... 27,013
</TABLE>
- -------
(1) The summary financial data of Electrotech is derived from historical
financial statements prepared under accounting principles generally
accepted in the U.K.
(2) Included in net income for the year ended June 30, 1995 is
(Pounds)3,076,000 of profit ((Pounds)5,040,000 before taxes) related to the
sale of Surface Technology Systems Limited in March 1995, and included in
net income for the year ended June 30, 1992 is (Pounds)3,104,000 of profit
((Pounds)4,652,000 before taxes) related to the sale of the business of
Plasma Products Limited.
8
<PAGE>
SUMMARY UNAUDITED PRO FORMA COMBINED FINANCIAL DATA
The summary unaudited pro forma combined financial data has been derived from
the unaudited pro forma combined financial statements and notes thereto set
forth elsewhere in this Prospectus, and should be read in conjunction with
those financial statements and notes. The summary unaudited pro forma combined
financial data does not purport to be indicative of future operations and
should not be construed as representative of future operations of the combined
companies.
<TABLE>
<CAPTION>
TWELVE MONTH PERIOD ENDED NINE MONTH PERIOD ENDED
DECEMBER 31, 1995(1) SEPTEMBER 30, 1996(1)
------------------------- -----------------------
(IN THOUSANDS OF U.S. DOLLARS, EXCEPT
SHARE AND RATIO INFORMATION)
<S> <C> <C>
PRO FORMA COMBINED
STATEMENTS OF OPERATIONS
DATA FOR PMT AND
ELECTROTECH:
Revenue................... $75,673 $90,873
Cost of sales............. 37,207 43,587
Research and development.. 12,969 13,764
Sales, general and
administrative........... 18,138 17,985
Amortization of
intangibles.............. 4,755 3,566
Income from operations.... 2,604 11,971
Net income (loss)......... (1,045) 3,306
Net income (loss) per
share.................... (0.09) 0.22
Number of shares used in
per share computation, in
thousands................ 12,193 14,721
Ratio of earnings to fixed
charges(2)............... 1.40 2.00
</TABLE>
<TABLE>
<CAPTION>
SEPTEMBER 30, 1996(1)
------------------------------
(IN THOUSANDS OF U.S. DOLLARS)
<S> <C>
PRO FORMA COMBINED BALANCE SHEET DATA FOR PMT
AND ELECTROTECH:
Working capital............................... $ 67,446
Total assets.................................. 186,842
Long-term debt and capital lease obligations,
less current portion......................... 88,110
Total shareholders' equity(3)................. 38,312
</TABLE>
- --------
(1) The unaudited pro forma combined balance sheet data assumes the Acquisition
and related financing of the Acquisition, through the issuance of
$86,250,000 of Convertible Notes as described in this Prospectus, took
place on September 30, 1996, and combines PMT's September 30, 1996 balance
sheet data with Electrotech's September 30, 1996 balance sheet data using
the purchase method of accounting. The unaudited pro forma statements of
operations data assumes that the Acquisition and related financing took
place as of the beginning of each of the periods presented using the
allocation of the purchase information calculated as of September 30, 1996,
and combines the statement of operations data for PMT and the profit and
loss accounts data for Electrotech for the twelve month period ended
December 31, 1995 and for the nine month period ended September 30, 1996.
The underlying financial data of Electrotech used to develop the pro forma
combined financial data has been converted to U.S. dollars using a
conversion rate of $1.56 U.S. to (Pounds)1 sterling at September 30, 1996
and $1.55 U.S. to (Pounds)1 sterling at December 31, 1995, and to US GAAP
for purposes of comparison.
(2) For purposes of computing the ratio of earnings to fixed charges,
"earnings" consist of income from operations before income taxes plus fixed
charges, and "fixed charges" consist of total interest expense plus an
allocation of a portion of rent expense representing interest. Such ratio
assumes the issuance of a principal amount of $86,250,000 of Convertible
Notes with an interest rate of 7.125%.
(3) Reflects a one-time, nonrecurring charge of $89 million relating to
purchased in-process technology of Electrotech. See the section "Pro Forma
Financial Information" and the notes thereto, beginning on page 29 of this
Prospectus.
9
<PAGE>
This Prospectus contains forward-looking statements within the meaning of
Section 27A of the Securities Act and Section 21E of the Exchange Act. These
statements are in paragraphs 6, 8, 16 and 17 under "Management's Discussion
and Analysis of Financial Condition and Results of Operations of PMT." Foward-
looking statements may also be found in various sections of this Prospectus
which are incorporated herein by reference or that are not specifically set
forth above. Actual results could differ materially from those projected in
the forward-looking statements as a result of certain factors, including those
set forth below.
RISK FACTORS
A prospective investor in the Convertible Notes or the shares of Common
Stock issuable upon conversion thereof should carefully consider the risk
factors set forth below before making a decision to purchase any of the
securities offered hereby.
RECENT DEVELOPMENTS
The semiconductor industry is currently experiencing a significant downturn
which has resulted, and which the Company anticipates will continue to result,
in reduced demand for semiconductor processing equipment and increased pricing
pressure upon equipment manufacturers, including the Company. For the quarter
ended September 30, 1996, PMT's product sales declined to $7.9 million from
$10.2 million for the quarter ended June 30, 1996, a reduction of 22.5%.
Similarly, for the quarter ended September 30, 1996, Electrotech's product
sales declined to (Pounds)10.2 million from (Pounds)15.2 million for the
quarter ended June 30, 1996, a reduction of 33%. Furthermore, decreased
product sales and pricing pressure resulted in decreased gross and operating
margins for both PMT and Electrotech for the quarter ended September 30, 1996,
as compared to the preceding quarter ended June 30, 1996.
Reduced demand for semiconductor processing equipment is anticipated to
continue to adversely affect the product sales and margins of both PMT and
Electrotech for the quarter ending December 31, 1996 and for subsequent
periods. Although actual results for the quarter ending December 31, 1996 will
depend upon shipments by PMT and Electrotech during the remaining weeks of
December 1996, the Company presently anticipates that the product sales of
each of PMT and Electrotech, considered separately, for the quarter ending
December 31, 1996 will be substantially the same as, or lower than, its
respective product sales for the preceding quarter ended September 30, 1996.
The combined Company's consolidated product sales for the quarter ending
December 31, 1996 will not include the product sales of Electrotech recognized
prior to November 15, 1996, the date of the consummation of the Acquisition.
The Company believes that the anticipated combined product sales will result
in the Company incurring a net loss for the quarter ending December 31, 1996
even before giving effect to the recognition of a one-time, nonrecurring
charge of $89 million incurred in connection with the Acquisition relating to
purchased in-process technology of Electrotech.
The Company anticipates that, for the same reasons as described above with
respect to the current quarter ending December 31, 1996, the Company's
operating results for at least the first two quarters of calendar 1997 could
continue to be adversely affected. The Company anticipates that current
indications of a possible recovery in the semiconductor industry could result
in improved operating results for the Company during the latter half of 1997,
although there can be no assurance that this will occur. Both PMT and
Electrotech are particularly sensitive to the current industry slowdown
because the loss or delay of one or more system sales during any quarter can
significantly and adversely affect their operating results for that quarter,
and also because the lengthy sales cycle experienced by both PMT and
Electrotech may adversely affect their ability to rapidly recover from the
downturn. See the Sections "--Cyclicality of Semiconductor Industry," "--
Quarterly Operating Results Affected by Many Business Factors," and "--Lengthy
Sales Cycle," below.
10
<PAGE>
SUBORDINATION OF CONVERTIBLE NOTES
The Convertible Notes are unsecured and subordinate in right of payment in
full to all existing and future Senior Debt of the Company. As a result of
such subordination, in the event of bankruptcy, liquidation or reorganization
of the Company, or upon the acceleration of any Senior Debt, the assets of the
Company will be available to pay obligations on the Convertible Notes only
after all Senior Debt has been paid in full, and there may not be sufficient
assets remaining to pay amounts due on any or all of the Convertible Notes
then outstanding. The Company expects from time to time to incur additional
indebtedness, including indebtedness that would constitute Senior Debt. The
Convertible Notes are also structurally subordinate to all existing and future
indebtedness and other liabilities, including trade payables, of the Company's
subsidiaries, including Electrotech. The Indenture (as defined) does not
prohibit or limit the incurrence of additional indebtedness, including Senior
Debt, by the Company or its subsidiaries, and the incurrence of additional
indebtedness by the Company or its subsidiaries could adversely affect the
Company's ability to pay its obligations on the Convertible Notes. As of
September 30, 1996, after giving effect to the sale of the Convertible Notes
sold in the Original Offering and the consummation of the Acquisition, on a
pro forma basis PMT would have had $800,000 of Senior Debt outstanding and the
Company's subsidiaries would have had $33.7 million of indebtedness that
effectively would have ranked senior in right of payment to the Convertible
Notes. In addition, on November 15, 1996, PMT established a senior secured
credit facility (the "Working Capital Facility") that permits the Company and
its subsidiaries, including Electrotech, to borrow an aggregate of up to
$35 million, subject to borrowing base limitations, based upon eligible
accounts receivable. As of November 15, 1996, the Working Capital Facility
would have permitted aggregate borrowings of approximately $21.6 million. The
Working Capital Facility is Designated Senior Debt. As of December 13, 1996
there were no borrowings under the Working Capital Facility. See "Description
of Convertible Notes--Subordination of Convertible Notes."
SUBSTANTIAL LEVERAGE; FUTURE CAPITAL NEEDS
The Company is capital intensive and requires significant funds to conduct
operations and requires regular and significant investments in inventory and
working capital. In order to remain competitive, the Company must continue to
make significant investments in technology and systems, in the expansion of
its operations, in evaluation systems and in research and development.
As a result of the Acquisition and the related sale of the Convertible Notes
in the Original Offering, the Company incurred a significant amount of
indebtedness. As of September 30, 1996, after giving effect to the sale of the
Convertible Notes sold in the Original Offering and the consummation of the
Acquisition, on a pro forma combined basis the Company's total interest
bearing indebtedness would have been approximately $99.6 million and its total
shareholders' equity would have been approximately $38.3 million. For the nine
months ended September 30, 1996, on a pro forma basis, the ratio of earnings
to fixed charges would have been 2.00.
The degree to which the Company is leveraged could have important
consequences to holders of the Convertible Notes including, but not limited
to, the following: (i) the Company's ability to obtain additional financing in
the future for working capital, capital expenditures, acquisitions, general
corporate or other purposes may be limited; (ii) a substantial portion of the
Company's cash flow from operations will be dedicated to the payment of
interest on, and the principal of, its debt; (iii) the Company's substantial
leverage may make it more vulnerable to economic downturns, limit its ability
to withstand competitive pressures and reduce its flexibility in responding to
changing business and economic conditions. Certain of the Company's
competitors currently operate on a less leveraged basis and have significantly
greater operating and financial flexibility than the Company.
The agreements relating to the Working Capital Facility contain numerous
financial and operating covenants including, among others, restrictions on the
Company's ability to incur additional
11
<PAGE>
indebtedness, to create liens or other encumbrances, to make certain payments
and investments and to merge or consolidate with another entity. The
agreements relating to the Working Capital Facility require the Company to
meet certain financial tests on a consolidated basis. A failure to comply with
the obligations contained in any agreements with respect to any additional
financing could result in an event of default under such agreements which
could permit acceleration of the related debt and acceleration of debt under
other debt agreements that may contain cross-acceleration or cross-default
provisions. Additionally, borrowings under the Working Capital Facility are
limited by a borrowing base formula that, as of November 15, 1996, would have
permitted aggregate borrowings of approximately $21.6 million.
DEDUCTIBILITY OF THE COMPANY'S INTEREST PAYMENTS
Section 279 of the Internal Revenue Code of 1986, as amended, disallows the
deduction of interest paid or accrued with respect to certain subordinated
convertible debt which is issued to provide consideration for the acquisition
of stock or assets of another corporation ("Section 279 Acquisition Debt").
Such a disallowance applies to the interest paid or accrued with respect to
Section 279 Acquisition Debt to the extent interest paid or accrued with
respect to such debt plus interest paid or accrued on other debt incurred to
provide consideration for an acquisition of stock or assets exceeds a $5
million threshold. Section 279 Acquisition Debt, however, does not include
debt issued to provide consideration for the acquisition of stock in, or the
assets of, a foreign corporation that derives substantially all of its income
from foreign sources during the three-year period ending with the date of the
acquisition (the "Foreign Acquisition Exception"). The Company believes that
the acquisition of Electrotech falls within the Foreign Acquisition Exception
and, accordingly, that Section 279 should not apply to disallow a deduction
for interest paid or accrued with respect to the Convertible Notes. There can
be no assurance in this regard, however, and, in any event, the interest paid
or accrued with respect to that portion of proceeds of the Original Offering
used in the acquisition of Electrotech still will figure in the calculation of
the $5 million threshold described above. Therefore, even if the Convertible
Notes do not constitute Section 279 Acquisition Debt, the Company may be
limited in its ability to deduct interest paid or accrued with respect to any
Section 279 Acquisition Debt that it may incur in the future. Additionally,
if, contrary to the position being taken by the Company, the Convertible Notes
are deemed to be Section 279 Acquisition Debt, Section 279 would disallow a
portion of the interest deduction with respect to the Convertible Notes and,
if the Company incurs additional acquisition debt (whether or not such debt is
Section 279 Acquisition Debt), the amount of the interest deduction disallowed
by Section 279 would increase. If Section 279 were to disallow any portion of
the interest paid or accrued with respect to the Convertible Notes or with
respect to other debt of the Company, the Company's effective tax rate would
increase. The Company does not intend to apply to the Internal Revenue Service
for a ruling on this issue and has not received an opinion of counsel as to
the deductibility of the interest on the Convertible Notes.
LIMITATIONS ON REPURCHASE OF CONVERTIBLE NOTES
Upon a Designated Event, which includes a Change of Control or a Termination
of Trading (each as defined), each holder of Convertible Notes will have the
right, at the holder's option, to require the Company to repurchase all or a
portion of such holder's Convertible Notes. If a Designated Event were to
occur, there can be no assurance that the Company would have sufficient funds
to pay the repurchase price for all Convertible Notes tendered by the holders
thereof. In addition, it is possible that the terms of future indebtedness or
lease obligations incurred by the Company may prohibit the Company from
purchasing any Convertible Notes and may also provide that a Designated Event,
as well as certain other change of control events with respect to the Company,
would constitute an event of default thereunder. If the Company were
prohibited from purchasing Convertible Notes tendered, this failure would
constitute an Event of Default under the Indenture, which would, in turn,
constitute a default under the terms of the Working Capital Facility, and may
also constitute an Event of Default
12
<PAGE>
under other indebtedness or long-term leases that the Company currently has or
may enter into from time to time. In such circumstances, the subordination
provisions in the Indenture would likely restrict payments to the holders of
Convertible Notes. See "Description of Convertible Notes--Repurchase at the
Option of Holders."
CYCLICALITY OF SEMICONDUCTOR INDUSTRY
The semiconductor industry is highly cyclical and has historically
experienced periodic downturns, which have been characterized by diminished
product demand and production overcapacity. The semiconductor industry is
currently experiencing a downturn, which is currently expected to continue at
least throughout most of 1997. This downturn has had, and is expected to
continue to have, a severe adverse effect on the semiconductor industry's
demand for semiconductor processing equipment. The Company's operations have
been and will continue to be dependent on the current and anticipated market
demand for integrated circuits (ICs) and products utilizing ICs that are
produced by semiconductor manufacturers. The current weakness in demand in the
semiconductor industry, and any continuation of this weakness in the future,
has materially and adversely affected, and would continue to materially and
adversely affect, the Company's business and results of operations. See "--
Recent Developments."
DEVELOPMENT AND ACCEPTANCE OF NEW PRODUCTS AND SYSTEMS
PMT's MORI(TM) source offers an alternative etch environment for the
manufacture of ICs to the reactive ion etch (RIE), inductively coupled plasma
(ICP) and electron cyclotron resonance (ECR) etch technology currently used by
PMT's competitors.
While Electrotech sells several proven products, Electrotech's Sigma
Forcefill(TM) system incorporates an alternative technology to conventional
physical vapor deposition (PVD) techniques by using low resistance aluminum
forced by high pressure argon to fill small diameter deep holes and vias on
ICs. Electrotech's competitors produce systems that use a conventional
chemical vapor deposition (CVD) tungsten system to fill deep holes and vias.
Electrotech's Planar 200 Flowfill(TM) system uses a CVD technique applied to
silicon dioxide that allows for gap filling and planarization. Competing
products include spin on glass (SOG) and high density plasma (HDP) coupled
with a chemical mechanical polishing (CMP) process.
PMT has sold a limited number of its PINNACLE 8000(R) and PINNACLE 8000R(TM)
etch systems to a small number of customers. Electrotech's Sigma Forcefill(TM)
and Planar 200 Flowfill(TM) are currently at the stage of customer review and
evaluation; however, considerable efforts are being applied by Electrotech to
attain product functionality and reliability levels acceptable to
Electrotech's target markets. To date, the substantial majority of PMT's sales
of its etch systems and all of Electrotech's sales of Sigma Forcefill(TM) and
Planar 200 Flowfill(TM) systems have been initial purchases by customers of
individual systems. Typically, semiconductor manufacturers initially purchase
individual systems and deploy them in a development or pre-production
environment prior to purchasing multiple systems for production. There can be
no assurance that any of such customers will purchase additional systems from
the Company for deployment in production.
Given that certain of the Company's systems represent an alternative to
conventional etch, PVD and CVD systems currently marketed by competitors,
management believes that continued growth depends in large part upon the
ability of the Company to gain acceptance of its systems and technology. Due
to the substantial investment required by semiconductor manufacturers to
install and integrate capital equipment into a semiconductor production line,
these manufacturers will tend to choose equipment manufacturers based on past
relationships, product compatibility and proven financial performance. Once a
semiconductor manufacturer has selected a particular vendor, management
believes that the manufacturer generally relies upon the equipment supplied by
that
13
<PAGE>
vendor for the specific production line application, and frequently will
attempt to consolidate its other capital equipment requirements with the same
vendor. As a result, semiconductor manufacturers will normally engage in a
long period of analysis and planning before determining to convert to a new
vendor of capital equipment. Given these factors, there can be no assurance
that the Company will be successful in obtaining broader acceptance of its new
systems or of PMT's MORI(TM) source or Electrotech's Forcefill(TM) or
Flowfill(TM) technologies.
RAPID TECHNOLOGICAL CHANGE
The markets in which the Company and its customers compete are characterized
by rapidly changing technology, the introduction of alternative technologies,
evolving industry standards and continuous improvements in products and
services. Management believes that the Company's future success will depend,
in part, upon its ability to continue to improve its systems and process
technologies and to develop new technologies and systems which compete
effectively on the basis of total cost of ownership and performance and which
adequately address customer requirements.
QUARTERLY OPERATING RESULTS AFFECTED BY MANY BUSINESS FACTORS
PMT has routinely experienced fluctuations in quarterly results and
currently derives most of its quarterly revenue from the sale of a small
number of etch systems which typically have list prices ranging from
approximately $975,000 to $3,100,000. During PMT's last six fiscal quarters,
PMT shipped virtually all of its systems in the last week of such quarters.
Accordingly, the timing of the shipment of a single PMT system could have a
significant impact on PMT's recognition of revenue and its quarterly operating
results. Historically, PMT's backlog at the beginning of a quarter has not
included all sales required to achieve its sales objectives for that quarter.
As such, PMT's quarterly product sales and operating results have historically
depended on the receipt of orders and the shipment of products in that same
quarter. As of November 30, 1996, backlog was approximately $2.5 million for
PMT, as compared to $4 million as of August 31, 1996, and backlog was
approximately $27.9 million for Electrotech, as compared to $19.7 million as
of August 31, 1996. Substantially all of the orders constituting backlog as of
November 30, 1996 will be shipped in the Company's fiscal quarter ending
December 31, 1996 and in subsequent periods in 1997.
Electrotech also derives a significant percentage of its quarterly revenues
from the shipment of a relatively small number of systems varying in price
from approximately $600,000 to $4,000,000. Product sales and operating results
for a particular quarter could be adversely affected if an anticipated order
for even one Electrotech system is not received in time to permit shipment
during that quarter. A delay in a shipment near the end of a particular
quarter may cause product sales in that quarter to fall below expectations,
and may thus materially and adversely affect operating results for such
quarter, which will have an adverse impact on the market price of the Common
Stock of the Company.
As a result of its continued investments in research, development and
engineering, and the development of a worldwide sales and marketing
organization, the Company has significant fixed costs that it will not be able
to reduce rapidly if its sales goals for a particular period are not met. The
impact of this factor on operating results in any future period cannot be
forecasted accurately.
HIGHLY COMPETITIVE INDUSTRY
The markets served by the Company's products are extremely competitive. The
Company faces significant competition from various suppliers of systems that
utilize alternative technologies. In the etch market, PMT's MORI(TM)-based
etch systems and Electrotech's etch products face competition from suppliers
of RIE systems, including Applied Materials, Lam Research and Tokyo Electron,
from ICP-based etch systems marketed by Applied Materials and Lam Research, as
well as the ECR-based etch system marketed by Hitachi. Additionally, in the
etch market, PMT and Electrotech compete with each other. In the PVD market,
Electrotech's Forcefill(TM) technology faces competition from suppliers of
14
<PAGE>
aluminum PVD systems, such as Applied Materials, Tokyo Electron, MRC, Varian
and Ulvac. In the CVD market, Electrotech's Flowfill(TM) technology faces
competition from a number of CVD competitors, including Applied Materials, Lam
Research, Novellus and Watkins-Johnson.
Many of these competitors are substantially larger companies with broader
product lines, and have well established reputations in the markets in which
the Company competes, longer operating histories, greater experience with high
volume manufacturing, broader name recognition, substantially larger customer
bases and substantially greater financial, technical and marketing resources
than the Company and, among other things, may therefore be less vulnerable
than the Company to long-term industry downturns, including the downturn
presently being experienced by the semiconductor equipment manufacturing
industry. The Company also faces potential competition from new entrants in
its respective markets, including established manufacturers in other segments
of the semiconductor capital equipment market, who may decide to diversify
into the Company's market segments. There can be no assurance that their
competitors will not develop enhancements to or future generations of
competitive products that will offer price and performance features superior
to those offered by the Company's systems.
COMBINATION OF PMT AND ELECTROTECH
The combination of PMT and Electrotech that occurred effective November 15,
1996 resulted in a significant increase in the number of employees employed by
the Company and brought new operating facilities to the Company, most of which
are located in the United Kingdom and Europe. While management currently
intends to maintain the corporate identities and operations of PMT and
Electrotech, seeking only to consolidate their worldwide sales organizations,
the combination of PMT and Electrotech may strain available managerial,
financial and other resources. There can be no assurance that the combination
of PMT and Electrotech will be successfully managed or will not result in
significant unforeseen operating expenses.
LENGTHY SALES CYCLE
Sales of the Company's systems typically involve a lengthy period during
which each may expend substantial funds and management effort. Such sales will
depend, in significant part, upon the decision of a prospective customer to
increase manufacturing capacity or to expand current manufacturing capacity,
both of which involve a significant capital commitment by the customer. The
amount of time from initial contact with a customer to the first order is
typically nine to twelve months, and may be longer, and may involve competing
capital budget considerations for the customer, thus making the timing of
customers' orders uneven and difficult to predict. The Company's ability to
receive orders for production systems from potential semiconductor
manufacturing customers depends, among other things, upon such customers
undertaking an evaluation for new equipment. Presently, all of the Sigma
Forcefill(TM) and the Planar 200 Flowfill(TM) systems sold are being used by
such customers to evaluate the future manufacturing capabilities of such
systems. There can be no assurance that Electrotech will receive any orders
for Sigma Forcefill(TM)or Planar 200 Flowfill(TM) systems from any of the
customers who have purchased such systems for evaluation purposes. Similarly,
the majority of PMT's Pinnacle 8000(R) and Pinnacle 8000R(TM) systems sold to
date have been sold as single systems. Prior to placing orders for production
systems, semiconductor manufacturing customers expect to evaluate systems on
an extended trial basis. Following initial system qualification, both PMT and
Electrotech often experience further delays in finalizing system sales while
the customer evaluates and receives approvals for the purchase of its systems
and completes a new or expanded facility. The failure or inability of the
Company to convert an evaluation system with a customer to a sale of
production systems could materially and adversely affect operations.
Furthermore, this lengthy sales cycle process may adversely affect the
Company's ability to rapidly recover from the current industry downturn.
15
<PAGE>
FAILURE TO RETAIN KEY PERSONNEL
The Company is dependent upon the efforts and abilities of a number of its
current key personnel. Such key personnel include, but are not limited to, Dr.
Gregor Campbell, Chief Executive Officer; Christopher Dobson, Chairman of the
Board; Nigel Wheeler, President and Chief Operating Officer; and Harvey Frye,
Vice President, Worldwide Sales and Marketing. Management believes that the
Company's success will, to a significant degree, depend upon its ability to
retain these and other key employees. The loss of certain of these people or
the Company's inability to retain other key employees could materially and
adversely affect its operations.
INCREASED INTERNATIONAL EXPOSURE
International sales accounted for approximately 77%, 47%, 66%, and 50% of
PMT's total revenue for the nine months ended September 30, 1996, the year
ended December 31, 1995, the ten months ended December 31, 1994, and the year
ended February 28, 1994, respectively. Similarly, Electrotech sales outside of
the United States accounted for approximately 57%, 84%, 82% and 72% of
Electrotech's total revenue for the three months ended September 30, 1996 and
the fiscal years ended June 30, 1996, 1995 and 1994, respectively. Sales
outside of the United States account for a majority of the Company's total
revenue. International sales are subject to certain risks, including
unexpected changes in regulatory requirements, exchange rates, tariffs and
other barriers, political and economic instability, difficulties in accounts
receivable collections, extended payment terms, the challenges of maintaining
a readily available supply of spare parts, difficulties in managing
distributors or representatives, difficulties in staffing and managing foreign
subsidiary operations, and potentially adverse tax consequences. In addition,
international sales may be materially adversely affected by currency risks
associated with devaluation of certain currencies. There can be no assurance
that these and other factors will not have a material adverse effect on
revenue.
INTELLECTUAL PROPERTY RIGHTS
The Company relies on a variety of types of intellectual property protection
to protect proprietary technology, including patent, copyright, trademark and
trade secret laws, non-disclosure agreements and other intellectual property
protection methods. Although management believes that the Company's patents
and trademarks may have value, management believes that its future success
will also depend on the innovation, technical expertise and marketing
abilities of its personnel. PMT currently holds a number of patents in the
United States and has patent applications pending in South Korea, Japan and
Europe.
Electrotech currently holds a number of patents in the United Kingdom, the
United States, Taiwan, Germany, France, Italy and the Netherlands and is
currently in the process of defending a challenge to the validity of its
European ICP patent. There can be no assurance as to the resolution of this
patent dispute and an unfavorable result could materially and adversely affect
Electrotech. Electrotech also has a number of patent applications pending
worldwide, including applications for its Forcefill(TM) technology.
