<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 31, 1998
REGISTRATION STATEMENT NO. 333-65973
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------------------------------------
AMENDMENT NO. 2
TO
FORM S-3
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
------------------------------------
MEMC ELECTRONIC MATERIALS, INC.
(Exact name of Registrant as specified in its charter)
<TABLE>
<S> <C>
DELAWARE 56-1505767
(State or other jurisdiction of incorporation or (I.R.S. employer identification number)
organization)
</TABLE>
501 PEARL DRIVE (CITY OF O'FALLON)
ST. PETERS, MISSOURI 63376
(314) 279-5500
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
HELENE F. HENNELLY, ESQ.
CORPORATE VICE PRESIDENT,
GENERAL COUNSEL AND SECRETARY
MEMC ELECTRONIC MATERIALS, INC.
501 PEARL DRIVE (CITY OF O'FALLON)
ST. PETERS, MISSOURI 63376
(314) 279-5500
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
COPIES OF ALL CORRESPONDENCE TO:
<TABLE>
<S> <C>
R. Randall Wang, Esq. Patrick A. Pohlen, Esq.
Peter D. Van Cleve, Esq. Brett D. White, Esq.
Bryan Cave LLP Cooley Godward LLP
One Metropolitan Square Five Palo Alto Square
211 N. Broadway, Suite 3600 3000 El Camino Real
St. Louis, Missouri 63102-2750 Palo Alto, CA 94306
(314) 259-2000 (650) 843-5000
</TABLE>
Approximate date of commencement of proposed sale to the public: As soon as
practicable 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 registered on this form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [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,
please check the following box. [ ]
------------------------------------
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> 2
The information in this prospectus is not complete and may be changed. We
may not sell these securities until the registration statement filed with
the Securities and Exchange Commission is effective. This prospectus is not
an offer to sell these securities and it is not soliciting an offer to buy
these securities in any state where the offer or sale is not permitted.
PROSPECTUS (Not Complete)
Issued December 31, 1998
[10,151,352] SHARES
MEMC ELECTRONIC MATERIALS, INC. LOGO
MEMC ELECTRONIC MATERIALS, INC.
COMMON STOCK
------------------------
MEMC is distributing to each of its stockholders, other than members of its
majority stockholder group, rights to purchase MEMC common stock at $[9.25] per
share. Each right entitles the holder to purchase one share of MEMC common
stock, plus a portion of any shares remaining if not all rights are exercised.
[The total dollar value of the common stock offered will be $93.9 million. We
currently estimate that the subscription price will be between $9.00 and $10.00
per share. The subscription price will be set at an average trading price per
share of MEMC common stock during a period shortly before the date of the final
prospectus. For purposes of this preliminary prospectus, we have assumed that
the subscription price will be $9.25 per share and we estimate the number of
shares offered will be 10,151,352 shares.]
------------------------
MEMC common stock trades on the New York Stock Exchange under the symbol
"WFR." We have applied to list the rights on the NYSE under the symbol "WFRRT."
We cannot assure you that an active trading market will develop or be maintained
for the rights.
------------------------
INVESTING IN MEMC COMMON STOCK INVOLVES A HIGH DEGREE OF RISK. SEE "RISK
FACTORS" BEGINNING ON PAGE 9.
------------------------
SUBSCRIPTION PRICE $[9.25] PER SHARE
------------------------
<TABLE>
<CAPTION>
DEALER MANAGER OFFERING
PUBLIC OFFERING FEES AND ESTIMATED PROCEEDS TO
PRICE REIMBURSED EXPENSES MEMC(1)
--------------- ------------------- -----------
<S> <C> <C> <C>
Per Share.................. $[9.25] $[0.19] $[9.06]
Total...................... $93,900,000 $1,970,000 $91,930,000
</TABLE>
- ---------------
(1) Before deducting other estimated offering expenses of $665,005 payable by
MEMC.
See "Plan of Distribution" beginning on page 57 for information relating to
fees and reimbursed expenses we will pay to the dealer managers.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
------------------------
Dealer Managers
NATIONSBANC MONTGOMERY SECURITIES LLC J.P. MORGAN & CO.
, 1999
<PAGE> 3
QUESTIONS & ANSWERS ABOUT THE RIGHTS OFFERING
WHAT IS THE RIGHTS OFFERING?
The rights offering is a distribution of rights on a pro rata basis to all
of our stockholders other than VEBA Corporation and its affiliates. We are
distributing rights for every share of MEMC common stock held on ,
1999.
WHAT IS A RIGHT?
Each right entitles stockholders to purchase one share of MEMC common stock
at a subscription price of $[9.25] per share. Each right carries with it a basic
subscription privilege and an over-subscription privilege.
WHAT IS THE BASIC SUBSCRIPTION PRIVILEGE?
The basic subscription privilege of each right entitles you to purchase one
share of MEMC common stock for $[9.25], the subscription price.
WHAT IS THE OVER-SUBSCRIPTION PRIVILEGE?
The over-subscription privilege of each right entitles you, if you fully
exercise your basic subscription privilege, to subscribe for additional shares
of MEMC common stock at the same subscription price of $[9.25] per share.
WHAT ARE THE LIMITATIONS ON THE OVER-SUBSCRIPTION PRIVILEGE?
We will be able to satisfy your exercise of the over-subscription privilege
only if rights holders subscribe for less than a total of [10,151,352] shares.
If sufficient shares are available, we will honor the over-subscription requests
in full. If over-subscription requests exceed the shares available, we will
allocate the available shares pro rata among those who over-subscribed.
WHAT SHOULD I DO IF I WANT TO PARTICIPATE IN THE RIGHTS OFFERING BUT MY SHARES
ARE HELD IN THE NAME OF MY BROKER OR A CUSTODIAN BANK?
If you hold shares of MEMC common stock through a broker, dealer or other
nominee, we will ask your broker, dealer or nominee to notify you of the rights
offering. If you wish to sell or exercise your rights, you will need to have
your broker, dealer or nominee act for you. To indicate your decision with
respect to your rights, you should complete and return to your broker, custodian
bank or other nominee the form entitled "Beneficial Owner Election Form." You
should receive this form from your broker or custodian bank with the other
rights offering materials.
WILL I BE CHARGED A SALES COMMISSION OR A FEE IF I EXERCISE MY RIGHTS?
No. We will not charge a brokerage commission or a fee to rights holders
for exercising their rights. However, if you exercise your rights through a
broker or nominee, you will be responsible for any fees charged by your broker
or nominee. If you sell your rights through Harris Trust and Savings Bank as
described beginning on page 34, it will not charge you any fees. If you sell
your rights through other means, you will be responsible for any fees arising
from such sale.
MAY I TRANSFER MY RIGHTS IF I DO NOT WANT TO PURCHASE ANY SHARES?
Yes. The rights are transferable and will be listed for trading on the New
York Stock Exchange until the close of business on the last trading day before
the rights offering expires.
HOW MAY I SELL MY RIGHTS?
You may contact Harris Trust and Savings Bank if you would like it to sell
your rights for you, as described beginning on page 34. Otherwise, you may try
to sell your rights through normal investment channels. We cannot assure you
that Harris Trust and Savings Bank or others will be able to sell any of your
rights.
AM I REQUIRED TO SUBSCRIBE IN THE RIGHTS OFFERING?
No.
IF I EXERCISE RIGHTS IN THE RIGHTS OFFERING, MAY I CANCEL OR CHANGE MY DECISION?
No. All exercises of rights are irrevocable unless the conditions to the
VEBA Corporation's and its affiliates' obligation to purchase all of the shares
not purchased by other rights holders in this rights offering are not satisfied
or waived before the time the rights expire. In that case, you will be able to
change your decision and we may extend the date the rights expire.
2
<PAGE> 4
IF THE RIGHTS OFFERING IS NOT COMPLETED, WILL MY SUBSCRIPTION PAYMENT BE
REFUNDED TO ME?
Yes. Harris Trust and Savings Bank will hold all funds it receives in
escrow until completion of the rights offering. If the rights offering is not
completed, Harris Trust and Savings Bank will return promptly, without interest,
all subscription payments.
WHAT SHOULD I DO IF I HAVE OTHER QUESTIONS?
If you have questions or need assistance, please contact Morrow & Co.,
Inc., the information agent for the rights offering, at:
Morrow & Co., Inc.
445 Park Avenue, 5th Floor
New York, NY 10022
(212) 754-8000
Toll Free (800) 566-9061
Banks and Brokerage Firms
Please call (800) 662-5200
For further assistance on how to subscribe for shares, you may also contact
Harris Trust and Savings Bank, the subscription agent for the rights offering,
by mail or telephone at:
Harris Trust and Savings Bank
c/o Harris Trust Company of New York
Wall Street Station
P.O. Box 1010
New York, New York 10268-1010
(800) 245-7630
FOR A MORE COMPLETE DESCRIPTION OF THE RIGHTS OFFERING, SEE "THE RIGHTS
OFFERING" BEGINNING ON PAGE 29.
3
<PAGE> 5
PROSPECTUS SUMMARY
SUMMARY This summary highlights information contained
elsewhere in this prospectus. This summary does
not contain all of the important information that
you should consider before investing in the rights
or MEMC common stock. You should carefully read
the entire prospectus.
INFORMATION ABOUT MEMC MEMC is a leading worldwide producer of silicon
wafers. The silicon wafer is the fundamental
building block from which almost all
semiconductors are manufactured. Semiconductors
are used in virtually all electronic applications,
including computers, telecommunications equipment,
automobiles, consumer electronics products,
industrial automation and control systems, and
analytical and defense systems.
Our principal executive offices are located at 501
Pearl Drive (City of O'Fallon), St. Peters,
Missouri 63376, and our telephone number is (314)
279-5500.
RISK FACTORS A purchase of MEMC common stock involves a high
degree of risk. You should read and carefully
consider the information set forth under "Risk
Factors" beginning on page 9 and the information
contained elsewhere in this prospectus.
NO RECOMMENDATIONS TO
RIGHTS
HOLDERS Neither we nor the dealer managers are making any
recommendations as to whether or not you should
subscribe for MEMC common stock. You should decide
whether to subscribe for MEMC common stock based
upon your own assessment of your best interests.
THE RIGHTS OFFERING
RIGHTS We will distribute to each stockholder of record
(other than the VEBA Corporation and its
affiliates) on , 1999, at no charge,
transferable subscription rights for
every share of MEMC common stock then owned.
Because we will not issue fractional rights, we
will round up to the nearest whole number the
number of rights we distribute to each
stockholder. For example, if you own 100 shares of
MEMC common stock, you will receive
rights instead of rights. The rights
will be evidenced by a transferable rights
certificate and will entitle the holder to
subscribe for shares of MEMC common stock at
[$9.25] per share pursuant to the basic
subscription privilege and over-subscription
privilege described on page 29.
RECORD DATE , 1999, at 5:00 p.m., New York City
time.
EXPIRATION DATE The rights will expire at 5:00 p.m., New York City
time, on , 1999. We may extend the
expiration date until , 1999 for any
reason. We may extend the expiration date until
some later date if our Board of Directors believes
that a material event has occurred and we need
more time to adequately disclose information about
such event to you.
TERMINATION OF THE RIGHTS
OFFERING We may terminate the rights offering prior to the
time the rights expire. If we terminate the rights
offering, we will promptly return all
4
<PAGE> 6
subscription payments. We will not pay interest
on, or deduct any amounts from, subscription
payments returned if we terminate the rights
offering. Rights that remain unexercised at the
expiration time will expire and will no longer be
exercisable.
PROCEDURE FOR EXERCISING
RIGHTS You may exercise rights by properly completing and
signing your rights certificate. You must deliver
to Harris Trust and Savings Bank your rights
certificate with payment of the subscription price
for each share of MEMC common stock subscribed for
(both pursuant to the basic subscription privilege
and the over-subscription privilege) on or prior
to the date and time when the rights offering
expires. If you use the United States mail to send
your rights certificate, we recommend that you use
insured, registered mail. If you cannot deliver
your rights certificate to Harris Trust and
Savings Bank on time, you may use the procedures
for guaranteed delivery described under "The
Rights Offering -- Guaranteed Delivery Procedures"
beginning on page 32. We will not pay interest on
subscription payments. We have provided more
detailed instructions on how to exercise your
rights under "The Rights Offering" beginning with
the section "-- Exercise of Rights" on page 30 and
with the rights certificate and "Instructions for
Use of MEMC Electronic Materials, Inc. Rights
Certificates" that may accompany this prospectus.
HOW FOREIGN STOCKHOLDERS
AND
STOCKHOLDERS WITH APO OR
FPO
ADDRESSES CAN EXERCISE
RIGHTS We will not mail rights certificates to you if you
are a stockholder with an address outside the
United States or if you have an APO or FPO
address. Instead, Harris Trust and Savings Bank
will hold rights certificates for your account. To
exercise such rights, you must notify Harris Trust
and Savings Bank on or prior to 11:00 a.m., New
York City time, on , 1999, and establish
to the satisfaction of Harris Trust and Savings
Bank that your exercise is permitted under
applicable law. If you do not notify Harris Trust
and Savings Bank and provide acceptable
instructions to Harris Trust and Savings Bank by
such time (if no contrary instructions are
received), Harris Trust and Savings Bank will try
to sell your rights, if feasible, and will pay the
net proceeds, if any, to you.
ISSUANCE OF COMMON STOCK We will issue certificates representing shares of
MEMC common stock purchased pursuant to the
exercise of rights as soon as practicable after
the expiration of the rights offering.
CERTAIN FEDERAL INCOME TAX
CONSEQUENCES Holders of MEMC common stock who receive rights,
more likely than not, will not recognize taxable
income in connection with the distribution or
exercise of rights. You may recognize a gain or
loss upon the sale of rights or shares of MEMC
common stock acquired through exercise of the
rights.
PRINCIPAL STOCKHOLDER GROUP VEBA Corporation, a corporation owned by VEBA AG
and its subsidiaries, and another subsidiary of
VEBA AG own [32,961,212] shares of MEMC common
stock ([63.4%] of outstanding shares). VEBA
Corporation and such subsidiary are referred to in
this prospectus as the VEBA group.
PRIVATE PLACEMENT TO THE
VEBA
GROUP On , 1999, we sold [11,470,270]
shares of MEMC common stock to the VEBA group, at
$[9.25] per share, for aggregate net proceeds of
approximately $105.9 million. The sale
5
<PAGE> 7
increased the VEBA group's percentage ownership
from approximately 53.1% to [63.4]% of the
outstanding shares.
REASONS FOR THE RIGHTS
OFFERING We are proceeding with the rights offering to
raise capital and to allow our stockholders (other
than the VEBA group) an opportunity to restore
their proportionate interest in MEMC at the same
price per share of common stock as was paid by the
VEBA group. If rights holders (other than the VEBA
group) purchase all shares of MEMC common stock
offered in the rights offering, the VEBA group
will again own approximately 53.1% of the
outstanding shares.
STANDBY AGREEMENT WITH THE
VEBA GROUP Although we are not distributing any rights to the
VEBA group, the VEBA group has agreed to purchase
all shares issuable upon exercise of the rights
that are not subscribed for pursuant to the basic
subscription privilege or the over-subscription
privilege by other stockholders, subject to
certain conditions that are customary in a firm
commitment underwriting. If no other rights
holders exercise their rights, the VEBA group will
purchase all of the shares of MEMC common stock
offered in this rights offering and will own
approximately [69.4]% of the shares of outstanding
MEMC common stock following this rights offering.
USE OF PROCEEDS We will receive approximately $91.2 million from
the rights offering, after paying estimated
expenses, including the fees to the dealer
managers. We have received approximately $105.9
million from the private placement to the VEBA
group, after paying estimated expenses. We will
use the proceeds of the private placement to the
VEBA group to repay debt from VEBA AG and its
affiliates under revolving credit agreements and
for general corporate purposes. We will use the
proceeds from the rights offering to repay
remaining debt from VEBA AG and its affiliates
under revolving credit agreements and for general
corporate purposes.
COMMON STOCK OUTSTANDING As of November 30, 1998, we had outstanding
40,507,216 shares of MEMC common stock. As of such
date, on a pro forma basis giving effect to the
private placement to the VEBA group, we had
outstanding [51,977,486] shares of MEMC common
stock. After the private placement, the rights
offering and completion of the standby agreement,
we will have outstanding approximately
[62,128,838] shares of MEMC common stock. These
numbers do not include 1,784,414 shares issuable
upon exercise of employee stock options (as of
November 30, 1998) and 1,365,444 shares available
for future grant under our Equity Incentive Plan.
FORWARD-LOOKING STATEMENTS
Parts of the information contained or referred to in this prospectus,
including information with respect to possible future cost savings, are
forward-looking statements. For a discussion of important factors that could
cause actual results to differ materially from the forward-looking statements,
see "Risk Factors" beginning on page 9 and "Cautionary Statement Regarding
Forward-Looking Statements" beginning on page 22.
6
<PAGE> 8
SUMMARY CONSOLIDATED FINANCIAL DATA
(Dollars in thousands, except per share data)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
------------------------------------------------------------------------ ------------------------
1993 1994 1995 1996 1997 1997 1998
---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF
OPERATIONS DATA:
Net sales............ $ 552,497 $ 660,807 $ 886,860 $1,119,500 $ 986,673 $ 728,090 $ 605,081
Gross margin......... 112,665 143,210 223,279 250,185 124,759 95,071 (8,139)
Marketing and
administration..... 37,868 41,298 63,893 79,680 70,715 51,972 53,665
Research and
development........ 25,509 27,403 31,226 44,313 64,457 46,417 58,330
Restructuring
costs(1)........... -- -- -- -- -- -- 139,454
Operating profit
(loss)............. 49,288 74,509 128,160 126,192 (10,413) (3,318) (259,588)
Equity in income
(loss) of joint
ventures........... (10,628) (6,783) 13,908 24,884 3,246 (9,477) (26,845)
Net earnings
(loss)(2).......... 8,875 34,076 87,273 101,556 (6,747) (3,285) (239,937)
Earnings (loss) per
share:
Basic.............. 0.41(3) $ 1.59(3) $ 2.85(3) $ 2.46 $ (0.16) $ (0.08) $ (5.90)
Diluted............ 0.41(3) 1.59(3) 2.83(3) 2.45 (0.16) (0.08) (5.90)
Shares used in
earnings (loss) per
share computation:
Basic.............. 21,490,942(3) 21,490,942(3) 30,612,636(3) 41,308,806 41,345,193 41,403,629 40,637,643
Diluted............ 21,490,942(3) 21,490,942(3) 30,838,704(3) 41,534,412 41,345,193 41,403,629 40,637,643
OTHER DATA:
Capital
expenditures....... $ 67,541 $ 78,676 $ 215,359 $ 590,049 $ 372,416 $ 273,347 $ 148,354
Equity infusions in
joint ventures..... -- 20,922 29,904 14,698 10,638 4,000 11,747
</TABLE>
<TABLE>
<CAPTION>
AT SEPTEMBER 30, 1998
----------------------------------------------
AS ADJUSTED FOR
PRIVATE PLACEMENT,
AS ADJUSTED RIGHTS OFFERING
FOR PRIVATE AND STANDBY
ACTUAL PLACEMENT(4) AGREEMENT(5)
---------- ------------ ------------------
<S> <C> <C> <C>
BALANCE SHEET DATA:
Working capital............................................. $ 18,097 $ 123,947 $ 215,212
Total assets................................................ 1,747,008 1,852,858 1,944,123
Long-term debt (including current portion).................. 720,985 720,985 720,985
Stockholders' equity........................................ 458,513 564,363 655,628
</TABLE>
7
<PAGE> 9
- ---------------
(1) During 1998, we recorded restructuring costs totaling $139.5 million in
order to close our Spartanburg, South Carolina facility, to forego
construction of an 8-inch (200 millimeter) wafer facility in Malaysia, to
withdraw from our joint venture participation in the small diameter wafer
operation in China and to implement a voluntary separation program.
(2) Our net earnings in 1994 were affected by the adoption of Statement of
Financial Accounting Standards (SFAS) No. 112, "Employers' Accounting for
Postemployment Benefits." The effect of such change was a charge of $1.3
million. Net earnings in 1993 were affected by the adoption of SFAS No.
109, "Accounting for Income Taxes," and the adoption of SFAS No. 106,
"Employers' Accounting for Postretirement Benefits Other than Pensions."
The cumulative effect of such changes was a credit of $19.3 million and a
charge of $29.3 million, respectively.
(3) Earnings per share and shares used in earnings per share computation have
been restated to comply with SFAS No. 128, "Earnings Per Share."
(4) We adjusted the September 30, 1998 balance sheet data to reflect the
estimated net proceeds of $105.9 million from the private placement to the
VEBA group after deducting estimated expenses attributed to the private
placement.
(5) We adjusted the September 30, 1998 balance sheet data to reflect estimated
net proceeds of $197.1 million collectively from the private placement to
the VEBA group, the consummation of the rights offering, and the
transactions contemplated by the standby agreement, after deducting
estimated expenses (including fees paid to the dealer managers). Our
application of the net proceeds is further described under "Use of
Proceeds" beginning on page 26 and "Plan of Distribution" beginning on page
57. At November 30, 1998, we had $96.2 million of debt to VEBA AG and its
affiliates under revolving credit agreements, which is expected to be
repaid with the proceeds from the private placement and the consummation of
the rights offering and the standby agreement.
8
<PAGE> 10
RISK FACTORS
You should carefully consider the following factors, together with the
other information contained in this prospectus, before purchasing rights or the
MEMC common stock we are offering. An investment in MEMC common stock involves a
high degree of risk and may not be appropriate for investors who cannot afford
to lose their entire investment.
HISTORY OF SIGNIFICANT
OPERATING
AND NET LOSSES; WE
ANTICIPATE
FUTURE LOSSES We have not reported an operating profit since the
second quarter of 1997. We reported an operating
loss in 1997 of $10.4 million. Through the first
three quarters of 1998, we had an operating loss
of $259.6 million, which included restructuring
costs of $139.5 million. Due to overcapacity and
decreasing prices in the semiconductor and silicon
wafer industries, weak economic conditions in the
Asia Pacific region and Japan, and other factors,
we do not expect to be profitable at least through
1999. We cannot predict how long we will continue
to experience significant or increasing operating
and net losses or whether we will become
profitable.
CONTINUED NEGATIVE CASH
FLOWS
MAY REDUCE OUR ABILITY TO
FUND
FUTURE OPERATIONS We cannot assure you that cash flows in the future
will be sufficient to fund our future operations.
We have incurred negative cash flows from
operations in recent periods.
WE NEED SUBSTANTIAL CAPITAL
INVESTMENTS TO FUND OUR
FUTURE
OPERATIONS We cannot assure you that, even with the proceeds
from this rights offering, the private placement
to, and standby agreement with, the VEBA group and
cash flows from operations, if any, we will have
enough capital to be able to fund our future
operations. Our business is very capital
intensive. We will need substantial amounts of
cash to continue to fund capital expenditures,
research and development, and marketing and
customer service and support. Our capital needs
depend on numerous factors, including our
profitability and investment in research and
development and capital expenditures.
WE MAY NOT BE ABLE TO
OBTAIN
CAPITAL IN THE FUTURE TO
MEET
OUR NEEDS We cannot assure you that we will be able to
obtain capital in the future to meet our needs. If
we cannot obtain additional funding, whether from
current or new lenders or investors, we may be
required to reduce our investments in research and
development, marketing and customer service and
support and capital expenditures. Such reductions
could materially adversely affect our ability to
compete and our business.
If we do find a source of additional capital, the
terms and pricing of any such financing may be
significantly more favorable to the lender or
investor than those in this rights offering.
Future capital raising could dilute or otherwise
materially adversely affect the holdings or rights
of our existing stockholders.
Historically, we have funded our operations
primarily through loans from VEBA AG and its
affiliates, internally generated funds, and our
initial public offering. To a lesser extent, we
have raised funds by borrowing money from
commercial banks. We will continue to explore and,
as appropriate, enter into discussions with other
parties regarding possible future sources of
capital. However, under the loan agreements
between us and our principal lender, VEBA AG and
its affiliates, we cannot pledge any of our assets
to secure additional financing. We do not believe
that we currently can obtain unsecured financing
from
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<PAGE> 11
third parties on better terms than those with VEBA
AG and its affiliates.
VEBA AG IS NOT OTHERWISE
OBLIGATED TO PROVIDE
ADDITIONAL
CAPITAL TO US; WE ARE A
NON-CORE BUSINESS OF VEBA
AG VEBA AG and its affiliates are not obligated to
provide capital to us except in connection with
the private placement and standby agreement and
under current loan agreements. We cannot assure
you that VEBA AG and its affiliates will provide
additional capital to us in the future. For
financial reporting purposes, both VEBA
Corporation and VEBA AG include VEBA Corporation's
share of our net earnings or losses in their
consolidated financial statements. Our recent
losses have adversely affected VEBA Corporation's
and VEBA AG's reported earnings. While we are not
one of the core businesses that VEBA AG has
identified as the focus of its future major
investments, VEBA AG and its affiliates have
recently provided us with substantial additional
capital commitments. See "Recent
Developments -- Financial Restructuring Plan"
beginning on page 25.
OUR ABILITY TO MEET OUR
SIGNIFICANT DEBT SERVICE
REQUIREMENTS WILL DEPEND ON
OUR FUTURE PERFORMANCE Our ability to meet our debt service and other
obligations will depend upon our future
performance and is subject to financial, economic
and other factors, many of which are beyond our
control. We currently have a significant amount of
debt which could adversely affect our ability to
obtain additional financing for working capital,
capital expenditures or other purposes. As of
November 30, 1998, we owed $704.4 million to VEBA
AG and its affiliates, and $169.3 million to other
lenders. Our debt service could make us more
vulnerable to industry downturns and competitive
pressures. In addition, the cash flow required to
service our debt may reduce our ability to fund
internal growth and capital requirements.
IF THE SEMICONDUCTOR
INDUSTRY
DOWNTURN CONTINUES OUR
BUSINESS COULD BE ADVERSELY
AFFECTED
If the current downturn in the semiconductor
industry continues, or the industry experiences
other downturns in the future, our business,
operating results and financial condition could be
materially adversely affected. Our ability to
reduce expenses during a downturn is limited
because of the fixed costs associated with our
substantial excess capacity and continued
investment in research and development and
marketing necessary to maintain our extensive
worldwide customer service and support
capabilities.
Our business depends in large part upon the market
demand for our customers' semiconductors and
products utilizing semiconductors. The
semiconductor industry experiences:
- rapid technological change;
- product obsolescence;
- price erosion; and
- wide fluctuations in product supply and
demand.
Recently, the semiconductor industry rapidly
expanded its production capacity, resulting in
overcapacity, especially for DRAM (commonly used
computer memory chips). This overcapacity has
caused semiconductor prices to decline, which has
depressed semiconductor revenues and
profitability.
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From time to time the semiconductor industry has
experienced significant downturns and is currently
in the midst of such a downturn. These downturns
often occur in connection with, or in anticipation
of, maturing product cycles (of both the
semiconductor companies and their "end customers")
and declines in general economic conditions. Some
of these downturns have lasted for more than a
year. Also, during such periods, customers of
semiconductor manufacturers benefiting from
shorter lead times may delay some purchases of
semiconductors into future periods. The current
semiconductor industry downturn began in the
fourth quarter of 1995. The resulting downturn in
the silicon wafer industry began in the summer of
1996.
The economic recessions in Japan and in nations in
the Asia Pacific region have made the current
downturn in the semiconductor industry worse. The
economies in these regions are contracting, and
demand for semiconductors and silicon wafers in
these regions has decreased significantly.
SUBSTANTIAL EXCESS CAPACITY
AND
DECLINING WAFER PRICES
LIMIT
OUR ABILITY TO BECOME
PROFITABLE Excess capacity in the silicon wafer industry
limits our ability to maintain or raise prices and
could dramatically increase the worldwide supply
of silicon wafers in the future, increase the
downward pressure on prices and materially
adversely impact our operating results. The growth
in the worldwide supply of silicon wafers has
outpaced the growth in worldwide demand in recent
periods, especially for 8-inch silicon wafers. As
a result, the selling prices for our products have
decreased. Because of price decreases and
declining product volume, our revenues are
currently insufficient to offset our costs, and
this is adversely affecting our operating results.
We have no firm information with which to
determine the capacity and expansion plans of our
competitors. Although some of our competitors have
announced plans to slow their capacity expansion
programs, many have already added significant
capacity for the production of 8-inch wafers. We
and our competitors have the ability to increase
our production of silicon wafers through unused
capacity and our ability to expand our capacity
quickly.
SUBSTANTIAL FLUCTUATIONS IN
OUR
OPERATING RESULTS COULD
ADVERSELY AFFECT THE MARKET
PRICE OF MEMC COMMON STOCK Our quarterly and annual operating results can
fluctuate dramatically, and this can adversely
affect the market price of MEMC common stock. The
main factor affecting these fluctuations is our
dependence on the performance of the semiconductor
industry, which historically has been cyclical.
Another factor is currency exchange rate
volatility, which affects the price we receive for
our wafers and may result in gains or losses on
unhedged currency exposure at our unconsolidated
joint ventures.
Our operating results are also affected by:
- the timing of orders from major customers;
- product mix;
- competitive pricing pressures; and
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<PAGE> 13
- the delay between the incurrence of
expenses to develop marketing and service
capabilities and expand capacity and the
realization of benefits from these
expenditures.
Moreover, customers may cancel or reschedule
shipments, and production difficulties could delay
shipments. We cannot predict the future impact of
any of these factors. These and other factors
could have a material adverse effect on our
quarterly or annual operating results.
VEBA AG'S CONTROL OF MEMC
COULD PREVENT A FAVORABLE
ACQUISITION OF MEMC VEBA AG's control of MEMC could prevent or
discourage any unsolicited acquisition of MEMC and
consequently could prevent an acquisition
favorable to MEMC's other stockholders. After the
rights offering, VEBA AG will continue to have
sufficient voting power to control our direction
and policies. VEBA AG will continue to be able to
control any merger, consolidation or sale of all
or substantially all of our assets, to elect the
members of the Board of Directors and to prevent
or cause a change in control of MEMC. Four of the
eight members of our Board of Directors are
employees of VEBA AG or its affiliates, not
including MEMC.
In addition, VEBA Corporation has advised us that
VEBA AG or one of its affiliates may purchase
rights on the New York Stock Exchange during the
rights offering. However, the VEBA group has
agreed not to exercise its over-subscription
privilege with respect to any rights. VEBA
Corporation has also advised us that it may decide
to purchase additional shares of MEMC common stock
following the rights offering.
POTENTIAL CONFLICTS OF
INTEREST
WITH VEBA AG AND ITS
AFFILIATES We have a number of agreements with VEBA AG and
some of its affiliates. See "Certain Relationships
and Related Party Transactions" beginning on page
48. These agreements include loan, raw material
and equipment supply, services and other
agreements. We believe that the terms of these
agreements are as favorable to us as those we
could negotiate with unrelated parties. In the
future, however, we may modify or renegotiate
these agreements and we may enter into additional
agreements or transactions with VEBA AG or its
affiliates. Conflicts of interest could arise with
VEBA AG and its affiliates with respect to such
agreements or other arrangements between us and
them. We expect to use a significant portion of
the proceeds from the private placement to, and
standby agreement with, the VEBA group and this
rights offering to repay debt under revolving
credit agreements with VEBA AG and its affiliates.
See "Use of Proceeds" beginning on page 26.
RESTRICTIVE COVENANTS WILL,
AND
HIGHER INTEREST RATES MAY,
APPLY TO MEMC IF VEBA AG
CEASES TO OWN A MAJORITY OF
OUR STOCK Certain of our loan agreements with VEBA AG and
its affiliates provide that if VEBA AG and its
affiliates own less than a majority of the
outstanding MEMC common stock on or after January
1, 2001, then the interest rates we pay on our
loans from VEBA AG and its affiliates will be the
higher of:
- the interest rate currently set forth in
each such loan agreement; or
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<PAGE> 14
- an interest rate determined, as of the
later of January 1, 2001 or the change of
control date, for an average industrial
borrower at an assumed credit rating based
on the remaining term of each such loan
agreement. See "Recent Developments --
Financial Restructuring Plan -- Debt
Restructuring" beginning on page 25.
In addition, in such an event we will become
subject to certain affirmative covenants set forth
in all of our loan agreements with VEBA AG and its
affiliates. These affirmative covenants include
requirements that we maintain a minimum net worth
and a minimum amount of working capital. We would
also need to meet certain financial ratios,
including a minimum fixed charge coverage ratio
and minimum working capital ratio.
If we had been subject to these covenants as of
November 30, 1998, we would not have been in
compliance with all of these covenants. If VEBA AG
and its affiliates own less than a majority of our
outstanding common stock at any time on or after
January 1, 2001 and we are then not in compliance
with all of these affirmative covenants, then we
would be in default under these loan agreements.
If VEBA AG and its affiliates own less than a
majority of the outstanding MEMC common stock,
then Taisil Electronic Materials Corporation, our
Taiwanese joint venture, may become obligated to
repay certain debt. See "-- We May Have To Make
Substantial Payments In Connection With Our Taisil
Joint Venture" beginning on page 15.
INTENSE COMPETITION IN THE
SILICON WAFER INDUSTRY
COULD
ADVERSELY AFFECT OUR
OPERATING
RESULTS If we cannot compete effectively with other
silicon wafer manufacturers, our operating results
could be materially adversely affected. We face
intense competition in the silicon wafer industry
from established manufacturers throughout the
world. Some of our competitors have substantial
financial, technical, engineering and
manufacturing resources. We believe that our
Japanese competitors benefit from their dominance
of the Japanese market, which represented
approximately 38% of the worldwide silicon wafer
market in 1997. In particular, Shin-Etsu Handotai,
the largest supplier of silicon wafers in Japan
and the world, is able to leverage globally its
sales and technology base.
We compete principally on the basis of product
quality, consistency and price, as well as
technical innovation, customer service and product
availability. We expect that our competitors will
continue to improve the design and performance of
their products and to introduce new products with
competitive price and performance characteristics.
Competitive pressures may cause additional price
reductions, which could have a material adverse
effect on our operating results.
FAILURE TO MAKE SIGNIFICANT
INVESTMENTS NEEDED TO
COMPLY
WITH CHANGING CUSTOMER
SPECIFICATIONS MAY
ADVERSELY
AFFECT OUR OPERATING
RESULTS If we fail to meet future customer requirements,
we could experience a material adverse effect on
our competitive position and operating results.