There can be no assurance that patents will be issued on the Company's
pending patent applications or that competitors will not be able to
legitimately ascertain proprietary information embedded in its products which
is not covered by patent or copyright. In such case, the Company may be
precluded from preventing the competitor from making use of such information.
In addition, should the Company wish to assert its patent rights against a
particular competitor's product, there can be no assurance that any claim in a
Company patent will be sufficiently broad nor, if sufficiently broad, any
assurance that the Company patent will not be challenged, invalidated or
circumvented, or that the Company will have sufficient resources to prosecute
its rights. The Company has a policy to protect and defend vigorously its
patents, trademarks and trade secrets.
16
<PAGE>
There are no pending lawsuits against the Company regarding infringement of
any existing patents or other intellectual property rights or, except as
described above, any unresolved claim where the Company has received notice
that it is infringing the intellectual property rights of others. There can be
no assurance, however, that such infringement claims will not be asserted in
the future nor can there be any assurance, if such claims were made, that the
Company would be able to defend against such claims successfully or, if
necessary, obtain licenses on reasonable terms. In addition, management
believes that litigation in the semiconductor equipment industry over patent
and other intellectual property rights has been increasing in recent years.
Any involvement in a patent or other intellectual property dispute or in any
action to protect trade secrets and know-how, even if successful, could
materially and adversely affect operations. Adverse determinations in any such
action could subject the Company to significant liabilities, require it to
seek licenses from third parties, which might not be available, and possibly
prevent it from manufacturing and selling its products, any of which could
materially and adversely affect operations.
ENVIRONMENTAL REGULATIONS
PMT is subject to a variety of federal, state and local laws, rules and
regulations in the United States relating to the use, storage, discharge and
disposal of hazardous chemicals used during its customer demonstrations and in
research and development activities. Public attention has increasingly been
focused on the environmental impact of operations which use hazardous
materials. In 1995, the United Kingdom adopted a new and comprehensive
environmental law known as the Environmental Act of 1995 (the "Environmental
Act"), which, among other things, deals with the allocation of responsibility
for the cleanup of contaminated property and expands potential liability with
respect to the remediation of such contamination. Electrotech owns or leases a
number of facilities in the United Kingdom, and compliance with the
Environmental Act is anticipated to result in certain expenses. A reserve of
$435,000 for the estimated potential liability of these expenses has been
recorded in the Unaudited Pro Forma Balance Sheet of PMT and Electrotech
combined as of September 30, 1996 included elsewhere in this Prospectus. There
can be no assurance that such expenses will not exceed present estimates.
Failure to comply with present or future regulations could result in
substantial liability to the Company, suspension or cessation of certain of
its operations, restrictions on its ability to expand at its present
locations, or requirements for the acquisition of significant equipment or the
incurrence of other significant expense.
CUSTOMER CONCENTRATION
To date Electrotech's sales have been highly concentrated, with
approximately 23% and 28% of its revenue for the three months ended September
30, 1996 and the year ended June 30, 1996, respectively, derived from sales to
Siemens. There can be no assurance that Siemens will continue to purchase
machinery and technology from Electrotech at current levels, or at all. To
date PMT has experienced some concentration of customers and, in future
periods, the concentration of the Company's customers could increase.
SIGNIFICANT INFLUENCE OF MR. DOBSON; DILUTION OF OWNERSHIP
As a result of the Acquisition, the former shareholders of Electrotech
beneficially own approximately 39% of the outstanding shares of Common Stock.
Christopher D. Dobson, the Chairman of the Board of Directors of the Company,
owns approximately 34% of the Common Stock outstanding. Mr. Dobson is in a
position to have a significant influence on the election of directors and
other corporate matters that require the vote of PMT shareholders.
Additionally, the Convertible Notes are convertible into 5,516,470 shares of
Common Stock. The issuance of such shares of Common Stock upon the conversion
of the Convertible Notes will represent substantial dilution of the ownership
interest in the Company by its current shareholders.
17
<PAGE>
SHARES AVAILABLE FOR RESALE
As a result of the Acquisition, the Company issued 5,600,000 additional
shares of Common Stock, of which 746,666 shares may be sold in the public
securities markets on and after December 24, 1996, pursuant to Regulation S of
the Securities Act. Subject to certain volume restrictions imposed by Rule 144
under the Securities Act, Mr. Dobson will also be permitted to sell a certain
number of the 4,853,334 shares of Common Stock issued to him in the
Acquisition. Future sales of a substantial amount of Common Stock in the
public market could adversely affect the market price of the Common Stock. The
former shareholders of Electrotech have agreed not to sell any of the shares
of Common Stock received by them in the Acquisition until February 13, 1997.
Approximately 3,108,421 shares of Common Stock held by certain significant
shareholders of the Company, including 1,638,354 shares held by Company
affiliates, are presently available for resale in the public market, subject
to certain restrictions on volume imposed by Rule 144 under the Securities
Act.
VOLATILE STOCK PRICE
Since the Company's initial public offering in late August 1995, the market
price for the Common Stock has been highly volatile. Management believes that
a variety of factors could cause the price of the Common Stock to continue to
fluctuate, perhaps substantially, including: announcements of developments
related to the Company's business; fluctuations in operating results and order
levels; general conditions in the semiconductor industry or the worldwide
economy; announcements of technological innovations; new products or product
enhancements by the Company or by its competitors; developments in patents or
other intellectual property rights; and developments in the Company's
relationships with its employees, customers, distributors and suppliers. In
addition, in recent years the stock market in general, and the market for
shares of the stock of technology-based issuers in particular, has experienced
extreme price fluctuations which have often been unrelated to the operating
performance of affected companies. Such fluctuations could adversely affect
the market price of the Common Stock.
18
<PAGE>
USE OF PROCEEDS
The Selling Holders will receive all of the net proceeds from the sale of
the Convertible Notes and Common Stock issuable upon the conversion thereof
pursuant to this Prospectus.
PRICE RANGE OF COMMON STOCK AND DIVIDEND POLICY
The Common Stock began trading in the over-the-counter market on August 23,
1995 upon effectiveness of the registration statement relating to the
Company's initial public offering and is quoted on Nasdaq under the symbol
"PMAT". The quarterly high and low sale prices for Common Stock as reported on
Nasdaq for the periods indicated since August 23, 1995 are as follows:
<TABLE>
<CAPTION>
HIGH LOW
------ ------
<S> <C> <C>
1995
Third Quarter (from August 23, 1995).......................... $21.25 $16.75
Fourth Quarter................................................ $17.50 $ 9.00
1996
First Quarter................................................. $16.25 $ 8.63
Second Quarter................................................ $20.25 $11.00
Third Quarter................................................. $15.75 $10.50
Fourth Quarter (through December 12, 1996).................... $16.88 $11.25
</TABLE>
As of December 12, 1996, there were 118 shareholders of record of Common
Stock.
PMT has not declared or paid cash dividends to its shareholders. PMT
anticipates that all of its earnings in the near future will be retained for
the development and expansion of its business and, therefore, does not
anticipate paying dividends on its Common Stock in the foreseeable future.
Declaration of dividends on the Common Stock will depend, among other things,
upon levels of indebtedness, future earnings, the operating and financial
condition of PMT, its capital requirements and general business conditions.
The Working Capital Facility contains provisions which prohibit PMT from
paying dividends on its Common Stock.
On December 12, 1996, the closing price of the Common Stock as reported on
Nasdaq was $15 per share.
19
<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of the Company as of
September 30, 1996 and on a pro forma and as adjusted basis, giving effect to
the consummation of the Acquisition and the Original Offering and application
of the net proceeds therefrom. This table should be read in conjunction with
the summary financial and pro forma data and the pro forma financial
information contained in this Prospectus, with the unaudited financial
statements of PMT and Electrotech included elsewhere in this Prospectus and
with the financial statements of PMT and of Electrotech and the notes thereto
contained in the Proxy Statement.
<TABLE>
<CAPTION>
SEPTEMBER 30, 1996
--------------------
PRO FORMA
AND
ACTUAL AS ADJUSTED
------- -----------
(IN THOUSANDS OF
U.S. DOLLARS)
<S> <C> <C>
Short-term debt and current portion of long-term debt(1).. $ 482 $ 11,475
======= ========
Long-term debt, less current portion:
7 1/8% Convertible Subordinated Notes Due 2001.......... $ -- $ 86,250
Other long-term debt, including capital lease
obligations............................................ 336 1,860
------- --------
Total long-term debt................................... 336 88,110
Shareholders' equity:
Common Stock, no par value; 50,000,000 shares
authorized; 8,692,264 issued and outstanding and
14,292,264 shares
issued and outstanding, as adjusted(2)................. 61,108 131,808
Accumulated deficit(3).................................. (4,440) (93,496)
------- --------
Total shareholders' equity............................. 56,668 38,312
------- --------
Total capitalization................................... $57,004 $126,442
======= ========
</TABLE>
- --------
(1) As of September 30, 1996, there were no borrowings under PMT's $3 million
revolving line of credit and there were borrowings of approximately $10
million under Electrotech's revolving line of credit, including bank
overdrafts.
(2) Does not include (a) 2,400,000 shares of Common Stock presently reserved
for issuance under the Company's 1991 Stock Option Plan, (b) 80,000 shares
of Common Stock issuable upon the exercise of a warrant outstanding as of
September 30, 1996 and (c) 5,516,470 shares of Common Stock reserved for
issuance upon conversion of the Convertible Notes.
(3) The substantial increase in the accumulated deficit amount is a result of
a one-time, nonrecurring charge of $89 million relating to purchased in-
process technology of Electrotech.
20
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA OF PMT
The following selected consolidated financial data of PMT are qualified by
reference to and should be read in conjunction with the unaudited condensed
consolidated financial statements of PMT included elsewhere in this Prospectus
and with the consolidated financial statements and notes thereto of PMT and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations of PMT," which are included in the Proxy Statement. The selected
consolidated financial data set forth below for the year ended February 28,
1994, as of and for the ten months ended December 31, 1994, and as of and for
the year ended December 31, 1995, have been derived from the audited financial
statements of PMT included in the Proxy Statement. The selected consolidated
financial data set forth below as of and for the year ended February 28, 1992,
as of and for the year ended February 28, 1993, and as of February 28, 1994,
have been derived from audited financial statements of PMT not included in the
Proxy Statement. The selected consolidated financial data for the ten months
ended December 31, 1993, the twelve months ended December 31, 1994, the nine
months ended September 30, 1995 and as of and for the nine months ended
September 30, 1996 have been derived from unaudited consolidated financial
statements of PMT, but include all adjustments (consisting only of normal
recurring adjustments) which PMT considers necessary for a fair presentation
of the results of operations for the periods presented. The results of
operations for the nine months ended September 30, 1996 are not necessarily
indicative of the results that may be expected for the Company's fiscal year
ending December 31, 1996.
<TABLE>
<CAPTION>
TEN MONTHS TWELVE NINE MONTHS
YEAR ENDED ENDED MONTHS YEAR ENDED
FEBRUARY 28, DECEMBER 31,(1) ENDED ENDED SEPTEMBER 30,
------------------------ ---------------- DECEMBER 31, DECEMBER 31, ----------------
1992 1993 1994 1993 1994 1994(1) 1995(2) 1995 1996
------ ------- ------- ------- ------- ------------ ------------ ------- -------
(IN THOUSANDS IN U.S. DOLLARS, EXCEPT SHARE INFORMATION)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENTS OF OPERA-
TIONS:
Revenues:
Product sales.......... $1,376 $ 4,215 $ 6,244 $ 4,435 $ 8,005 $ 9,813 $20,890 $13,597 $25,851
License revenue........ 2,000 -- 1,900 1,900 700 700 400 400 --
Contract revenue....... -- -- -- -- -- -- -- -- 1,767
------ ------- ------- ------- ------- ------- ------- ------- -------
Total revenue.......... 3,376 4,215 8,144 6,335 8,705 10,513 21,290 13,997 27,618
Costs and expenses:
Costs of goods sold.... 763 2,442 4,259 3,218 5,404 6,444 11,144 7,301 12,991
Research and
development........... 1,205 2,218 2,812 2,186 3,584 4,210 4,567 3,195 5,449
Selling, general and
administrative........ 1,083 1,806 2,224 1,688 3,382 3,917 5,943 4,273 7,125
------ ------- ------- ------- ------- ------- ------- ------- -------
Total costs and
expenses.............. 3,051 6,466 9,295 7,092 12,370 14,571 21,654 14,769 25,566
------ ------- ------- ------- ------- ------- ------- ------- -------
Income (loss) before
interest and income tax
provision.............. 325 (2,251) (1,151) (757) (3,665) (4,058) (364) (772) 2,053
Other:
Interest expense....... (22) (94) (227) (213) (146) (159) (294) (257) (119)
Interest income........ 21 26 32 15 125 143 777 224 1,205
------ ------- ------- ------- ------- ------- ------- ------- -------
Income (loss) before
income tax provision... 324 (2,319) (1,346) (955) (3,686) (4,074) 119 (805) 3,139
Income tax provision.... 196 -- 51 51 54 54 1 1 17
------ ------- ------- ------- ------- ------- ------- ------- -------
Net income (loss)....... $ 128 $(2,319) $(1,397) $(1,006) $(3,740) $(4,128) $ 118 $ (806) $ 3,122
====== ======= ======= ======= ======= ======= ======= ======= =======
Net income (loss) per
share (3).............. $ (0.75) $ (0.82) $ 0.02 $ (0.15) $ 0.34
------- ------- ------- ------- -------
Number of shares used in
per share computation
(3).................... 5,013 5,013 6,593 5,495 9,121
======= ======= ======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
FEBRUARY 28,
--------------------- DECEMBER 31, DECEMBER 31, SEPTEMBER 30,
1992 1993 1994 1994 1995(2) 1996
------ ------ ------- ------------ ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital......... $1,205 $ 609 $ 5,926 $ 6,171 $49,037 $44,118
Total assets............ 3,145 5,032 12,080 16,631 59,293 70,155
Long-term debt (capital
lease obligations),
less current portion... 119 387 145 733 686 336
Redeemable convertible
preferred stock........ -- 1,250 8,705 14,205 -- --
Shareholders' equity
(deficit), excluding
redeemable convertible
preferred stock........ 1,901 820 (646) (4,419) 53,413 56,668
</TABLE>
- -------
(1) During 1994, PMT changed its fiscal year end from the last day of February
to December 31. Information for the twelve months ended December 31, 1994
(unaudited) is provided for comparison to the information for the year
ended December 31, 1995. Information for the ten months ended December 31,
1993 (unaudited) is provided for comparison to the information for the ten
months ended December 31, 1994.
(2) On August 29, 1995, PMT completed its initial public offering, resulting
in approximately $40,093,235 of net proceeds to PMT. The funds were used
to cover PMT's working capital needs, its investment in evaluation systems
and capital expenditures, and to continue to expand its research and
development and operational activities. The remaining funds were used to
finance the cash portion of the Acquisition and related transaction costs
and expenses.
(3) See Note 1 of Notes to Consolidated Financial Statements in the Proxy
Statement for an explanation of the method used to determine the number of
shares used to compute per share amounts.
21
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF PMT
The following discussion should be read in conjunction with the section
entitled "Selected Consolidated Financial Data of PMT" above, with the
unaudited condensed consolidated financial statements of PMT included
elsewhere in this Prospectus and with the consolidated financial statements of
PMT and noted thereto included in the Proxy Statement.
COMPARISON OF THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1996 TO THE THREE
AND NINE MONTHS ENDED SEPTEMBER 30, 1995
OVERVIEW
During the third quarter of fiscal 1996, the Company reported product sales
and net income of $7.9 million and $0.5 million, respectively.
RESULTS OF OPERATIONS
The following table sets forth the statement of operations data of the
Company expressed as a percentage of revenues for the period indicated.
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
--------------------------- ---------------------------
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
1996 1995 1996 1995
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Revenues................ 100.0% 100.0% 100.0% 100.0 %
Cost of sales........... 43.8 54.6 47.0 52.2
----- ----- ----- -----
Gross profit............ 56.2 45.4 53.0 47.8
Operating expenses:
Research and
development............ 22.6 17.7 19.7 22.8
Selling, general and
administrative......... 31.2 23.6 25.8 30.5
----- ----- ----- -----
Total operating
expenses............... 53.8 41.3 45.5 53.3
----- ----- ----- -----
Income (loss) from
operations............. 2.4 4.1 7.5 (5.5)
Interest income
(expense), net......... 3.3 1.7 3.9 (0.2)
----- ----- ----- -----
Income (loss) before
income tax provision... 5.7 5.8 11.4 (5.7)
Income tax provision.... -- -- 0.1 --
----- ----- ----- -----
Net income (loss)....... 5.7% 5.8% 11.3% (5.7)%
----- ----- ----- -----
</TABLE>
Revenues
Product Sales. Product sales for the third quarter of fiscal 1996 increased
22% to $7.9 million compared to $6.5 million for the third quarter of fiscal
1995. Product sales increased as a result of the shipment of two of the
Company's PINNACLE 8000R(TM) plasma processing systems, five process modules
and four MORI sources. Product sales for the nine month period ending
September 30, 1996 increased 90% to $25.9 million from $13.6 million for the
nine month period ending September 30, 1995. Product sales increased as a
result of the shipment of one PINNACLE 8000(R) and ten PINNACLE 8000R(TM)
systems, six process modules and eight MORI sources for the nine months ended
September 30, 1996 as compared to five PINNACLE 8000(R) systems, four process
modules and sixteen MORI sources shipped in the nine months ended September
30, 1995. Notwithstanding the quarter-to-quarter and period-to-period
increases noted above, product sales for the third quarter of 1996 decreased
from $10.2 million, or 22.5%, as compared to product sales for the second
quarter of 1996. Management believes that this decrease in product sales is
primarily attributable to the current downturn in the semiconductor industry,
which has adversely affected the semiconductor equipment manufacturing
industry.
22
<PAGE>
International sales, which are predominately to customers based in Japan and
Korea, accounted for 94% and 91% of product sales for the third quarter of
fiscal years 1996 and 1995, respectively. International product sales
accounted for 82% and 54% of product sales for the nine months ending
September 30, 1996 and 1995, respectively.
License Revenue. The Company received no license revenues for the third
quarter or nine month period of fiscal 1996, compared to $0 and $400,000 for
the third quarter and the nine month period, respectively, of fiscal 1995,
because all of the past license agreements the Company had entered into were
fully paid prior to 1996. The Company does not anticipate the receipt of any
additional license revenues in the next twelve months. However, the Company
may enter into additional license agreements as it deems appropriate in order
to broaden the applications of its MORI(TM) technology, or to improve the
Company's market penetration.
Contract Revenue. The Company received contract revenues for the third
quarter and nine month period of fiscal 1996 of $918,449 and $1,767,127,
respectively, as compared to no contract revenue for the third quarter and
nine month period of fiscal 1995. This increase was due to the March 1996
agreement between PMT and PMT CVD Partners, L.P. See Note C to Notes to
Unaudited Condensed Consolidated Financial Statements included elsewhere in
this Prospectus.
Gross Margin on Product Sales
The Company's gross margin on product sales for the third quarter of fiscal
1996 increased to 51% as compared to 45% for the third quarter of fiscal 1995,
and for the nine months ended September 30, 1996 gross margin on product sales
increased to 50% in comparison to 46% for the nine months ended September 30,
1995. The improved margin for each such comparable period is attributable to
the higher sales volume which resulted in increased production efficiencies
and higher average selling prices. Notwithstanding the period-to-period
increases in gross margins referenced above, management believes that
decreased revenues attendant to the current downturn in the semiconductor
equipment manufacturing industry, together with pricing pressure attendant to
PMT's shipment of products in the current and future quarters, could result in
lower gross and operating margins in such future periods.
Research and Development
Research and development expenses for the third quarter of fiscal 1996 were
$2.0 million, or 23% of revenues, compared to $1.2 million, or 18% of
revenues, for the third quarter of fiscal 1995. For the nine months ended
September 30, 1996, research and development expenses were $5.4 million, or
20% of revenues, as compared to $3.2 million, or 23% of revenues, for the nine
months ended September 30, 1995. The dollar increases and, for the third
quarter of fiscal 1996, the increase as a percentage of revenues, are
attributable principally to the Company's continued investment in the
development of new processes in further advancing its proprietary plasma
source technology. In addition, expenses include costs incurred associated
with the contract revenue from PMT CVD Partners, L.P. See Note C of Notes to
Unaudited Condensed Consolidated Financial Statements included elsewhere in
this Prospectus.
Selling, General and Administrative Expenses
Selling, general and administrative expenses for the third quarter of fiscal
1996 were $2.8 million, or 31% of revenues, compared to $1.5 million, or 24%
of revenues, for the third quarter of fiscal 1995. For the nine months ended
September 30, 1996, selling, general and administrative expenses were $7.1
million, or 26% of net revenues, as compared to $4.3 million, or 31% of
revenues, for the nine months ended September 30, 1995. The increased expense
was due primarily to the addition of employees in both the sales and support
departments to accommodate the increased sales volume.
23
<PAGE>
Income Tax Provision
The Company paid a nominal amount of Federal and State income taxes for the
first nine months of fiscal 1996. In addition, a nominal amount of income tax
was paid by the Company's Korean subsidiary. The Company paid no income tax
for the first nine months of fiscal 1995 due to the Company's ability to
utilize prior net operating loss and credit carryforwards that can be applied
against future income but is subject to an annual limitation due to the
ownership change limitations provided by the Internal Revenue Code of 1986 and
similar state provisions. The provision for income taxes at September 30, 1996
differs from the statutory federal rate of 35% due to the reduction of the
valuation allowance attributed to the utilization of the net operating loss
carryforwards.
LIQUIDITY AND CAPITAL RESOURCES
At September 30, 1996, PMT had $20.0 million in cash, cash equivalents and
short-term investments, compared to $38.8 million at December 31, 1995. This
$18.8 million decrease was primarily due to the increases in inventories and
accounts receivable related to the sales volume increase. In addition, $6.5
million was invested in capital equipment as the Company used funds to expand
its applications laboratory to support process development and customer
demonstrations. This was offset by net cash resulting from higher trade
payables related to the purchase of inventory and capital equipment.
In March 1996, PMT sponsored a partnership with certain third-party
investors to fund research and development costs and expenses relating to CVD
technology and applications. Third-party investors invested an aggregate of
approximately $5,350,000 in the partnership, which aggregate amount is
available to fund such costs and expenses. At September 30, 1996 approximately
$3,148,868 remained available for future funding of such research and
development. See Note C to Notes to Unaudited Condensed Consolidated Financial
Statements included elsewhere in this Prospectus.
On October 7, 1996 PMT completed the Original Offering of the Convertible
Notes. On November 15, 1996 PMT consummated the Acquisition of Electrotech for
an aggregate consideration of $145.7 million consisting of $75 million in cash
and 5.6 million shares of newly-issued Common Stock having a fair market value
of $70.7 million, based on the $12.625 per share closing price of the Common
Stock on July 17, 1996, the last day prior to the public announcement of the
Acquisition. The net proceeds from the sale of the Convertible Notes in the
Original Offering were used by PMT to substantially fund the cash needed with
respect to the Acquisition.
On November 15, 1996 the Company entered into a senior secured credit
facility with certain domestic and U.K. lenders (the "Working Capital
Facility") that permits the Company and its subsidiaries, including
Electrotech, to borrow an aggregate of up to $35 million, subject to borrowing
base limitations, based upon eligible accounts receivable. As of November 15,
1996 the Working Capital Facility would have permitted aggregate borrowings of
approximately $21.6 million.
Through the nine month period ended September 30, 1996, PMT made capital
expenditures of $6.5 million. The Company anticipates additional capital
expenditures of approximately $3.3 million during the fiscal quarter ending
December 31, 1996. This is expected to include investments in demonstration
and test equipment, information systems, new facilities and other capital
items that should enable the Company to expand its ability to support and
develop new products and services. In addition, the Company expects to
increase its investment in inventory of evaluation systems at customer sites.
The Company believes that cash provided or available from the Convertible
Notes, the Working Capital Facility and other sources of capital available to
the Company, including cash on hand, will be sufficient to support the
Company's liquidity needs over the next 12 months.
24
<PAGE>
SELECTED COMBINED FINANCIAL DATA OF ELECTROTECH
The selected combined financial data presented below for the fiscal year
ended June 30, 1993, and as of and for each of the three fiscal years ended
June 30, 1994, 1995, and 1996 are derived from audited combined financial
statements of Electrotech, which have been audited by Ernst & Young Chartered
Accountants, independent auditors, and, except with respect to the June 30,
1993 financial statements, are contained in the Proxy Statement. The selected
combined financial data presented below as of June 30, 1993 and as of and for
the year ended June 30, 1992 are derived from unaudited combined financial
statements of Electrotech, which are not contained in the Proxy Statement. The
combined financial statements below are presented in British pounds sterling.
For reference purpose, the Noon Buying Rate was U.S.$1.65 = (Pounds)1 on
December 12, 1996. All of the selected combined financial data below is
prepared under accounting principles generally accepted in the United Kingdom
("UK GAAP"), which differ in certain respects from United States generally
accepted accounting principles ("US GAAP"). The selected combined financial
data set forth below is qualified in its entirety by, and should be read in
conjunction with, Electrotech's unaudited condensed combined financial
statements included elsewhere in this Prospectus and with Electrotech's
combined financial statements and related notes thereto and "Management's
Discussion and Analysis of Financial Condition and Results of Operations of
Electrotech," which are included in the Proxy Statement.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED JUNE 30, SEPTEMBER 30,
------------------------------------------------------------------------------ -----------------------------
1992 1993 1994 1995 1996 1995 1996
-------------- -------------- -------------- -------------- -------------- ------------- --------------
(IN THOUSANDS OF BRITISH POUNDS)
<S> <C> <C> <C> <C> <C> <C> <C>
COMBINED PROFIT
AND LOSS ACCOUNT
DATA:
Sales............ (Pounds)13,919 (Pounds)16,547 (Pounds)23,807 (Pounds)34,496 (Pounds)49,012 (Pounds)7,761 (Pounds)10,197
Cost of sales.... 6,790 7,967 11,496 17,014 23,406 3,760 5,218
-------------- -------------- -------------- -------------- -------------- ------------- --------------
Gross profit..... 7,129 8,580 12,311 17,482 25,606 4,001 4,979
Operating
expenses:
Research and
development.... 2,207 2,365 3,332 4,421 6,674 1,239 1,702
Administrative
expenses....... 6,764 4,659 7,161 8,615 8,295 1,861 2,321
-------------- -------------- -------------- -------------- -------------- ------------- --------------
Total operating
expenses........ 8,971 7,024 10,493 13,036 14,969 3,100 4,023
-------------- -------------- -------------- -------------- -------------- ------------- --------------
Operating profit
(loss).......... (1,842) 1,556 1,818 4,446 10,637 901 956
Profit on
disposal of
businesses(1)... 4,652 -- -- 5,040 -- -- --
-------------- -------------- -------------- -------------- -------------- ------------- --------------
Profit on
ordinary
activities
before interest. 2,810 1,556 1,818 9,486 10,637 901 956
Interest payable,
net............. (376) (95) (255) (438) (609) (146) (211)
-------------- -------------- -------------- -------------- -------------- ------------- --------------
Profit on
ordinary
activities
before taxation. 2,434 1,461 1,563 9,048 10,028 755 745
Tax charge on
profit on
ordinary
activities...... 1,110 627 574 3,530 3,721 344 332
-------------- -------------- -------------- -------------- -------------- ------------- --------------
Profit for the
period.......... (Pounds) 1,324 (Pounds) 834 (Pounds) 989 (Pounds) 5,518 (Pounds) 6,307 (Pounds) 411 (Pounds) 413
============== ============== ============== ============== ============== ============= ==============
</TABLE>
- --------
(1) Represents the profits, before taxes, recognized on the sales of Surface
Technology Systems Limited during the fiscal year ended June 30, 1995 and
the sale of the business of Plasma Products Limited during the fiscal year
ended June 30, 1992.