The silicon wafer industry changes rapidly.
Changes include requirements for new and more
demanding technology, product specifications and
manufacturing processes. Our ability to remain
competitive will depend upon our ability to
develop technologically
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<PAGE> 15
advanced products and processes. We must continue
to meet the increasingly demanding requirements of
our customers on a cost-effective basis. As a
result, we expect to continue to make significant
investments in research and development. We cannot
assure you that we will be able to successfully
introduce, market and cost-effectively manufacture
any new products, or that we will be able to
develop new or enhanced products and processes
that satisfy customer needs or achieve market
acceptance.
LOSS OF PRINCIPAL CUSTOMERS
MAY ADVERSELY AFFECT OUR
OPERATING RESULTS Our operating results could materially suffer if
we, or our joint ventures, experience a
significant reduction in purchases by one or more
of our top customers. Historically, we have sold a
significant portion of our products to a limited
number of principal customers. In 1997 and the
first nine months of 1998, we made over one-half
of our sales to ten customers. Likewise, POSCO
HULS Co., Ltd. (commonly known as PHC), our
unconsolidated joint venture in Korea, sold most
of its products to Samsung, one of our partners in
that joint venture. We cannot assure you that we
or PHC will realize equivalent sales from our top
customers in the future.
CURRENCY EXCHANGE RATES AND
INCREASED COMPETITION HAVE
REDUCED WAFER PRICES Over the past few years, the Japanese yen and
Deutsche mark have declined significantly relative
to the U.S. dollar. The currency declines have
given our Japanese and German competitors
significant cost advantages in the marketplace.
These currency pressures, together with the
effects of the semiconductor downturn and excess
capacity, as described above, have increased
competition and resulted in significant decreases
in wafer prices.
RISKS OF INTERNATIONAL
OPERATIONS; ADVERSE EFFECT
OF
CURRENCY EXCHANGE RATES ON
RESULTS OF OPERATIONS A number of factors, in the past have adversely
affected, and may adversely affect in the future,
our results of operations and international sales
and operations, including periodic economic
downturns and fluctuations in interest and foreign
currency exchange rates.
We expect that international sales will continue
to represent a significant percentage of our total
sales. In addition, a significant portion of our
manufacturing operations are located outside of
the United States. Sales outside of the United
States expose us to currency exchange rate
fluctuations. Our risk exposure from these sales
is primarily limited to the Japanese yen, Deutsche
mark and European ecu. Our risk exposure from
expenses at international manufacturing facilities
is concentrated in Italian lira, Japanese yen and
Malaysian ringgit. We generally hedge receivables
denominated in foreign currencies at the time of
sale. We hedge some foreign currency denominated
intercompany loans by entering into long-dated
forward exchange contracts. However, we cannot
predict whether exchange rate fluctuations will
have a material adverse effect on our operations
and financial results in the future.
Our unconsolidated joint ventures have sales
denominated in the U.S. dollar and manufacturing
expenses primarily denominated in the U.S. dollar,
Korean won and New Taiwanese dollar. PHC also has
significant debt denominated in the U.S. dollar
and Korean won. Likewise, Taisil Electronic
Materials Corporation, our unconsolidated
Taiwanese joint venture, has significant debt
denominated in the U.S.
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<PAGE> 16
dollar and New Taiwanese dollar. For U.S.
generally accepted accounting principles, these
two unconsolidated joint ventures use the U.S.
dollar as their functional currency and do not
hedge net Korean won or New Taiwanese dollar
exposures. We do not hedge our net Korean won
exposure, because the forward contract market is
limited for the Korean won and we do not believe
the prices of such contracts are attractive. To
date, we have not hedged net New Taiwanese dollar
exposure. However, given the increasingly broader
market and depth for forward contracts in both
Korea and Taiwan, we may consider forward
contracts in the future.
The economic downturns in the Asia Pacific region
and Japan and the devaluation of the Japanese yen
against the U.S. dollar are currently adversely
affecting our operating results. Additionally,
other factors may have a material adverse effect
on our operations in the future including:
- the imposition of governmental controls;
- export license requirements;
- restrictions on the export of technology;
- political instability;
- trade restrictions and changes in tariffs;
and
- difficulties in staffing and managing
international operations.
As a result, we may need to modify our current
business practices.
WE MAY HAVE TO MAKE
SUBSTANTIAL PAYMENTS IN
CONNECTION WITH OUR TAISIL
JOINT VENTURE Taisil's financial performance has been adversely
affected in recent periods due to the downturn in
the semiconductor industry in Taiwan. As a result
of this downturn, Taisil has incurred losses,
which have negatively impacted its debt-to-equity
ratio. The increase in the debt-to-equity ratio
and the downturn in the semiconductor industry in
Taiwan have raised concerns with Taisil's lenders.
In recent months, several financial institutions
have indicated that they are no longer able to
continue to sell Taisil's commercial paper. In
addition, we believe that several lenders have
placed Taisil on their credit watch lists. Certain
of these lenders have also made inquiries to MEMC
and VEBA AG regarding our continued financial
support to Taisil. We have also been informed by
one member of a three bank syndicate of lenders to
Taisil, that another bank in the syndicate
expressed a preliminary concern that a material
adverse change in the financial condition of
Taisil might have occurred and, without additional
equity contributions, an event of default should
be declared. Action by such bank syndicate,
however, required the agreement of two out of the
three banks, and we have been informed by the two
other banks that they did not believe a material
adverse change in the financial condition of
Taisil had occurred. In order to improve Taisil's
debt-to-equity ratio, certain of Taisil's
shareholders made capital contributions to Taisil
of approximately $20.7 million and $10.0 million
in November 1998 and December 1998, respectively.
Our share of these capital contributions was
approximately $10.3 million and $5.1 million,
respectively. We anticipate that we and certain of
Taisil's
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<PAGE> 17
other shareholders will make an additional capital
contribution to Taisil of approximately $24.8
million in early 1999. Our share of this capital
contribution would be approximately $12.3 million.
In early 1999, Taisil also intends to raise up to
approximately $6.2 million of additional capital
through sale of stock to Taisil's employees. We
believe that these capital contributions will
satisfy the concerns of Taisil's current lenders,
including the bank syndicate member that had
previously expressed concern about potential
material adverse changes in the condition of
Taisil. However, if Taisil's financial performance
continues to be adversely affected by the downturn
in the semiconductor industry in Taiwan, we and
Taisil's other shareholders may have to consider
additional financing alternatives for Taisil.
Statements above as to future capital
contributions to Taisil and the response to such
capital contributions by Taisil's lenders are
forward looking statements. Such future capital
contributions and response from Taisil's lenders
may not occur due to a variety of factors,
including inability of Taisil's shareholders to
agree on the magnitude, apportionment or other
terms of such capital contributions, changes or
perceived changes in Taisil's prospects,
regulatory requirements and the willingness of
Taisil employees to make an equity investment in
Taisil.
As of November 30, 1998, Taisil had approximately
$215.6 million of debt outstanding. We have
guaranteed approximately $74.1 million of such
debt (which may increase to approximately $80.2
million). Generally under the guarantees, if VEBA
AG's and its affiliates' ownership of MEMC common
stock falls below 50% of our total issued and
outstanding shares, we become obligated to either
pay, or provide other collateral satisfactory to
the banks, which may include a letter of credit in
an amount equal to, the maximum amount we may owe
under the guarantees.
The terms of Taisil's loan agreements vary. If
Taisil defaults on its obligations to its lenders,
in some circumstances Taisil may immediately be
required to repay all of its obligations to its
lenders. If Taisil is required to make an
immediate repayment of its obligations to its
lenders, we may be required to make payments on
our guarantees of Taisil's debt. The circumstances
in which immediate repayment may occur include,
without limitation:
- a material adverse change in Taisil;
- a reduction below 70% in the combined
ownership of Taisil by the two major joint
venture partners (us and China Steel
Corporation);
- a material adverse change in us or China
Steel Corporation;
- a reduction below 50% in VEBA AG's and its
affiliates' ownership of MEMC common stock;
or
- other customary circumstances.
We cannot assure you that Taisil's lenders will
not declare a default on Taisil's debt if they
determine there has occurred a material
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<PAGE> 18
adverse change, or they determine a material
adverse change occurs in the future, in Taisil or
MEMC.
MANUFACTURING DELAYS COULD
RESULT IN A LOSS OF
CUSTOMERS Interruption of operations at any of our primary
manufacturing facilities could result in delays or
cancellations of shipments of silicon wafers and a
loss of customers which could materially and
adversely affect our operating results. A number
of factors could cause interruptions, including
labor disputes, equipment failures, or shortages
of raw materials or supplies. A union represents
employees at PHC's facility in Korea. A strike at
this facility could cause interruptions in
manufacturing. We cannot assure you that alternate
qualified capacity would be available on a timely
basis or at all. It typically takes six months for
one of our customers to qualify one of our
manufacturing facilities to produce a specific
product, but it could take longer in today's
environment of excess capacity.
LIMITED INTELLECTUAL
PROPERTY
PROTECTION; NOTICES OF
POSSIBLE
INFRINGEMENT We believe that the success of our business
depends in part on our proprietary technology,
information and processes and know-how. We
generally try to protect our intellectual property
rights based on trade secrets and patents as part
of our ongoing research, development and
manufacturing activities. Recently, we have
increased our efforts to obtain patent protection
for our technology in response to an increase in
patent applications by our competitors. However,
much of our proprietary information and technology
relating to the wafer manufacturing process is not
patented and may not be patentable. We cannot
assure you that we have adequately protected or
will be able to adequately protect our technology,
that our competitors will not be able to utilize
our existing technology or develop similar
technology independently, that the claims allowed
on any patents held by us will be broad enough to
protect our technology or that foreign
intellectual property laws will adequately protect
our intellectual property rights.
Despite our efforts to protect our proprietary
rights, unauthorized parties may attempt to copy
or otherwise obtain and use our products or
technology that we consider proprietary, and third
parties may attempt to develop similar technology
independently. In addition, effective protection
of intellectual property rights may be unavailable
or limited in certain countries. Accordingly,
there can be no assurance that our means of
protecting our proprietary rights will be adequate
or that our competitors will not independently
develop similar technology.
Although third parties have not sued us based on
claims of infringement of intellectual property
rights during the last several years, we cannot
assure you that third parties will not bring such
suits in the future. Competitors, suppliers and
others frequently sue each other regarding
intellectual property rights in other technology
industries, including the semiconductor industry.
From time to time, we receive notices from
substantial companies with significant patent
portfolios that we may be infringing certain of
their patents or other rights. We may receive more
of these notices in the future. If such companies
were to assert any claims against us based on
patents or other rights described in existing
notices, we believe, based on strategic and other
considerations, that we should be able to resolve
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<PAGE> 19
them outside of litigation without a material
adverse effect to us; however, this conclusion is
subject to significant uncertainty. We expect to
try to resolve these matters through negotiation
or, if necessary, by obtaining a license. However,
if we are not able to resolve these matters
satisfactorily, or to obtain a license on
acceptable terms, we may face litigation. In that
event, the ultimate outcome of these matters could
have a material adverse effect on our business,
results of operations or financial condition.
Under certain contracts, we are required to
indemnify some third parties against claims of
infringement of the intellectual property rights
of others.
Any litigation in the future to enforce patents
issued to us, to protect trade secrets or know-how
possessed by us or to defend us or indemnify
others against claimed infringement of the rights
of others could have a material adverse effect on
our financial condition and operating results.
Also, regardless of the validity or successful
outcome of such claims, we may need to expend
significant time and expense to protect our
intellectual property rights or to defend against
claims of infringement by third parties, which
could have a material adverse effect on us. If we
lose any such litigation, we may be required to:
- pay substantial damages;
- seek licenses from others; or
- change, or stop manufacturing or selling,
some of our products.
Any of these outcomes could have a material
adverse effect on our business, results of
operations or financial condition.
DEPENDENCE ON KEY
PERSONNEL;
CHALLENGES IN ATTRACTING
AND
RETAINING QUALIFIED
PERSONNEL The loss of key personnel or the inability to hire
and retain qualified personnel could have a
material adverse effect on our operating results.
We are dependent upon a limited number of key
management and technical personnel. We compete for
personnel with other companies, academic
institutions, government entities and other
organizations. Our future success will depend in
part upon our ability to attract and retain highly
qualified personnel. We cannot assure you that we
will be successful in hiring or retaining
qualified personnel, or that any of our personnel
will remain employed by MEMC.
In March 1998, we adopted a special incentive
bonus program designed to retain the services of
24 of our officers and key employees, including
eleven then executive officers. Under this
program, the participants received a special
bonus. Half of this bonus was paid when the
participant entered into a special incentive bonus
agreement; the other half becomes payable on June
30, 1999, subject to continued employment. If the
participant's employment is terminated under
certain circumstances, that participant must repay
us all or a portion of the bonus the participant
has already received. Despite this program, a
number of experienced members of upper and middle
management have left MEMC.
RISKS OF COMPUTER FAILURES
DUE
TO YEAR 2000 PROBLEMS Failure by our computer systems could adversely
affect our manufacturing processes and/or our
ability to cost-effectively manage MEMC
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during the time required to fix such problems. We
are currently assessing the readiness of our
computer systems to handle dates beyond the year
1999. Although we expect to implement successfully
the systems and programming changes necessary to
address Year 2000 issues, we do not believe that
the cost of such actions will materially adversely
affect our results of operations or financial
condition.
Year 2000 issues create risks for us from
unforeseen problems in our own computers and
embedded systems and from customers, suppliers and
other organizations with which we conduct
transactions worldwide. We are working with our
principal customers and suppliers to address Year
2000 issues. Failures by our customers' computer
systems could adversely affect their demand for
our products. Failures by our suppliers could
adversely affect our ability to obtain critical
raw materials and equipment. If any one of these
events occurs, our business, financial condition
and results of operations could be materially and
adversely affected. For more information on this
subject, see "Business -- Year 2000" beginning on
page 45.
WE DEPEND ON CERTAIN
SUPPLIERS We obtain substantially all our requirements for
several raw materials, equipment, parts and
supplies from sole suppliers. We believe that we
could find adequate alternative sources of supply
for these raw materials, equipment, parts and
supplies. However, we may be required to obtain
new qualifications from our customers in order to
change or substitute suppliers. We cannot predict
whether we would be successful or how long that
process would take. In addition, our manufacturing
yields could be adversely affected while we
transition to a new supplier. A decrease in our
manufacturing yields could have a material adverse
effect on our operating results.
From time-to-time we have experienced tight
supplies of certain raw materials, equipment,
parts and supplies, particularly polysilicon. We
believe that adequate quantities of all our key
raw materials, equipment, parts and supplies are
currently available. However, because of the
cyclical nature of our industry, we may experience
shortages in the future. Increases in prices
resulting from these shortages could have a
material adverse effect on our operating results.
EXPOSURE TO SIGNIFICANT
ENVIRONMENTAL LIABILITY Any failure to comply with environmental laws
could subject us to substantial liability or could
force us to significantly change our manufacturing
operations. We are subject to a variety of
foreign, federal, state and local laws and
regulations governing the protection of the
environment. These environmental regulations
include those related to the use, storage,
handling, discharge and disposal of toxic,
volatile or otherwise hazardous materials used in
our manufacturing processes. Because the public is
focusing more attention on the environmental
impact of the semiconductor and related
industries' manufacturing operations, these laws
and regulations may become more stringent in the
future. In addition, under some of these laws and
regulations, we could be held financially
responsible for remedial measures if our
properties are contaminated, even if we did not
cause such contamination.
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In early 1998, a valve at our Italian facility
malfunctioned, resulting in a release of a
hazardous gas. Governmental authorities are
continuing to investigate the incident and, in
addition to private individuals, could seek to
assert claims against us. However, based on
information currently available, we do not believe
any such claims should have a material adverse
effect on us.
RISKS ASSOCIATED WITH
TRADING IN
OR EXERCISING RIGHTS We cannot assure you that the public trading
market price of MEMC common stock will not decline
before the rights expire. Further, we cannot
assure you that following the exercise of rights,
you will be able to sell the shares of MEMC common
stock you purchase at a price equal to or greater
than the subscription price. Until certificates
are delivered upon expiration of the rights
offering, you may not be able to sell the shares
of MEMC common stock you purchase in the rights
offering. Certificates representing shares of MEMC
common stock purchased will be delivered as soon
as practicable after expiration of the rights
offering. We will not pay you interest on funds
delivered to Harris Trust and Savings Bank
pursuant to the exercise of rights.
NO REVOCATION OF EXERCISE
OF
RIGHTS; CANCELLATION OF
RIGHTS OFFERING Once you exercise your rights, you may not revoke
the exercise unless the conditions to the VEBA
group's obligation under its standby commitment
are not satisfied or waived prior to the time the
rights expire. In that case, we will extend the
date the rights expire and you will be able to
change your decision. If we elect to withdraw or
terminate the rights offering, neither we nor
Harris Trust and Savings Bank will have any
obligation with respect to the rights except to
return, without interest, any subscription
payments.
SUBSCRIPTION PRICE MAY NOT
REFLECT THE VALUE OF MEMC The subscription price does not necessarily bear
any relationship to the book value of our assets,
past operations, cash flows, losses, financial
condition or any other established criteria for
valuation. A special committee of the Board of
Directors set the subscription price at the
average trading price per share of MEMC common
stock during a period shortly before the date of
the final prospectus. You should not consider the
subscription price as an indication of the value
of MEMC. See "The Rights Offering -- Determination
of Subscription Price" beginning on page 35.
DILUTION RESULTING FROM
PRIVATE
PLACEMENT TO THE VEBA GROUP Each stockholder's ownership interest in MEMC was
substantially diluted as a result of the private
placement of shares to the VEBA group. If you are
a stockholder and exercise your basic subscription
privilege in full, you will restore your
proportionate ownership interest in MEMC to the
same interest you had prior to the private
placement to the VEBA group. If you exercise your
over-subscription privilege and receive shares
pursuant to the over-subscription privilege, you
will increase your proportionate ownership
interest in MEMC. If you do not exercise your
rights, your proportionate interest in MEMC will
substantially decrease.
VOLATILITY OF MEMC STOCK
PRICE Based on the trading history of MEMC common stock,
we believe that certain factors cause the market
price of MEMC common stock to fluctuate
significantly. These factors include, without
limitation:
- quarterly fluctuations in our financial
results;
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- announcements of technological innovations
or new products by us or our competitors;
- market conditions in the semiconductor
industry;
- market conditions in the silicon wafer
industry;
- developments in patent or other
proprietary rights;
- changes in our relationships with our
customers;
- any actual or perceived change in our
relationship with VEBA AG and its
affiliates; and
- the size of the public float of MEMC
common stock (which will depend, in part,
on the number of shares of MEMC common
stock purchased or acquired by rights
holders other than by the VEBA group in
this rights offering).
Technology company stocks in general have
experienced extreme price and trading volume
fluctuations that often have been unrelated to the
operating performance of these companies. This
market volatility may adversely affect the market
price of MEMC common stock. In addition, if we
suffer an actual or anticipated shortfall in net
sales, gross margin or net earnings from security
analysts' expectations, the trading price of MEMC
common stock in any given period could decline.
21
<PAGE> 23
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
The following statements are or may constitute forward-looking statements:
- Statements set forth in this prospectus or statements incorporated by
reference from documents we have filed with the SEC, including possible
or assumed future results of our operations, including but not limited to
any statements contained herein or therein concerning:
- the manner, timing and estimated savings of restructuring activities
and the voluntary separation program;
- the transfer of Spartanburg-based small diameter production activities
to other existing locations;
- the utilization of the restructuring reserve;
- product volume for the fourth quarter of 1998;
- pricing for the near term;
- capital expenditures for 1998 and 1999;
- our liquidity into 2000;
- excess capacity for future periods;
- the resolution of any intellectual property infringement claims;
- the continued support of VEBA AG;
- the status, effectiveness and projected completion of our Year 2000
initiatives;
- the outcome of potential litigation;
- an increase in interest expense on existing debt with VEBA AG and its
affiliates; and
- the impact of the introduction of the euro;
- any statements preceded by, followed by or that include the words
"believes," "expects," "predicts," "anticipates," "intends," "estimates,"
"should," "may" or similar expressions; and
- other statements contained or incorporated by reference in this
prospectus regarding matters that are not historical facts.
Because such statements are subject to risks and uncertainties, actual
results may differ materially from those expressed or implied by such
forward-looking statements. Factors that could cause actual results to differ
materially include, but are not limited to:
- the demand for our silicon wafers;
- utilization of manufacturing capacity;
- demand for semiconductors generally;
- changes in the pricing environment;
- general economic conditions in the Asia Pacific region and Japan;
- our competitors' actions;
- willingness of our customers to re-qualify Spartanburg-based production
at our other locations;
- the accuracy of our assumptions regarding savings from restructuring
activities;
- the status and effectiveness of our Year 2000 efforts;
- changes in interest and exchange rates; and
- the factors discussed above under "Risk Factors" beginning on page 9.
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<PAGE> 24
You should not place undue reliance on such statements, which speak only as
of the date that they were made. Our independent public accountants have not
examined or compiled the forward-looking statements and, accordingly, do not
provide any assurance with respect to such statements. These cautionary
statements should be considered in connection with any written or oral
forward-looking statements that we may issue in the future. We do not undertake
any obligation to release publicly any revisions to such forward-looking
statements after completion of the rights offering to reflect later events or
circumstances or to reflect the occurrence of unanticipated events.
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<PAGE> 25
RECENT DEVELOPMENTS
COST REDUCTION PLAN
During the first half of 1998 we accelerated our cost reduction plan in
response to the difficult industry environment.
We decided to close our small-diameter wafer facility in Spartanburg, South
Carolina and to withdraw from our joint venture participation in a
small-diameter wafer facility in China. We are negotiating the terms of our
withdrawal with our joint venture partner. We took these actions because:
- our customers have been operating their 8-inch fabrication lines in
preference to their smaller diameter fabrication lines, reducing the
demand for smaller diameter wafers;
- a number of our customers recently have undertaken restructuring
initiatives focused on permanently eliminating small diameter lines; and
- we believe that even when the semiconductor market begins to recover, we
will have excess small diameter wafer capacity.
We also decided not to construct a new 8-inch wafer facility in Malaysia
due to the substantial excess capacity for these wafers.
In addition, we implemented a voluntary separation program for our hourly
and salaried U.S. employees. As a result of the actions described above and
other initiatives, we are reducing our workforce by approximately 2,000
employees, or 25% compared to December 31, 1997.
We estimated pre-tax savings from our restructuring activities and our
voluntary separation program to be $60 million on an annualized basis. We began
to realize approximately $30 million of these estimated savings in the third
quarter of 1998 through reduced personnel costs as a result of the voluntary
separation program.
We expect the other $30 million in annualized savings to come from the
closure of our Spartanburg facility. We expect approximately half of the savings
from the Spartanburg facility's closure to relate to personnel costs, and the
other half of these savings to relate to manufacturing costs such as
depreciation and supplies and utilities. As we re-qualify and transfer the
production of silicon wafers made at the Spartanburg facility to other
locations, we expect to reduce our Spartanburg workforce. With each workforce
reduction, we expect a portion of our annualized cost savings associated with
personnel costs to be realized. As a result, we began to realize a portion of
the remaining $30 million in annualized cost savings in the third quarter of
1998. As the manufacturing cost savings are fixed in nature, we expect they will
largely be realized upon the closure of the Spartanburg facility.
The time frame for achieving the $30 million in annualized cost savings
from the closing of the Spartanburg facility is largely dependent upon how long
it takes us to re-qualify the silicon wafers produced at the Spartanburg
facility at our other locations. This, in turn, determines how quickly
Spartanburg's workforce will be reduced. While we believe that this will occur
by March 31, 1999, the ability to re-qualify silicon wafers is highly dependent
upon the cooperation of our customers.
We are also implementing a number of other cost cutting and savings
initiatives:
- We have initiated short-term plant shutdowns to better align production
with the current lower level of demand;
- We are accelerating the implementation of our "best practices" worldwide
and the development of new manufacturing technologies in order to reduce
our processing costs;
- We are implementing a plant focus program that limits the number of
wafer diameters manufactured at each site;
- We have implemented aggressive spending cuts for all of our departments;
- We are obtaining price concessions from our vendors; and
- We are performing a critical review of our capital spending and research
and development requirements and reducing these planned investments
where possible.
We anticipate that we will reduce our capital expenditures in 1999 to less
than $100 million.
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<PAGE> 26
The statements above regarding expected future savings and cost reduction
efforts are forward-looking statements. Actual results could differ materially
from our expectations due to, among other things, the factors set forth above
and the accuracy of assumptions regarding savings from restructuring activities.
See "Cautionary Statement Regarding Forward-Looking Statements" beginning on
page 22 and "Risk Factors" beginning on page 9.
FINANCIAL RESTRUCTURING PLAN
In order to address our capital requirements, we have initiated a financial
restructuring that includes:
- the approximately $91.3 million net proceeds from this rights offering;
- the approximately $105.9 million of equity financing from the VEBA group
pursuant to the private placement;
- an additional $150 million of debt financing from VEBA AG and its
affiliates ($50 million of which became available on June 30, 1998 and
$100 million of which became available on September 23, 1998); and
- an extension until 2001 of the maturities on all our outstanding debt
maturing prior to January 1, 2001 with VEBA AG and its affiliates (but
only in the event we have used our best efforts to obtain replacement
financing on equivalent terms and have been unsuccessful).
Private Placement to the VEBA Group and the Rights Offering. On
, 1999, we sold [11,470,270] shares of MEMC common stock to the
VEBA group at $[9.25] per share for aggregate net proceeds of approximately
$105.9 million. Prior to the private placement to the VEBA group, the VEBA group
owned approximately 53.1% of the outstanding shares. Our primary purpose for the
sale to the VEBA group and the rights offering is to raise approximately $200
million of additional capital. We are proceeding with the rights offering to
allow our stockholders (other than the VEBA group) an opportunity to restore
their proportionate interest in MEMC at the same price per share of common stock
as was paid by the VEBA group.
We sold MEMC common stock to the VEBA group before the rights offering in
order to evidence the VEBA group's commitment to us and to increase our working
capital and reduce our interest expense. If rights holders (other than the VEBA
group) purchase all shares of MEMC common stock offered in this rights offering,
the VEBA group will again own approximately 53.1% of the outstanding shares.
Debt Restructuring. As part of the agreement with VEBA AG and its
affiliates to provide the additional debt financing and to extend the maturity
dates of outstanding loans that mature prior to January 1, 2001 until their
respective maturity date anniversaries in 2001, we have agreed to increase the
interest rates payable by MEMC on all of our existing debt to VEBA AG and its
affiliates. On November 30, 1998, we had approximately $704.4 million of U.S.
dollar and Japanese yen based loans outstanding with VEBA AG and its affiliates,
including $70 million of the additional $150 million of debt financing. Prior to
this restructuring, interest rates ranged from 2.1% to 7.6%. As part of the debt
restructuring completed during the third quarter of 1998, our loans with VEBA AG
and its affiliates have been repriced at interest rates reflecting the longer
maturities and at interest rate spreads applicable to an average industrial
borrower at an assumed credit rating. As a result, our loans with VEBA AG and
its affiliates now have interest rates ranging from 3.4% to 10.3%. These higher
rates will cause our interest payments on these loans to increase by
approximately $15 million per year, based on debt outstanding with VEBA AG and
its affiliates and the new interest rates that were in effect as of September
30, 1998. In addition, for all existing loans that mature prior to January 1,
2001 and which maturities are extended by VEBA AG and its affiliates until 2001,
the interest rates we must pay during the extension period will be adjusted to
reflect the then-current interest rate spreads applicable to an average
industrial borrower at an assumed credit rating.
We have also agreed to increase the annual commitment fee payable by us on
the undrawn portion of these loans from 1/8 of one percent to 1/4 of one
percent. Additionally, we have agreed that we will not allow any encumbrances,
such as mortgages and security interests, to be placed on our properties.
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<PAGE> 27
The additional $150 million of debt financing provided to us by VEBA AG and
its affiliates is also priced at interest rate spreads applicable to an average
industrial borrower at an assumed credit rating. As of November 30, 1998, $70
million of this additional debt financing was outstanding.
The assumed credit rating for these loan agreements was assumed solely for
purposes of the loan agreements and does not reflect a view by MEMC or VEBA AG
or its affiliates as to the rating that would be assigned by an independent
rating agency. No independent rating agency currently rates MEMC or its debt.
OPTION ON PASADENA FACILITY
In September 1998, we granted Tokuyama Corporation, Marubeni Corporation
and Marubeni America Corporation an option to acquire a majority interest in
MEMC Pasadena, Inc. Tokuyama is a Japanese polysilicon manufacturer and Marubeni
is a Japanese trading company. MEMC Pasadena is our granular polysilicon
subsidiary. In exchange for the option, Tokuyama and Marubeni made an option
payment to us. The term of the option is two years, subject to a one year
extension at the option of Tokuyama and Marubeni. If Tokuyama and Marubeni
exercise their option, we will then negotiate the terms and conditions
(including price) of the exercise with them based on the market value at that
time. The entire option payment will be applied toward the ultimate purchase
price. If Tokuyama and Marubeni do not exercise their option, then we will
return one-half of the option payment to them. During the term of the option,
Tokuyama and Marubeni have a right of first refusal over any transfer of MEMC
Pasadena's granular polysilicon business. In addition, for two years, we cannot
solicit offers from third parties for this business. In connection with the
option, Tokuyama will provide technical assistance to MEMC Pasadena for two
years (unless the option is earlier terminated by Tokuyama and Marubeni) to help
improve the quality of MEMC Pasadena's granular polysilicon products.
CHANGES IN OUR BOARD OF DIRECTORS
On August 12, 1998, Mr. Helmut Mamsch became Chairman of the Board and Dr.
Hans Michael Gaul joined the Board of Directors. Mr. Mamsch has been a member of
our Board of Directors since March 1998 and he replaced Dr. Erhard Meyer-Galow
as Chairman of the Board. Dr. Meyer-Galow resigned from the Board of Directors
effective as of November 30, 1998. Mr. Mamsch is a member of the Board of
Management of VEBA AG and recently assumed responsibility for VEBA AG's
corporate strategy and development. Dr. Gaul is a member of the Board of
Management of VEBA AG and serves as VEBA AG's Chief Financial Officer.
CHANGE OF OUR PRINCIPAL STOCKHOLDER
On September 30, 1998, Huls Corporation, our former principal stockholder,
merged into its corporate parent, VEBA Corporation. As a result, VEBA
Corporation now owns the MEMC common stock previously owned by Huls Corporation.
Immediately after the merger, VEBA Corporation owned 53.1% of MEMC common stock.
As a result of the private placement, the VEBA group now directly owns [63.4]%
of MEMC common stock.
USE OF PROCEEDS
We have received approximately $105.9 million from the private placement to
the VEBA group, after paying estimated expenses. We will use the proceeds of the
private placement to repay debt under our revolving credit agreements with VEBA
AG and its affiliates. We will receive approximately $91.3 million upon
completion of this rights offering, after deducting dealer managers' fees and
our other estimated offering expenses. We will use the proceeds from the rights
offering and the standby agreement and any remaining proceeds from the private
placement to repay the remaining debt under our three-year $100 million
revolving credit agreement with VEBA AG and its affiliates. At November 30,
1998, $20 million had been borrowed under that agreement. The interest rate
under this agreement becomes fixed for each borrowing based upon the term of
that borrowing and an assumed credit rating for an average industrial borrower
as of the date of such borrowing. The credit rating was assumed solely for
purposes of the agreement and does not reflect a view by MEMC or VEBA AG or its
affiliates as to the rating that would be
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<PAGE> 28
assigned by an independent rating agency. No independent rating agency currently
rates MEMC or its debt. As of November 30, 1998, the interest rate was
approximately 9.8% with respect to such borrowing. The debt under that agreement
has been and will be used to fund capital expenditures and operating losses. The
remaining net proceeds will be used for general corporate purposes. We expect to
reborrow additional amounts under the revolving credit agreements that are
repaid from the proceeds of the private placement and the rights offering and
the standby agreement for general corporate purposes. Our ability to reborrow
will be subject to customary conditions.
At November 30, 1998, we had $704.4 million total outstanding debt to VEBA
AG and its affiliates, of which $96.2 million was outstanding under revolving
credit agreements. This amount varies from time to time based on our cash needs.
Pending their ultimate application, we may deposit the remainder of the net
proceeds with VEBA AG or one of its affiliates and receive a market rate of
interest on the funds deposited. Alternatively, pending their ultimate
application, we may invest the net proceeds in interest or non-interest bearing
accounts or short-term government obligations, interest-bearing securities,
money market instruments or certificates of deposit.
DIVIDEND POLICY
We are presently not paying dividends on MEMC common stock. We plan to
retain all net earnings, if any, to fund the development of our business. We do
not presently plan to pay dividends on MEMC common stock for the foreseeable
future. Our Board of Directors has sole discretion over the declaration and
payment of future dividends. Any future dividends will depend upon our
profitability, financial condition, cash requirements, future prospects, general
business conditions, the terms of any of our debt agreements and other factors
our Board of Directors believes are relevant.
PRICE RANGE OF COMMON STOCK
You can find MEMC common stock traded on the NYSE under the symbol "WFR."
The following table shows the high and low sales prices of MEMC common stock
over recent periods.
<TABLE>
<CAPTION>
HIGH LOW
---- ---
<S> <C> <C>
Year Ended December 31, 1996
First Quarter............................................. $37 1/4 $26 1/2
Second Quarter............................................ 55 36 1/4
Third Quarter............................................. 40 5/8 20 1/4
Fourth Quarter............................................ 28 1/2 16 3/4
Year Ended December 31, 1997
First Quarter............................................. 29 3/4 22 1/4
Second Quarter............................................ 38 1/4 22 7/8
Third Quarter............................................. 38 7/8 25 5/8
Fourth Quarter............................................ 30 14 7/16
Year Ending December 31, 1998
First Quarter............................................. 18 3/4 14 1/2
Second Quarter............................................ 16 7/16 9 1/4
Third Quarter............................................. 10 13/16 2 15/16
Fourth Quarter (through December 30, 1998)................ 12 5/8 2 15/16
</TABLE>
On November 30, 1998, we had 837 record stockholders. MEMC common stock's
price closed at $7 7/8 on October 21, 1998, the last full trading day before we
publicly announced the rights offering, and at $8 1/2 on December 30, 1998.