<TABLE>
<CAPTION>
AS OF
AS OF JUNE 30, SEPTEMBER 30,
-------------------------------------------------------------------------- --------------
1992 1993 1994 1995 1996 1996
-------------- -------------- -------------- -------------- -------------- --------------
(IN THOUSANDS OF BRITISH POUNDS)
<S> <C> <C> <C> <C> <C> <C>
COMBINED BALANCE SHEET
DATA:
Working capital......... (Pounds) 8,173 (Pounds)10,075 (Pounds)10,547 (Pounds)14,035 (Pounds)16,422 (Pounds)15,847
Total assets............ 18,615 22,093 28,005 38,339 51,030 47,427
Long-term obligations... 1,097 2,559 1,932 1,339 948 977
Total shareholders'
equity................. 12,884 13,836 14,844 20,401 26,621 27,013
</TABLE>
25
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS OF ELECTROTECH
The following discussion should be read in conjunction with the section
entitled "Selected Combined Financial Data of Electrotech" above, with the
unaudited condensed combined financial statements of Electrotech included
elsewhere in this Prospectus and with the combined financial statements of
Electrotech and notes thereto included in the Proxy Statement. The combined
financial statements of Electrotech combine the consolidated financial
statements of each of ET and ETE, which are subject to common control. The
financial information for Electrotech has been prepared in accordance with UK
GAAP and in British pounds. See the notes to the unaudited condensed combined
financial statements of Electrotech contained elsewhere in this Prospectus for
a reconciliation to US GAAP for selected financial information.
COMPARISON OF THE THREE MONTHS ENDED SEPTEMBER 30, 1996 TO THE THREE MONTHS
ENDED SEPTEMBER 30, 1995
RESULTS OF OPERATIONS
The following table sets forth for the periods indicated the percentage of
total revenues represented by certain line items in the combined profit and
loss accounts related to the operations of Electrotech:
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
SEPTEMBER 30,
--------------
1995 1996
------ ------
<S> <C> <C>
Sales........................................................... 100.0% 100.0%
Cost of sales................................................... 48.4 51.2
------ ------
Gross margin.................................................... 51.6 48.8
Research and development expenses............................... 16.0 16.7
Administrative expenses......................................... 24.0 22.8
------ ------
Total operating expenses........................................ 40.0 39.5
------ ------
Profit on ordinary activities before interest................... 11.6 9.3
Interest payable, net........................................... 1.9 2.0
------ ------
Profit on ordinary activities before taxation................... 9.7 7.3
Tax charge on profit on ordinary activities..................... 4.4 3.3
------ ------
Profit for the period........................................... 5.3% 4.0%
====== ======
</TABLE>
REVENUES
Total revenues were (Pounds)10.2 million for the three months ended
September 30, 1996 compared to (Pounds)7.8 million for the three months ended
September 30, 1995, an increase of 30.8%. Notwithstanding such period-to-
period increase, revenues for the quarter ended September 30, 1996 decreased
from (Pounds)15.2 million, or 33%, as compared to revenues for the quarter
ended June 30, 1996.
The period-to-period increase in revenues is primarily due to increased
sales of PVD products (Forcefill(TM) and Sigma). Units shipped increased to
four Sigma systems and two Forcefill(TM) modules in the three months ended
September 30, 1996, compared to two Sigma systems and one Forcefill(TM) module
in the three months ended September 30, 1995. Revenues from these products
were (Pounds)7.8 million, representing 76.6% of total revenues in the three
months ended September 30, 1996 compared to revenues of (Pounds)2.9 million,
representing 37.1% of total revenues in the three months ended
26
<PAGE>
September 30, 1995. Revenues from the sales of PVD products increased by 169%
between the two quarters. The increase in revenues from the sale of Sigma
products from quarter to quarter was primarily due to higher unit selling
prices and a reduction in the number of sales made through distributors.
There were no sales of CVD products (Flowfill(TM), Delta and ND) during the
quarter ended September 30, 1996. During the quarter ended September 30, 1995,
there were sales of one Flowfill(TM), one Delta and one ND system, resulting
in total revenues of (Pounds)1.4 million.
Revenues from sales of Omega(TM) etch products were (Pounds)600,000 for the
three months ended September 30, 1996 and (Pounds)1.5 million for the three
months ended September 30, 1995, a decrease of 60% between the two periods.
During the three months ended September 30, 1996, two Omega(TM) etch systems
were shipped, compared to three Omega(TM) systems, during the three months
ended September 30, 1995.
GROSS MARGIN
Electrotech's gross margin was 48.8% in the three months ended September 30,
1996 and 51.6% in the three months ended September 30, 1995. The decrease in
gross margin is primarily due to the effect of exchange rate fluctuations on
conversion to pounds sterling of revenues earned in other currencies.
RESEARCH AND DEVELOPMENT EXPENSES
Research and development expenses include costs associated with the
definition, design and development of new products. Research and development
expenses were (Pounds)1.7 million for the three months ended September 30,
1996, compared to (Pounds)1.2 million for the three months ended September 30,
1995, an increase of 41.7%. This increase is primarily due to increased
development costs on Forcefill(TM) and Flowfill(TM) technologies.
Electrotech considers its research and development activities to be crucial
to its future success and, therefore, expects its research and development
expenditures to continue to rise in monetary terms, although not necessarily
as a percentage of sales.
ADMINISTRATIVE EXPENSES
Administrative expenses consist of personnel costs and overhead for
administration, finance, sales and marketing, information systems, human
resources and general management. Administrative expenses were
(Pounds)2.3 million during the three months ended September 30, 1996 compared
to (Pounds)1.9 million during the three months ended September 30, 1995, an
increase of 21.0% over such periods. Significant variations in expenditure
between the two periods were in payroll costs, which increased to
(Pounds)945,000 from (Pounds)827,000, an increase of 14.3%, and automobile and
travel costs which increased to (Pounds)580,000 from (Pounds)365,000, an
increase of 58.9%. Included in administrative expenses for the three months
ended September 30, 1996 were currency exchange gains of (Pounds)303,000
compared to currency exchange gains of (Pounds)150,000 for the three months
ended September 30, 1995.
In January 1996, Electrotech commenced partial occupation of new leased
premises in Newport, South Wales. Electrotech anticipates that the property
will be fully occupied by early 1997. Following full occupation of the
property the rental charge and depreciation of improvements will increase
administrative expenses by approximately (Pounds)1.2 million per annum.
Management anticipates that general and administrative expenses will continue
to increase in support of planned business expansion in markets outside the
United Kingdom.
27
<PAGE>
INTEREST EXPENSE, NET
Net interest expense was (Pounds)211,000 in the three months ended September
30, 1996 compared to (Pounds)146,000 in the three months ended September 30,
1995, an increase of 44.5% over such periods. The increase was primarily due
to increased working capital requirements necessary to fund the expansion of
the business.
INCOME TAX EXPENSE
Income tax expense was (Pounds)332,000 in the three months ended September
30, 1996 compared to (Pounds)344,000 in the three months ended September 30,
1995, a decrease of 3.5% over such periods. The effective tax rates were 44.6%
and 45.5%, respectively. The high effective tax rate for both periods was
primarily due to a larger portion of earnings arising in countries with a
higher effective tax rate than the U.K.
WORLDWIDE TAX EXPENSE
ET and ETE each operate as a holding company. ET and its subsidiaries
operate in the United Kingdom. ETE has operating subsidiaries in several
countries, and each subsidiary is taxed based on the laws of the jurisdiction
in which it operates. Because taxes are incurred at the subsidiary level, and
one subsidiary's tax losses cannot be used to offset the taxable income of
subsidiaries in other jurisdictions, ETE's consolidated effective tax rate may
increase to the extent it reports tax losses in some subsidiaries and taxable
income in others. The subsidiaries are subject to taxation in countries where
they operate, and such operations generally are taxed at rates similar to or
higher than tax rates in the United Kingdom. The payment of dividends or
distributions by the subsidiaries to ETE would be subject to withholding taxes
in the country of domicile and may be mitigated under the terms of relevant
double tax treaties with the United Kingdom.
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by operating activities was (Pounds)2.3 million for the
three months ended September 30, 1996 against a net inflow from operating
activities of (Pounds)147,000 in the three months ended September 30, 1995.
The net cash inflows from operating activities reflect movements in the
working capital of Electrotech.
Net cash used in investing activities was (Pounds)1.1 million in the three
months ended September 30, 1996 and (Pounds)1.2 million in the three months
ended September 30, 1995. In both periods, this was primarily due to capital
expenditure at the new premises at Newport, South Wales.
Due to recent growth in Electrotech's sales and its development of new
products, Electrotech's existing facilities have reached their capacity limit.
Electrotech has leased a 102,000 square foot facility into which it moved
certain of its sales, customer support and financing operations in January
1996. Approximately 20,000 square feet of the facility are currently in use,
and the remaining space is being built out with a view to full occupancy in
early 1997. The rental of the new premises is (Pounds)500,000 per annum.
28
<PAGE>
PRO FORMA FINANCIAL INFORMATION
The unaudited pro forma financial information presented below should be read
in conjunction with the notes hereto, as set forth below, and the separate
financial statements of PMT and Electrotech presented elsewhere in this
Prospectus and in the Proxy Statement.
UNAUDITED PRO FORMA BALANCE SHEET OF PMT AND ELECTROTECH
COMBINED AS OF SEPTEMBER 30, 1996
(IN THOUSANDS OF U.S. DOLLARS)
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
PMT ELECTROTECH ADJUSTMENTS COMBINED
------- ----------- ----------- ---------
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents......... $ 7,450 $ 2,622 $ 86,250 $ 10,622
(85,700)
Short-term investments............ 12,559 -- -- 12,559
Accounts receivable............... 16,519 21,428 -- 37,947
Inventories....................... 15,766 26,060 -- 41,826
Demonstration inventory........... 4,478 -- -- 4,478
Other current assets.............. 495 4,360 -- 4,855
------- ------- -------- --------
Total current assets............ 57,267 54,470 550 112,287
Property, equipment and leasehold
improvements--net.................. 9,924 15,910 (1,675) 24,159
Developed technology................ -- -- 40,203 40,203
In-process technology............... -- -- 89,056 --
(89,056)
Assembled workforce................. -- -- 5,862 5,862
Covenant not to compete............. -- -- 424 424
Financing cost...................... -- -- 3,200 3,200
Other assets........................ 2,963 25 (2,281) 707
------- ------- -------- --------
Total assets.................... $70,154 $70,405 $ 46,283 $186,842
======= ======= ======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Revolving line of credit and bank
overdrafts....................... $ -- $10,023 $ -- $ 10,023
Accounts payable and accrued
expenses......................... 11,566 6,465 (481) 17,550
Warranty expense.................. 815 849 -- 1,664
Customer deposits................. 0 1,925 -- 1,925
Accrued salaries and related
liabilities...................... 287 538 -- 825
Current portion of capital lease
obligations...................... 482 970 -- 1,452
Other accrued liabilities......... -- 5,839 -- 5,839
Income taxes payable.............. -- 5,563 -- 5,563
------- ------- -------- --------
Total current liabilities....... 13,150 32,172 (481) 44,841
Long-term debt and capital lease ob-
ligations.......................... 336 1,524 1,860
Convertible subordinated notes...... -- -- 86,250 86,250
Deferred income taxes............... -- 956 14,623 15,579
------- ------- -------- --------
Total liabilities............... 13,486 34,652 100,392 148,530
Shareholders' equity:
Common stock:
PMT............................... 61,108 -- 70,700 131,808
Electrotech....................... -- 17 (17) --
Retained earnings (accumulated defi- (4,440) 35,736 (35,736) (93,496)
cit)...............................
(89,056)
------- ------- -------- --------
Total shareholders' equity...... 56,668 35,753 (54,109) 38,312
------- ------- -------- --------
Total liabilities and share-
holders' equity ............. $70,154 $70,405 $ 46,283 $186,842
======= ======= ======== ========
</TABLE>
29
<PAGE>
UNAUDITED PRO FORMA STATEMENT OF OPERATIONS OF
PMT AND ELECTROTECH
FOR THE TWELVE MONTH PERIOD ENDED DECEMBER 31, 1995
(IN THOUSANDS OF U.S. DOLLARS, EXCEPT SHARE INFORMATION)
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
PMT ELECTROTECH ADJUSTMENTS COMBINED
------- ----------- ----------- ---------
<S> <C> <C> <C> <C>
Revenues:
Sales.............................. $20,890 $54,383 $ -- $75,273
License revenue.................... 400 -- -- 400
------- ------- -------- -------
Total revenues.................... 21,290 54,383 -- 75,673
Operating costs and expenses:
Costs of goods sold................ 11,144 26,063 -- 37,207
Research and development........... 4,567 8,402 -- 12,969
Sales, general and administrative.. 5,944 12,194 -- 18,138
Amortization of intangibles........ -- -- 4,755 4,755
------- ------- -------- -------
Total............................. 21,655 46,659 4,755 73,069
------- ------- -------- -------
Operating income (loss)............. (365) 7,724 (4,755) 2,604
Other income and expense:
Interest income.................... 777 294 (50) 1,021
Interest expense................... (293) (959) (6,785) (8,037)
Profit on disposal of business..... -- 7,812 -- 7,812
------- ------- -------- -------
484 7,147 (6,835) 796
------- ------- -------- -------
Income (loss) before income tax
provision.......................... 119 14,871 (11,590) 3,400
Income tax provision................ 1 5,966 (1,522) 4,445
------- ------- -------- -------
Net income (loss)................... $ 118 $ 8,905 $(10,068) $(1,045)
======= ======= ======== =======
Net income (loss) per PMT share..... $ 0.02 $ (0.09)
======= =======
Number of shares outstanding, in
thousands.......................... 6,593 5,600 12,193
</TABLE>
30
<PAGE>
UNAUDITED PRO FORMA STATEMENT OF OPERATIONS OF
PMT AND ELECTROTECH
FOR THE NINE MONTH PERIOD ENDED SEPTEMBER 30, 1996
(IN THOUSANDS OF U.S. DOLLARS, EXCEPT SHARE INFORMATION)
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
PMT ELECTROTECH ADJUSTMENTS COMBINED
------- ----------- ----------- ---------
<S> <C> <C> <C> <C>
Revenues:
Product sales..................... $25,851 $63,255 $ -- $89,106
Contract revenue.................. 1,767 -- -- 1,767
------- ------- ------- -------
27,618 63,255 -- 90,873
Operating costs and expenses:
Cost of sales..................... 12,991 30,596 -- 43,587
Research and development.......... 5,449 8,315 -- 13,764
Sales, general and administrative. 7,125 10,860 -- 17,985
Amortization of intangibles....... -- -- 3,566 3,566
------- ------- ------- -------
Total........................... 25,565 49,771 3,566 78,902
------- ------- ------- -------
Operating income.................... 2,053 13,484 (3,566) 11,971
Other income and expense:
Interest income................... 1,205 421 (38) 1,588
Interest expense.................. (119) (1,378) (5,089) (6,586)
------- ------- ------- -------
1,086 (957) (5,127) (4,998)
Income before income taxes.......... 3,139 12,527 (8,693) 6,973
Provision for income taxes.......... 17 4,792 (1,142) 3,667
------- ------- ------- -------
Net income.......................... $ 3,122 $ 7,735 $(7,551) $ 3,306
======= ======= ======= =======
Net income per PMT share............ $ 0.34 $ 0.22
======= =======
Number of shares outstanding, in
thousands.......................... 9,121 5,600 14,721
</TABLE>
The accompanying unaudited pro forma financial statements include
adjustments for the allocation of the purchase price to the underlying assets
and liabilities as discussed below, the issuance of Common Stock, the
elimination of Electrotech's equity in combination of the two companies,
depreciation and amortization of the amounts allocated to various assets and
liabilities acquired and a reduction of interest income and increase in
interest expense associated with the reduction of cash and the issuance of the
Convertible Notes in connection with the Acquisition.
The unaudited pro forma financial information presented above combines the
September 30, 1996 balance sheets of PMT and Electrotech and the statements of
operations for the twelve month period ended December 31, 1995 and the nine
month period ended September 30, 1996 on a pro forma basis. This pro forma
combination gives effect to the following assumptions:
. That the Acquisition occurred on September 30, 1996 for the unaudited pro
forma balance sheet.
. That the Acquisition occurred as of the beginning of each statement of
operations presented with the allocation of the purchase price estimated
based on the September 30, 1996 unaudited combined balance sheet of
Electrotech.
. That the Acquisition would be accounted for as a purchase.
. That the purchase price paid by PMT to acquire Electrotech would be
approximately $145.7 million, consisting of $75 million in cash, 5.6
million shares of Common Stock valued at $12.625 per share, and that the
estimated transaction and financing costs would be $9.3 million and
$3.2 million, respectively. The valuation of Common Stock is based on the
$12.625 per share closing price of Common Stock on July 17, 1996, the
last day prior to the public announcement of the parties' agreement to
the terms of the Acquisition.
31
<PAGE>
. That cash required to consummate the Acquisition would be financed
through the issuance of $86.25 million of Convertible Notes, which will
bear interest at 7.125% per annum.
. That the excess of the purchase price including the estimated transaction
cost, over the net shareholders' equity of Electrotech would be allocated
to the following assets and liabilities and that the amounts allocated
would be amortized over the following time periods:
<TABLE>
<CAPTION>
AMOUNT
ITEM ($000) AMORTIZATION PERIOD
---- ------- -------------------
<S> <C> <C>
Fixed assets
. Land and buildings.......... $(1,675) Twelve years for buildings
Intangible assets
. Developed technology........ 40,203 Ten years
. Assembled workforce......... 5,862 Eight years
. In-process technology....... 89,056 100% immediately following
the Acquisition
. Covenant not to compete..... 424 Three years
Deferred tax liability......... 14,623 As utilized based on the above lives
</TABLE>
. The preliminary allocation of the purchase price among identifiable
tangible and intangible assets and liabilities, as reflected in the
accompanying pro forma financial statements, is based on an analysis of
the estimated fair value of those assets and liabilities as of November
15, 1996, the closing date of the Acquisition, and the net shareholders'
equity of Electrotech as of September 30, 1996. The allocation of the
purchase price is preliminary and the actual amounts to be recorded could
change.
Purchased in-process technology was analyzed through interviews and
analysis of data concerning each of Electrotech's projects in development
(i.e. Forcefill(TM) and Flowfill(TM)). Expected future cash flows of the
developmental projects were discounted to present value taking into
account risks associated with the inherent difficulties and uncertainties
in completing the projects, and thereby achieving technological
feasibility, and the risks related to potential changes in future target
markets. PMT's expected post-acquisition business strategies were
considered as they relate to Electrotech's current products and projects
in development. Considerable efforts are being applied by Electrotech to
its Forcefill(TM) and Flowfill(TM) projects to attain product
functionality and reliability levels acceptable to their intended target
market.
The write-off of purchased in-process technology is not reflected in the
accompanying unaudited statements of operations as it is a non-recurring
charge. It will be included, however, in the actual consolidated statement
of operations of PMT for the fourth fiscal quarter of 1996, the period in
which the Acquisition was consummated.
Using the methodology that was used for in-process technology, expected
future cash flows of the developed technology were discounted taking into
account risks related to the characteristics and application of each
product, existing and future markets, and assessments of the life cycle
stage of each product. This analysis resulted in an estimated value of
$40.2 million for developed technology, which has reached technological
feasibility and therefore would be capitalized.
. For United Kingdom income tax purposes, the tax basis of the underlying
assets and liabilities is not adjusted. Accordingly, a deferred tax
liability has been included in the purchase price allocation which
represents the tax effect of the difference in the basis for financial
reporting and tax purposes of the assets, except goodwill, and
liabilities acquired, after considering the effects of the purchase price
allocation. The portion of the tax credit associated with the
amortization of the excess of the recorded basis of the assets is
reflected as a tax benefit in the accompanying pro forma statements of
operations.
32
<PAGE>
. The number of shares used in the computation of earnings per share has
been adjusted to reflect the issuance of 5,600,000 shares of Common Stock
in connection with the Acquisition as if it had occurred at the beginning
of the year presented. Fully dilutive earnings per share data has not
been presented because such data would be anti-dilutive. See note 1 to
the audited Financial Statements of PMT for the year ended December 31,
1995 in the Proxy Statement.
It should be noted that the unaudited pro forma financial information:
. Uses a pro forma allocation of the purchase price paid for Electrotech as
shown above; the allocation of the actual purchase price is preliminary
and subject to refinement pursuant to completion and updating of
valuation studies at the time of closing.
. Does not give effect to any costs of combining the companies or to any
efficiencies in operations that could be achieved by combining the
companies.
. Does not purport to be indicative either of the results of operations
that would have occurred had the Acquisition been consummated at the
dates indicated, or of the future combined results of operations of the
companies.
. The financial data of PMT for the year ended December 31, 1995 used to
develop the unaudited pro forma combining statement of operations is
derived from the historical audited financial statements of PMT.
. All interim financial data of PMT and Electrotech, and the financial data
of Electrotech for the twelve month period ended December 31, 1995 used
to develop the unaudited pro forma combining balance sheet and statements
of operations is derived from historical unaudited financial statements
of PMT and Electrotech, but in the opinions of management of PMT and
Electrotech, respectively, reflect all adjustments necessary (consisting
only of normal recurring entries) for a fair presentation thereof. The
interim financial data and the financial data for the twelve month period
ended December 31, 1995 for Electrotech have been adjusted to conform
with U.S. generally accepted accounting principles and have been
converted to U.S. dollars using the following U.S. dollar conversion
rates per (Pounds)1 sterling: September 30, 1996--$1.56 and December 31,
1995--$1.55.
33
<PAGE>
DESCRIPTION OF CONVERTIBLE NOTES
GENERAL
The Convertible Notes were issued pursuant to an Indenture dated as of
October 7, 1996 (the "Indenture"), between the Company and U.S. Trust Company
of California, N.A., as trustee (the "Trustee"). The following summary of
certain provisions of the Convertible Notes, the Indenture and the
Registration Agreement does not purport to be complete and is qualified in its
entirety by reference to the Convertible Notes, the Indenture and the
Registration Agreement, respectively, including the definitions therein of
certain terms used in the following summary. The definitions of certain other
terms used in the following summary are set forth below under "--Certain
Definitions."
The Convertible Notes are unsecured general obligations of the Company,
subordinated in right of payment to all existing and future Senior Debt of the
Company to the extent set forth in the Indenture and limited to $86,250,000
aggregate principal amount. The Indenture does not limit the amount of other
Indebtedness or securities that may be issued by the Company or any of its
subsidiaries. The Indenture does not contain any financial covenants or
restrictions on the payment of dividends, the incurrence of Senior Debt or
issuance or repurchase of securities of the Company (other than the
Convertible Notes). The Indenture contains no covenants or other provisions to
afford protection to holders of Convertible Notes in the event of a highly
leveraged transaction or a change in control of the Company except to the
extent described under "Repurchase at the Option of Holders." The Convertible
Notes are also structurally subordinated to all existing and future
indebtedness and other liabilities of the Company's subsidiaries. As of
September 30, 1996, after giving effect to the sale of the Convertible Notes
sold in the Original Offering and the Acquisition, on a pro forma basis PMT
would have had $800,000 of Senior Debt and the Company's subsidiaries would
have had approximately $33.7 million of indebtedness that effectively would
have ranked senior in right of payment to the Convertible Notes. In addition,
as of December 13, 1996, the Company had in place the Working Capital
Facility, which indebtedness constitutes Designated Senior Debt. As of such
date, there were no borrowings under the Working Capital Facility.
The Convertible Notes have been approved for trading in the PORTAL Market.
PRINCIPAL, MATURITY AND INTEREST
The Convertible Notes bear interest from October 7, 1996 at the rate of 7
1/8% per annum and will mature on October 15, 2001.
Interest on the Convertible Notes is payable semiannually on April 15 and
October 15 of each year (each an "Interest Payment Date"), commencing on April
15, 1997, to holders of record at the close of business on April 1 or October
1 (each a "Regular Record Date") immediately preceding such Interest Payment
Date. Interest will be computed on the basis of a 360-day year comprised of
twelve 30-day months.
Interest on the Convertible Notes accrues from the most recent date to which
interest has been paid or, if no interest has been paid, from October 7, 1996.
The Convertible Notes are payable as to principal, liquidated damages or
premium, if any, and interest at the office or agency of the Company
maintained for such purpose within the City and State of New York or, at the
option of the Company, payment of interest may be made by check mailed to the
holders of the Convertible Notes at their respective addresses set forth in
the register of holders of Convertible Notes. Until otherwise designated by
the Company, the Company's office or agency in New York will be the office of
the Trustee maintained for such purposes. The Convertible Notes were issued in
registered form, without coupons, and in denominations of $1,000 and integral
multiples thereof.
34
<PAGE>
OPTIONAL REDEMPTION
The Convertible Notes are not subject to optional redemption prior to
October 15, 1999 and are redeemable on such date and thereafter at the option
of the Company, in whole or in part (in any integral multiple of $1,000), upon
not less than 15 days nor more than 60 days' prior notice by mail at the
following redemption prices (expressed as percentages of the principal
amount), in each case, together with accrued and unpaid interest to the
redemption date (subject to the right of holders of record on the relevant
record date to receive interest due on an Interest Payment Date). If redeemed
during the 12-month period beginning October 15 of the years indicated below,
such redemption price shall be as indicated:
<TABLE>
<CAPTION>
REDEMPTION
YEAR PRICE
---- ----------
<S> <C>
1999........................................................... 102.850%
2000........................................................... 101.425%
</TABLE>
On or after the redemption date, interest will cease to accrue on the
Convertible Notes, or portion thereof, called for redemption.
MANDATORY REDEMPTION
The Company is not required to make mandatory redemption or sinking fund
payments with respect to the Convertible Notes.
REPURCHASE AT THE OPTION OF HOLDERS
Upon the occurrence of a Designated Event, each holder of Convertible Notes
shall have the right to require the Company to repurchase all or any part
(equal to $1,000 or an integral multiple thereof) of such holder's Convertible
Notes pursuant to the offer described below (the "Designated Event Offer") at
a purchase price equal to 101% of the principal amount thereof, together with
accrued and unpaid interest thereon to the Designated Event Payment Date (the
"Designated Event Payment"). Within 30 days following any Designated Event,
the Company will mail a notice to each holder stating: (1) that the Designated
Event Offer is being made pursuant to the covenant entitled "Designated Event"
and that all Convertible Notes tendered will be accepted for payment; (2) the
purchase price, the length of time the Designated Event Offer will remain open
and the purchase date, which shall be no earlier than 30 days nor later than
40 days from the date such notice is mailed (the "Designated Event Payment
Date"); (3) that any Convertible Notes not tendered will continue to accrue
interest; (4) that, unless the Company defaults in the payment of the
Designated Event Payment, all Convertible Notes accepted for payment pursuant
to the Designated Event Offer shall cease to accrue interest on and after the
Designated Event Payment Date; (5) that holders electing to have any
Convertible Notes purchased pursuant to a Designated Event Offer will be
required to surrender the Convertible Notes, with the form entitled "Option of
Noteholder to Elect Purchase" on the reverse of the Convertible Notes
completed, to the Paying Agent at the address specified in the notice prior to
the close of business on the third Business Day preceding the Designated Event
Payment Date; (6) that holders will be entitled to withdraw their election if
the Paying Agent receives, not later than the close of business on the second
Business Day preceding the Designated Event Payment Date, a telegram, telex,
facsimile transmission or letter setting forth the name of the holder, the
principal amount of Convertible Notes delivered for purchase, and a statement
that such holder is withdrawing his or her election to have such Convertible
Notes purchased; and (7) that holders whose Convertible Notes are being
purchased only in part will be issued new Convertible Notes equal in principal
amount to the unpurchased portion of the Convertible Notes surrendered, which
unpurchased portion must be equal to $1,000 in principal amount or an integral
multiple thereof.
The Company will comply with the requirements of Rules 13e-4 and 14e-1 under
the Exchange Act and any other securities laws and regulations thereunder to
the extent such laws and regulations
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are applicable in connection with the repurchase of the Convertible Notes in
connection with a Designated Event.
On the Designated Event Payment Date, the Company will, to the extent
lawful, (1) accept for payment Convertible Notes or portions thereof tendered
pursuant to the Designated Event Offer, (2) deposit with the Paying Agent in
immediately available funds an amount equal to the Designated Event Payment in
respect of all Convertible Notes or portions thereof so tendered and
(3) deliver or cause to be delivered to the Trustee the Convertible Notes so
accepted together with an Officers' Certificate identifying the Notes or
portions thereof tendered to the Company. The Paying Agent will promptly mail
to each holder of Convertible Notes so accepted payment in an amount equal to
the purchase price for such Convertible Notes, and the Trustee will promptly
authenticate and mail (or cause to be transferred by book entry) to each
holder a new Convertible Note equal in principal amount to any unpurchased
portion of the Convertible Notes surrendered, if any, provided that each such
new certificate representing a Convertible Note shall be in a principal amount
of $1,000 or an integral multiple thereof. The Company will publicly announce
the results of the Designated Event Offer on or as soon as practicable after
the Designated Event Payment Date. There can be no assurance that the Company
will have the financial resources necessary to repurchase the Convertible
Notes in such circumstances.
Except as described above with respect to a Designated Event, the Indenture
does not contain any other provisions that permit the holders of the
Convertible Notes to require that the Company repurchase or redeem the
Convertible Notes in the event of a takeover, recapitalization or similar
restructuring. In addition, the foregoing provisions would not necessarily
afford holders of the Convertible Notes protection in the event of highly
leveraged or other transactions involving the Company that may adversely
affect holders. There are no restrictions in the Indenture on the creation of
Senior Debt (or any other indebtedness) and, under certain circumstances, the
incurrence of significant amounts of additional indebtedness could have an
adverse effect on the Company's ability to service its indebtedness, including
the Convertible Notes.
The Designated Event purchase feature of the Convertible Notes may in
certain circumstances make more difficult or discourage a merger,
consolidation or tender offer (even if such transaction is supported by the
Company's Board of Directors or is favorable to the shareholders), the
assumption of control by a holder of a large block of the Company's shares,
and the removal of incumbent management. The Designated Event purchase
feature, however, is not the result of management's knowledge of any specific
effort to accumulate the Company's stock or to obtain control of the Company
by means of a merger, tender offer, solicitation or otherwise, or part of a
plan by management to adopt a series of antitakeover provisions. Instead, the
Designated Event purchase feature is a result of negotiations between the
Company and the Initial Purchasers. Management has no current intention to
engage in a transaction involving a Designated Event, although it is possible
that the Company could decide to do so in the future. Subject to the
limitations on mergers, consolidations and sales of assets described herein,
the Company could, in the future, enter into certain transactions, including
acquisitions, refinancings or other recapitalizations, that would not
constitute a Designated Event under the Indenture, but that could increase the
amount of Indebtedness (including Senior Debt) outstanding at such time or
otherwise affect the Company's capital structure or credit ratings, or
substantially reduce or eliminate the Company's assets. The payment of the
Designated Event Payment is subordinated to the prior payment of Senior Debt
as described under "--Subordination of Convertible Notes" below.
Any future credit agreements or other agreements relating to Indebtedness of
the Company may contain prohibitions or restrictions on the Company's ability
to effect a Designated Event Payment. In the event a Designated Event occurs
at a time when such prohibitions or restrictions are in effect, the Company
could seek the consent of its lenders to the purchase of Convertible Notes or
could attempt to refinance the borrowings that contain such prohibition. If
the Company does not obtain such a
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<PAGE>
consent or repay such borrowings, the Company would be effectively prohibited
from purchasing Convertible Notes. In such case the Company's failure to
purchase tendered Convertible Notes would constitute an Event of Default under
the Indenture, and may constitute a default under the terms of other
Indebtedness or long-term leases that the Company may enter into from time to
time. In such circumstances, the subordination provisions in the Indenture
would likely restrict payments to the holders of Convertible Notes.
A "Designated Event" will be deemed to have occurred upon a Change of
Control or a Termination of Trading.
A "Change of Control" will be deemed to have occurred when: (i) any "person"
or "group" (as such terms are used in Section 13(d) and 14(d) of the Exchange
Act) is or becomes the "beneficial owner" (as defined in Rules 13d-3 and 13d-5
under the Exchange Act) of shares representing more than 50% of the combined
voting power of the then outstanding securities entitled to vote generally in
elections of directors of the Company ("Voting Stock"), (ii) the Company
consolidates with or merges into any other corporation, or any other
corporation merges into the Company, and, in the case of any such transaction,
the outstanding Common Stock of the Company is reclassified into or exchanged
for any other property or security, unless the shareholders of the Company
immediately before such transaction own, directly or indirectly immediately
following such transaction, at least a majority of the combined voting power
of the outstanding voting securities of the corporation resulting from such
transaction in substantially the same proportion as their ownership of the
Voting Stock immediately before such transaction, (iii) the Company conveys,
transfers or leases all or substantially all of its assets (other than to one
or more wholly-owned subsidiaries of the Company) or (iv) any time the
Continuing Directors do not constitute a majority of the Board of Directors of
the Company (or, if applicable, a successor corporation to the Company);
provided that a Change of Control shall not be deemed to have occurred if at
least 90% of the consideration (excluding cash payments for fractional shares)
in the transaction or transactions constituting the Change of Control consists
of shares of common stock that are, or upon issuance will be, traded on a
United States national securities exchange or approved for trading on an
established automated over-the-counter trading market in the United States and
as a result of such transaction or transactions the Convertible Notes become
convertible solely into such common stock or a combination of such common
stock and cash.
The definition of Change of Control includes a phrase relating to the lease,
transfer or conveyance of "all or substantially all" of the assets of the
Company. Although there is a developing body of case law interpreting the
phrase "substantially all," there is no precise established definition of the
phrase under applicable law. Accordingly, the ability of a holder of
Convertible Notes to require the Company to repurchase such Convertible Notes
as a result of a lease, transfer or conveyance of less than all of the assets
of the Company to another person or group may be uncertain.
"Continuing Directors" means, as of any date of determination, any member of
the Board of Directors of the Company who (i) was a member of such Board of
Directors on the date of the Indenture or (ii) was nominated for election or
elected to such Board of Directors with the approval of a majority of the
Continuing Directors who were members of such Board at the time of such
nomination or election.
A "Termination of Trading" will be deemed to have occurred if the Common
Stock (or other common stock into which the Convertible Notes are then
convertible) is neither listed for trading on a United States national
securities exchange nor approved for trading on an established automated over-
the-counter trading market in the United States.
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<PAGE>
SELECTION AND NOTICE
If less than all of the Convertible Notes are to be redeemed at any time,
selection of Convertible Notes for redemption will be made by the Trustee in
compliance with the requirements of the principal national securities
exchange, if any, on which the Convertible Notes are listed, or, if the
Convertible Notes are not so listed, on a pro rata basis, by lot or by such
method as the Trustee shall deem fair and appropriate, provided that no
Convertible Notes of $1,000 or less shall be redeemed in part. Notice of
redemption shall be mailed by first class mail at least 15 days but not more
than 60 days before the redemption date (other than a Special Redemption Date)
to each holder of Convertible Notes to be redeemed at its registered address.
If any Convertible Note is to be redeemed in part only, the notice of
redemption that relates to such Convertible Note shall state the portion of
the principal amount thereof to be redeemed. A new Convertible Note in
principal amount equal to the unredeemed portion thereof will be issued in the
name of the holder thereof upon cancellation of the original Convertible Note.
On and after the redemption date, interest ceases to accrue on Convertible
Notes or portions thereof called for redemption.
REGISTRATION RIGHTS
In connection with the Original Offering, the Company entered into a
Registration Agreement (the "Registration Agreement"), pursuant to which the
Company agreed for the benefit of the holders of the Convertible Notes or
Common Stock issued upon conversion thereof that are, in each case,
Registrable Securities, that (i) it will, at its cost, within the later to
occur of (A) 60 days after the closing of the Original Offering (the
"Closing") or (B) 30 days after the consummation of the Acquisition, file a
shelf registration statement (the "Shelf Registration Statement") with the
Commission with respect to resales of the Convertible Notes and the Common
Stock issuable upon conversion thereof, (ii) within (A) 90 days after the
Closing or (B) if the Acquisition occurs 60 days or more after the Closing, 30
days after such Shelf Registration Statement is filed with the Commission,
such Shelf Registration Statement shall be declared effective by the
Commission and (iii) the Company will keep such Shelf Registration Statement
continuously effective under the Securities Act until the third anniversary of
the date of the Closing or such earlier date as of which all the Convertible
Notes or the Common Stock issuable upon conversion thereof have been sold
pursuant to such Shelf Registration Statement or are otherwise saleable
without restrictions under applicable exemptions (the "Shelf Registration
Period"). This Registration Statement on Form S-3, which contains this
Prospectus, is the Shelf Registration Statement. The Company shall use its
best efforts to cause DTC, upon the effectiveness of the Shelf Registration
Statement, to remove from any existing CUSIP number assigned to the
Convertible Notes or the Common Stock issuable upon conversion thereof any
designation indicating that the Convertible Notes or Common Stock are
"restricted securities" within the meaning of Rule 144(a)(3) under the
Securities Act.
The Company will provide or cause to be provided to each holder of the
Convertible Notes, or the Common Stock issuable upon conversion of the
Convertible Notes, copies of this Prospectus, notify or cause to be notified
each such holder when such Shelf Registration Statement has become effective
and take certain other actions as are required to permit unrestricted resales
of the Convertible Notes or the Common Stock issuable upon conversion of the
Convertible Notes. A holder of Convertible Notes or the Common Stock issuable
upon conversion of the Convertible Notes that sells such securities pursuant
to the Shelf Registration Statement will be required to be named as a selling
holder in the related prospectus and to deliver a prospectus to purchasers,
will be subject to certain of the civil liability provisions under the
Securities Act in connection with such sales and will be bound by the
provisions of the Registration Agreement that are applicable to such holder
(including certain indemnification and contribution rights and obligations).
At least three business days prior to any intended resale of the Convertible
Notes or the Common Stock issuable upon conversion thereof, the holder thereof
must notify the Company of such intention
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<PAGE>
and provide such information with respect to such holder and the specifics of
the intended resale as may be required to amend the Shelf Registration
Statement or supplement the related prospectus (a holder giving such notice, a
"Notice Holder"). Within two business days after the foregoing notice is
provided by a Notice Holder, the Company will either (i) notify such Notice
Holder that resales may proceed or file any amendment to the Shelf
Registration Statement or supplement to the related prospectus needed to
ensure that those documents, among other things, comply with the Securities
Act, cause any such amendment to be declared effective and notify such Notice
Holder thereof or (ii) notify such Notice Holder of the Company's election to
defer resales until further notice (a "Deferral Period") under certain
circumstances relating to issuance of a stop order by the Commission,
suspension or qualification under state law, accuracy of the prospectus which
is a part of the Shelf Registration Statement, pending corporate developments,
public filings with the Commission and similar events. If the Company elects
the option described in clause (i) of the preceding sentence, such Notice
Holder may resell Convertible Notes or the Common Stock issuable upon
conversion thereof pursuant to the Shelf Registration Statement for a period
of 45 days (with respect to such Notice Holder, a "Selling Period") from the
date notice of such election is given and, if the Company elects the option
described in clause (ii) of the preceding sentence, such Notice Holder may
resell such securities for a Selling Period that commences at the end of the
Deferral Period. The Company may also defer until further notice a Notice
Holder's existing Selling Period upon the occurrence of the events described
in clause (ii) of the second preceding sentence; provided that upon receipt of
such further notice, such Selling Period shall be extended by the number of
days of such Deferral Period. The Company may not defer Selling Periods more
than one time in any three month period or three times in any twelve month
period and no deferral shall exceed 30 days. The Company will pay all expenses
of the Shelf Registration Statement, provide to each registered holder of
Convertible Notes copies of such prospectus, notify each such registered
holder when the Shelf Registration Statement has become effective and take
certain other actions as are required to permit, subject to the foregoing,
unrestricted resales of the Convertible Notes and the Common Stock issuable
upon conversion thereof.
In the event the Shelf Registration Statement is not declared effective
under the Securities Act within the time period set forth above, a stop order
is issued by the Commission prior to the end of the Shelf Registration Period
or Selling Periods have been deferred more frequently or for longer periods
than are described above, the Company has agreed to pay liquidated damages to
all Holders of Convertible Notes and of Common Stock issuable upon conversion
thereof until such event is cured. Liquidated damages shall be calculated,
with respect to Convertible Notes held by a holder, at a rate of one-half of
one percent (50 basis points) per annum of the aggregate principal amount of
such Convertible Notes and, with respect to shares of Common Stock held by a
holder and issued upon conversion of Convertible Notes, the same percentage of
the aggregate principal amount of Convertible Notes that were converted into
such shares.
"Registrable Securities" means the Convertible Notes and shares of Common
Stock issued upon conversion thereof, excluding any such securities that, and
any such securities the predecessors of which, were previously sold pursuant
to a registration statement or Rule 144 under the Securities Act.
CONVERSION
The holder of any Convertible Note has the right, exercisable at any time
after January 5, 1997, and prior to the close of business on the Business Day
immediately preceding the maturity date of the Convertible Notes, to convert
the principal amount thereof (or any portion thereof that is an integral
multiple of $1,000) into shares of Common Stock at the conversion price set
forth on the cover page of this Prospectus, subject to adjustment as described
below (the "Conversion Price"), except that if a Convertible Note is called
for redemption, the conversion right will terminate at the close of business
on the Business Day immediately preceding the date fixed for redemption. Upon
conversion, no
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<PAGE>
adjustment or payment will be made for interest accrued thereon or for
dividends or distributions on any Common Stock issued, but if a holder
surrenders a Convertible Note for conversion after the close of business on
the record date for the payment of an installment of interest and prior to the
opening of business on the next Interest Payment Date, then, notwithstanding
such conversion, the interest payable on such Interest Payment Date shall be
paid to the registered holder of such Convertible Note on such record date. In
such event, such Convertible Note, when surrendered for conversion after
October 15, 1999, must be accompanied by payment of an amount equal to the
interest payable on such Interest Payment Date on the portion so converted
and, when surrendered on or prior to October 15, 1999, need not be accompanied
by such payment. No fractional shares will be issued upon conversion but a
cash adjustment will be made for any fractional interest.
The Conversion Price is subject to adjustment upon the occurrence of certain
events, including: (i) the issuance of shares of Common Stock as a dividend or
distribution on the Common Stock; (ii) the subdivision or combination of the
outstanding Common Stock; (iii) the issuance to substantially all holders of
Common Stock of rights or warrants to subscribe for or purchase Common Stock
(or securities convertible into Common Stock) at a price per share less than
the then Current Market Price per share, as defined; (iv) the distribution of
shares of capital stock of the Company (other than Common Stock), evidences of
indebtedness or other assets (excluding dividends in cash out of current or
retained earnings, except as described in clause (v) below) to all holders of
Common Stock; (v) the distribution, by dividend or otherwise, of cash to all
holders of Common Stock in an aggregate amount that, together with the
aggregate of any other distributions of cash that did not trigger a Conversion
Price adjustment to all holders of its Common Stock within the 12 months
preceding the date fixed for determining the shareholders entitled to such
distribution and all Excess Payments in respect of each tender offer or other
negotiated transaction by the Company or any of its Subsidiaries for Common
Stock concluded within the preceding 12 months not triggering a Conversion
Price adjustment, exceeds 15% of the product of the Current Market Price per
share (determined as set forth below) on the date fixed for the determination
of shareholders entitled to receive such distribution times the number of
shares of Common Stock outstanding on such date; (vi) payment of an Excess
Payment in respect of a tender offer or other negotiated transaction by the
Company or any of its Subsidiaries for Common Stock, if the aggregate amount
of such Excess Payment, together with the aggregate amount of cash
distributions made within the preceding 12 months not triggering a Conversion
Price adjustment and all Excess Payments in respect of each tender offer or
other negotiated transaction by the Company or any of its Subsidiaries for
Common Stock concluded within the preceding 12 months not triggering a
Conversion Price adjustment, exceeds 15% of the product of the Current Market
Price per share on the expiration of such tender offer or the date of payment
of such negotiated transaction consideration times the number of shares of
Common Stock outstanding on such date; and (vii) the distribution to
substantially all holders of Common Stock of rights or warrants to subscribe
for securities (other than those securities referred to in clause (iii)
above). In the event of a distribution to substantially all holders of Common
Stock of rights to subscribe for additional shares of the Company's capital
stock (other than those securities referred to in clause (iii) above), the
Company may, instead of making any adjustment in the Conversion Price, make
proper provision so that each holder of a Convertible Note who converts such
Convertibles Note after the record date for such distribution and prior to the
expiration or redemption of such rights shall be entitled to receive upon such
conversion, in addition to shares of Common Stock, an appropriate number of
such rights.
No adjustment in the Conversion Price will be required unless such
adjustment would require a change of at least 1% of the Conversion Price then
in effect; provided that any adjustment that would otherwise be required to be
made shall be carried forward and taken into account in any subsequent
adjustment. Except as stated above, the Conversion Price will not be adjusted
for the issuance of Common Stock or any securities convertible into or
exchangeable for Common Stock or carrying the right to purchase any of the
foregoing.
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If the Company reclassifies or changes its outstanding Common Stock, or
consolidates with or merges into any person or transfers or leases all or
substantially all its assets, or is a party to a merger that reclassifies or
changes its outstanding Common Stock, the Convertible Notes will become
convertible into the kind and amount of securities, cash or other assets which
the holders of the Convertible Notes would have owned immediately after the
transaction if the holders had converted the Convertible Notes immediately
before the effective date of the transaction.
The Indenture also provides that if rights, warrants or options expire
unexercised the Conversion Price shall be readjusted to take into account the
actual number of such warrants, rights or options which were exercised.
In the Indenture, the "Current Market Price" per share of Common Stock on
any date shall be deemed to be the average of the Daily Market Prices for the
shorter of (i) 30 consecutive Business Days ending on the last full Trading
Day on the exchange or market referred to in determining such Daily Market
Prices prior to the time of determination (as defined in the Indenture) or
(ii) the period commencing on the date next succeeding the first public
announcement of the issuance of such rights or warrants or such distribution
or negotiated transaction through such last full Trading Day on the exchange
or market referred to in determining such Daily Market Prices prior to the
time of determination.
"Excess Payment" means the excess of (i) the aggregate of the cash and fair
market value of other consideration paid by the Company or any of its
Subsidiaries with respect to the shares acquired in a tender offer or other
negotiated transaction over (ii) the Daily Market Price on the Trading Day
immediately following the completion of the tender offer or other negotiated
transaction multiplied by the number of acquired shares.
The Company from time to time may to the extent permitted by law reduce the
Conversion Price by any amount for any period of at least 20 days, in which
case the Company shall give at least 15 days' notice of such reduction, if the
Board of Directors has made a determination that such reduction would be in
the best interests of the Company, which determination shall be conclusive.
The Company may, at its option, make such reductions in the Conversion Price,
in addition to those set forth above, as the Board of Directors deems
advisable to avoid or diminish any income tax to holders of Common Stock
resulting from any dividend or distribution of stock (or rights to acquire
stock) or from any event treated as such for income tax purposes. See "Certain
Federal Income Tax Considerations."
SUBORDINATION OF CONVERTIBLE NOTES
The Convertible Notes are subordinate in right of payment to all existing
and future Senior Debt. The Indenture does not restrict the amount of Senior
Debt or other Indebtedness of the Company or any Subsidiary of the Company. In
addition, the Convertible Notes are structurally subordinate to all existing
and future indebtedness and other liabilities of the Company's Subsidiaries,
including Electrotech.
The payment of the principal of, interest on or any other amounts due on the
Convertible Notes is subordinate in right of payment to the prior payment in
full of all Senior Debt of the Company (whether outstanding on the date of the
Indenture or thereafter incurred). No payment on account of principal of,
redemption of, interest on or any other amounts due on the Convertible Notes,
including, without limitation, any payments on the Designated Event Offer, and
no redemption, purchase or other acquisition of the Convertible Notes may be
made unless (i) full payment of amounts then due on all Designated Senior Debt
has been made or duly provided for pursuant to the terms of the instrument
governing such Designated Senior Debt, and (ii) at the time for, or
immediately after giving effect to, any such payment, redemption, purchase or
other acquisition, there shall not exist under any Senior Debt or any
agreement pursuant to which any Senior Debt has been issued, any default which
shall not have been cured or waived and which shall have resulted in the full
amount of such Senior Debt
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<PAGE>
being declared due and payable. In addition, the Indenture will provide that
if any of the holders of any issue of Designated Senior Debt notify (the
"Payment Blockage Notice") the Company and the Trustee that a default has
occurred giving the holders of such Designated Senior Debt the right to
accelerate the maturity thereof, no payment on account of principal,
redemption, interest or any other amounts due on the Convertible Notes and no
purchase, redemption or other acquisition of the Convertible Notes will be
made for the period (the "Payment Blockage Period") commencing on the date the
Payment Blockage Notice is received and ending on the earlier of (A) the date
on which such event of default shall have been cured or waived or (B) 180 days
from the date the Payment Blockage Notice is received. Notwithstanding the
foregoing (but subject to the provisions contained in the first sentence of
this Section), unless the holders of such Designated Senior Debt or the
representative of such holders shall have accelerated the maturity of such
Designated Senior Debt, the Company may resume payments on the Convertible
Notes after the end of such Payment Blockage Period. Not more than one Payment
Blockage Notice may be given in any consecutive 365-day period, irrespective
of the number of defaults with respect to Senior Debt during such period.
Upon any distribution of its assets in connection with any dissolution,
winding-up, liquidation or reorganization of the Company or acceleration of
the principal amount due on the Convertible Notes because of an Event of
Default, all Senior Debt must be paid in full before the holders of the
Convertible Notes are entitled to any payments whatsoever.
If payment of the Convertible Notes is accelerated because of an Event of
Default, the Company or the Trustee shall promptly notify the holders of
Senior Debt or the representatives of such holders of such acceleration. The
Company may not pay the Convertible Notes until five days after such holders
or such representatives receive notice of such acceleration and, thereafter,
may pay the Convertible Notes only if the subordination provisions of the
Indenture otherwise permit payment at that time.
As a result of these subordination provisions, in the event of the Company's
insolvency, holders of the Convertible Notes may recover ratably less than
general creditors of the Company.
The Convertible Notes are structurally subordinate to all existing and
future indebtedness and other liabilities of the Company's subsidiaries,
including Electrotech. As of September 30, 1996, after giving effect to the
sale of the Convertible Notes offered hereby and the Acquisition, on a pro
forma basis PMT would have had $800,000 of Senior Debt and the Company's
subsidiaries would have had approximately $33.7 million of indebtedness that
effectively would have ranked senior in right of payment to the Convertible
Notes. In addition, as of December 13, 1996, the Company had in place the
Working Capital Facility, which indebtedness constitutes Designated Senior
Debt. As of such date, there were no borrowings under the Working Capital
Facility. The Indenture does not limit the amount of additional Indebtedness,
including Senior Debt, that the Company can create, incur, assume or
guarantee, nor does the Indenture limit the amount of Indebtedness and other
liabilities that any subsidiary of the Company can create, incur, assume or
guarantee.
In the event that, notwithstanding the foregoing, the Trustee or any holder
of Convertible Notes receives any payment or distribution of assets of the
Company of any kind in contravention of any of the terms of the Indenture,
whether in cash, property or securities, including, without limitation by way
of set-off or otherwise, in respect to the Convertible Notes before all Senior
Debt is paid in full, then such payment or distribution will be held by the
recipient in trust for the benefit of holders of Senior Debt, and will be
immediately paid over or delivered to the holders of Senior Debt or their
representative or representatives to the extent necessary to make payment in
full of all Senior Debt remaining unpaid, after giving effect to any
concurrent payment or distribution, or provision therefor, to or for the
holders of Senior Debt.
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MERGER, CONSOLIDATION OR SALE OF ASSETS
The Indenture provides that the Company may not consolidate or merge with or
into any person (whether or not the Company is the surviving corporation), or
sell, assign, transfer, lease, convey or otherwise dispose of all or
substantially all of its properties of assets unless (i) (a) the Company is
the surviving or continuing corporation or (b) the person formed by or
surviving any such consolidation or merger (if other than the Company) or the
person which acquires by sale, assignment, transfer, lease, conveyance or
other disposition the properties and assets of the Company is a corporation
organized or existing under the laws of the United States, any state thereof
or the District of Columbia; (ii) the entity or person formed by or surviving
any such consolidation or merger (if other than the Company) or the person to
which such sale, assignment, transfer, lease, conveyance or other disposition
will have been made assumes all the Obligations of the Company, pursuant to a
supplemental indenture in a form reasonably satisfactory to the Trustee, under
the Convertible Notes and the Indenture; (iii) such sale, assignment,
transfer, lease, conveyance or other disposition of all or substantially all
of the Company's properties or assets shall be as an entirety or virtually as
an entirety to one person and such person shall have assumed all the
obligations of the Company, pursuant to a supplemental indenture in a form
reasonably satisfactory to the Trustee, under the Convertible Notes and the
Indenture; (iv) immediately after such transaction no Default or Event of
Default exists; and (v) the Company or such person shall have delivered to the
Trustee an Officers' Certificate and an Opinion of Counsel, each stating that
such transaction and the supplemental indenture comply with the Indenture and
that all conditions precedent in the Indenture relating to such transaction
have been satisfied.