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<PAGE> 29
CAPITALIZATION
The following table shows our short-term debt and capitalization as of
September 30, 1998. The table also shows our short-term debt and capitalization
as adjusted for the consummation of the private placement to the VEBA group and
rights offering and the transactions contemplated by the standby agreement
(including application of the net proceeds from such transactions) at the
assumed subscription price of $9.25 per share.
<TABLE>
<CAPTION>
SEPTEMBER 30, 1998
-----------------------------------------------
AS ADJUSTED FOR
PRIVATE PLACEMENT,
AS ADJUSTED RIGHTS OFFERING
FOR PRIVATE AND STANDBY
ACTUAL PLACEMENT AGREEMENT
---------- ----------- ------------------
(IN THOUSANDS)
<S> <C> <C> <C>
Debt:
Short-term debt to related parties................ $ 75,000 $ -- --
Short-term debt to third parties.................. 27,486 27,486 27,486
---------- ---------- ----------
Total short-term debt (including current
maturities of long-term debt)................ $ 102,486 $ 27,486 27,486
========== ========== ==========
Long-term debt to related parties................. $ 604,640 $ 604,640 $ 604,640
Long-term debt to third parties................... 113,788 113,788 113,788
---------- ---------- ----------
Total long-term debt (excluding current
maturities).................................. $ 718,428 $ 718,428 $ 718,428
---------- ---------- ----------
Minority interests.................................. 50,220 50,220 50,220
---------- ---------- ----------
Stockholders' equity:
Preferred stock, $0.01 par value: 50,000,000
shares authorized, none issued and outstanding
Common stock, $0.01 par value: 200,000,000 shares
authorized, 41,436,421 shares issued (actual),
52,906,691 shares issued (as adjusted for the
private placement) and 63,058,043 shares issued
(as adjusted for the private placement, rights
offering and standby agreement)(1)............. 414 [529] [630]
Additional paid-in capital........................ 574,317 [680,052] [771,216]
Accumulated deficit............................... (75,541) (75,541) (75,541)
Accumulated other comprehensive loss.............. (23,392) (23,392) (23,392)
Unearned restricted stock awards.................. (265) (265) (265)
Treasury stock, at cost: 929,205 shares........... (17,020) (17,020) (17,020)
---------- ---------- ----------
Total stockholders' equity..................... 458,513 564,363 655,628
---------- ---------- ----------
Total capitalization........................... $1,227,161 $1,333,011 $1,424,276
========== ========== ==========
</TABLE>
- ---------------
(1) Excludes 1,788,052 shares of MEMC common stock issuable upon exercise of
employee stock options as of September 30, 1998 and 1,361,806 shares
available for future grant under our Equity Incentive Plan.
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<PAGE> 30
THE RIGHTS OFFERING
THE RIGHTS
On , 1999, we will distribute to each holder of MEMC common stock
(except the VEBA group), at no charge, transferable subscription
rights for each share of MEMC common stock they own. We will distribute the
rights to you only if you are a record holder of MEMC common stock on the record
date, which is 5:00 p.m., New York City time, on , 1999. We will round
up, to the nearest whole number, the number of rights we distribute to each
stockholder.
BEFORE EXERCISING OR SELLING ANY RIGHTS, YOU SHOULD READ CAREFULLY THE
INFORMATION SET FORTH UNDER "RISK FACTORS" BEGINNING ON PAGE 9.
The following describes the rights offering in general and assumes (unless
specifically provided otherwise) that you are a record holder of MEMC common
stock. If you hold your shares in a brokerage account or by a custodian bank,
please see "-- Beneficial Owners" on page 32 below.
NO FRACTIONAL RIGHTS
We will not issue fractional rights, but rather will round up any
fractional rights to the nearest whole right. For example, if you own 100 shares
of MEMC common stock, you will receive rights, instead of
rights you would have received without rounding.
You may request that Harris Trust and Savings Bank divide your rights
certificate into transferable parts, for instance if you are the record holder
for a number of beneficial holders of MEMC common stock. However, Harris Trust
and Savings Bank will not divide your rights certificate so that (through
rounding or otherwise) you would receive a greater number of rights than those
to which you otherwise would be entitled.
EXPIRATION DATE OF THE RIGHTS OFFERING
You may exercise the basic subscription privilege and the over-subscription
privilege at any time before 5:00 p.m., New York City time, on , 1999.
We may extend the time for exercising the rights. If you do not exercise your
rights before the time they expire, then your rights will be null and void. We
will not be obligated to honor your exercise of rights if Harris Trust and
Savings Bank receives the documents relating to your exercise after the time
they expire, regardless of when you transmitted the documents, except when you
have timely transmitted the documents pursuant to the guaranteed delivery
procedures described below.
We will not extend the date the rights expire beyond , 1999,
unless our Board of Directors believes that a material event has occurred and we
need more time to disclose adequately to you the information about the event.
If we elect to extend the date the rights expire, we will issue a press
release announcing the extension before the first New York Stock Exchange
trading day after the most recently announced expiration date. If we extend the
date the rights will expire by more than 14 calendar days, we will send prompt
written notice of the extension to you and all rights holders of record. See
"-- Extensions and Termination" on page 36.
SUBSCRIPTION PRIVILEGES
Your rights entitle you to the basic subscription privilege and the
over-subscription privilege.
Basic Subscription Privilege. With the basic subscription privilege, you
may purchase one share of MEMC common stock per right, upon delivery of the
required documents and payment of the subscription price of $[9.25] per share,
before the time the rights expire. You are not required to exercise all of your
rights unless you wish to purchase shares under your over-subscription privilege
described below.
Over-Subscription Privilege. In addition to your basic subscription
privilege, you may subscribe for additional shares of MEMC common stock, upon
delivery of the required documents and payment of the subscription price of
$[9.25] per share before the time the rights expire. You may only exercise your
over-subscription privilege if you exercised your basic subscription privilege
in full and other holders of rights do not exercise their basic subscription
privileges in full.
Pro Rata Allocation. If there are not enough shares to satisfy all
subscriptions pursuant to the exercise of the over-subscription privilege, we
will allocate the remaining shares pro rata (subject to the elimination of
fractional shares)
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<PAGE> 31
among those over-subscribing. Pro rata means in proportion to the number of
shares you and the other holders have purchased pursuant to the exercise of the
basic subscription privilege. If there is a pro rata distribution of the
remaining shares and the pro ration results in the allocation to you of a
greater number of shares than you subscribed for pursuant to the
over-subscription privilege, then we will allocate to you only the number of
shares for which you subscribed. We will allocate the remaining shares among all
other holders exercising their over-subscription privilege.
Full Exercise of Basic Subscription Privilege. You may exercise the
over-subscription privilege only if you exercise your basic subscription
privilege in full. To determine if you have fully exercised your basic
subscription privilege, we will consider only the basic subscription privileges
held by you in the same capacity. For example, suppose you were granted rights
for shares of MEMC common stock you own individually and shares of MEMC common
stock you own collectively with your spouse. If you wish to exercise your
over-subscription privilege with respect to the rights you own individually, but
not with respect to rights you own collectively with your spouse, you only need
to exercise your basic subscription right with respect to your individually
owned rights. You do not have to subscribe for any shares under the basic
subscription privilege owned collectively with your spouse to exercise your
individual over-subscription privilege.
When you complete the portion of the rights certificate to exercise the
over-subscription privilege, you will be representing and certifying that you
have fully exercised your basic subscription privilege received in respect of
shares of MEMC common stock you hold in that capacity. You must exercise your
over-subscription privilege at the same time you exercise your basic
subscription privilege in full.
If you own your shares of MEMC common stock through your bank, broker or
other nominee holder who will exercise your over-subscription privilege on your
behalf, the nominee holder will be required to certify to us and the
subscription agent:
- the number of shares held on , 1999, the record date, on
your behalf;
- the number of rights you exercised under your basic subscription
privilege;
- that your entire basic subscription privilege held in the same capacity
has been exercised in full; and
- the number of shares of MEMC common stock you subscribed for pursuant to
the over-subscription privilege.
Your nominee holder must also disclose to us certain other information
received from you.
Return of Excess Payment. If you exercised your over-subscription
privilege and are allocated less than all of the shares of MEMC common stock for
which you wished to subscribe, the excess funds you paid for shares of MEMC
common stock that are not allocated to you will be returned by mail without
interest or deduction as soon as practicable after the expiration date of the
rights.
EXERCISE OF RIGHTS
You may exercise your rights by delivering the following to Harris Trust
and Savings Bank at or before the time the rights expire:
- Your properly completed and executed rights certificate evidencing those
rights with any required signature guarantees or other supplemental
documentation; and
- Your payment in full of the subscription price for each share of MEMC
common stock subscribed for pursuant to the basic subscription privilege
and the over-
subscription privilege.
METHOD OF PAYMENT
Your payment of the subscription price must be made by either:
- Check or bank draft drawn upon a U.S. bank or postal, telegraphic, or
express money order payable to Harris Trust and Savings Bank, as
subscription agent; or
- Wire transfer of immediately available funds to the account maintained
by the subscription agent for such purpose at The Chase Manhattan Bank,
New York, N.Y., ABA No. 021 000 021, Account No.: 617-999988 (marked:
"MEMC Electronic Materials, Inc. Subscription").
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<PAGE> 32
RECEIPT OF PAYMENT
Your payment of the subscription price will be deemed to have been received
by Harris Trust and Savings Bank, the subscription agent, only upon:
- Clearance of any uncertified check;
- Receipt by Harris Trust and Savings Bank of any certified check or bank
draft drawn upon a U.S. bank or any postal, telegraphic or express money
order; or
- Receipt of collected funds in Harris Trust and Savings Bank's account at
The Chase Manhattan Bank, New York, N.Y. designated above.
CLEARANCE OF UNCERTIFIED CHECKS
You should note that funds paid by uncertified personal checks may take
five business days or more to clear. If you wish to pay the subscription price
by an uncertified personal check, we urge you to make payment sufficiently in
advance of the time the rights expire to ensure that your payment is received
and clears by that time. We urge you to consider using a certified or cashier's
check, money order or wire transfer of funds to avoid missing the opportunity to
exercise your rights.
DELIVERY OF SUBSCRIPTION MATERIALS AND PAYMENT
You should deliver the rights certificate and payment of the subscription
price, as well as any nominee holder certifications, notices of guaranteed
delivery and DTC participant over-subscription forms,
IF BY MAIL TO:
Harris Trust and Savings Bank
c/o Harris Trust Company of New York
P.O. Box 1010
New York, New York 10268-1010
IF BY HAND DELIVERY OR OVERNIGHT COURIER TO:
Harris Trust and Savings Bank
c/o Harris Trust Company of New York
Wall Street Plaza
88 Pine Street, 19th Floor
New York, New York 10005
You may call Harris Trust and Savings Bank at (800) 245-7630.
CALCULATION OF RIGHTS EXERCISED
If you do not indicate the number of rights being exercised, or do not
forward full payment of the aggregate subscription price for the number of
rights that you indicate are being exercised, then you will be deemed to have
exercised the basic subscription privilege with respect to the maximum number of
rights that may be exercised for the aggregate subscription price payment you
delivered to Harris Trust and Savings Bank. If your aggregate subscription price
payment is greater than the amount you owe for your subscription, you will be
deemed to have exercised the over-subscription privilege to purchase the maximum
number of shares with your overpayment. If we do not apply your full
subscription price payment to your purchase of shares of MEMC common stock, we
will return the excess amount to you by mail without interest or deduction as
soon as practicable after the date the rights expire.
EXERCISING A PORTION OF YOUR RIGHTS
If you subscribe for fewer than all of the shares of MEMC common stock
represented by your rights certificate, you may, under certain circumstances,
either direct Harris Trust and Savings Bank to attempt to sell your remaining
rights or receive from Harris Trust and Savings Bank a new rights certificate
representing the unused rights. See "-- Method of Transferring and Selling
Rights" beginning on page 34.
FUNDS WILL BE HELD BY HARRIS TRUST AND SAVINGS BANK UNTIL SHARES OF COMMON STOCK
ARE ISSUED
Harris Trust and Savings Bank will hold your payment of the subscription
price in a segregated account with other payments received from holders of
rights until we issue to you your shares of MEMC common stock.
SIGNATURE GUARANTEE MAY BE REQUIRED
Your signature on each rights certificate must be guaranteed by an eligible
institution such as a member firm of a registered national securities exchange
or a member of the National Association of Securities Dealers, Inc. or a
commercial bank or trust company having an office or correspondent in the United
States, subject to standards and procedures adopted by Harris Trust and Savings
Bank, unless
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- Your rights certificate provides that the shares of the MEMC common
stock you subscribed for are to be delivered to you; or
- You are an eligible institution.
NOTICE TO BENEFICIAL HOLDERS
If you are a broker, a trustee or a depositary for securities who holds
shares of MEMC common stock for the account of others (a "nominee record date
holder"), you should notify the respective beneficial owners of such shares of
the rights as soon as possible to find out such beneficial owners' intentions.
You should obtain instructions from the beneficial owner with respect to the
rights, as set forth in the instructions we have provided to you for your
distribution to beneficial owners. If the beneficial owner so instructs, you
should complete the appropriate rights certificates and, in the case of the
over-subscription privilege, the related nominee holder certification, and
submit them to Harris Trust and Savings Bank with the proper payment. Nominee
record date holders that hold shares for the account(s) of more than one
beneficial owner may exercise the number of rights to which all such beneficial
owners in the aggregate otherwise would have been entitled if they had been
direct record holders of MEMC common stock on , 1999, the record date,
provided the nominee record date holder makes a proper showing to Harris Trust
and Savings Bank.
BENEFICIAL OWNERS
If you are a beneficial owner of shares of MEMC common stock or rights that
you hold through a nominee record date holder, we will ask your broker,
custodian bank or other nominee to notify you of this rights offering. If you
wish to sell or exercise your rights, you will need to have your broker,
custodian bank or other nominee act for you. To indicate your decision with
respect to your rights, you should complete and return to your broker, custodian
bank or other nominee the form entitled "Beneficial Owners Election Form." You
should receive this form from your broker, custodian bank or other nominee with
the other rights offering materials.
INSTRUCTIONS FOR COMPLETING THE RIGHTS CERTIFICATE
You should read and follow the instructions accompanying the rights
certificates carefully. If you want to exercise your rights, you must send your
rights certificates to Harris Trust and Savings Bank. YOU SHOULD NOT SEND THE
RIGHTS CERTIFICATES TO US.
YOU ARE RESPONSIBLE FOR THE METHOD OF DELIVERY OF RIGHTS CERTIFICATES, ANY
NECESSARY ACCOMPANYING DOCUMENTS AND PAYMENT OF THE SUBSCRIPTION PRICE TO HARRIS
TRUST AND SAVINGS BANK. IF YOU SEND THE RIGHTS CERTIFICATES AND PAYMENT OF THE
SUBSCRIPTION PRICE BY MAIL, WE RECOMMEND THAT YOU SEND THEM BY REGISTERED MAIL,
PROPERLY INSURED, WITH RETURN RECEIPT REQUESTED. YOU SHOULD ALLOW A SUFFICIENT
NUMBER OF DAYS TO ENSURE DELIVERY TO HARRIS TRUST AND SAVINGS BANK AND CLEARANCE
OF PAYMENT PRIOR TO THE TIME THE RIGHTS EXPIRE.
DETERMINATIONS REGARDING THE EXERCISE OF RIGHTS
We will decide all questions concerning the timeliness, validity, form and
eligibility of your exercise of rights. Our decisions will be final and binding.
We, in our sole discretion, may waive any defect or irregularity, or permit a
defect or irregularity to be corrected within such time as we may determine. We
may reject the exercise of any of your rights because of any defect or
irregularity. Your subscription will not be deemed to have been received or
accepted until all irregularities have been waived by us or cured by you within
such time we decide, in our sole discretion.
Neither we nor Harris Trust and Savings Bank, will be under any duty to
notify you of a defect or irregularity. We will not be liable for failing to
give you such notice. We reserve the right to reject your exercise of rights if
your exercise is not in accordance with the terms of the rights offering or in
proper form. We will also not accept your exercise of rights if our issuance of
shares of MEMC common stock pursuant to your exercise could be deemed unlawful
or materially burdensome. See "-- Regulatory Limitation" on page 36.
GUARANTEED DELIVERY PROCEDURES
If you wish to exercise your rights, but you do not have sufficient time to
deliver the rights certificates evidencing your rights to the
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subscription agent on or before the time the rights expire, you may exercise
your rights by the following guaranteed delivery procedures:
- Make your payment in full of the subscription price for each share of
MEMC common stock being subscribed for pursuant to the basic
subscription privilege and the over-subscription privilege to be
received (in the manner set forth in "-- Method of Payment" on page 30)
to Harris Trust and Savings Bank on or before the time the rights
expire;
- Deliver a notice of guaranteed delivery to Harris Trust and Savings Bank
at or before the time the rights expire; and
- Deliver the properly completed rights certificate evidencing the rights
being exercised (and, if applicable for a nominee holder, the related
nominee holder certification), with any required signatures guaranteed,
to Harris Trust and Savings Bank, within one New York Stock Exchange
trading day following the date of the notice of guaranteed delivery was
delivered to Harris Trust and Savings Bank.
Your notice of guaranteed delivery must be substantially in the form
provided with the instructions as to use of rights certificates distributed to
you with your rights certificate. Your notice of guaranteed delivery must come
from an eligible institution, or other eligible guarantee institutions which are
a member of, or a participant in, a signature guarantee program acceptable to
Harris Trust and Savings Bank. In your notice of guaranteed delivery you must
state:
- Your name;
- The number of rights represented by your rights certificates, the number
of shares of MEMC common stock you are subscribing for pursuant to the
basic subscription privilege and the number of the shares of MEMC common
stock, if any, you are subscribing for pursuant to the over-
subscription privilege; and
- Your guarantee that you will deliver to Harris Trust and Savings Bank
any rights certificates evidencing the rights you are exercising within
one New York Stock Exchange trading day following the date Harris Trust
and Savings Bank receives your notice of guaranteed delivery.
You may deliver the notice of guaranteed delivery to Harris Trust and
Savings Bank in the same manner as the rights certificate at the addresses set
forth above, under "-- Delivery of Subscription Materials and Payment" on page
31. You may also transmit the notice of guaranteed delivery to Harris Trust and
Savings Bank by telegram or facsimile transmission (telecopier no. (212)
701-7636). To confirm facsimile deliveries, you may call (212) 701-7624.
Morrow & Co., Inc. will send you additional copies of the form of notice of
guaranteed delivery if you need them. Please call Morrow & Co., Inc. at (800)
566-9061. Banks and brokerage firms please call (800) 622-5200 to request any
copies of the form of notice of guaranteed delivery.
SUBSCRIPTION AGENT
We have appointed Harris Trust and Savings Bank as subscription agent for
the rights offering. We will pay its fees and expenses related to the rights
offering. We also have agreed to indemnify Harris Trust and Savings Bank from
certain liabilities which it may incur in connection with the rights offering.
QUESTIONS ABOUT EXERCISING RIGHTS -- INFORMATION AGENT
You may direct any questions or requests for assistance concerning the
method of exercising your rights, additional copies of this prospectus, the
instructions, the nominee holder certification, the notice of guaranteed
delivery or other subscription documents referred to herein, to Morrow & Co.,
Inc., the information agent, at the following telephone number and address:
Morrow & Co., Inc.
445 Park Avenue, 5th Floor
New York, NY 10022
(212) 754-8000
Toll Free (800) 566-9061
Banks and Brokerage Firms
Please call (800) 662-5200
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NO REVOCATION OF EXERCISE OF RIGHTS UNLESS VEBA CONDITIONS ARE NOT MET
Once you have exercised your basic subscription privilege and/or
over-subscription privilege, you may not revoke your exercise, unless the
conditions to the VEBA group's obligation to purchase all of the shares not
purchased by other rights holders in this rights offering are not satisfied or
waived before the time the rights expire. In that case, we plan to notify you
through a prospectus supplement, you will be able to change your decision, and
we may extend the date the rights expire.
NO FRACTIONAL SHARES WILL BE ISSUED
We will not issue any fractional shares of MEMC common stock. You may not
exercise a right in part.
METHOD OF TRANSFERRING AND SELLING RIGHTS
We have applied to list the rights on the New York Stock Exchange under the
symbol "WFRRT." Additionally, we expect that rights may be purchased or sold
through usual investment channels until the close of business on the last
trading day preceding the date the rights expire. However, there has been no
prior public market for the rights. We cannot assure you that a trading market
for the rights will develop or, if a market develops, that the market will
remain available throughout the subscription period. Additionally, we cannot
assure you of the price at which the rights will trade, if at all. If you do not
exercise or sell your rights you will lose any value inherent in the rights.
Transfer of Rights. You may transfer rights in whole by endorsing the
rights certificate for transfer. Please follow the instructions for transfer
included in the information sent to you with your rights certificate. If you
wish to transfer only a portion of the rights (but not fractional rights), you
should deliver your properly endorsed rights certificate to Harris Trust and
Savings Bank. With your rights certificate, you should include instructions to
register such portion of the rights evidenced thereby in the name of the
transferee (and to issue a new rights certificate to the transferee evidencing
such transferred rights). The subscription agent will send you a new rights
certificate evidencing the balance of the rights issued to you but not
transferred to the transferee. You may also instruct Harris Trust and Savings
Bank to send the rights certificate to one or more additional transferees. If
you do not wish to receive your remaining rights, you may instruct Harris Trust
and Savings Bank to sell your rights for you as described below.
If you wish to transfer all or a portion of your rights (but not fractional
rights), you should allow a sufficient amount of time prior to the time the
rights expire for Harris Trust and Savings Bank to:
- Receive and process your transfer instructions; and
- Issue and transmit a new rights certificate to your transferee or
transferees with respect to transferred rights, and to you with respect
to rights you retained, if any.
If you wish to transfer your rights to any person other than a bank or
broker, the signatures on your rights certificate must be guaranteed by an
eligible institution.
Sales of Rights Through Harris Trust and Savings Bank. You may also sell
the rights, in whole or in part (but not fractional rights), through Harris
Trust and Savings Bank as the subscription agent. If you wish to have Harris
Trust and Savings Bank try to sell your rights, you must deliver your properly
executed rights certificate, with appropriate instructions, to Harris Trust and
Savings Bank. If you want the subscription agent to try to sell only a portion
of your rights, you must send Harris Trust and Savings Bank instructions setting
forth what you would like done with the rights, along with your rights
certificate.
If Harris Trust and Savings Bank sells rights for you, it will send you a
check for the proceeds from the sale of any of your rights as soon as possible
after the date the rights expire. If your rights can be sold, the sale will be
deemed to have been made at the weighted average sale price of all rights sold
by Harris Trust and Savings Bank. We will pay the fees charged by Harris Trust
and Savings Bank for making your sale. We cannot assure you, however, that a
market will develop for the rights or that Harris Trust and Savings Bank will be
able to sell your rights.
You must have your order to sell your rights to Harris Trust and Savings
Bank before 11:00 a.m., New York City time, on ,
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1999, the fifth business day before the date the rights are expected to expire.
If less than all sales orders received by Harris Trust and Savings Bank are
filled, it will prorate the sales proceeds among you and the other holders based
upon the number of rights each holder has instructed Harris Trust and Savings
Bank to sell during such period, irrespective of when during such period the
instructions are received by it. Harris Trust and Savings Bank is required to
sell your rights only if it is able to find buyers. If Harris Trust and Savings
Bank cannot sell your rights by 5:00 p.m. New York City time, on ,
1999, the third business day prior to the dates the rights are expected to
expire, Harris Trust and Savings Bank will return your rights certificate
promptly by mail to you.
General Considerations Regarding the Transfer of Rights. You should also
allow two to ten business days for your transferee to exercise or sell the
rights evidenced by such new rights certificates. The amount of time needed by
your transferee to exercise or sell its rights depends upon the method by which
the transferee delivers the rights certificates, the method of payment made by
the transferee, and the number of transactions which the holder instructs Harris
Trust and Savings Bank to effect. Neither we nor Harris Trust and Savings Bank
will be liable to a transferee or transferor of rights if rights certificates or
any other required documents are not received in time for exercise or sale prior
to the time the rights expire.
You will receive a new rights certificate upon a partial exercise, transfer
or sale of rights only if Harris Trust and Savings Bank receives your properly
endorsed rights certificate no later than 5:00 p.m., New York City time, five
business days before the date the rights expire. Harris Trust and Savings Bank
will not issue a new rights certificate if your rights certificate is received
after that time and date. If your instructions and rights certificate are not
received by Harris Trust and Savings Bank by that time and date, you will lose
your power to sell or exercise your remaining rights.
Unless you make other arrangements with Harris Trust and Savings Bank, a
new rights certificate issued to you after 5:00 p.m., New York City time, five
business days before the date the rights expire will be held for pick-up by you
at Harris Trust and Savings Bank's hand delivery address provided herein. You
bear the responsibility for all newly issued rights certificates.
Except for fees charged by Harris Trust and Savings Bank (which will be
paid by us), you are responsible for all commissions, fees and other expenses
(including brokerage commissions and transfer taxes) incurred in connection with
the purchase, sale or exercise of your rights. Any amounts you owe will be
deducted from your account.
IF YOU DO NOT EXERCISE YOUR RIGHTS BEFORE THE SPECIFIED EXPIRATION TIME,
YOUR RIGHTS WILL EXPIRE AND WILL NO LONGER BE EXERCISABLE.
PROCEDURES FOR DTC PARTICIPANTS
We expect that the rights will be eligible for transfer through, and that
your exercise of your basic subscription privilege (but not your over-
subscription privilege) may be made through, the facilities of The Depository
Trust Company (commonly known as DTC). If your rights are exercised as part of
the basic subscription privilege through DTC we refer to them as "DTC Exercised
Rights." If you hold DTC Exercised Rights, you may exercise your
over-subscription privilege by properly executing and delivering to Harris Trust
and Savings Bank, at or prior to the time the rights expire, a DTC participant
over-subscription exercise form and a nominee holder certification and making
payment of the appropriate subscription price for the number of shares of MEMC
common stock for which your over-subscription privilege is to be exercised.
Please call Harris Trust and Savings Bank at (800) 245-7630 to obtain copies of
the DTC participant over-subscription exercise form and the nominee holder
certification.
DETERMINATION OF SUBSCRIPTION PRICE
A special committee of our Board of Directors set the subscription price at
an average trading price of MEMC common stock from , 1999 to ,
1999. We completed the private placement of shares to the VEBA group on ,
1999 at $[9.25] per share. In approving the subscription price, the special
committee considered a number of factors, including advice provided by the
dealer managers with respect to the size, pricing and structure of the private
placement to the VEBA group and the rights offering and the results of analyses
performed by NationsBanc Montgomery Securities LLC to
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assist us in determining the appropriate and desirable pricing terms for the
private placement to the VEBA group and the rights offering. The special
committee also considered additional factors, such as the alternatives available
to us for raising capital, the market price of MEMC common stock, the pro rata
nature of the private placement to the VEBA group and the rights offering, the
pricing of similar transactions, our business prospects and the general
condition of the securities markets. See "Plan of Distribution" beginning on
page 57.
EXTENSIONS AND TERMINATION
We may extend the rights offering and the period for exercising your
rights. However, we will not extend the rights offering or exercise period
beyond , 1999. We may terminate the rights offering at any time
prior to the time the rights expire.
NO RECOMMENDATIONS TO RIGHTS HOLDERS
We are not making any recommendation as to whether or not you should
exercise your rights. You should make your decision based on your own assessment
of your best interests. None of our Board of Directors, the special committee,
our officers, the dealer managers or any other person are making any
recommendations as to whether or not you should exercise your rights.
FOREIGN STOCKHOLDERS AND STOCKHOLDERS WITH APO OR FPO ADDRESSES
We will not mail rights certificates to record date holders or to
subsequent transferees whose addresses are outside the United States or who have
an APO or FPO address. Instead, we will have Harris Trust and Savings Bank hold
such rights certificates for such holders' accounts. To exercise their rights,
such holders must notify the subscription agent prior to 11:00 a.m., New York
City time, on , 1999, three business days prior to the date the rights
expire, and must establish to the satisfaction of the subscription agent that
such exercise is permitted under applicable law. If such holder does not notify
and provide acceptable instructions to Harris Trust and Savings Bank by such
time (if no contrary instructions have been received), the rights will be sold,
subject to Harris Trust and Savings Bank's ability to find a purchaser. Any such
sales will be deemed to be effected at the weighted average sale price of all
rights sold by Harris Trust and Savings Bank. See "- Method of Transferring and
Selling Rights" beginning on page 34. If the rights can be sold, Harris Trust
and Savings Bank will remit a check for the proceeds from the sale of any rights
to such holders by mail. The proceeds, if any, resulting from sales of rights
pursuant to the basic subscription privilege of holders whose addresses are not
known by Harris Trust and Savings Bank or to whom delivery cannot be made will
be held in an interest bearing account. Any amount remaining unclaimed on the
second anniversary of the date the rights expire will be turned over to us.
REGULATORY LIMITATION
We will not be required to issue shares of MEMC common stock pursuant to
the rights offering to you if, in our opinion, you would be required to obtain
prior clearance or approval from any state or federal regulatory authorities to
own or control such shares if, at the time the rights expire, you have not
obtained such clearance or approval.
ISSUANCE OF COMMON STOCK
Harris Trust and Savings Bank will issue to you certificates representing
shares of MEMC common stock you purchase pursuant to the rights offering as soon
as practicable after the time the rights expire.
Your payment of the subscription price will be retained by Harris Trust and
Savings Bank, and will not be delivered to us, until your subscription is
accepted and you are issued your stock certificates. We will not pay you any
interest on funds paid to Harris Trust and Savings Bank, regardless of whether
such funds are applied to the subscription price or returned to the you. You
will have no rights as a stockholder of MEMC with respect to shares of MEMC
common stock subscribed for until certificates representing such shares are
issued to you. Upon our issuance of such certificates, you will be deemed the
owner of the shares you purchased by exercise of your rights. Unless otherwise
instructed in the rights certificates, your certificates for shares issued
pursuant to your exercise of rights will be registered in your name.
If the rights offering is not completed for any reason, Harris Trust and
Savings Bank will
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promptly return, without interest, all funds received by it.
We will retain any interest earned on the funds held by Harris Trust and
Savings Bank prior to the closing or termination of the rights offering.
PRINCIPAL STOCKHOLDER GROUP
As of , 1999, the record date, the VEBA group will
beneficially own approximately [32,961,212] shares of the outstanding MEMC
common stock ([63.4]% of the outstanding shares). The VEBA group is comprised of
VEBA Zweite Verwaltungsegesellschaft mbH and VEBA Corporation, each a subsidiary
of VEBA AG and its subsidiaries.
STOCK SALE TO THE VEBA GROUP
On , 1999, we sold [11,470,270] shares of MEMC common stock
to the VEBA group at $[9.25] per share, the subscription price, for aggregate
proceeds to us of approximately $105.9 million, after paying estimated expenses.
See "Recent Developments -- Financial Restructuring Plan -- Private Placement to
the VEBA Group and the Rights Offering" on page 25.
STANDBY AGREEMENT WITH THE VEBA GROUP
Although we will not distribute any rights to the VEBA Group, the VEBA
Group has agreed to purchase at $[9.25] per share, the subscription price, all
shares of MEMC common stock not purchased by rights holders in the rights
offering. This standby agreement is subject to certain conditions, including the
following material conditions which have not yet been satisfied:
- the VEBA group must receive a specified opinion of our counsel;
- the VEBA group must receive a specified letter from our certified public
accountants;
- we must not have received a stop order suspending our registration
statement of which this prospectus forms a part;
- we must not have experienced any material adverse change in our capital
stock or any material increase in our short-term or long-term debt other
than in the ordinary course of business or pursuant to existing
agreements with VEBA Corporation and its affiliates;
- we must not have experienced any material adverse change since October
22, 1998;
- we must not have incurred any material liabilities or obligations,
except liabilities with VEBA Corporation and its affiliates, that were
not in existence on October 22, 1998; and
- all representations and warranties we made in the standby agreement with
the VEBA group must be true and correct as of the day the rights expire.
The number of shares the VEBA group purchases will be determined after all
rights holders exercise their basic subscription and over-subscription
privileges. The VEBA group will pay for the shares of MEMC common stock it
purchases under the standby agreement on or after the date the rights expire. If
the VEBA group purchases any rights, it will not exercise its over-subscription
privilege with respect to those rights.
Assuming no other holders exercise their rights and the VEBA group
purchases all unsubscribed shares of MEMC common stock offered hereby, the VEBA
group will own approximately [69.4]% of the MEMC common stock issued and
outstanding after the rights offering, based on the number of shares purchased
by the VEBA group in the private placement and the number of shares of MEMC
common stock outstanding as of November 30, 1998.
SHARES OF COMMON STOCK OUTSTANDING AFTER THE RIGHTS OFFERING
Assuming we issue all of the shares of MEMC common stock offered in the
rights offering, approximately [62,128,838] shares of MEMC common stock will be
issued and outstanding. Based on the [11,470,270] shares purchased by the VEBA
group in the private placement and the 40,507,216 shares of MEMC common stock
outstanding as of November 30, 1998, our issuance of shares in the rights
offering would result (on a pro forma basis as of November 30, 1998) in a
[19.5]% increase in the number of outstanding shares of MEMC common stock.
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COMPLIANCE WITH STATE REGULATIONS PERTAINING TO THE RIGHTS OFFERING
We are not making the rights offering in any state or other jurisdiction in
which it is unlawful to do so. We will not sell or accept an offer to purchase
MEMC common stock from you if you are a resident of any such state or other
jurisdiction. We may delay the commencement of the rights offering in certain
states or other jurisdictions in order to comply with the laws of such states or
other jurisdictions. We do not expect that there will be any changes in the
terms of the rights offering. However, we may decide, in our sole discretion,
not to modify the terms of the rights offering as may be requested by certain
states or other jurisdictions. If that happens and you are a resident of that
state, you will not be eligible to participate in the rights offering.
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BUSINESS
GENERAL
MEMC is a leading worldwide producer of silicon wafers. The silicon wafer
is the fundamental building block from which almost all semiconductors are
manufactured. Semiconductors are used in virtually all electronic applications,
including computers, telecommunications equipment, automobiles, consumer
electronics products, industrial automation and control systems, and analytical
and defense systems. We operate manufacturing facilities, directly or through
joint ventures, in Italy, Japan, Malaysia, South Korea, Taiwan, and the United
States. We sell silicon wafers to most of the world's largest manufacturers of
semiconductors. We are the leading worldwide supplier of silicon wafers outside
of Japan and the only significant non-Japanese silicon wafer manufacturer with
manufacturing and research facilities in Japan.