PAYMENTS FOR CONSENT
Neither the Company nor any of its Subsidiaries shall, directly or
indirectly, pay or cause to be paid any consideration, whether by way of
interest, fee or otherwise, to any holder of any Convertible Notes for or as
an inducement to any consent, waiver or amendment of any of the terms or
provisions of the Indenture or the Convertible Notes unless such consideration
is offered to be paid or agreed to be paid to all holders of the Convertible
Notes that consent, waive or agree to amend in the time frame set forth in the
solicitation documents relating to such consent, waiver or agreement.
REPORTS
Whether or not required by the rules and regulations of the Commission, so
long as any Convertible Notes are outstanding, the Company will, to the extent
permitted by the Commission, file with the Commission and furnish to the
holders of Convertible Notes all quarterly and annual financial information
required to be contained in a filing with the Commission on Forms 10-Q and 10-
K, including a "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and, with respect to the annual consolidated
financial statements only, a report thereon by the Company's independent
auditors.
EVENTS OF DEFAULT AND REMEDIES
The Indenture provides that each of the following constitutes an Event of
Default: (i) default for 30 days in the payment when due of interest on the
Convertible Notes; (ii) default in payment when due of principal on the
Convertible Notes; (iii) failure by the Company to comply with the provisions
described under "Designated Event"; (iv) failure by the Company for 60 days
after the receipt of written notice to comply with any other covenants and
agreements contained in the Indenture or the Convertible Notes; (v) default
under any mortgage, indenture or instrument under which there may be issued or
by which there may be secured or evidenced any Indebtedness for money borrowed
by the Company or any of its Subsidiaries (or the payment of which is
guaranteed by the Company or any of its Subsidiaries), whether such
Indebtedness or guarantee now exists or is created after the date on which the
Convertible Notes were first authenticated and issued, which default (a) is
caused by a
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failure to pay when due principal or interest on such Indebtedness within the
grace period provided in such Indebtedness (which failure continues beyond any
applicable grace period) (a "Payment Default") or (b) results in the
acceleration of such Indebtedness prior to its express maturity without such
acceleration being rescinded or annulled and, in each case, the principal
amount of any such Indebtedness, together with the principal amount of any
other such Indebtedness under which there has been a Payment Default or the
maturity of which has been so accelerated, aggregates $10 million or more;
(vi) failure by the Company or any Subsidiary of the Company to pay final
judgments (other than any judgment or portion thereof as to which a reputable
insurance company has accepted full liability) aggregating in excess of $10
million, which judgments are not discharged, stayed or bonded within 60 days
after their entry; and (vii) certain events of bankruptcy or insolvency with
respect to the Company or any Material Subsidiary of the Company.
If any Event of Default occurs and is continuing, the Trustee or the holders
of at least 25% in principal amount of the then outstanding Convertible Notes
may declare all the Convertible Notes to be due and payable immediately.
Notwithstanding the foregoing, in the case of an Event of Default arising from
certain events of bankruptcy or insolvency, with respect to the Company or any
Material Subsidiary of the Company, all outstanding Convertible Notes will
become due and payable without further action or notice. Holders of the
Convertible Notes may not enforce the Indenture or the Convertible Notes
except as provided in the Indenture. Subject to certain limitations, holders
of a majority in principal amount of the then outstanding Convertible Notes
may direct the Trustee in its exercise of any trust or power. The Trustee may
withhold from holders of the Convertible Notes notice of any continuing
Default or Event of Default (except a Default or Event of Default relating to
the payment of principal or interest) if it determines that withholding notice
is in their interest.
The holders of a majority in aggregate principal amount of the Convertible
Notes then outstanding by notice to the Trustee may on behalf of the holders
of all of the Convertible Notes waive any existing Default or Event of Default
and its consequences under the Indenture except a continuing Default or Event
of Default in the payment of the Designated Event Payment or interest on, or
the principal of, the Convertible Notes.
The Company is required to deliver to the Trustee annually a statement
regarding compliance with the Indenture, and the Company is required, upon
becoming aware of any Default or Event of Default, to deliver to the Trustee a
statement specifying such Default or Event of Default.
BOOK-ENTRY; DELIVERY AND FORM; MATTERS PERTAINING TO DTC
Convertible Notes sold in reliance on Rule 144A under the Securities Act
("Rule 144A") are represented by one or more permanent global certificates in
fully registered form without interest coupons (the "Restricted Global Note")
and are registered in the name of the Depositary Trust Company, as depositary
("DTC" or the "Depositary") or a nominee of the Depositary and deposited with
the Trustee as custodian for DTC.
Convertible Notes sold in offshore transactions in reliance on Regulation S
under the Securities Act will be represented by one or more permanent global
certificates in fully registered form without interest coupons (the
"Unrestricted Global Note" and, together with the Restricted Global Note, the
"Global Notes") and will be registered in the name of the Depositary or a
nominee of the Depositary and deposited with the Trustee as custodian for DTC.
On or prior to the 40th day after the closing of the Acquisition, interests in
the Unrestricted Global Note may be held only through the Euroclear System
("Euroclear") or Cedel Bank, societe anonyme ("Cedel").
On or prior to such 40th day, an interest in the Unrestricted Global Note
may be transferred to a person who takes delivery in the form of an interest
in the Restricted Global Note only upon receipt by the Trustee of a written
certification from the transferor (in the form provided in the Indenture) to
the effect that such transfer is being made to a person whom the transferor
reasonably believes to be a
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"qualified institutional buyer" within the meaning of Rule 144A ("QIB") in a
transaction meeting the requirements of Rule 144A or pursuant to another
exemption from the registration requirements under the Securities Act which is
accompanied by an Opinion of Counsel regarding the availability of such
exemption and in accordance with any applicable securities laws of any state
of the United States or any other jurisdiction. After such 40th day, such
certification requirement will no longer apply to such transfers. Interests in
the Restricted Global Note may be transferred to a person who takes delivery
in the form of an interest in the Unrestricted Global Note, whether before, on
or after such 40th day, only upon receipt by the Trustee of a written
certification from the transferor (in the form provided in the Indenture) to
the effect that such transfer is being made in accordance with Rule 903 or 904
of Regulation S or Rule 144 under the Securities Act. Any interest in one of
the Global Notes that is transferred to a person who takes delivery in the
form of an interest in the other Global Note will, upon transfer, cease to be
an interest in the former Global Note and become an interest in the other
Global Note and, accordingly, will thereafter be subject to all transfer
restrictions and other procedures applicable to beneficial interests in such
other Global Note for as long as it remains such an interest.
Upon the issuance of the Restricted Global Note and the Unrestricted Global
Note, DTC or its custodian will credit, in its internal system, the respective
principal amount of the individual interests represented by such Global Notes
to the accounts of persons who have accounts with DTC. Such accounts initially
will be designated by or on behalf of the Initial Purchasers. Ownership of
beneficial interests in a Global Note will be limited to persons who have
accounts with DTC ("DTC Participants") or persons who hold interests through
DTC Participants. Ownership of beneficial interests in the Global Notes will
be shown on, and the transfer of that ownership will be effected only through,
records maintained by DTC or its nominee (with respect to interests of DTC
Participants) and the records of DTC Participants (with respect to interests
of persons other than DTC Participants).
Convertible Notes originally purchased by or transferred to institutional
"accredited investors" (as defined in Rule 501(a)(1), (2), (3) or (7) under
the Securities Act and referred to as "Institutional Accredited Investors")
who are not QIBs will be issued and registered in certificated form without
coupons and will bear a legend containing restrictions on transfers. Upon the
transfer to a QIB or a person who acquired in accordance with Rule 903 or 904
of Regulation S under the Securities Act of certificated Convertible Notes,
such certificated Convertible Notes will be exchanged for an interest in the
Restricted Global Note or Unrestricted Global Note, as applicable,
representing the principal amount of Convertible Notes being transferred.
So long as DTC, or its nominee, is the registered owner or holder of a
Global Note, DTC or such nominee, as the case may be, will be considered the
sole owner or holder of the Convertible Notes represented by such Global Note
for all purposes under the Indenture and the Convertible Notes.
Investors may hold their interests in the Unrestricted Global Note through
Euroclear or Cedel, if they are participants in such systems, or indirectly
through organizations that are participants in such systems. Beginning 40 days
after the Closing (but not earlier), investors may also hold such interests
through organizations other than Euroclear and Cedel that are participants in
the DTC system. Euroclear and Cedel will hold interests in the Unrestricted
Global Note on behalf of their participants through their respective
depositaries, which in turn will hold such interests in such depositaries'
names on the books of DTC. Investors may hold their interests in the
Restricted Global Note directly through DTC, if they are DTC Participants, or
indirectly through organizations that are DTC Participants.
Payments of the principal of, liquidated damages or premium, if any, and
interest on, Global Notes will be made to DTC or its nominee as the registered
owner thereof. Neither the Company nor the Trustee will have any
responsibility or liability for any aspect of the records relating to, or
payments made on account of, ownership interests in the Global Notes or for
maintaining, supervising or reviewing any records relating to such ownership
interests, or for any notice permitted or required to
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be given to holders of Convertible Notes or any consent given or actions taken
by DTC as holder of Convertible Notes. The Company expects that DTC or its
nominee, upon receipt of any payment of principal or interest in respect of a
Global Note representing any Convertible Notes held by it or its nominee, will
immediately credit DTC Participants' accounts with payments in amounts
proportionate to their respective interests in the principal amount of such
Global Note as shown on the records of DTC or its nominee. The Company also
expects that payments by DTC Participants to owners of interests in such
Global Note held through such DTC Participants will be governed by standing
instructions and customary practices, as is now the case with securities held
for the accounts of customers registered in the names of nominees for such
customers. Such payments will be the responsibility of such DTC Participants.
Transfers between DTC Participants will be effected in DTC's Same-Day Funds
Settlement System. Transfers between participants in Euroclear and Cedel will
be effected in accordance with their respective rules and operating
procedures. If a holder requires physical delivery of a certificated note for
any reason, including to sell Convertible Notes to persons in jurisdictions
which require such delivery of such Convertible Notes or to pledge such
Convertible Notes, such holder must transfer its interest in a Global Note in
accordance with the normal procedures of DTC and the procedures set forth in
the Indenture. Because DTC can only act on behalf of DTC Participants, who in
turn act on behalf of indirect participants and certain banks, the ability of
a person having a beneficial interest in the principal amount represented by
the Global Note to pledge such interest to persons or entities that are not
DTC Participants, or otherwise take actions in respect of such interest, may
be affected by the lack of a physical certificate evidencing such interest.
Conversion through DTC Participants will be effected in accordance with
DTC's procedures. Conversion through participants in Euroclear and Cedel will
be effected in the ordinary way in accordance with their respective rules and
operating procedures.
Subject to compliance with the transfer restrictions applicable to the
Convertible Notes described above, cross-market transfers between DTC
Participants, on the one hand, and directly or indirectly through Euroclear or
Cedel participants, on the other, will be effected by DTC in accordance with
DTC rules on behalf of Euroclear or Cedel, as the case may be, by its
respective depositary; however, such cross-market transactions will require
delivery of instructions to Euroclear or Cedel, as the case may be, by the
counterparty in such system in accordance with its rules and procedures and
within its established deadlines. Euroclear or Cedel, as the case may be,
will, if the transaction meets its settlement requirements, deliver
instructions to its respective depositary to take action to effect final
settlement on its behalf by delivering or receiving interests in the
Unrestricted Global Note by DTC, and making or receiving payment in accordance
with normal procedures for same-day funds settlement applicable to DTC.
Euroclear and Cedel participants may not deliver instructions directly to the
depositaries for Euroclear and Cedel.
Because of time zone differences, the securities account of a Euroclear or
Cedel participant purchasing an interest in a Global Note from a DTC
Participant will be credited during the securities settlement processing day
(which must be a business day for Euroclear or Cedel, as the case may be)
immediately following the DTC settlement date and such credit of any
transactions in interests in a Global Note settled during such processing day
will be reported to the relevant Euroclear or Cedel participant on such day.
Cash received in Euroclear or Cedel as a result of sales of interests in a
Global Note by or through a Euroclear or Cedel participant to a DTC
Participant will be received for value on the DTC settlement date but will be
available in the relevant Euroclear or Cedel cash account only as of the
business day following settlement in DTC.
DTC has advised the Company that it will take any action permitted to be
taken by a holder of Convertible Notes (including the presentation of
Convertible Notes for exchange as described below)
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only at the direction of one or more DTC Participants to whose account or
accounts with DTC interests in the Global Notes are credited and only in
respect of such portion of the aggregate principal amount of the Global Notes
as to which such DTC Participant or DTC Participants has or have given such
direction. However, in the limited circumstances described below, DTC will
exchange the Global Notes for individual certificated Convertible Notes,
bearing a restricted legend, which will be distributed to its participants.
The giving of notices and other communications by DTC to DTC Participants,
by DTC Participants to persons who hold accounts with them and by such persons
to holders of beneficial interests in a Global Note will be governed by
arrangements between them, subject to any statutory or regulatory requirements
as may exist from time to time.
DTC has advised the Company as follows: DTC is a limited purpose trust
company organized under the laws of the State of New York, a member of the
Federal Reserve System, a "clearing corporation" within the meaning of the
Uniform Commercial Code and "clearing agency" registered pursuant to the
provisions of Section 17A of the Exchange Act. DTC was created to hold
securities for DTC Participants and facilitate the clearance and settlement of
securities transactions between DTC Participants through electronic book-entry
changes in accounts of DTC Participants, thereby eliminating the need for
physical movement of certificates.
DTC Participants include securities brokers and dealers, banks, trust
companies and clearing corporations and may include certain other
organizations. Indirect access to the DTC system is available to others such
as banks, brokers, dealers and trust companies that clear through or maintain
a custodial relationship with a DTC Participant, either directly or indirectly
("indirect participants").
Although DTC, Euroclear and Cedel have agreed to the foregoing procedures in
order to facilitate transfers of interests in the Restricted Global Note and
in the Unrestricted Global Note among participants of DTC, Cedel and
Euroclear, they are under no obligation to perform or continue to perform such
procedures, and such procedures may be discontinued at any time. Neither the
Company nor the Trustee will have any responsibility for the performance by
DTC, Euroclear or Cedel or their respective participants or indirect
participants of their respective obligations under the rules and procedures
governing their operations.
If DTC is at any time unwilling or unable to continue as a depositary for
the Global Notes and a successor depositary is not appointed by the Company
within 90 days, or an Event of Default has occurred and is continuing, the
Company will issue certificated Convertible Notes in exchange for the Global
Notes.
TRANSFER AND EXCHANGE
A holder may transfer or exchange Convertible Notes in accordance with the
Indenture. The Registrar and the Trustee may require a holder, among other
things, to furnish appropriate endorsements and transfer documents and the
Company may require a holder to pay any taxes and fees required by law or
permitted by the Indenture. The Company is not required to exchange or
register the transfer of any Convertible Note selected for redemption. Also,
the Company is not required to exchange or register the transfer of any
Convertible Note for a period of 30 days before a selection of Convertible
Notes to be redeemed.
The registered holder of a Convertible Note will be treated as the owner of
it for all purposes.
AMENDMENT, SUPPLEMENT AND WAIVER
Except as provided in the next succeeding paragraph, the Indenture or the
Convertible Notes may be amended or supplemented with the consent of the
holders of at least a majority in principal amount
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of the then outstanding Convertible Notes (including consents obtained in
connection with a tender offer or exchange offer for Convertible Notes), and
any existing default or compliance with any provision of the Indenture or the
Convertible Notes may be waived with the consent of the holders of a majority
in principal amount of the then outstanding Convertible Notes (including
consents obtained in connection with a tender offer or exchange offer for
Convertible Notes).
Without the consent of each holder affected, an amendment or waiver may not
(with respect to any Convertible Notes held by a nonconsenting holder of
Convertible Notes): (i) reduce the amount Convertible Notes whose holders must
consent to an amendment, supplement or waiver, (ii) reduce the principal of or
change the fixed maturity of any Convertible Note or alter the provisions with
respect to the redemption of the Convertible Notes, (iii) reduce the rate of
or change the time for payment of interest on any Convertible Note, (iv) waive
a default in the payment of the Designated Event Payment or principal of or
interest on any Convertible Notes (except a rescission of acceleration of the
Convertible Notes by the holders of at least a majority in aggregate principal
amount of the Convertible Notes and a waiver of the payment default that
resulted from such acceleration), (v) make any Convertible Note payable in
money other than that stated in the Convertible Notes, (vi) make any change in
the provisions of the Indenture relating to waivers of Defaults or the rights
of holders of Convertible Notes to receive payments of principal of or
interest on the Convertible Notes, (vii) waive a redemption payment with
respect to any Convertible Note, (viii) impair the right to convert the
Convertible Notes into Common Stock, (ix) modify the conversion or
subordination provisions of the Indenture in a manner adverse to the holders
of the Convertible Notes or (x) make any change in the foregoing amendment and
waiver provisions.
Notwithstanding the foregoing, without the consent of any holder of
Convertible Notes, the Company and the Trustee may amend or supplement the
Indenture or the Convertible Notes to cure any ambiguity, defect or
inconsistency, to provide for uncertificated Convertible Notes in addition to
or in place of certificated Convertible Notes, to provide for the assumption
of the Company's obligations to holders of the Convertible Notes in the case
of a merger or consolidation, to make any change that would provide any
additional rights or benefits to the holders of the Convertible Notes or that
does not adversely affect in any material respect the legal rights under the
Indenture of any such holder, or to comply with the requirements of the
Commission in order to qualify, or maintain the qualification of, the
Indenture under the Trust Indenture Act.
CONCERNING THE TRUSTEE
The Indenture contains certain limitations on the rights of the Trustee,
should it become a creditor of the Company, to obtain payment of claims in
certain cases, or to realize on certain property received in respect of any
such claim as security or otherwise. The Trustee is permitted to engage in
other transactions, provided that, if it acquires any conflicting interest, it
must eliminate such conflict within 90 days, apply to the Commission for
permission to continue or resign.
The holders of a majority in principal amount of the then outstanding
Convertible Notes have the right to direct the time, method and place of
conducting any proceeding for exercising any remedy available to the Trustee,
subject to certain exceptions. The Indenture provides that, in case an Event
of Default shall occur (which shall not be cured), the Trustee will be
required, in the exercise of its power, to use the degree of care of a prudent
person in the conduct of his or her own affairs. Subject to such provisions,
the Trustee will be under no obligation to exercise any of its rights or
powers under the Indenture at the request of any holder of Convertible Notes,
unless such holder shall have offered to the Trustee security and indemnity
satisfactory to it against any loss, liability or expense.
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ADDITIONAL INFORMATION
Anyone who receives this Prospectus may obtain a copy of the Indenture or
the Registration Agreement without charge by writing to the Company at 9255
Deering Avenue, Chatsworth, California 91311.
CERTAIN DEFINITIONS
Set forth below are certain defined terms used in the Indenture. Reference
is made to the Indenture for a full disclosure of all such terms, as well as
any other capitalized terms used herein for which no definition is provided.
"Capital Stock" means any and all shares, interests, participations, rights
or other equivalents (however designated) of equity interests in any entity,
including, without limitation, corporate stock, including any preferred stock,
and partnership interests, whether general or limited.
"Default" means any event that is, or with the passage of time or the giving
of notice or both would be, an Event of Default.
"Designated Senior Debt" means (i) any Senior Debt which, as of the date of
the Indenture, has an aggregate principal amount outstanding of at least $20
million, (ii) any Senior Debt which, at the date of determination, has an
aggregate principal amount outstanding of, or commitments to lend up to, at
least $20 million, (iii) Senior Debt which, at the date of determination, has
a principal amount outstanding of at least $5 million and consists of one
capital leasing facility to which the Company is a party with respect to
equipment used in the operation of the Company, and (iv) any Senior Debt
which, at the date of determination, has an aggregate principal amount
outstanding of, or commitments to lend up to, at least $2.5 million and
consists of obligations for borrowed money to a bank, savings and loan
association or foreign bank or savings and loan association or equivalent
institution as defined in Rule 144A(a)(1)(vi) pursuant to the Securities Act;
provided that with respect to the Senior Debt referenced in clauses (ii),
(iii) and (iv) above, such Senior Debt is specifically designated by the
Company in the instrument evidencing or governing such Senior Debt as
"Designated Senior Debt" for purposes of the Indenture (provided that such
instrument may place limitations and conditions on the right of such Senior
Debt to exercise the rights of Designated Senior Debt).
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as may be approved by a significant segment of the accounting
profession of the United States, which are in effect from time to time.
"Guarantee" means a guarantee (other than by endorsement of negotiable
instruments for collection in the ordinary course of business), direct or
indirect, in any manner (including, without limitation, letters of credit and
reimbursement agreements in respect thereof), of all or any part of any
Indebtedness.
"Indebtedness" means, with respect to any person, all obligations, whether
or not contingent, of such person (i) (a) for borrowed money (including, but
not limited to, any indebtedness secured by a security interest, mortgage or
other lien on the assets of such person which is (1) given to secure all or
part of the purchase price of property subject thereto, whether given to the
vendor of such property or to another, or (2) existing on property at the time
of acquisition thereof), (b) evidenced by a note, debenture, bond or other
written instrument, (c) under a lease required to be capitalized on the
balance sheet of the lessee under GAAP or under any lease or related document
(including a purchase agreement) which provides that such person is
contractually obligated to purchase or to cause a third party to purchase such
leased property, (d) in respect of letters of credit, bank guarantees or
bankers'
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acceptances (including reimbursement obligations with respect to any of the
foregoing), (e) with respect to indebtedness secured by a mortgage, pledge,
lien, encumbrance, charge or adverse claim affecting title or resulting in an
encumbrance to which the property or assets of such person are subject,
whether or not the obligation secured thereby shall have been assumed or
Guaranteed by or shall otherwise be such person's legal liability, (f) in
respect of the balance of the deferred and unpaid purchase price of any
property or assets and (g) under interest rate or currency swap agreements,
cap, floor and collar agreements, spot and forward contracts and similar
agreements and arrangements; (ii) with respect to any obligation of others of
the type described in the preceding clause (i) or under clause (iii) below,
assumed by or Guaranteed in any manner by such person or in effect Guaranteed
by such person through an agreement to purchase (including, without
limitation, "take or pay" and similar arrangements), contingent or otherwise
(and the obligations of such person under any such assumptions, Guarantees or
other such arrangements); and (iii) any and all deferrals, renewals,
extensions, refinancings and refundings of, or amendments, modifications or
supplements to, any of the foregoing.
"Issuance Date" means October 7, 1996.
"Material Subsidiary" means any Subsidiary of the Company which at the date
of determination is a "significant subsidiary" as defined in Rule 1-02(w) of
Regulation S-X under the Securities Act and the Exchange Act (as such
Regulation is in effect on the date hereof).
"Obligations" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.
"person" means any individual, corporation, partnership, joint venture,
association, joint stock company, trust, unincorporated organization, limited
liability company or government or any agency or political subdivision
thereof.
"Representative" means the trustee, agent or representative (if any) for an
issue of Senior Debt.
"Rule 144A" means Rule 144A promulgated under the Securities Act.
"Senior Debt" means the principal of, premium, if any, interest on and other
amounts due on Indebtedness of the Company, whether outstanding on the date of
the Indenture or thereafter created, incurred, assumed or Guaranteed by the
Company; unless, in the instrument creating or evidencing or pursuant to which
Indebtedness is outstanding, it is expressly provided that such Indebtedness
is not senior in right of payment to the Convertible Notes. Senior Debt
includes, with respect to the obligations described above, interest accruing,
pursuant to the terms of such Senior Debt, on or after the filing of any
petition in bankruptcy or for reorganization relating to the Company, whether
or not post-filing interest is allowed in such proceeding, at the rate
specified in the instrument governing the relevant obligation. Notwithstanding
anything to the contrary in the foregoing, Senior Debt shall not include: (a)
Indebtedness of or amounts owed by the Company for compensation to employees,
or for goods, services or materials purchased in the ordinary course of
business; (b) Indebtedness of the Company to a Subsidiary of the Company; or
(c) any liability for Federal, state, local, foreign or other taxes, owed or
owing by the Company.
"Subsidiary" means any corporation, association or other business entity of
which more than 50% of the total voting power of shares of Capital Stock
entitled (without regard to the occurrence of any contingency) to vote in the
election of directors, managers or trustees thereof is at the time owned or
controlled, directly or indirectly, by any person or one or more of the other
Subsidiaries of that person or a combination thereof.
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DESCRIPTION OF CAPITAL STOCK
The authorized capital stock of the Company consists of 50,000,000 shares of
Common Stock, no par value, and 20,000,000 shares of Preferred Stock, no par
value.
COMMON STOCK
On December 12, 1996, there were 14,292,262 shares of Common Stock
outstanding held of record by 118 shareholders.
Holders of Common Stock are entitled to one vote per share on all matters
voted upon by shareholders. In electing directors, subject to complying with
certain notice requirements, each shareholder is entitled to cumulate such
holder's votes and give one candidate a number of votes equal to the number of
directors to be elected, multiplied by the number of shares of Common Stock
held, or to distribute such votes among as many candidates as the holder sees
fit. Subject to preferences that may be applicable to any then outstanding
Preferred Stock, holders of Common Stock are entitled to receive ratably such
dividends as may be declared by the Board of Directors out of funds legally
available therefor. In the event of a liquidation, dissolution or winding up
of the Company, holders of Common Stock are entitled to share ratably in all
assets remaining after payment of liabilities and the liquidation preferences
of any then outstanding Preferred Stock. Holders of Common Stock have no
preemptive rights and no right to convert their Common Stock into any other
securities. There are no redemption or sinking fund provisions applicable to
the Common Stock. The shares of Common Stock outstanding at the date of this
Prospectus are, and the shares of Common Stock to be issued upon conversion of
the Convertible Notes will be, fully paid and nonassessable.
PREFERRED STOCK
The Board of Directors has the authority to issue up to 20,000,000 shares of
Preferred Stock in one or more series and to fix the rights, preferences,
privileges and restrictions thereof, including dividend rights, conversion
rights, voting rights, terms of redemption, liquidation preferences, sinking
fund terms and the number of shares constituting any series or the designation
of such series, without any further vote or action by shareholders. The
issuance of Preferred Stock could adversely affect the voting power of holders
of Common Stock, and the likelihood that such holders will receive dividend
payments and payments upon liquidation, and could have the effect of delaying,
deferring or preventing a change in control of the Company. The Company has no
present plans to issue any shares of Preferred Stock.
WARRANTS
The Company has issued warrants to purchase an aggregate of 80,000 shares of
its Common Stock (the "Warrants"). The exercise price of the Warrants is $4.50
per share, and the Warrants expire on December 31, 1998. The Warrants may be
exercised by the holders by converting the value of the Warrants (number of
shares issuable multiplied by the fair market value of the Company's Common
Stock less the aggregate exercise price) into shares of Common Stock having an
equal value.
REGISTRATION RIGHTS
Pursuant to that certain Second Amended and Restated Registration Rights
Agreement dated as of May 24, 1995, to which the Company and the holders of
approximately 3,634,460 shares of Common Stock (including shares issuable on
the exercise of the Warrants) are subject (the "Registration Rights
Agreement"), such holders are entitled to certain rights with respect to the
registration of such shares under the Securities Act. Subject to certain
limitations, if the Company registers any of its securities under the
Securities Act, either for its own account or the account of other
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<PAGE>
security holders, such holders are entitled to written notice of the
registration and are entitled to include (at the Company's expense) such
shares therein; provided, among other conditions, that the underwriters of any
such offering have the right to limit the number of such shares included in
the registration. In addition, holders of at least a majority of the shares of
Registrable Common (as defined therein) can require the Company, on not more
than two occasions, to file a registration statement under the Securities Act
with respect to such shares, and the Company is required to use its best
efforts to effect such registration, subject to certain conditions and
limitations. All fees, costs and expenses of such registrations (other than
underwriting discounts, commissions and transfer taxes, and other than legal
and accounting expenses of such holders) will be borne by the Company.
Further, not more than once during any twelve calendar month period, such
holders may require the Company (at the Company's expense) to register their
shares on Form S-3 when such form becomes available to the Company, subject to
certain conditions and limitations.
In connection with the Acquisition, the Company entered into a registration
agreement with Mr. Dobson (the "Dobson Registration Agreement"), which
provides, among other things, for the registration in certain circumstances of
the 4,853,334 shares of Common Stock received by Mr. Dobson on consummation of
the Acquisition. The Dobson Registration Agreement provides that, among other
things, on and after November 15, 1997, Mr. Dobson may exercise up to three
"demand" rights (at PMT's sole expense) and will also have the right to
participate in Company registrations on a "piggyback" basis. The Dobson
Registration Agreement contains customary terms and provisions, including
reciprocal indemnification and contribution provisions.
LIABILITY AND INDEMNIFICATION OF DIRECTORS AND OFFICERS
The California Corporations Code provides for the indemnification of
directors, officers, employees and agents of the Company under certain
circumstances set forth in Section 317. Section 317 permits a corporation to
indemnify its agents, typically directors and officers, for expenses incurred
or settlements or judgments paid in connection with certain legal proceedings.
Only those legal proceedings arising out of such persons' actions as agents of
the corporation may be grounds for indemnification.
The Company's Articles of Incorporation authorize the Board of Directors to
provide indemnification of its agents through bylaw provisions or
indemnification agreements, or both, in excess of the indemnification
otherwise permitted by Section 317, subject to the limits on such excess
indemnification set forth in Section 204 of the California Corporations Code.
The Company's bylaws provide that the Company will indemnify its directors and
officers to the fullest extent not prohibited by law.
The directors and officers of the Company and its subsidiaries are insured
under certain insurance policies against claims made during the period of the
policies against liabilities arising out of claims for certain acts in their
capacities as directors and officers of the Company and its subsidiaries.
Insofar as indemnification for liabilities under the Securities Act of 1933
may be permitted with respect to directors, officers or persons controlling
the Registrant pursuant to the foregoing provisions, the Registrant has been
informed that, in the opinion of the Securities and Exchange Commission, such
indemnification is against public policy as expressed in the Act and is
therefore unenforceable.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the Common Stock of the Company is
American Stock Transfer & Trust Company.
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CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The following is a general discussion of certain United States federal
income tax considerations relevant to holders of the Convertible Notes and
does not deal with tax consequences arising under the laws of any foreign,
state or local jurisdiction. This discussion is based upon the Internal
Revenue Code of 1986, as amended (the "Code"), Treasury Regulations, Internal
Revenue Service ("IRS") rulings and judicial decisions now in effect, all of
which are subject to change (possibly with retroactive effect) or different
interpretations. This discussion does not purport to deal with all aspects of
federal income taxation that may be relevant to a particular investor's
decision to purchase the Convertible Notes. Certain holders (including dealers
in securities, banks, financial institutions, insurance companies, tax-exempt
organizations, foreign corporations and persons who are not citizens or
residents of the United States) may be subject to special rules not discussed
below. In addition, this discussion is limited to persons that purchase the
Convertible Notes in the offering and hold the Convertible Notes as a "capital
asset" within the meaning of Section 1221 of the Code.
ALL PROSPECTIVE PURCHASERS OF THE CONVERTIBLE NOTES ARE ADVISED TO CONSULT
THEIR OWN TAX ADVISORS REGARDING THE FEDERAL, STATE, LOCAL AND FOREIGN TAX
CONSEQUENCES OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF THE CONVERTIBLE
NOTES AND THE COMMON STOCK.
UNITED STATES HOLDERS
As used herein, the term "United States Holder" means a holder of a
Convertible Note that is a citizen or resident of the United States, or that
is a corporation, partnership or other entity created or organized in or under
the laws of the United States or any political subdivision thereof or an
estate or trust the income of which is subject to United States federal income
taxation regardless of its source, and the term "United States" means the
United States of America (including each State and District of Columbia).
STATED INTEREST
Interest on a Convertible Note generally will be includible in the income of
a United States Holder as ordinary income at the time such interest is
received or accrued, in accordance with such Holder's method of accounting for
United States federal income tax purposes.
DIVIDENDS ON THE COMMON STOCK
Dividends paid on the Common Stock generally will be includible in the
income of United States Holders as ordinary income to the extent of the
Company's current or accumulated earnings and profits.
SALES OR OTHER DISPOSITION OF COMMON STOCK
In general, any gain or loss on the sale or exchange of Common Stock by a
United States Holder will be taxable as capital gain or loss in an amount
equal to the difference between the amount realized on the disposition and
such Holder's adjusted tax basis in the shares. Such capital gain will be
long-term capital gain if such Holder held shares of Common Stock for more
than one year.
CONVERSION OF CONVERTIBLE NOTES INTO COMMON STOCK
In general, no gain or loss will be recognized for income tax purposes on a
conversion of the Convertible Notes into shares of Common Stock. However, cash
paid in lieu of a fractional share of Common Stock will likely result in
taxable gain (or loss), which will be capital gain (or loss) to the extent
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that the amount of such cash exceeds (or is exceeded by) the portion of the
adjusted basis of the Convertible Note allocable to such fractional share. The
adjusted basis of shares of Common Stock received on conversion will equal the
adjusted basis of the Convertible Note converted, reduced by the portion of
adjusted basis allocated to any fractional share of Common Stock exchanged for
cash. The holding period of an investor in the Common Stock received on
conversion will include the period during which the converted Convertible
Notes were held.
The conversion price of the Convertible Notes is subject to adjustment under
certain circumstances. See "Description of Convertible Notes--Conversion."
Section 305 of the Code and the Treasury Regulations issued thereunder may
treat United States Holders as having received a constructive distribution,
resulting in ordinary income (subject to a dividends received deduction in the
case of certain corporate holders) to the extent of the Company's current
earnings and profits as of the end of the taxable year to which the
constructive distribution relates and/or accumulated earnings and profits, if
and to the extent that certain adjustments in the Conversion Price that may
occur in limited circumstances (including an adjustment to reflect a taxable
dividend to holders of Common Stock) increase the proportionate interest of a
United States Holder in the fully diluted Common Stock, whether or not such
Holder ever exercises its conversion privilege. Moreover, if there is not a
full adjustment to the Conversion Price of the Convertible Notes to reflect a
stock dividend or other event increasing the proportionate interest of the
holders of outstanding Common Stock in the assets or earnings and profits of
the Company, then such increase in the proportionate interest of the holders
of the Common Stock generally will be treated as a distribution to such
holders, taxable as ordinary income (subject to a dividends received deduction
in the case of certain corporate holders) to the extent of the Company's
current earnings and profits as of the end of the taxable year to which the
constructive distribution relates and/or accumulated earnings and profits.
MARKET DISCOUNT
Investors acquiring Convertible Notes should note that the resale of those
Convertible Notes may be adversely affected by the market discount provisions
of Sections 1276 through 1278 of the Code. Under the market discount rules, if
a United States Holder purchases a Convertible Note at market discount (i.e.,
at a price below its stated redemption price at maturity) in excess of a
statutorily-defined de minimis amount and thereafter recognizes gain upon a
disposition or retirement of the Convertible Note, then the lesser of the gain
recognized or the portion of the market discount that accrued on a ratable
basis (or, if elected, on a constant interest rate basis) generally will be
treated as ordinary income at the time of the disposition. Moreover, any
market discount on a Convertible Note may be taxable to an investor to the
extent of appreciation at the time of certain otherwise non-taxable
transactions (e.g., gifts). Any accrued market discount not previously taken
into income prior to a conversion of a Convertible Note, however, should carry
over to the Common Stock received on conversion and be treated as ordinary
income upon a subsequent disposition of such Common Stock to the extent of any
gain recognized on such disposition. In addition, absent an election to
include market discount in income as it accrues, a holder of a market discount
debt instrument may be required to defer a portion of any interest expense
that otherwise may be deductible on any indebtedness incurred or maintained to
purchase or carry such debt instrument until the holder disposes of the debt
instrument in a taxable transaction.
SALE, EXCHANGE OR RETIREMENT OF CONVERTIBLE NOTES
Each United States Holder generally will recognize gain or loss upon the
sale, exchange, redemption, repurchase, retirement or other disposition (other
than a conversion) of the Convertible Notes measured by the difference (if
any) between (i) the amount of cash and the fair market value of any property
received (except to the extent that such cash or other property is
attributable to the payment of accrued interest not previously included in
income, which amount will be taxable as
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<PAGE>
ordinary income) and (ii) the United States Holder's adjusted tax basis in
those Convertible Notes (including any market discount previously included in
income by the United States Holder). Each holder of Common Stock into which
the Convertible Notes are converted, in general, will recognize gain or loss
upon the sale, exchange, redemption, or other disposition of the Common Stock
measured under rules similar to those described in the preceding sentence for
the Convertible Notes. Special rules may apply to redemptions of Common Stock
which may result in different treatment. Any such gain or loss recognized on
the sale, exchange, redemption, repurchase, retirement or other disposition of
a Convertible Note or share of Common Stock should be capital gain or loss
(except as discussed under "--Market Discount" above), and would be long-term
capital gain or loss if the Convertible Note or the Common Stock had been held
for more than one year at the time of the sale or exchange. An investor's
initial basis in a Convertible Note will be the cash price it paid therefor.
BACKUP WITHHOLDING
A United States Holder may be subject to "backup withholding" at a rate of
31% with respect to certain "reportable payments," including interest
payments, dividend payments and, under certain circumstances, principal
payments on the Convertible Notes. These backup withholding rules apply if the
United States Holder, among other things (i) fails to furnish a social
security number or other taxpayer identification number ("TIN") certified
under penalties of perjury within a reasonable time after the request
therefor, (ii) furnishes an incorrect TIN, (iii) fails to report properly
interest or dividends, or (iv) under certain circumstances, fails to provide a
certified statement, signed under penalties of perjury, that the TIN furnished
is the correct number and that such United States Holder is not subject to
backup withholding. A United States Holder who does not provide the Company
with its correct TIN also may be subject to penalties imposed by the IRS. Any
amount withheld from a payment to a United States Holder under the backup
withholding rules is creditable against the United States Holder's federal
income tax liability, provided the required information is furnished to the
IRS. Backup withholding will not apply, however, with respect to payments made
to certain holders, including corporations, tax-exempt organizations and
certain foreign persons, provided their exemption from backup withholding is
properly established. See "--Certain United Tax Consequences to Non-United
States Holders."
The Company will report to the holders of Convertible Notes and Common Stock
and to the IRS the amount of any "reportable payments" for each calendar year
and the amount of tax withheld, if any, with respect to such payments.
AMORTIZABLE BOND PREMIUM
Generally, if the tax basis of an obligation held as a capital asset exceeds
the amount payable at maturity of the obligation, such excess may constitute
amortizable bond premium that the holder may elect to amortize on a yield to
maturity basis and deduct over the period from his or her acquisition date to
the obligation's maturity date. In no case, however, shall bond premium
include any amount attributable to the conversion feature of a Convertible
Note. A holder who elects to amortize bond premium may reduce his or her tax
basis in the related obligation by the amount of the aggregate deductions
allowable for amortizable bond premium.
In the case of a debt instrument, such as a Convertible Note, that may be
called or submitted for redemption at a premium prior to maturity, an earlier
call date of the debt instrument is treated as the maturity date of the debt
instrument and the amount of bond premium is determined by treating the amount
payable on such call date as the amount payable at maturity if such a
calculation produces a smaller amortizable bond premium than the method
described in the preceding paragraph. If a holder of a debt instrument is
required to amortize and deduct the bond premium by reference to a certain
call date the debt instrument will be treated as maturing on such date for the
amount payable, and, if not redeemed on such date, the debt instrument will be
treated as reissued on such date of the amount
55
<PAGE>
so payable. If a debt instrument purchased at a premium is redeemed prior to
its maturity, a purchaser who has elected to deduct the bond premium may be
permitted to deduct any remaining unamortized bond premium as an ordinary loss
in the taxable year of redemption.
The amortizable bond premium deduction is treated as an offset to interest
income on the related security for federal income tax purposes. Each purchaser
is urged to consult his or her tax advisor as to the consequences of the
treatment of such premium as an offset to interest income for federal income
tax purposes.
CERTAIN UNITED STATES TAX CONSEQUENCES TO NON-UNITED STATES HOLDERS
Interest on Convertible Notes. Interest paid by the Company to a holder of
Convertible Notes that is not a United States Holder (a "Non-United States
Holder") should qualify as "portfolio interest" not subject to United States
federal income or withholding tax pursuant to Sections 871(h), 881(c),
1441(c)(9), and 1442(a) of the Code if such interest is not effectively
connected with the conduct of a trade or business within the United States by
such Non-United States Holder and (i) the Convertible Notes are in "registered
form," as defined in the Code, (ii) the Non-United States Holder does not
actually or constructively own 10% or more of the total voting power of all
voting stock of the Company and is not a controlled foreign corporation with
respect to which the Company is a "related person" within the meaning of the
Code and (iii) the beneficial owner of the Convertible Notes certifies, under
penalties of perjury, that the beneficial owner is not a United States person
and provides the beneficial owner's name and address.
Gain on Disposition of Convertible Notes. A Non-United States Holder will
generally not be subject to United States federal income tax on gain
recognized on a sale, redemption or other disposition of Convertible Note
unless (i) the gain is effectively connected with the conduct of a trade or
business within the United States by the Non-United States Holder, (ii) in the
case of a Non-United States Holder who is a nonresident alien individual and
holds the Convertible Note as a capital asset, such Holder is present in the
United States for 183 or more days in the taxable year and certain other
requirements are met.
Dividends on Common Stock. The Company has not declared or paid any
dividends on shares of Common Stock and does not anticipate paying cash
dividends on its Common Stock in the foreseeable future. In the event that
dividends are paid on shares of Common Stock, except as described below, such
dividends paid to a Non-United States Holder of Common Stock will be subject
to withholding of United States federal income tax at a 30% rate or such lower
rate as may be specified by an applicable income tax treaty, unless the
dividends are effectively connected with the conduct of trade or business of
the Non-United States Holder within the United States. If the dividend is
effectively connected with the conduct of a trade or business of the Non-
United States Holder within the United States, the dividend would be subject
to United States federal income tax on a net income basis at applicable
graduated individual or corporate rates and would be exempt from the 30%
withholding tax described above. Any such effectively connected dividends
received by a foreign corporation may, under certain circumstances, be subject
to an additional "branch profits tax" at a 30% rate or such lower rate as may
be specified by an applicable income tax treaty.
Under current United States Treasury regulations, dividends paid to an
address in a foreign country are presumed to be paid to a resident of such
country for purposes of the withholding discussed above, and, under the
current interpretation of United States Treasury regulations, for purposes of
determining the applicability of a tax treaty rate. Under proposed United
States Treasury regulations, not currently in effect, however, a Non-United
States Holder of Common Stock who wishes to claim the benefit of an applicable
treaty rate would be required to satisfy applicable certification and other
requirements. Certain certification and disclosure requirements must be
complied with in order to be exempt from withholding under the effectively
connected income exemption discussed above.
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<PAGE>
A Non-United States Holder of Common Stock that is eligible for a reduced
rate of United States withholding tax pursuant to a tax treaty may obtain a
refund of any excess amounts currently withheld by filing an appropriate claim
for refund with the IRS.
Information Reporting and Backup Withholding. The Company must report
annually to the IRS and to each Non-United States Holder the amount of
interest and dividends paid to such Holder and the amount of any tax withheld.
These information reporting requirements apply regardless of whether
withholding is required. Copies of the information returns reporting such
interest and dividends and withholding may also be made available to the tax
authorities in the country in which the Non-United States Holder resides under
the provisions of an applicable income tax treaty.
In the case of payments of interest to Non-United States Holders, temporary
United States Treasury regulations provide that the 31% backup withholding tax
and certain information reporting will not apply to such payments with respect
to which either the requisite certification, as described above, has been
received or an exemption has otherwise been established; provided that neither
the Company nor its payment agent has actual knowledge that the holder is a
United States person or that the conditions of any other exemption are not in
fact satisfied. Under such regulations, these information reporting and backup
withholding requirements will apply, however, to the gross proceeds paid to a
Non-United States Holder on the disposition of the Convertible Notes by or
through a United States office of a United States or foreign broker, unless
the Holder certifies to the broker under penalties of perjury as to its name,
address and status as a foreign person or the holder otherwise establishes an
exemption. Information reporting requirements, but not backup withholding,
will also apply to a payment of the proceeds of a disposition of the
Convertible Notes by or through a foreign office of a broker that is a United
States person or a "U.S. related person" unless the broker has documentary
evidence in its files that the owner is a Non-United States Holder and certain
other requirements are met or the holder otherwise establishes an exemption.
For this purpose, a "U.S. related person" is (i) a foreign person 50% or more
of whose gross income from all sources for the three-year period ending with
the close of its taxable year preceding the payment (or for such part of the
period that the broker has been in existence) is derived from activities that
are effectively connected with the conduct of a United States trade or
business or (ii) a controlled foreign corporation, as defined in the Code.
Neither information reporting nor backup withholding generally will apply to a
payment of the proceeds of a disposition of the Convertible Notes by or
through a foreign office of a foreign broker not subject to the preceding
sentence.
United States backup withholding tax generally will not apply to (a) the
payment of dividends paid on Common Stock to a Non-United States Holder at an
address outside the United States or (b) the payment of the proceeds of the
sale of Common Stock to or through the foreign office of a broker. In the case
of the payment of proceeds from such a sale of Common Stock through a foreign
office of a broker that is a United States person or a U.S. related person (as
defined above), however, information reporting (but not backup withholding) is
required with respect to the payment unless the broker has documentary
evidence in its files that the owner is a Non-United States Holder and certain
other requirements are met or the holder otherwise establishes an exemption.
The payment of the proceeds of a sale of shares of Common Stock to or through
a United States office of a broker is subject to information reporting and
possible backup withholding unless the owner certifies its non-United States
status under penalties of perjury or otherwise establishes an exemption.
Backup withholding is not an additional tax. Any amounts withheld under the
backup withholding rules may be refunded or credited against the Non-United
States Holder's United States federal income tax liability, provided that the
required information is furnished to the IRS.
In April 1996, proposed United States Treasury Regulations were issued that,
if adopted, would modify, in certain mainly procedural respects, the current
rules pertaining to the withholding of tax on amounts paid to Non-United
States Holders, the procedures for certifying non-United States status for
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purposes of the withholding and backup withholding rules, and the information
reporting requirements for payments made to Non-United States Holders. These
proposed United States Treasury Regulations generally would apply to payments
made after December 31, 1997.
THE FOREGOING DISCUSSION OF CERTAIN FEDERAL INCOME TAX CONSEQUENCES IS FOR
GENERAL INFORMATION ONLY AND IS NOT TAX ADVICE. ACCORDINGLY, EACH PURCHASER OF
CONVERTIBLE NOTES SHOULD CONSULT HIS OR HER TAX ADVISOR WITH RESPECT TO THE
TAX CONSEQUENCES TO HIM OR HER OF THE ACQUISITION, OWNERSHIP, CONVERSION AND
DISPOSITION OF THE CONVERTIBLE NOTES, INCLUDING THE APPLICABILITY AND EFFECT
OF FEDERAL, STATE, LOCAL, FOREIGN AND OTHER TAX LAWS.
SELLING HOLDERS
The Convertible Notes were originally issued by the Company and sold by the
Initial Purchasers, in a transaction exempt from the registration requirements
of the Securities Act, to persons reasonably believed by such Initial
Purchasers to be "qualified institutional buyers" (as defined in Rule 144A
under the Securities Act), other institutional "accredited investors" (as
defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act) or in
transactions complying with the provisions of Regulation S under the
Securities Act. The Selling Holders (which term includes their transferees,
pledgees, donees or their successors) may from time to time offer and sell
pursuant to this Prospectus any or all of the Convertible Notes and Common
Stock issued upon conversion of the Convertible Notes.
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The following table sets forth information with respect to the Selling
Holders and the respective principal amounts of Convertible Notes and shares
of Common Stock beneficially owned by each Selling Holder. Such information
has been obtained from the Selling Holders or such other sources as the
Company deems reliable. Except as otherwise disclosed herein, none of the
Selling Holders has, or within the past three years has had, any position,
office or other material relationship with the Company or any of its
predecessors or affiliates. Because the Selling Holders may offer all or some
portion of the Convertible Notes or the Common Stock issuable upon conversion
thereof pursuant to this Prospectus, no estimate can be given as to the amount
of the Convertible Notes or the Common Stock issuable upon conversion thereof
that will be held by the Selling Holders upon termination of any such sales.
In addition, the Selling Holders identified below may have sold, transferred
or otherwise disposed of all or a portion of their Convertible Notes, since
the date on which they provided the information regarding their Convertible
Notes, in transactions exempt from the registration requirements of the
Securities Act.
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT OF NUMBER OF
CONVERTIBLE NOTES SHARES OF
BENEFICIALLY OWNED COMMON STOCK
SELLING HOLDER AND OFFERED HEREBY BENEFICIALLY OWNED(1)
-------------- ------------------- ---------------------
<S> <C> <C>
Bank of New York..................... $ 2,100,000 --
Bankers Trust Company................ 15,860,000 --
Bear Stearns Securities Corp. ....... 350,000 --
Bessemer Trust Co. .................. 60,000 --
Boston Safe Deposit & Trust Co. ..... 19,895,000 --
The Chase Manhattan Bank, N.A. ...... 10,790,000 --
Chase Manhattan Bank/Chemical........ 3,170,000 --
United States Trust Company of New
York................................ 510,000 --
U.S. Trust Co. of California......... 500,000 --
Citibank, N.A. ...................... 2,150,000 --
First Tennessee Bank, N.A. (Memphis). 1,135,000 --
Firstar Trust Company................ 450,000 --
Fleet Bank of Massachusetts, N.A. ... 100,000 --
The First National Bank of Boston.... 235,000 --
The First National Bank of Maryland.. 190,000 --
First National Bank of Omaha......... 200,000 --
First Marathon Securities Limited.... 500,000
Investors Bank & Trust/M.F. Custody.. 680,000 --
Lehman Brothers, Inc. ............... 1,100,000 --
Lehman Brothers International
Europe--Prime Broker (LGSI)......... 1,100,000 --
Mercantile, Safe Deposit and Trust
Company............................. 3,540,000 --
Merrill Lynch, Pierce, Fenner & Smith
Safekeeping......................... 500,000 --
Morgan Stanley & Co., Incorporated... 3,500,000 --
Northern Trust Co.--Trust............ 1,895,000 --
Paine, Webber, Inc. ................. 1,965,000 --
PNC National Association............. 85,000 --
Prudential Securities Incorporated... 700,000 --
Salomon Brothers Inc................. 2,385,000 --
SBC Warburg.......................... 250,000 --
SSB--Custodian....................... 4,115,000
Wells Fargo Bank, National
Association......................... 6,240,000 --
</TABLE>
- --------
(1) Does not include shares of Common Stock issuable on the conversion of
Convertible Notes.
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Salomon Brothers Inc has from time to time provided investment banking and
financial advisory services to the Company, including, but not limited to,
acting as an Initial Purchaser, participating as a managing underwriter in the
initial public offering of the Company's Common Stock in August 1995, and
issuing a fairness opinion in connection with the Acquisition, and may in the
future provide services to the Company, for which it has received or expects
to receive customary compensation.
PLAN OF DISTRIBUTION
The Convertible Notes and Common Stock offered hereby may be sold from time
to time to purchasers directly by the Selling Holders. Alternatively, the
Selling Holders may from time to time offer the Convertible Notes and Common
Stock to or through underwriters, broker/dealers or agents, who may receive
compensation in the form of underwriting discounts, concessions or commissions
from the Selling Holders or the purchasers of Convertible Notes and Common
Stock for whom they may act as agents. The Selling Holders and any
underwriters, broker/dealers or agents that participate in the distribution of
Convertible Notes and Common Stock may be deemed to be "underwriters" within
the meaning of the Securities Act and any profit on the sale of Convertible
Notes and Common Stock by them and any discounts, commissions, concessions or
other compensation received by any such underwriter, broker/dealer or agent
may be deemed to be underwriting discounts and commissions under the
Securities Act.
The Convertible Notes and Common Stock issuable upon conversion thereof may
be sold from time to time in one or more transactions at fixed prices, at
prevailing market prices at the time of sale, at varying prices determined at
the time of sale or at negotiated prices. The sale of the Convertible Notes
and the Common Stock issuable upon conversion thereof may be effected in
transactions (which may involve crosses or block transactions) (i) on any
national securities exchange or quotation service on which the Convertible
Notes or the Common Stock may be listed or quoted at the time of sale, (ii) in
the over-the-counter market, (iii) in transactions otherwise than on such
exchanges or in the over-the-counter market or (iv) through the writing of
options. At the time a particular offering of the Convertible Notes or the
Common Stock is made, a Prospectus Supplement, if required, will be
distributed which will set forth the aggregate amount and type of Convertible
Notes and Common Stock being offered and the terms of the offering, including
the name or names of any underwriters, broker/dealers or agents, any
discounts, commissions and other terms constituting compensation from the
Selling Holders and any discounts, commissions or concessions allowed or
reallowed or paid to broker/dealers.
To comply with the securities laws of certain jurisdictions, if applicable,
the Convertible Notes and Common Stock will be offered or sold in such
jurisdictions only through registered or licensed brokers or dealers. In
addition, in certain jurisdictions the Convertible Notes and Common Stock may
not be offered or sold unless they have been registered or qualified for sale
in such jurisdictions or an exemption from registration or qualification is
available and is complied with.