INDUSTRY OVERVIEW
Almost all semiconductors are manufactured from silicon wafers and thus the
strength of the silicon wafer industry is highly correlated to the performance
of the semiconductor industry. Although there are over two hundred semiconductor
manufacturers worldwide, we believe that the top twenty semiconductor
manufacturers accounted for over 70% of all semiconductor revenues in 1997. We
also believe that of the approximately 24 silicon wafer manufacturers in the
world today, six principal manufacturers, including ourselves, supply a
substantial majority of the wafers used by the major semiconductor
manufacturers.
Semiconductor Industry
The semiconductor industry historically has been a high growth cyclical
industry. Worldwide, the industry grew at a compound annual growth rate of 16.2%
from $24.3 billion in revenues in 1985 to $147.2 billion in revenues in 1997,
according to Dataquest estimates. Continuous improvements in semiconductor
process and design technologies, semiconductor fabrication equipment and silicon
wafers have allowed semiconductor manufacturers to produce more complex, higher
performance and more reliable devices at a lower cost per device. The result has
been a large proliferation of uses for semiconductors and historically rapid
growth in semiconductor revenue.
Despite the semiconductor industry's history of significant growth,
semiconductor revenues declined by 6.3% in 1996 and grew by only 3.6% in 1997,
according to Dataquest estimates. This slowdown has been attributed to excess
capacity and resultant price erosion, especially for DRAM (commonly used
computer memory chips). This downturn has been extended into 1998 due to
continued overcapacity and the weak economic conditions in the Asia Pacific and
Japanese markets. Dataquest and other industry sources have forecasted that
semiconductor industry revenues will be down 5.9% to 13.0% in 1998.
Throughout this downturn, semiconductor manufacturers have been exerting
significant price pressure on their raw material suppliers, including silicon
wafer manufacturers. Semiconductor manufacturers have also accelerated the speed
at which they have reduced their device linewidths in an effort to reduce costs.
The reduction in linewidths results in a requirement for less silicon per
device. Additionally, the semiconductor industry has recently experienced
significant restructuring and consolidation activities.
Semiconductor manufacturers greatly reduced their capital spending
beginning in late 1997 and throughout 1998. This reduced capital spending has
limited additions to capacity.
Silicon Wafer Industry
The silicon wafer industry historically has been a high growth cyclical
industry correlated to the growth of the semiconductor industry. Worldwide, the
industry grew at a compound annual growth rate of 10.8% from 1.2 billion square
inches in 1985 to 4.0 billion square inches in 1997, according to Dataquest
estimates. From 1993 through the first half of 1996 the industry was
characterized by excess demand and wafer shortages. Due to these shortages and
anticipated future demand, wafer manufacturers quickly added capacity,
especially for 8-inch wafers, the predominant wafer used in the industry today
and the wafer diameter anticipated to have the most significant growth over the
next several years. This growth rate declined significantly in late 1996.
The silicon wafer industry slowdown, which began in late 1996, has left the
industry in a state of overcapacity. Price declines have resulted from
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this overcapacity. Moreover, the weakness of the Japanese yen and Deutsche mark
have allowed Japanese and German competitors to offer lower dollar based
pricing. The price declines have been greatest for 8-inch wafers where the
highest overcapacity exists. According to Dataquest, the industry saw the growth
rate in silicon wafer consumption decline to 7.1% in 1997. Dataquest and another
industry source have forecasted that silicon wafer consumption will be flat to a
decline of 4.2% in 1998.
Major silicon wafer manufacturers, including MEMC, invested in 12-inch
wafer manufacturing capacity in anticipation that the semiconductor industry
would migrate to this larger diameter wafer. However, in 1998, the industry
experienced a softening semiconductor market and successful implementation of
thinner device linewidths on the current diameters. This resulted in industry
recognition that the transition to 12-inch wafers would be delayed. The new
transition timing requires 12-inch wafer characteristics to be even more
advanced at the time they are introduced for production of integrated circuits.
The leading semiconductor manufacturers organized and funded two industry
consortia for the purpose of evaluating 12-inch equipment and materials. These
consortia, International Sematech in Austin, Texas, and SELETE in Japan, heavily
influenced the 12-inch market during 1998. While the primary use of 12-inch
wafers in 1999 will continue to be for semiconductor device process and tool
development, MEMC expects to also ship samples of 12-inch prime polished and
epitaxial wafers.
PRODUCTS
Our silicon wafers vary in diameter, surface features (polished or
epitaxial), composition, electrical properties and method of manufacture. Our
silicon wafers are manufactured according to the exacting specifications
required by our customers; we currently produce wafers with a variety of product
features satisfying more than 1,000 unique product specifications. Semiconductor
manufacturers require wafers of larger diameter and more stringent technical
specifications in order to produce increasingly complex semiconductor devices
such as the larger megabit memory chips and microprocessors.
Our customers have increased their focus on efficient semiconductor
production processes because their manufacturing processes for semiconductor
devices have become more expensive. Our customers make many semiconductor
devices, or chips, from the same wafer, and all chips from a particular wafer
are manufactured and processed simultaneously at each stage in the device
manufacturing process. Because of this, larger-sized wafers allow for a greater
throughput from the same semiconductor manufacturing process and allow
semiconductor manufacturers to spread their fixed costs of production over a
larger volume of finished products. For example, a 6-inch (150 millimeter) wafer
has a surface area of approximately 27.4 square inches, whereas an 8-inch (200
millimeter) wafer has a surface area of approximately 48.7 square inches. Thus,
the 8-inch wafer is approximately 78% more surface area than the 6-inch wafer. A
12-inch (300 millimeter) wafer has a surface area of approximately 109.6 square
inches or approximately 125% more surface area than an 8-inch wafer. Despite the
industry's focus on 6-inch and larger diameter wafers, we continue to
manufacture and sell a significant amount of 4-inch (100 millimeter) and 5-inch
(125 millimeter) wafers.
We manufacture wafers in sizes ranging from 4 inches to 8 inches in
diameter as well as a limited number of pilot development 12-inch diameter
wafers from our pilot development lines. Customers use the larger diameter
wafers in more sophisticated applications where semiconductor manufacturers
benefit from the increased efficiencies and greater number of available die per
wafer.
Our silicon wafers fall into one of three general types:
Prime Polished Wafers
Our principal product is the prime polished wafer, which is a highly
refined, pure silicon wafer with an ultraflat and ultraclean surface. We put
prime polished wafers through a sophisticated chemical-mechanical polishing
process that removes defects and leaves an extremely smooth surface. This makes
the wafers suitable for the advanced technologies used by our customers. Our
customers use prime polished wafers in a broad range of applications for
integrated circuit devices.
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Epitaxial Wafers
Customers have forced semiconductor manufacturers to use smaller and
smaller device features in order to incorporate more complex functionality in
the integrated circuit. Smaller devices also improve performance and control
power consumption and heat production. We manufacture epitaxial wafers to serve
the technological demands of our customers that manufacture advanced
semiconductors.
Epitaxial wafers consist of a thin, single-crystal silicon layer grown on
the polished surface of the silicon wafer. The wafer is designed to have
different composition and electrical properties from the epitaxial layer on the
wafer surface. The wafer, among other things, helps to improve isolation between
circuit elements our customers fabricate on the silicon film surface of the
wafer. One result of such smaller devices is the requirement that the distance
between circuit elements becomes increasingly narrow. The industry refers to the
distance between circuit elements as line widths. A critical aspect in the
construction of any integrated circuit device is the isolation of these
different elements that comprise the integrated circuit device. Without
sufficient isolation of the various elements, the elements could communicate
electrically with each other, which could ruin the device. Epitaxial wafers
provide improved isolation and allow for increased reliability of the finished
semiconductor device, greater efficiencies during the semiconductor
manufacturing process, and ultimately more complex integrated circuit devices.
Test/Monitor Wafers
We supply test/monitor wafers, or monitor wafers, to our customers for
their use in testing semiconductor fabrication lines and processes. Although
monitor wafers are substantially the same as prime polished wafers with respect
to cleanliness, and in some cases flatness, other specifications are generally
less rigorous. This allows us to produce monitor wafers from the portion of a
silicon ingot that does not meet customer specifications for wafers to be used
in the manufacture of semiconductors. Therefore, sales of monitor wafers allow
us to experience a higher yield from each silicon ingot produced.
RAW MATERIALS
The main raw material in our production process is polysilicon. We produce
almost one-half of our total polysilicon requirements and purchase the remainder
of our requirements from others. The availability of polysilicon currently
significantly exceeds demand. We believe that an adequate supply of polysilicon
will be available internally or from others for the foreseeable future.
We obtain substantially all of our requirements for several raw materials,
equipment, parts and supplies from sole suppliers. Although we believe that we
could find adequate alternative sources of supply for these raw materials,
equipment, parts and supplies, we may be required to obtain new qualifications
from our customers in order to change or substitute suppliers. Because we cannot
predict whether we would be successful or how long that process would take, our
manufacturing yields could be adversely affected while we transition to a new
supplier.
We believe that adequate quantities of all our key raw materials,
equipment, parts and supplies are currently available. However, because of the
cyclical nature of our industry, we may experience shortages in the future. See
"Risk Factors -- We Depend on Certain Suppliers" on page 19.
MANUFACTURING PROCESS
Silicon wafers for the semiconductor industry are extremely complex
materials with characteristics such as high purity levels, highly uniform
crystal structure, and precise mechanical tolerances. Electronic grade silicon
is one of the most refined materials in the world, having an impurity level of
no more than one part per billion. Requirements for highly uniform crystal
structure, mechanical tolerances and cleanliness in the manufacture of silicon
wafers are at levels that stretch manufacturing processes to the limits of
measurement, and necessitate that we conduct certain processes in "clean rooms."
The silicon wafer manufacturing process consists of three principal phases:
the crystal growth process, the wafer slicing process and the wafer finishing
process.
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Crystal Growth Process
The first step in the wafer manufacturing process is the formation of a
large, silicon single crystal or ingot. This process begins with the melting of
polysilicon, together with minute amounts of electrically active elements such
as arsenic, boron, phosphorous or antimony in a quartz crucible.
Once the melt has reached the desired temperature, we lower a silicon seed
crystal, or "seed" into the melt. The melt is slowly cooled to the required
temperature, and crystal growth begins around the seed. As the growth continues,
the seed is slowly extracted or "pulled" from the melt. The temperature of the
melt and the speed of extraction govern the diameter of the ingot, and the
concentration of an electrically active element in the melt governs the
electrical properties of the silicon wafers to be made from the ingot. This is a
complex, proprietary process requiring many control features on the
crystal-growing equipment.
Wafer Slicing Process
After we grow the ingots, we extract them from the crystal pulling furnaces
and allow them to cool. We grind the ingots to the specified diameter, and then
we slice the ingots into thin wafers. Next, we prepare the wafers for the
surface polishing steps with a multi-step process using precision lapping
machines, edge contour machines and chemical etchers.
Wafer Finishing Process
Final polishing and cleaning processes give the wafers the clean and
superflat mirror polished surfaces required for the fabrication of semiconductor
devices. For wafer polishing, we currently use our proprietary, ninth-generation
polishers together with our innovative chemical-mechanical polishing process.
This form of polishing was one of our early inventions that first allowed solid
state devices to move from individual circuits to the complexities of today's
integrated circuits. We further process some of our products into epitaxial
wafers.
RESEARCH AND DEVELOPMENT
A number of factors drive our current research and development efforts.
These include our business strategy and focus mainly on:
- the development and improvement of large diameter and advanced silicon
wafer products,
- manufacturing process improvements, and
- enhancement and cost reduction of existing products.
Customer focus also influences research and development. We work closely with
customers in developing new products and refining existing products to faster
meet the needs of the marketplace. To strengthen this relationship and
interaction, we assign research and development application engineers to key
customer accounts worldwide.
A recent product innovation of our research and development program
includes a new class of polished wafer with a virtually defect-free wafer
surface. We are currently delivering 6-inch and 8-inch diameters of this class
of polished wafer to customers for evaluation in increasing their yields. We
also engage in ongoing research and development to continuously improve the
surface of epitaxial wafers. Further, as a result of our commitment to develop
the next diameter of silicon wafers, we are now supplying high quality 12-inch
wafers to the industry from pilot development lines. We first produced our
12-inch diameter wafers in 1991 and believe we are one of the industry leaders
in the development of this next generation of wafers. Our new class of polished
wafer and 12-inch wafers are in the pilot stage of development, and we cannot
assure you that either will ever mature to a commercial product.
We continue to see rapid technological change and product innovation in the
market for silicon wafer products. In response to this business environment, we
recently commissioned a "Wafering Center of Excellence" to direct our wafering
process research and development. The Wafering Center of Excellence is located
at our plant in Utsunomiya, Japan and has the capacity to produce 12-inch
wafers.
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We do not expect the demand for 12-inch wafers to develop until the year
2001 or beyond. In the interim, we expect semiconductor customers to continue
their support of two industry consortia to develop the tool set and processes
necessary to fabricate integrated circuits on 12-inch wafers.
MARKETING AND SALES
We market most of our products through a direct sales force. We believe a
key element of our marketing strategy is establishing and maintaining close
relationships with our customers. We try to accomplish this through
multi-functional teams of technical, marketing and sales, and manufacturing
personnel. These teams work closely with customers in developing their new
production facilities, qualifying our products for use at such new facilities
and maintaining qualification at all existing manufacturing facilities. We
complete sales principally through indicative-only contracts of one year or less
that indicate expected volumes and specify price.
Our close relationships with our customers are partly the result of the
lengthy and expensive "qualification" process by which customers qualify silicon
wafer manufacturers, and their individual facilities, to supply a particular
product. We are aware of changing customer needs and target our manufacturing to
try to produce wafers adapted to each customer's process and requirements. For
1997 and the first nine months of 1998, the following ten customers generated
over half of our sales:
- Advanced Micro Devices, Inc.;
- Chartered Semiconductor Manufacturing, Ltd.;
- Cypress Semiconductor Corporation;
- International Business Machines Corporation;
- Motorola, Inc.;
- National Semiconductor Corporation;
- Philips Electronics N.V.;
- Samsung Electronics Co., Ltd.;
- ST Microelectronics N.V.;
- and Texas Instruments Incorporated.
Texas Instruments alone represented more than 10% of our sales in 1997 and the
first nine months of 1998.
COMPETITION
We face intense competition in the silicon wafer industry from established
manufacturers throughout the world. We believe that we possess certain
technological and other strengths relative to our competitors. However,
realizing and maintaining such strengths requires us to continue making a high
level of investment in research and development, marketing and customer service
and support. Our inability to maintain such investments could have a material
adverse effect on our operating results. For other risks related to competition,
see "Risk Factors -- Intense Competition in the Silicon Wafer Industry Could
Adversely Affect Our Operating Results" on page 13 and "Risk Factors -- Currency
Exchange Rates and Increased Competition Have Reduced Wafer Prices" on page 14.
JOINT VENTURES
We have entered into a number of joint ventures as part of our strategy to
leverage our capital, to enter expanding markets, to forge closer working
relationships with our principal customers and to broaden the geographic
diversification of our operations. We have joint ventures with prominent
partners in South Korea, Taiwan and the United States.
POSCO HULS Co., Ltd.
In 1990, we entered into a joint venture in South Korea with Samsung
Electronic Co., Ltd. and Pohang Iron and Steel. Samsung is a South Korean
manufacturer of integrated circuits and one of our largest customers. Pohang is
a South Korean steel manufacturer. The South Korea joint venture is named POSCO
HULS Co., Ltd. (commonly known as PHC) and manufactures and sells silicon wafers
in South Korea. PHC generated sales of $88.9 million for the first nine months
of 1998, $167.7 million for the first nine months of 1997, $226.4 million in
1997, $275.5 million in 1996 and $181.2 million in 1995. Over half of PHC's
sales are to Samsung. PHC has the capacity to produce per month an aggregate of
approximately 320,000 6-inch and 8-inch wafers. We currently own 40% of PHC.
Pohang
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currently owns 40% and Samsung currently owns 20%.
We have agreed to provide technical assistance and information to PHC. We
have also granted licenses to PHC to use certain technology to manufacture,
promote and sell silicon wafers. In exchange for such technical assistance and
licenses, we receive royalties. Through September 30, 1998 we received quarterly
royalties based on PHC's net sales. Effective October 1, 1998, the agreement by
which we provide technical assistance and information and have granted licenses
to PHC was amended. The amendment, among other things, extends the term of the
technical agreement. Under the amendment, we receive quarterly royalties based
on net sales and an annual royalty based on net income after taxes.
Taisil Electronic Materials Corporation
In 1994, we formed Taisil Electronic Materials Corporation with China Steel
Corporation. China Steel Corporation is a Taiwanese steel manufacturer. Taisil
manufactures and sells silicon wafers in Taiwan. Taisil generated sales of $40.7
million for the first nine months of 1998, $33.8 million for the first nine
months of 1997, $61.9 million for 1997 and $7.3 million in 1996. Taisil did not
generate sales in 1995 because it did not finish construction of its
manufacturing facilities until May of 1996. Taisil has the capacity to produce
approximately 140,000 8-inch wafers per month. Taisil has in place
infrastructure that could support the production of approximately 240,000 8-inch
wafers per month. We currently own 45% of Taisil. The remainder of Taisil is
owned by China Steel Corporation (35%), Chao Tung Bank (10%) and the China
Development Corporation (10%).