Under applicable rules and regulations under the Exchange Act, any person
engaged in a distribution of the Convertible Notes or the Common Stock may not
simultaneously engage in market-making activities with respect to such
securities for a period of two or nine business days prior to the commencement
of such distribution. In addition to and without limiting the foregoing, each
Selling Holder and any other person participating in a distribution will be
subject to applicable provisions of the Exchange Act and the rules and
regulations thereunder, including without limitation Rules 10b-6 and 10b-7,
which provisions may limit the timing of purchases and sales of any of the
securities by the Selling Holders or any such other person. All of the
foregoing may affect the marketability of the Convertible Notes and the Common
Stock and the brokers' and dealers' ability to engage in market-making
activities with respect to these securities.
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Pursuant to the Registration Agreement, all expenses of the registration of
the Convertible Notes and Common Stock will be paid by the Company, including,
without limitation, Commission filing fees and expenses of compliance with
state securities or "blue sky" laws; provided, however, that the Selling
Holders will pay all underwriting discounts and selling commissions, if any.
The Selling Holders will be indemnified by the Company against certain civil
liabilities, including certain liabilities under the Securities Act, or will
be entitled to contribution in connection therewith. The Company will be
indemnified by the Selling Holders against certain civil liabilities,
including certain liabilities under the Securities Act, or will be entitled to
contribution in connection therewith.
LEGAL MATTERS
The validity of the Convertible Notes, and the shares of Common Stock
issuable upon conversion thereof, and certain other legal matters relating to
the offering of the Convertible Notes in this Prospectus will be passed upon
by Riordan & McKinzie, a Professional Corporation, Los Angeles, California.
EXPERTS
The consolidated financial statements of Plasma & Materials Technologies,
Inc. included in the Proxy Statement and the Company's Annual Report on Form
10-K for the fiscal year ended December 31, 1995 and the combined financial
statements of Electrotech Equipments Limited and Electrotech Limited as of
June 30, 1995 and 1996 and for each of the three years in the period ended
June 30, 1996 included in the Proxy Statement have been audited by Ernst &
Young LLP and Ernst & Young--Chartered Accountants, respectively, independent
auditors, as set forth in their reports thereon included therein and
incorporated herein by reference. Such financial statements have been
incorporated herein by reference in reliance upon such reports given upon the
authority of such firm as experts in accounting and auditing.
61
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PMT
Condensed Consolidated Balance Sheets at September 30, 1996 (unaudited)
and December 31, 1995.................................................... F-2
Unaudited Condensed Consolidated Statements of Operations for the Three
Months ended September 30, 1996 and 1995 and for the Nine Months ended
September 30, 1996 and 1995.............................................. F-3
Unaudited Condensed Consolidated Statements of Cash Flows for the Nine
Months ended September 30, 1996 and 1995................................. F-4
Notes to Unaudited Condensed Consolidated Financial Statements............ F-5
ELECTROTECH
Unaudited Condensed Combined Statements of Income--Three Months ended
September 30, 1996 and 1995 ............................................. F-8
Unaudited Condensed Combined Balance Sheets--As of September 30, 1996 and
1995..................................................................... F-9
Unaudited Condensed Combined Cash Flow Statements--Three Months ended
September 30, 1996 and 1995 ............................................. F-10
Notes to the Unaudited Condensed Combined Financial Statements............ F-11
</TABLE>
F-1
<PAGE>
PLASMA & MATERIALS TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
SEPTEMBER DECEMBER
30, 1996 31, 1995(1)
--------- -----------
(UNAUDITED)
<S> <C> <C>
ASSETS
------
Current assets:
Cash and cash equivalents......................... $ 7,449,643 $24,770,363
Short-term investments............................ 12,559,216 13,992,109
Accounts receivable............................... 16,519,423 8,423,272
Inventories....................................... 15,765,795 5,453,835
Demonstration inventory........................... 4,478,208 1,367,233
Prepaid expenses.................................. 494,919 223,970
----------- -----------
Total current assets............................ 57,267,204 54,230,782
Property, equipment and leasehold improvements, net
of accumulated depreciation and amortization 9,924,486 4,576,043
Other assets........................................ 2,962,917 486,182
----------- -----------
Total assets.................................... $70,154,607 $59,293,007
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
Current liabilities:
Accounts payable and accrued expenses............. $11,565,613 $ 4,023,705
Warranty expense.................................. 814,306 449,295
Accrued salaries and related liabilities.......... 287,244 228,998
Current portion of capital lease obligations...... 482,384 491,561
----------- -----------
Total current liabilities....................... 13,149,547 5,193,559
Capital lease obligations, less current portion..... 336,430 686,230
Commitments and contingencies
Shareholders' equity:
Preferred Stock undesignated:
Authorized shares--20,000,000
Issued and outstanding--None
Convertible Preferred Stock (Series A and B), no
par value
Authorized shares--None
Issued and outstanding--None
Common Stock, no par value:
Authorized shares--50,000,000
Issued and outstanding--8,692,264 at September
30, 1996 and 8,659,843 at December 31, 1995..... 61,108,385 60,975,483
Accumulated deficit............................... (4,439,755) (7,562,265)
----------- -----------
Total shareholders' equity...................... 56,668,630 53,413,218
----------- -----------
Total liabilities and shareholders' equity...... $70,154,607 $59,293,007
=========== ===========
</TABLE>
- --------
(1)The Balance Sheet at December 31, 1995 has been derived from the audited
financial statements at that date but does not include all of the information
and footnotes required by generally accepted accounting principles for
complete financial statements.
See notes to unaudited condensed consolidated financial statements.
F-2
<PAGE>
PLASMA & MATERIALS TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
--------------------------- ---------------------------
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
1996 1995 1996 1995
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Revenues:
Product sales......... $7,904,906 $6,505,429 $25,851,165 $13,597,325
License revenues...... -- -- -- 400,000
Contract revenues..... 918,449 -- 1,767,127 --
---------- ---------- ----------- -----------
8,823,355 6,505,429 27,618,292 13,997,325
Costs and expenses:
Cost of goods sold.... 3,863,568 3,554,446 12,991,004 7,301,202
Research and
development.......... 1,992,661 1,152,237 5,449,346 3,195,472
Selling, general and
administrative....... 2,755,340 1,537,396 7,125,153 4,272,689
---------- ---------- ----------- -----------
8,611,569 6,244,079 25,565,503 14,769,363
---------- ---------- ----------- -----------
Income (loss) from
operations............. 211,786 261,350 2,052,789 (772,038)
Other:
Interest income
(expense), net....... 293,880 115,144 1,086,698 (32,774)
---------- ---------- ----------- -----------
Income (loss) before
income tax
provision.............. 505,666 376,494 3,139,487 (804,812)
Income tax provision.... 4,495 -- 16,977 800
---------- ---------- ----------- -----------
Net income (loss)....... $ 501,171 $ 376,494 $ 3,122,510 $ (805,612)
========== ========== =========== ===========
Net income (loss) per
share:
Primary............... $ 0.06 $ 0.06 $ 0.34 $ (0.15)
========== ========== =========== ===========
Average common shares
and equivalents........ 9,103,103 6,845,824 9,120,709 5,495,391
========== ========== =========== ===========
</TABLE>
See notes to unaudited condensed consolidated financial statements.
F-3
<PAGE>
PLASMA & MATERIALS TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
----------------------------
SEPTEMBER 30, SEPTEMBER 30,
1996 1995
------------- -------------
<S> <C> <C>
OPERATING ACTIVITIES
Net income (loss).................................. $ 3,122,510 $ (805,612)
Adjustments to reconcile net income (loss) to net
cash used in operating activities:
Depreciation and amortization.................... 1,199,912 867,333
Changes in operating assets and liabilities:
Accounts receivable............................ (8,096,151) (5,090,037)
Inventories.................................... (10,311,960) 1,059,378
Demonstration inventory........................ (3,110,975) --
Other current assets........................... -- (202,550)
Prepaid expenses............................... (270,949) (77,921)
Accounts payable and other accrued expenses.... 7,965,165 (477,224)
Other current liabilities...................... -- 80,918
------------ -----------
Net cash used in operating activities.............. (9,502,448) (4,645,715)
INVESTING ACTIVITIES
Purchases of property, equipment and leasehold
improvements...................................... (6,548,355) (444,433)
Proceeds from sales of short-term investments...... 19,914,800 --
Purchases of short-term investments................ (18,481,907) --
Other assets....................................... (2,476,735) --
------------ -----------
Net cash used in investing activities.............. (7,592,197) (444,433)
FINANCING ACTIVITIES
Borrowings under line of credit.................... -- 1,810,708
Repayments of line of credit....................... -- (3,810,708)
Proceeds from sale of Preferred Stock.............. -- 3,366,204
Proceeds from Inital Public Offering (Common
Stock), (before deducting $1,000,000 for related
expenses during the nine months ended September
30, 1995)......................................... -- 41,175,750
Proceeds from sale of Common Stock................. 132,902 41,719
Payments on capital lease obligations.............. (358,977) (452,526)
------------ -----------
Net cash provided by (used in) financing
activities........................................ (226,075) 42,131,147
------------ -----------
Net increase (decrease) in cash and cash
equivalents....................................... (17,320,720) 37,040,999
Cash and cash equivalents at beginning of period... 24,770,363 3,563,753
------------ -----------
Cash and cash equivalents at end of period......... $ 7,449,643 $40,604,752
============ ===========
</TABLE>
See notes to unaudited condensed consolidated financial statements.
F-4
<PAGE>
PLASMA & MATERIALS TECHNOLOGIES, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1996
NOTE A--BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q and
Article 10 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of management, all
adjustments (consisting of normal recurring accruals) considered necessary for
a fair presentation have been included. The operating results for the nine
months ended September 30, 1996 are not necessarily indicative of the results
that may be expected for the year ended December 31, 1996. For further
information, refer to the consolidated financial statements and footnotes
thereto included in the Proxy Statement.
NOTE B--INVENTORIES
Inventories are stated at the lower of cost (first-in, first-out method) or
market. The components of inventory consist of the following:
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1996 1995
------------- ------------
<S> <C> <C>
Components........................................ $10,186,046 $3,774,458
Work in process................................... 3,943,618 1,611,382
Finished goods.................................... 1,636,131 67,995
----------- ----------
15,765,795 5,453,835
Demonstration inventory........................... 4,478,208 1,367,233
----------- ----------
$20,244,003 $6,821,068
=========== ==========
</TABLE>
Demonstration inventory or evaluation units represent completed systems
located at certain strategic customer sites or at the Company's facilities.
The Company provides these demonstration systems at no charge for a specified
evaluation period. All operating costs incurred during the evaluation period
are paid by the customer. At the conclusion of the agreed upon evaluation
period, provided that the equipment performs to required specifications,
management expects that the customer, while not obligated to do so, will
purchase the system. Demonstration inventory is stated at lower of cost or
estimated net realizable value. Demonstration inventory is not amortized.
NOTE C--PMT CVD PARTNERS, L.P.
On March 29, 1996, the Company entered into a number of agreements with PMT
CVD Partners, L.P. (the "Limited Partnership") and the limited partners
thereof (the "Limited Partners"). The Limited Partnership was formed to fund
research and development costs and expenses relating to chemical vapor
deposition ("CVD") technology and applications. An aggregate of approximately
$5,350,000 was invested in the Limited Partnership to fund such research and
development efforts. The Limited Partnership owns the rights to the technology
developed. PMT has entered into a license agreement with the Limited
Partnership whereby PMT is obligated to pay stated royalties to the Limited
Partnership on sales of related products, and the royalty percentage will vary
based on the geographic location of the sale. There is no provision for
royalty payments to the Limited Partners in fiscal 1996. PMT has been granted
an exclusive option to purchase all of the Limited Partners' interest in the
Limited Partnership, based on an established purchase price formula which
terminates PMT's obligation under the license agreement. PMT may exercise such
option at its sole discretion.
F-5
<PAGE>
PLASMA & MATERIALS TECHNOLOGIES, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS--(CONTINUED)
NOTE C--PMT CVD PARTNERS, L.P.--(CONTINUED)
PMT has agreed to provide certain personnel to the Limited Partnership to
perform such research and development activities. PMT will be paid for such
services at an amount equal to its actual direct costs, as defined, plus a
stated percentage of such costs. During the quarter and nine months ended
September 30, 1996, the amount of research and development costs incurred,
including the stated percentage of 250% of direct costs, with respect to CVD
technology and applications was $918,449 and $1,767,127, respectively and is
reflected in contract revenue in the accompanying statement of operations.
NOTE D--IMPACT ON FINANCIAL STATEMENTS OF RECENTLY ISSUED ACCOUNTING STANDARDS
In March 1995, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 121, Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of
("SFAS No. 121"), which will be effective for the Company's fiscal year ending
December 31, 1996. SFAS No. 121 requires impairment losses to be recorded on
long-lived assets used in operations when indicators of impairment are
presented and the undiscounted cash flows estimated to be generated by those
assets are less than the assets' carrying amount. SFAS No. 121 also addresses
the accounting for long-lived assets that are expected to be disposed of. The
Company adopted SFAS No. 121 for the annual reporting period of fiscal 1996,
during the first quarter ended March 31, 1996. No adjustments are required
with respect to such action.
In October 1995, the FASB issued Statement of Financial Accounting Standards
No. 123, Accounting for Awards of Stock-Based Compensation to Employees ("SFAS
No. 123"), which will be effective for the Company's fiscal year ending
December 31, 1996. SFAS No. 123 provides alternative accounting treatment to
APB No. 25 with respect to stock-based compensation and requires certain
additional disclosures, including disclosures if the Company elects not to
adopt the accounting requirements of SFAS No. 123. The Company intends to make
additional disclosure requirements of SFAS No. 123 for the annual reporting
period of fiscal 1996, but will elect to continue to measure compensation
costs following present accounting rules under APB No. 25. Consequently, the
Company will provide pro forma disclosures of what net income and earnings per
share would have been had the fair market value method of SFAS No. 123 been
used for the relevant periods.
NOTE E--INCOME TAXES
The provision for income taxes at September 30, 1996 differs from the
statutory federal rate of 35% due to the reduction of the valuation allowance
attributed to the utilization of the net operating loss carryforwards.
NOTE F--NET INCOME (LOSS) PER SHARE
Net income (loss) per share is computed using the weighted average number of
shares of Common Stock outstanding. Common equivalent shares from stock
options and warrants (using the treasury stock method) have been included in
the computation when dilutive, and common equivalent shares from the
redeemable convertible Preferred Stock and convertible Preferred Stock which
converted into Common Stock in connection with the Company's Initial Public
Offering are included as if converted at the original date of issuance, even
though inclusion is anti-dilutive, for the three and nine months ended
September 30, 1995. Pursuant to the Securities and Exchange Commission (SEC)
Staff Accounting Bulletins, all common and common equivalent shares issued by
the Company at an
F-6
<PAGE>
PLASMA & MATERIALS TECHNOLOGIES, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS--(CONTINUED)
NOTE F--NET INCOME (LOSS) PER SHARE--(CONTINUED)
exercise price below the Initial Public Offering price of $14.00 per share
during the twelve-month period prior to the offering (cheap stock) have been
included in the calculation as if they were outstanding for the three and nine
months ended September 30, 1995 (using the treasury stock method at the Initial
Public Offering price of $14.00 per share and the if-converted method for
redeemable convertible Preferred Stock and convertible Preferred Stock). For
the nine months ended September 30, 1996, such cheap stock shares were not
included in the calculation.
NOTE G--REVOLVING AND EQUIPMENT LINE OF CREDIT
On June 5, 1996, the Company renewed its line of credit agreement (the
"Agreement") with a commercial bank which provides for borrowing up to the
lesser of 80% of eligible accounts receivable or $3,000,000. Interest on the
line of credit is payable monthly at prime (8.25% at September 30, 1996) plus
0.5%. The Agreement also provides for equipment loans which allows the Company
to borrow up to the lesser of 80% of eligible equipment purchases or
$3,000,000, subject to certain limits. Interest on borrowings under the
equipment line is payable monthly at prime plus 1.5%. At September 30, 1996,
there were no balances outstanding on either of these two loans.
NOTE H--SUBSEQUENT EVENTS
On November 15, 1996, the Company consummated the acquisition of Electrotech
Limited and Electrotech Equipments Limited, U.K. corporations, for $75,000,000
cash and the issuance of 5,600,000 shares of Common Stock for a total purchase
price of $145,700,000 excluding anticipated direct transaction and financing
related costs of $9,300,000 and $3,200,000, respectively. Included in other
assets as of September 30, 1996 is approximately $2,280,000 of direct
transaction related costs. The cash portion of the Acquisition was financed
through the issuance, on October 7, 1996, of $86,250,000 of 7 1/8% Convertible
Subordinated Notes Due 2001.
In addition, on November 15, 1996 the Company entered into a senior secured
credit facility with certain domestic and U.K. lenders (the "Working Capital
Facility") which permits the Company and its subsidiaries, including
Electrotech, to borrow an aggregate of up to $35 million, subject to certain
borrowing base limitations, based on eligible accounts receivable. As of
November 15, 1996 the Working Capital Facility would have permitted aggregate
borrowings of approximately $21.6 million. The Working Capital Facility
replaces the existing revolving credit line which was terminated. Borrowings
under the Working Capital Facility bear interest at either the base rate, or
the Euro-rate, as each is defined in the Working Capital Facility, plus various
percentages, ranging from 0.00% to 3.00% depending on various financial ratios
achieved by the Company. The Working Capital Facility is scheduled to terminate
on November 15, 1999.
F-7
<PAGE>
ELECTROTECH EQUIPMENTS LIMITED AND ELECTROTECH LIMITED
UNAUDITED CONDENSED COMBINED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
THREE MONTHS ENDED
SEPTEMBER 30,
------------------------------
1996 1995
-------------- --------------
(IN THOUSANDS OF
BRITISH POUNDS)
<S> <C> <C>
SALES
Continuing operations........................... (Pounds)10,197 (Pounds) 7,761
-------------- --------------
COST OF SALES................................... 5,218 3,760
-------------- --------------
GROSS PROFIT.................................... 4,979 4,001
Research and development costs.................. 1,702 1,239
Administrative expenses......................... 2,321 1,861
-------------- --------------
OPERATING PROFIT................................ 956 901
-------------- --------------
Interest receivable............................. 78 76
Interest payable................................ 289 222
-------------- --------------
PROFIT ON ORDINARY ACTIVITIES BEFORE TAXATION... 745 755
Tax on profit on ordinary activities............ 332 344
-------------- --------------
PROFIT FOR THE FINANCIAL QUARTER................ 413 411
Retained profit brought forward................. 24,302 18,011
Exchange difference on opening balance.......... (21) 86
Amortization of revaluation surplus............. 13 13
-------------- --------------
RETAINED PROFIT AT THE END OF THE FINANCIAL
QUARTER........................................ (Pounds)24,707 (Pounds)18,521
============== ==============
</TABLE>
A summary of the significant adjustments to profit for the financial quarter
(net income) which would be required if US generally accepted accounting
principles had been applied instead of UK generally accepted accounting
principles is set forth in the Notes to the Unaudited Condensed Combined
Financial Statements.
The Notes to the Unaudited Condensed Combined Financial Statements form part
of these Unaudited Condensed Combined Financial Statements.
F-8
<PAGE>
ELECTROTECH EQUIPMENTS LIMITED AND ELECTROTECH LIMITED
UNAUDITED CONDENSED COMBINED BALANCE SHEETS
<TABLE>
<CAPTION>
AS OF SEPTEMBER 30,
-----------------------------
1996 1995
-------------- --------------
(IN THOUSANDS
OF BRITISH POUNDS)
<S> <C> <C>
ASSETS
FIXED ASSETS
Intangible assets................................. (Pounds) 16 (Pounds) 25
Tangible assets................................... 12,494 8,957
-------------- --------------
12,510 8,982
CURRENT ASSETS
Inventories....................................... 16,705 14,529
Accounts receivable............................... 13,736 12,315
Other debtors and prepayments..................... 2,795 2,794
Cash.............................................. 1,681 3,262
-------------- --------------
TOTAL ASSETS...................................... (Pounds)47,427 (Pounds)41,882
============== ==============
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Bank loans and overdrafts......................... 6,825 5,418
Trade accounts payable............................ 4,144 4,326
Corporate tax..................................... 3,566 4,060
Accruals and deferred income...................... 1,489 1,229
Other current liabilities......................... 3,046 4,192
-------------- --------------
19,070 19,225
-------------- --------------
NONCURRENT LIABILITIES
Long-term borrowings.............................. 400 800
Corporate tax..................................... 203 574
Other noncurrent liabilities...................... 374 140
-------------- --------------
977 1,514
-------------- --------------
PROVISION FOR LIABILITIES AND CHARGES
Deferred taxation................................. 367 291
-------------- --------------
TOTAL LIABILITIES................................. 20,414 21,030
-------------- --------------
SHAREHOLDERS' EQUITY
Share capitals.................................... 11 11
Revaluation reserves.............................. 2,295 2,320
Profit and loss account........................... 24,707 18,521
-------------- --------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY........ (Pounds)47,427 (Pounds)41,882
============== ==============
</TABLE>
A summary of the significant adjustments to shareholder's equity which would
be required if US generally accepted accounting principles had been applied
instead of UK generally accepted accounting principles is set forth in the
Notes to the Unaudited Condensed Combined Financial Statements.
The Notes to the Unaudited Condensed Combined Financial Statements form part
of these Unaudited Condensed Combined Financial Statements.
F-9
<PAGE>
ELECTROTECH EQUIPMENTS LIMITED AND ELECTROTECH LIMITED
UNAUDITED CONDENSED COMBINED CASH FLOW STATEMENTS
<TABLE>
<CAPTION>
THREE MONTHS ENDED
SEPTEMBER 30,
-----------------------------
1996 1995
------------- --------------
(IN THOUSANDS OF
BRITISH POUNDS)
<S> <C> <C>
NET CASH INFLOW FROM OPERATING ACTIVITIES....... (Pounds)2,350 (Pounds) 147
------------- --------------
RETURNS ON INVESTMENTS AND SERVICING OF FINANCE
Interest received............................... 78 76
Interest paid................................... (289) (222)
------------- --------------
NET CASH OUTFLOW FROM RETURNS ON INVESTMENTS AND
SERVICING OF FINANCE........................... (211) (146)
------------- --------------
TAXATION
UK corporate tax (paid)/recovered............... (119) 74
------------- --------------
TAX (PAID)/RECOVERED............................ (119) 74
------------- --------------
INVESTING ACTIVITIES
Payments to acquire tangible fixed assets....... (1,122) (1,195)
------------- --------------
NET CASH OUTFLOW FROM INVESTING ACTIVITIES...... (1,122) (1,195)
------------- --------------
NET CASH INFLOW/(OUTFLOW) BEFORE FINANCING...... 898 (1,120)
------------- --------------
FINANCING
Capital elements of finance lease payments...... (12) (13)
------------- --------------
NET CASH OUTFLOW FROM FINANCING................. (12) (13)
------------- --------------
INCREASE/(DECREASE) IN CASH AND CASH
EQUIVALENTS.................................... (Pounds) 886 (Pounds)(1,133)
============= ==============
</TABLE>
A summary of the cash flow statement under US generally accepted accounting
principles is set forth in the Notes to the Unaudited Condensed Combined
Financial Statements.
The Notes to the Unaudited Condensed Combined Financial Statements form part
of these Unaudited Condensed Combined Financial Statements.
F-10
<PAGE>
ELECTROTECH EQUIPMENTS LIMITED AND ELECTROTECH LIMITED
NOTES TO THE UNAUDITED CONDENSED COMBINED FINANCIAL STATEMENTS
AS AT 30 SEPTEMBER 1996
BASIS OF PREPARATION AND ACCOUNTING POLICIES
These condensed financial statements are unaudited; however, in the opinion
of the directors, all adjustments (consisting of normal recurring adjustments)
necessary for a fair presentation have been made. Operating results for the
three month period ended 30 September, 1996 are not necessarily indicative of
future results. These statements should be read in conjunction with the
consolidated financial statements and notes thereto for the year ended 30 June
1996 included in the Proxy Statement.
DIFFERENCES BETWEEN ACCOUNTING PRINCIPLES GENERALLY ACCEPTED IN THE UNITED
KINGDOM AND THE UNITED STATES
The combined financial statements are prepared under accounting principles
generally accepted in the United Kingdom ("UK GAAP") which differ in certain
respects from United States generally accepted principles ("US GAAP").
Differences estimated to have a significant effect on combined net income and
shareholders equity due set out below.
Revaluation of land and buildings
Certain land and buildings were revaluated in 1991 on the basis of their
value to the business and they are included in these combined financial
statements at that valuation less subsequent depreciation. Under US GAAP, such
revaluations would not be reflected in the financial statements. Land and
buildings would be included at historical cost under US GAAP with depreciation
computed on such cost.
Deferred taxation
Provision is made for deferred taxation using liability method on all
material timing differences to the extent that it is probable that the
liabilities will crystallise in the foreseeable future. Under US GAAP, as set
out in Statement of Financial Accounting Standards No. 109" Accounting for
Income Taxes", deferred taxation is generally provided on a full liability
basis on all temporary differences.
Pensions
Under UK GAAP the cost of providing pensions is accounted for over the
working lives of the employees in the scheme. Under US GAAP, FAS 87 requires
that a specific actuarial approach is applied for measuring the pension cost,
the objective of which is to recognise in each accounting period the cost of
providing the pension benefits earned by employees in that period.
The following is a summary of the effect of the above differences on profit
for the financial year (net income) and equity shareholders' funds:
<TABLE>
<CAPTION>
QUARTER ENDED
-------------------------
30 SEPTEMBER 30 SEPTEMBER
1996 1995
(Pounds)'000 (Pounds)'000
------------ ------------
<S> <C> <C>
Net income:
Profit for the financial quarter as reported...... 413 411
Adjustments....................................... -- --
Depreciation adjustments as a result of
revaluation...................................... 13 13
--- ---
Net income as adjusted to accord with US GAAP..... 426 424
=== ===
</TABLE>
F-11
<PAGE>
ELECTROTECH EQUIPMENTS LIMITED AND ELECTROTECH LIMITED
NOTES TO THE UNAUDITED CONDENSED COMBINED FINANCIAL STATEMENTS
AS AT 30 SEPTEMBER 1996
<TABLE>
<CAPTION>
AS AT 30 SEPTEMBER
1996
(Pounds)'000
------------------
<S> <C>
Shareholders' Equity
Shareholders' equity as reported............................. 27,013
Revaluation.................................................. (2,542)
Depreciation adjustment as a result of revaluation........... 247
Deferred taxation............................................ (246)
Pensions..................................................... (625)
------
Shareholders' equity as adjusted to accord with US GAAP...... 23,847
======
</TABLE>
The categories of cash flow activity under US GAAP can be summarised as
follows:
<TABLE>
<CAPTION>
3 MONTHS ENDED
-------------------------
30 SEPTEMBER 30 SEPTEMBER
1996 1995
(Pounds)'000 (Pounds)'000
------------ ------------
<S> <C> <C>
Cash inflows from operating activities................ 2,020 75
Cash outflows from investing activities............... (1,122) (1,195)
Cash outflows from financing activities............... (12) (13)
------ ------
Increase/(decrease) in cash and cash equivalents...... 886 (1,133)
Cash and cash equivalents at 1 July................... (5,630) (623)
------ ------
Cash and cash equivalents at 30 September............. (4,744) (1,756)
====== ======
</TABLE>
F-12
<PAGE>
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFOR-
MATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PRO-
SPECTUS IN CONNECTION WITH THE OFFER MADE BY THIS PROSPECTUS AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING
BEEN AUTHORIZED BY THE COMPANY OR THE SELLING HOLDERS. NEITHER THE DELIVERY OF
THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES,
CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE
COMPANY SINCE THE DATE AS OF WHICH INFORMATION IS GIVEN IN THIS PROSPECTUS.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER OR SOLICITATION BY ANYONE IN ANY
JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED OR IN WHICH
THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO OR TO
ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH SOLICITATION.
---------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information..................................................... 2
Information Incorporated by Reference..................................... 3
Prospectus Summary........................................................ 4
Risk Factors.............................................................. 10
Use of Proceeds........................................................... 19
Price Range of Common Stock and Dividend Policy........................... 19
Capitalization............................................................ 20
Selected Consolidated Financial Data of PMT............................... 21
Management's Discussion and Analysis of Financial Condition and Results of
Operations of PMT........................................................ 22
Selected Combined Financial Data of Electrotech........................... 25
Management's Discussion and Analysis of Financial Condition and Results of
Operations of Electrotech................................................ 26
Pro Forma Financial Information........................................... 29
Description of Convertible Notes.......................................... 34
Description of Capital Stock.............................................. 51
Liability and Indemnification of Directors and Officers................... 52
Transfer Agent and Registrar.............................................. 52
Certain Federal Income Tax Considerations................................. 53
Selling Holders........................................................... 58
Plan of Distribution...................................................... 60
Legal Matters............................................................. 61
Experts................................................................... 61
</TABLE>
$86,250,000
PLASMA & MATERIALS
TECHNOLOGIES, INC.
7 1/8% CONVERTIBLE
SUBORDINATED NOTES
DUE 2001
AND
5,516,470 SHARES OF
COMMON STOCK
[LOGO OF PLASMA & MATERIALS TECHNOLOGIES, INC.]
PROSPECTUS
DATED DECEMBER , 1996
<PAGE>
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the various expenses to be paid by the
registrant in connection with the sale and distribution of the securities
being registered, other than underwriting discounts and commissions. All of
the amounts shown are estimates except the Securities and Exchange Commission
registration fee and the Nasdaq additional listing fee.
<TABLE>
<S> <C>
SEC registration fee............................................. $26,137
Nasdaq additional listing fee.................................... 17,500
Printing and engraving expenses.................................. *
Accounting fees and expenses..................................... *
Fees and expenses of Trustee and Transfer Agent.................. *
Legal fees and expenses.......................................... *
Miscellaneous fees............................................... *
-------
Total........................................................... $ *
=======
</TABLE>
- --------
* To be filed by amendment
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The California Corporations Code provides for the indemnification of
directors, officers, employees and agents of the Company under certain
circumstances set forth in Section 317. Section 317 permits a corporation to
indemnify its agents, typically directors and officers, for expenses incurred
or settlements or judgments paid in connection with certain legal proceedings.
Only those legal proceedings arising out of such persons' actions as agents of
the corporation may be grounds for indemnification.
Whether or not indemnification may be paid in a particular case depends upon
whether the agent wins, loses or settles the suit and upon whether a third
party or the corporation itself is the plaintiff. The section provides for
mandatory indemnification, no matter who the plaintiff is, when an agent is
successful on the merits of a suit. In all other cases, indemnification is
permissive.
If the agent loses or settles a suit brought by a third party, he or she may
be indemnified for expenses incurred and settlements or judgments paid. Such
indemnification may be authorized upon finding that the agent acted in good
faith and in a manner he or she reasonably believed to be in the best
interests of the corporation.
If the agent loses or settles a suit brought by or on behalf of the
corporation, his or her rights to indemnification is more limited. If he or
she is adjudged to be liable to the corporation, the court in which such
proceeding was held must determine whether it would be fair and reasonable to
indemnify him or her for expenses which such court shall determine. If the
agent settles such a suit with court approval, he or she may be indemnified
for expenses incurred upon a finding that the agent acted in good faith and in
a manner he or she reasonably believed to be in the best interests of the
corporation and, in addition, that he or she acted with the care, including
reasonable inquiry, of an ordinarily prudent person.
The indemnification discussed above may be authorized by a majority vote of
the disinterested directors or shareholders (the person to be indemnified is
excluded from voting his or her shares) or the court in which the proceeding
was brought. The Company's Board of Directors makes all decisions regarding
the indemnification of its officers and directors on a case-by-case basis.
Any provision in the Company's Articles of Incorporation or Bylaws or
contained in a shareholder or director resolution that indemnifies its
officers or directors must be consistent with Section 317.
II-1
<PAGE>
Moreover, such a provision may prohibit permissive, but not mandatory,
indemnification as described above. Last, a corporation has the power to
purchase indemnity insurance for its agents even if it would not have the
power to indemnify them.
The Company's Articles of Incorporation authorize the Board of Directors to
provide indemnification of its agents through bylaw provisions or
indemnification agreements, or both, in excess of the indemnification
otherwise permitted by Section 317, subject to the limits on such excess
indemnification set forth in Section 204 of the California Corporations Code.
The Company's bylaws provide that the Company will indemnify its directors and
officers to the fullest extent not prohibited by law.
Reference is made to the Registration Agreement (attached as Exhibit 4.5 to
this Registration Statement) which provides for indemnification by the Selling
Holders of the directors and officers of the Company signing the Registration
Statement and certain controlling persons of the Company against certain
liabilities, including those arising under the Securities Act.
The directors and officers of the Company and its subsidiaries are insured
under certain insurance policies against claims made during the period of the
policies against liabilities arising out of claims for certain acts in their
capacities as directors and officers of the Company and its subsidiaries.
Insofar as indemnification for liabilities under the Securities Act of 1933
may be permitted with respect to directors, officers or persons controlling
the Registrant pursuant to the foregoing provisions, the Registrant has been
informed that, in the opinion of the Securities and Exchange Commission, such
indemnification is against public policy as expressed in the Act and is
therefore unenforceable.
II-2
<PAGE>
ITEM 16.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
------- ----------------------
<C> <S>
1.1 Purchase Agreement dated as of October 7, 1996 among the Company,
Salomon Brothers Inc and Unterberg Harris*
2.1 Share Purchase Agreement dated July 17, 1996 (the "Share Purchase
Agreement") among PMT, Electrotech and the Electrotech
Shareholders*
2.2 Amendment No. 1 to Share Purchase Agreement dated as of September 9,
1996*
2.3 Amendment No. 2 to Share Purchase Agreement dated as of October 16,
1996*
2.4 Amendment No. 3 to Share Purchase Agreement dated as of November 14,
1996*
4.1 Warrant to Purchase Common Stock issued to St. Paul Fire and Marine
Insurance Company on November 29, 1993**
4.2 Warrant to Purchase Common Stock issued to Brentwood Associates V,
L.P. on November 29, 1993**
4.3 Co-Investment Agreement made as of August 30, 1991 between BeneVent
and Brentwood V**
4.4 Indenture dated as of October 7, 1996 between the Company and U.S.
Trust Company of California, N.A., as trustee, relating to the 7
1/8% Convertible Subordinated Notes Due 2001*
4.5 Registration Agreement dated as of October 7, 1996 among the
Company, Salomon Brothers Inc and Unterberg Harris*
5 Opinion of Riordan & McKinzie
12 Computation of Ratio of Earnings to Fixed Charges and Ratio of
Earnings to Combined Fixed Charges
23.1 Consent of Ernst & Young LLP
23.2 Consent of Ernst & Young--Chartered Accountants
23.3 Consent of Riordan & McKinzie (included in their opinion)
24 Powers of Attorney (included on signature pages hereto)
25 Form T-1 Statement of Eligibility and Qualification of the Trustee
Under the Trust Indenture Act of 1939
27 Financial Data Schedule***
</TABLE>
- --------
* Filed as an exhibit to the Company's Current Report on Form 8-K on November
27, 1996.
** Filed as an exhibit to the Company's Registration Statement on Form S-1
(Registration No. 33-94450) on July 11, 1995.
*** Filed as an exhibit to the Company's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1996.
II-3
<PAGE>
ITEM 17. UNDERTAKINGS.
The undersigned Registrant hereby undertakes:
(1)To file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement:
(i) To include any prospectus required by section 10(a)(3) of the
Securities Act;
(ii) To reflect in the prospectus any facts or events arising after the
effective date of the Registration Statement (or the most recent post-
effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
Registration Statement; and
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the Registration Statement or any
material change to such information in the Registration Statement.
(2) That, for the purpose of determining any liability under the Securities
Act, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of
the offering.
The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Exchange Act (and, where applicable, each filing of an employee benefit plan's
annual report pursuant to Section 15(d) of the Exchange Act) that is
incorporated by reference in this Registration Statement shall be deemed to be
a new registration statement relating to the securities offered herein, and
the offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form S-3 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Chatsworth, State of California, on
December 13, 1996.
PLASMA & MATERIALS TECHNOLOGIES, INC.
By: /s/ Gregor A. Campbell
____________________________________
Name: Gregor A. Campbell
Title: Chief Executive Officer
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints each of Dr. Gregor A. Campbell and John W.
LaValle his true and lawful attorney-in-fact and agent with full power of
substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities, to sign any and all amendments to this Registration
Statement, and to file the same, with all exhibits thereto, and other
documents in connection therewith, with the Securities and Exchange
Commission, granting unto each said attorney-in-fact and agent, full power and
authority to do and perform each and every act and thing requisite or
necessary to be done in and about the premises, as fully to all intents and
purposes as he might or could do in person, hereby ratifying and confirming
all that said attorney-in-fact and agent or either of them, or their or his
substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Act, this Registration
Statement has been signed by the following persons in the capacities and on
the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Gregor A. Campbell Chief Executive Officer and December 13, 1996
____________________________________ Director (Principal
Gregor A. Campbell Executive Officer)
/s/ John W. LaValle Vice President, Chief December 13, 1996
____________________________________ Financial Officer and
John W. LaValle Secretary (Principal
Financial and Accounting
Officer)
Chairman of the Board and December , 1996
____________________________________ Director
Christopher D. Dobson
/s/ John A. Rollwagen Director December 13, 1996
____________________________________
John A. Rollwagen
/s/ Nigel Wheeler Director December 13, 1996
____________________________________
Nigel Wheeler
</TABLE>
II-5
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ G. Bradford Jones Director December 13, 1996
____________________________________
G. Bradford Jones
/s/ Brian D. Jacobs Director December 13, 1996
____________________________________
Brian D. Jacobs
Director December , 1996
____________________________________
Hiroyuki Mizuno
/s/ Charles Thompson Director December 13, 1996
____________________________________
Charles Thompson
</TABLE>
II-6
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
------- ----------- ------------
<C> <S> <C>
1.1 Purchase Agreement dated as of October 7, 1996 among
the Company, Salomon Brothers Inc and Unterberg
Harris*
2.1 Share Purchase Agreement dated July 17, 1996 (the
"Share Purchase Agreement") among PMT, Electrotech and
the Electrotech Shareholders*
2.2 Amendment No. 1 to Share Purchase Agreement dated as of
September 9, 1996*
2.3 Amendment No. 2 to Share Purchase Agreement dated as of
October 16, 1996*
2.4 Amendment No. 3 to Share Purchase Agreement dated as of
November 14, 1996*
4.1 Warrant to Purchase Common Stock issued to St. Paul
Fire and Marine Insurance Company on November 29,
1993**
4.2 Warrant to Purchase Common Stock issued to Brentwood
Associates V, L.P. on November 29, 1993**
4.3 Co-Investment Agreement made as of August 30, 1991
between BeneVent and Brentwood V**
4.4 Indenture dated as of October 7, 1996 between the
Company and U.S. Trust Company of California, N.A., as
trustee, relating to the 7 1/8% Convertible
Subordinated Notes Due 2001*
4.5 Registration Agreement dated as of October 7, 1996
among the Company, Salomon Brothers Inc and Unterberg
Harris*
5 Opinion of Riordan & McKinzie
12 Computation of Ratio of Earnings to Fixed Charges and
Ratio of Earnings to Combined Fixed Charges
23.1 Consent of Ernst & Young LLP
23.2 Consent of Ernst & Young--Chartered Accountants
23.3 Consent of Riordan & McKinzie (included in their
opinion)
24 Powers of Attorney (included on signature pages hereto)
25 Form T-1 Statement of Eligibility and Qualification of
the Trustee Under the Trust Indenture Act of 1939
27 Financial Data Schedule***
</TABLE>
- --------
* Filed as an exhibit to the Company's Current Report on Form 8-K on November
27, 1996.
** Filed as an exhibit to the Company's Registration Statement on Form S-1
(Registration No. 33-94450) on July 11, 1995.
*** Filed as an exhibit to the Company's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1996.
<PAGE>
Exhibit 5
December 13, 1996
Plasma & Materials Technologies, Inc.
9255 Deering Avenue
Chatsworth, CA 91311
Gentlemen:
We have acted as counsel for Plasma & Materials Technologies, Inc., a
California corporation (the "Company"), with respect to the proposed
registration by the Company of $86,250,000 aggregate principal amount of the
Company's 7 1/8% Convertible Subordinated Notes Due 2001 (the "Convertible
Notes") and 5,516,470 shares (the "Shares") of the Company's Common Stock, no
par value per share (the "Common Stock"), into which the Convertible Notes are
initially convertible, covered by a Registration Statement on Form S-3
(Registration Statement No. 33- ; hereinafter the "Registration Statement")
filed with the Securities and Exchange Commission (the "Commission") under the
Securities Act of 1933, as amended (the "Act").
In connection herewith, we have examined the Seventh Restated Articles of
Incorporation of the Company, the Bylaws of the Company as currently in
effect, the Registration Statement and the Indenture dated October 7, 1996
between the Company and U.S. Trust Company of California, N.A., as trustee
(the "Trustee"). Additionally, in rendering the opinions set forth herein, we
have made such investigations of fact and law, and examined such other
documents and instruments, or copies thereof established to our satisfaction
to be true and correct copies thereof, as we have deemed necessary under the
circumstances. Among other things, we have assumed that the Indenture has been
duly authorized, executed and delivered by the Trustee.
Based upon such examination, it is our opinion that:
1. The Convertible Notes constitute legal, valid and binding obligations of
the Company and are entitled to the benefits of the Indenture, subject, as to
enforcement of remedies, to applicable bankruptcy, reorganization, insolvency,
moratorium or other laws affecting creditors' rights generally and general
principles of equity, whether any such enforcement is considered in a
proceeding in equity or at law.
2. The Shares, when issued upon conversion of the Convertible Notes in
accordance with the terms of the Convertible Notes and the Indenture, will be
legally issued, fully paid and nonassessable.
We hereby consent to the reference to our name in the Registration Statement
and in the related Prospectus under the caption "Legal Matters" and to the use
of the foregoing opinion as an exhibit to the Registration Statement.
Very truly yours,
/s/ RIORDAN & McKINZIE
<PAGE>
EXHIBIT 12
STATEMENT RE: COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(000'S OMITTED)
<TABLE>
<CAPTION>
TEN MONTHS NINE MONTHS
YEAR ENDED YEAR ENDED YEAR ENDED ENDED YEAR ENDED ENDED
FEBRUARY 29, FEBRUARY 28, FEBRUARY 28, DECEMBER 31, DECEMBER 31, SEPTEMBER 30,
1992 1993 1994 1994 1995 1996
------------ ------------ ------------ ------------ ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
Consolidated pretax
income (loss).......... $323 $(2,319) $(1,346) $(3,685) $119 $3,123
Interest expense........ 22 94 227 146 294 119
Interest portion of
rental expense......... 15 61 72 96 113 100
---- ------- ------- ------- ---- ------
Earnings.............. $360 $(2,164) $(1,047) $(3,443) $526 $3,342
==== ======= ======= ======= ==== ======
Interest expense........ $ 22 $ 94 $ 227 $ 146 $294 $ 119
Interest portion of
rental expense......... 15 61 72 96 113 100
---- ------- ------- ------- ---- ------
Fixed charges......... $ 37 $ 155 $ 299 $ 242 $407 $ 219
==== ======= ======= ======= ==== ======
Ratio of earnings (loss)
to fixed charges....... 9.73 (13.96) (3.51) (14.21) 1.29 15.26
==== ======= ======= ======= ==== ======
</TABLE>
<PAGE>
EXHIBIT 23.1--CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in the
Registration Statement (Form S-3, dated December 13, 1996) and related
Prospectus of Plasma & Materials Technologies, Inc. for the registration of
$86,250,000 of 7 1/8% Convertible Subordinated Notes Due 2001 and 5,516,470
shares of common stock and to the incorporation by reference therein of our
report dated January 30, 1996, with respect to the financial statements and
schedule of Plasma & Materials Technologies, Inc. included in its Annual
Report (Form 10-K) for the year ended December 31, 1995 and in its Proxy
Statement dated September 11, 1996, filed with the Securities and Exchange
Commission.
/s/ Ernst & Young LLP
Woodland Hills, California
December 12, 1996
<PAGE>
EXHIBIT 23.2--CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in the
Registration Statement (Form S-3, dated December 13, 1996) and related
Prospectus of Plasma & Materials Technologies, Inc. for the registration of
$86,250,000 of 7 1/8% Convertible Subordinated Notes Due 2001 and 5,516,470
shares of common stock and to the incorporation by reference therein of our
report dated August 28, 1996 with respect to the combined financial statements
of Electrotech Equipments Limited and Electrotech Limited included in the
Plasma & Materials Technologies, Inc. Proxy Statement dated September 11,
1996, filed with the Securities and Exchange Commission.
/s/ Ernst & Young
Chartered Accountants
Cardiff, Wales
December 12, 1996
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
EXHIBIT 25
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
FORM T-1
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939 OF
A CORPORATION DESIGNATED TO ACT AS TRUSTEE
----------------
CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY
OF A TRUSTEE PURSUANT TO SECTION 305(B)(2) [_]
----------------
U.S. TRUST COMPANY OF CALIFORNIA, N.A.
(EXACT NAME OF TRUSTEE AS SPECIFIED IN ITS CHARTER)
95-4311476
(I.R.S. EMPLOYER IDENTIFICATION NO.)
515 SOUTH FLOWER STREET, SUITE 2700
LOS ANGELES, CA 90071
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
DWIGHT LIU
515 SOUTH FLOWER STREET, SUITE 2700
LOS ANGELES, CALIFORNIA 90071
(213) 861-5000
(NAME, ADDRESS, INCLUDING ZIP CODE AND TELEPHONE NUMBER OF AGENT FOR SERVICE)
----------------
PLASMA & MATERIALS TECHNOLOGIES
(EXACT NAME OF OBLIGOR AS SPECIFIED IN ITS CHARTER)
CALIFORNIA 95-4054321
(STATE OR OTHER JURISDICTION (I.R.S. EMPLOYER IDENTIFICATION NO.)
OF INCORPORATION OR ORGANIZATION)
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
9255 Deering Avenue
Chatsworth, CA 91311
(Address of principal executive offices)
7 1/8% Convertible Subordinated Notes Due 2001
(Title of indenture securities)
GENERAL
1. GENERAL INFORMATION
Furnish the following information as to the trustee:
(a) Name and address of each examining or supervising authority to which
it is subject.
Comptroller of the Currency
490 L'Enfant Plaza East, S.W.
Washington, D.C. 20219
Federal Deposit Insurance Corporation
550 17th Street, N.W.
Washington, D.C. 20429
Federal Reserve Bank (12th District)
San Francisco, California
(b) Whether it is authorized to exercise corporate trust powers.
The trustee is authorized to exercise corporate trust powers.
2. AFFILIATIONS WITH THE OBLIGOR
If the obligor is an affiliate of the trustee, describe each such
affiliation.
None.
3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14 and 15.
The obligor currently is not in default under any of its outstanding
securities for which U.S. Trust Company of California, N.A. is Trustee.
Accordingly, responses to Items 3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14 and 15
of Form T-1 are not required under General Instruction B.
16. LIST OF EXHIBITS
T-1.1--A copy of the Articles of Association of U.S. Trust Company of
California, N.A. currently in effect; incorporated herein by reference to
Exhibit T-1.1 filed with Form T-1 Statement, Registration No. 33-33031.
T-1.2--Included in Exhibit T-1.1.
T-1.3--Included in Exhibit T-1.1.
T-1.4--A copy of the By-Laws of U.S. Trust Company of California, N.A., as
amended to date; incorporated by reference to Exhibit T-1.4 filed with Form T-
1 Statement, Registration No. 33-54136.
<PAGE>
T-1.6--The consent of the trustee required by Section 321(b) of the Trust
Indenture Act of 1939; incorporated herein by reference to Exhibit T-1.6 filed
with Form T-1 Statement, Registration No. 33-33031.
T-1.7--A copy of the latest report of condition of the trustee published
pursuant to law or the requirements of its supervising or examining authority.
NOTE
As of December 13, 1996 the Trustee had 20,000 shares of Capital Stock
outstanding, all of which are owned by U.S. Trust Corporation.
The responses to Items 2, 5, 6, 7, 8, 9, 10, 11 and 14 set forth the
information requested as though U.S. Trust Company of California, N.A. and
U.S. Trust Corporation were the "trustee."
In answering Item 2 in this statement of eligibility as to matters
peculiarly within the knowledge of the obligor or its directors, the trustee
has relied upon information furnished to it by the obligor and will rely on
information to be furnished by the obligor and the trustee disclaims
responsibility for the accuracy or completeness of such information.
Pursuant to the requirements of the Trust Indenture Act of 1939, the
trustee, U.S. Trust Company of California, N.A., a corporation organized and
existing under the laws of the State of California, has duly caused this
statement of eligibility and qualification to be signed on its behalf by the
undersigned, thereunto duly authorized, all in the City of Los Angeles, and
State of California, on the 13th day of December, 1996.
U.S. Trust Company of California,
N.A.
Trustee
By: /s/ Sandee' Parks
----------------------------------
Sandee' Parks
Authorized Signatory
<PAGE>
EXHIBIT T-1.7
CONSOLIDATED REPORT OF CONDITION FOR INSURED COMMERCIAL AND STATE-CHARTERED
SAVINGS BANKS FOR SEPTEMBER 30, 1996
All schedules are to be reported in thousands of dollars. Unless otherwise
indicated, report the amount outstanding as of the last business day of the
quarter.
SCHEDULE RC--BALANCE SHEET
<TABLE>
<CAPTION>
DOLLAR AMOUNTS
--------------
(IN THOUSANDS)
ASSETS
------
<C> <S> <C>
1. Cash and balances due from depository institutions (from
Schedule RC-A):
a. Noninterest-bearing balances and currency and coin(1).. 3,466
b. Interest-bearing balances(2)........................... 26
2. Securities:
a. Held-to-maturity securities (from Schedule RC-B, column
A)........................................................ 0
b. Available-for-sale securities (from Schedule RC-B,
column D)................................................. 74,310
3. Federal funds sold and securities purchased under
agreements to resell:
a. Federal funds sold..................................... 14,208
b. Securities purchased under agreements to resell........ 0
4. Loans and lease financing receivables:
a. Loans and leases, net of unearned income (from
Schedule RC-C).............................. 125,061
b. LESS: Allowance for loan and lease losses.. 1,859
c. LESS: Allocated transfer risk reserve...... 0
d. Loans and leases, net of unearned income, allowance,
and reserve (item 4.a minus 4.b and 4.c)................ 123,202
5. Trading assets............................................ 0
6. Premises and fixed assets (including capitalized leases) 7,445
7. Other real estate owned (from Schedule RC-M).............. 0
8. Investments in unconsolidated subsidiaries and associated
companies (from Schedule RC-M)............................ 0
9. Customers' liability to this bank on acceptances
outstanding............................................... 0
10. Intangible assets (from Schedule RC-M).................... 158
11. Other assets (from Schedule RC-F)......................... 5,200
12. Total assets (sum of items 1 through 11).................. 228,015
</TABLE>
- --------
(1) Includes cash items in process of collection and unposted debits.
(2) Includes time certificates of deposit not held for trading.
<PAGE>
SCHEDULE RC--CONTINUED
<TABLE>
<CAPTION>
DOLLAR AMOUNTS
--------------
(IN THOUSANDS)
LIABILITIES
-----------
<S> <C> <C>
13. Deposits:
a. In domestic offices (sum of totals of columns A and C from Schedule RC-E). 199,834
(1) Noninterest-bearing(1)....................................... 7,716
(2) Interest-bearing............................................. 192,118
b. In foreign offices, Edge and Agreement subsidiaries, and IBFs.............
(1) Noninterest-bearing......................................................
(2) Interest-bearing.........................................................
14. Federal funds purchased and securities sold under agreements to repurchase:
a. Federal funds purchased................................................... 0
b. Securities sold under agreements to repurchase............................ 0
15. a. Demand notes issued to the U.S. Treasury.................................. 0
b. Trading liabilities....................................................... 0
16. Other borrowed money:
a. With a remaining maturity of one year or less............................. 0
b. With a remaining maturity of more than one year........................... 0
17. Mortgage indebtedness and obligations under capitalized leases............... 0
18. Bank's liability on acceptances executed and outstanding..................... 0
19. Subordinated notes and debentures............................................ 0
20. Other liabilities (from Schedule RC-G)....................................... 4,384
21. Total liabilities (sum of items 13 through 20)............................... 204,218
22. Limited-life preferred stock and related surplus............................. 0
<CAPTION>
EQUITY CAPITAL
--------------
<S> <C> <C>
23. Perpetual preferred stock and related surplus................................ 5,000
24. Common stock................................................................. 2,000
25. Surplus (exclude all surplus related to preferred stock)..................... 10,251
26. a. Undivided profits and capital reserves.................................... 6,577
b. Net unrealized holding gains (losses) on available-for-sale securities.... (31)
27. Cumulative foreign currency translation adjustments..........................
28. Total equity capital (sum of items 23 through 27)............................ 23,797
29. Total liabilities, limited-life preferred stock, and equity capital
(sum of items 21, 22, and 28)................................................ 228,015
MEMORANDUM
To be reported only with the March Report of Condition.
1. Indicate in the box at the right the number of the statement below that best
describes the most comprehensive level of auditing work performed for the
bank by independent external auditors as of any date during 1995............. N/A
</TABLE>
1 = Independent audit of the bank conducted in accordance with generally
accepted auditing standards by a certified public accounting firm which
submits a report on the bank
2 = Independent audit of the bank's parent holding company conducted in
accordance with generally accepted auditing standards by a certified
public accounting firm which submits a report on the consolidated holding
company (but not on the bank separately)
<PAGE>
3 = Directors' examination of the bank conducted in accordance with generally
accepted auditing standards by a certified public accounting firm (may be
required by state chartering authority)
4 = Directors' examination of the bank performed by other external auditors
(may be required by state chartering authority)
5 = Review of the bank's financial statements by external auditors
6 = Compilation of the bank's financial statements by external auditors
7 = Other audit procedures (excluding tax preparation work)
8 = No external audit work
- --------
(1) Includes total demand deposits and noninterest-bearing time and savings
deposits.