We have agreed to provide technical assistance and information to Taisil.
We have also granted licenses to Taisil to use certain technology to manufacture
and sell silicon wafers. In exchange for such technical assistance and licenses,
we receive semiannual royalties based on Taisil's net sales and operating
income.
For other information regarding Taisil, see "Risk Factors -- We May Have to
Make Substantial Payments In Connection With Our Taisil Joint Venture" beginning
on page 15.
PROPRIETARY INFORMATION AND INTELLECTUAL PROPERTY
As of November 30, 1998, we owned of record or beneficially approximately
112 U.S. patents, of which approximately 14 will expire by 2003, approximately
22 will expire between 2004 and 2008 and approximately 76 will expire after
2008. As of November 30, 1998, we owned of record or beneficially approximately
174 foreign patents, of which approximately 34 will expire by 2003,
approximately 79 will expire between 2004 and 2008 and approximately 61 will
expire after 2008. These foreign patents are generally counterparts of our U.S.
patents. We cannot assure you, however, that any of these patents will not be
challenged, invalidated or circumvented in the future, or that they do or will
provide a competitive advantage. As of that date, we had also submitted
approximately 96 U.S. and 440 foreign patent applications. However, we cannot
assure you that any of these applications will be granted.
For additional information regarding our proprietary information and
intellectual property, see the section entitled "Risk Factors -- Limited
Intellectual Property Protection; Notices of Possible Infringement" beginning on
page 17.
LEGAL PROCEEDINGS
We have a dispute with a manufacturer of equipment for the production of
silicon wafers. The dispute involves our cancellation of an order for a number
of pieces of equipment. The manufacturer claims that we are obligated for
approximately $5 million for costs related to the cancelled order, including the
cost of inventory it has on hand and on order with its vendors. We are in the
process of evaluating the merits of the manufacturer's claim. The manufacturer
has advised us that if we are unable to resolve this dispute, it will file suit
against us. While we will assert all of our defenses in this dispute, we cannot
assure you that we will be able to resolve this dispute on terms favorable to
us.
In a case entitled Damewood vs. Ethyl Corporation, et al., (Case No.
96-38521), filed on August 1, 1996, three employees of the former operator of
MEMC Pasadena's plant, Albemarle Corporation, filed suit against us and others
in the 189th Judicial District Court, Harris County, Texas. The employees
alleged that they sustained injuries during an explosion at that plant on
January 27, 1996. We have settled this matter
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with plaintiffs and have been dismissed as a party. One of the other defendants,
Ethyl Corporation, was the only defendant in this case at the time of trial in
October 1998. A jury awarded a verdict against Ethyl Corporation in the amount
of $6.1 million.
In July of 1996, two employees of the former operator of the MEMC Pasadena
plant were injured when flaming liquid escaped from a valve under repair. These
individuals filed suit on June 13, 1997, against us and others in a case
entitled Parden vs. Ethyl Corporation, et al. (Case No. 97-34857) in the 61st
Judicial District Court, Harris County, Texas. Plaintiffs are seeking actual and
exemplary damages in an unstated amount. We believe that we have meritorious
defenses to this cause of action. This case is currently set for trial on
February 22, 1999.
A demand against us for defense and indemnity in both these cases was made
on behalf of Ethyl Corporation by Albemarle Corporation on September 29, 1998.
Albemarle Corporation has assumed the obligation to defend and indemnify Ethyl
Corporation under an agreement in which Ethyl Corporation transferred ownership
of the plant where the injury took place to Albemarle Corporation. Ethyl
Corporation's demand for defense and indemnification against us is under
evaluation by our counsel. In early November, we made a demand for indemnity in
these cases against Albemarle. Demands for indemnity made by Albemarle
Corporation on behalf of Ethyl Corporation and by us are both based on
contractual indemnity language contained in the contract for the sale of the
MEMC Pasadena plant from Albemarle Corporation to us.
Due to uncertainty regarding the litigation process, the scope and
interpretation of contractual indemnity provisions and the status of any
insurance coverage, we cannot assure you that the ultimate outcome of the
foregoing matters will not have a material adverse effect on us.
For certain other potential disputes see "Risk Factors -- Limited
Intellectual Property Protection; Notices of Possible Infringement" beginning on
page 17 and "-- Exposure to Environmental Liability" on page 19.
EMPLOYEES
At November 30, 1998, we had approximately 6,300 full-time employees and 90
temporary workers worldwide. We intend to close our Spartanburg, South Carolina
facility in the first half of 1999 and withdraw from our joint venture in
Luoyang, China during the fourth quarter of 1998. As of November 30, 1998,
approximately 600 full-time employees worked at our Spartanburg, South Carolina
facility and joint venture in Luoyang, China.
We have not experienced any material work stoppages at any of our
facilities during the last several years. We believe our relationships with
employees are satisfactory.
YEAR 2000
Many existing software programs, computers and other types of equipment
were not designed to accommodate the Year 2000 and beyond. If not corrected,
these computer applications and equipment could fail or create erroneous
results. For us, this could disrupt purchasing, manufacturing, sales, finance
and other support areas and affect our ability to timely deliver silicon wafers
with the exacting specifications required by our customers, thereby causing
potential lost sales and additional expenses.
Our State of Readiness
We have created a Year 2000 Project Team that is comprised of a Program
Office, including a Global Project Manager, Customer and Vendor Management
groups and Year 2000 representatives from all sites around the world, including
our unconsolidated joint ventures. This team is responsible for planning and
monitoring all Year 2000 activities and reporting to our executive management.
Our Chief Financial Officer is the sponsor for the Year 2000 project and reports
to our Board of Directors on a periodic basis.
Our Year 2000 project encompasses both information and non-information
systems within MEMC as well as the investigation of the readiness of our
strategic suppliers/business partners. Our goal is to have all Year 2000 issues
resolved by June 1999, with Year 2000 issues relating to the most critical
business systems (i.e., financial, order processing) resolved by the first
quarter of 1999. To that end, we have inventoried
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and assessed the Year 2000 readiness of the following:
- In-house Applications -- Those applications that are developed and
supported in-house or purchased applications that are heavily customized
and supported in-house. This classification also includes
end-user-developed applications deemed critical to the business.
- Business Software (Purchased) -- Applications purchased from an outside
vendor and used for automating business processes (i.e., financial
systems, order processing systems, purchasing systems).
- Manufacturing Software (Purchased) -- Applications purchased from an
outside vendor and used for automating manufacturing processes.
- Personal Computer Software (Purchased) -- All software packages resident
on personal computers. This includes things such as operating systems,
word processing software, communications software, project management
software, and spreadsheet software.
- Infrastructure Software (Purchased) -- Purchased software used in the
client/server and network environments.
- IT Hardware -- Information Technology hardware components including
midrange machines, personal computers, printers, network hardware.
- Facilities & Utilities -- Components in the office and manufacturing
supporting systems environments. Types of components include: copy
machines, fax machines, telephone/communications systems, security
systems, fire alarm/control, electrical, waste treatment, alarms, and
air handlers.
- Manufacturing Equipment -- Shop floor equipment such as clean rooms,
crystal pullers, epitaxial reactors, inspection, lab, lappers, laser
markers, measurement tools, grinders, polishers, slicers, and wet
benches.
In-House Applications. We are evaluating the extent to which modifications
of our in-house applications will be necessary to accommodate the Year 2000 and
are modifying our in-house applications to enable continued processing of data
into and beyond the Year 2000. This phase of our Year 2000 project is
approximately 70% complete and we anticipate completing remediation and testing
of our in-house applications by the end of the first quarter of 1999.
Purchased Software. We are obtaining, where feasible, contractual
warranties from systems vendors that their products are or will be Year 2000
compliant. We have completed approximately 80% of our Year 2000 project related
to business software, approximately 50% of our Year 2000 project related to
manufacturing software, and approximately 75% of our Year 2000 project for
personal computer software. We have substantially completed our Year 2000
project related to infrastructure software. We expect this phase of our Year
2000 project to be completed by the end of the first quarter of 1999. We require
Year 2000 contractual warranties from all vendors of new software and hardware.
In addition, we are testing newly purchased computer hardware and software
systems in an effort to ensure their Year 2000 compliance.
Embedded Systems. For in-house embedded systems, we are modifying our
systems to enable the continuing functioning of equipment into and beyond the
Year 2000. For third party embedded systems, we are obtaining, where feasible,
contractual warranties from systems vendors that their products are or will be
Year 2000 compliant. We have completed this phase of our Year 2000 project for
our hardware. We have completed approximately 50% of our Year 2000 project with
respect to facilities and utilities, and approximately 30% of our Year 2000
project with respect to manufacturing equipment. We anticipate having fully
tested such embedded systems by the end of the second quarter of 1999.
Suppliers/Business Partners. We have also communicated with our strategic
suppliers and equipment vendors seeking assurances that they will be Year 2000
ready. Our goal is to obtain as much detailed information as possible about our
strategic suppliers/business partners' Year 2000 plans so as to identify those
companies which appear to pose a significant risk of failure to perform their
obligations to us as a result of the Year 2000. We expect to have compiled
detailed
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information regarding all of our strategic suppliers and equipment vendors by
December 1998. This will be an ongoing process during our Year 2000 project. For
those strategic suppliers and equipment vendors that do not respond as to their
status or their response is not satisfactory, we intend to develop contingency
plans to ensure that sufficient resources are available to continue with
business operations.
Costs to Address the Year 2000
Spending for modifications and updates is being expensed as incurred and is
not expected to have a material impact on our results of operations or cash
flows. The cost of our Year 2000 project is being funded through borrowings. We
estimate that our total Year 2000 expenditures will be in the range of $5-7
million. Through November 30, 1998, we have expended approximately $1.7 million
which consists mainly of contracting programmers and consulting costs associated
with the evaluation, assessment and remediation of computer systems and
manufacturing equipment. We anticipate that contract programming costs will be
our most significant cost as the Year 2000 project proceeds to completion.
Risk Analysis
Like most large business enterprises, we are dependent upon our own
internal computer technology and rely upon the timely performance of our
suppliers/business partners. A large-scale Year 2000 failure could impair our
ability to timely deliver silicon wafers with the exacting specifications
required by our customers, thereby causing potential lost sales and additional
expenses. Our Year 2000 project seeks to identify and minimize this risk and
includes testing of our in-house applications, purchased software and embedded
systems to ensure that all such systems will function before and after the Year
2000. We are continually refining our understanding of the risk the Year 2000
poses to our strategic suppliers/business partners based upon information
obtained through our surveys. This refinement will continue through the rest of
1998 and into mid-1999.
Contingency Plans
Our Year 2000 project includes the development of contingency plans for
business critical systems and manufacturing equipment as well as for strategic
suppliers/business partners to attempt to minimize disruption to our operations
in the event of a Year 2000 failure. We will be formulating plans to address a
variety of failure scenarios, including failures of our in-house applications,
as well as failures of strategic suppliers/business partners. We anticipate that
we will complete Year 2000 contingency planning by June 1999.
Cautionary Statement
Year 2000 issues are widespread and complex. While we believe we will
address them on a timely basis, we cannot assure you that we will be successful
or that these problems will not materially adversely affect our business or
results of operations. To a large extent, we depend on the efforts of our
customers, suppliers and other organizations with which we conduct transactions
to address their Year 2000 issues, over which we have no control.
The statements regarding the expected outcome and timing of Year 2000
efforts are forward-looking statements. Actual results could differ materially
from our expectations. See "Cautionary Statement Regarding Forward-Looking
Statements" beginning on page 22 and "Risk Factors -- Risks of Computer Failures
Due to Year 2000 Problems" beginning on page 18.
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CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
The VEBA group owns [63.4]% of the outstanding shares of MEMC common stock,
including the shares of MEMC common stock purchased by the VEBA group in the
private placement. VEBA Corporation and VEBA Zweite Verwaltungsegesellschaft mbH
are owned by VEBA AG and its subsidiaries. On , 1999, we sold
[11,470,270] shares of MEMC common stock to the VEBA group at $[9.25] per share
for aggregate net proceeds of approximately $105.9 million. See "Recent
Developments -- Financial Restructuring Plan -- Private Placement to the VEBA
Group and the Rights Offering" on page 25. The VEBA group has also agreed to
purchase all shares not subscribed for by other stockholders in the rights
offering, subject to certain conditions that are customary in a firm commitment
underwriting. See "The Rights Offering -- Standby Agreement with the VEBA Group"
on page 37.
In an effort to minimize conflicts of interest by members of our Board of
Directors affiliated with VEBA AG or other related parties, the Audit Committee
generally approves or ratifies any material transaction with a related party.
Our Audit Committee currently consists of two independent directors.
In 1997, we made payments to VEBA Corporation and certain of its affiliates
for raw materials, equipment, office space, services, credit commitments and
interest. We also reimbursed VEBA Corporation and certain of its affiliates for
the use of a tax carryover and for certain insurance premiums paid on our
behalf. The following discussion summarizes our significant agreements and
arrangements with VEBA Corporation and its affiliates.
SERVICE AGREEMENT
We have entered into a service agreement with VEBA Corporation (as
successor to Huls Corporation), which requires VEBA Corporation to provide us
with accounting services and office space. According to the terms of the service
agreement, either party may terminate the service agreement at any time on 30
days' notice. The service agreement also may be modified from time to time by
mutual consent of the parties. We believe that the terms of the service
agreement are comparable to terms that we could obtain from unrelated third
parties. We terminated our accounting services with VEBA Corporation during
1998. In 1997, we paid VEBA Corporation approximately $700,000 under this
agreement.
We had arrangements with two affiliates of VEBA AG that permitted the two
affiliates to use our computer hardware to implement their software systems. The
two affiliates paid us $192,000 in 1997 pursuant to these arrangements. These
arrangements terminated in 1998.
AGREEMENT FOR COMMUNICATION SERVICES
We have an arrangement with VEBA Corporation covering our communication
service needs. Our arrangement allows us to participate with VEBA Corporation
and several of its affiliates in a communication services agreement between VEBA
Corporation and AT&T. The term of the communication services agreement expires
in 2001. In return for volume pricing discounts, VEBA Corporation provided AT&T
with minimum revenue commitments for each contract year during the term of the
communication services agreement. We entered into a reimbursement agreement with
VEBA Corporation which requires us to reimburse VEBA Corporation if our payments
to AT&T under the communication services agreement do not meet certain specified
minimum levels for each contract year. Because of the combined volume of VEBA
Corporation and its affiliates (including our volume), we believe that the
pricing terms available to us under the communication services agreement are no
less favorable than we could obtain if we independently entered into a contract
for similar communication services. To date, we have not made any reimbursement
payments to VEBA Corporation under this agreement.
LOAN AGREEMENTS AND GUARANTEES
We have entered into credit and loan arrangements with VEBA AG and its
affiliates. See "Recent Developments -- Financial Restructuring Plan -- Debt
Restructuring" beginning on page 25. We and VEBA Corporation and its affiliates
have guaranteed certain indebtedness of PHC with an aggregate principal amount
outstanding of approximately $3.7 million as of December 31, 1997, the latest
portion of which
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matures in September 1999. Neither we nor VEBA Corporation has been required to
make any payments under these guarantees. We have agreed to indemnify VEBA
Corporation with respect to its guarantee. We have agreed to pay VEBA
Corporation an annual fee of 1/8 of one percent calculated on the outstanding
principal balance under the PHC credit agreements for this guarantee. In 1997,
we paid VEBA Corporation and certain of its affiliates approximately $23.6
million in interest, commitment fees and other financing fees.
TAX AGREEMENTS
From 1990 to 1995, we were a party to various tax sharing agreements with
VEBA Corporation and its affiliates. The tax sharing agreements provided a
method to determine each party's respective federal income tax liabilities. In
1995, we entered into a tax disaffiliation agreement with VEBA Corporation
terminating the tax sharing agreements. As a result, we are now responsible for
our own federal, state, and local tax returns and tax liabilities. Pursuant to
the terms of the tax disaffiliation agreement, we agreed with VEBA Corporation
to indemnify each other from and against any additional federal income tax
liability attributable to each other's operations that is determined to be due
with respect to taxable periods covered by the tax sharing agreements. In 1997,
we paid VEBA Corporation $1.3 million under the tax sharing agreements as
reimbursement for the use of certain tax credit carry forwards.
REGISTRATION RIGHTS AGREEMENT
Pursuant to a registration rights agreement, as amended in connection with
the private placement, we granted the VEBA group the right to demand
registration under the Securities Act of 1933 of its shares of MEMC common
stock, including shares purchased in the private placement and shares that may
be purchased under the standby commitment or otherwise. The demand rights are
exercisable and must be exercised for at least 25% of MEMC common stock covered
by the registration rights agreement. We may be required to effect up to three
such demand registrations. The VEBA group will bear the expenses of any such
demand registration. We are not obligated to take any action to register shares
of MEMC common stock owned by the VEBA group:
- during the period starting 30 days prior to the estimated date of filing
of, and ending 90 days after the effective date of, any other
registration statement filed by us under the Securities Act;
- more than once during any six-month period; and
- for up to 90 days after a request from the VEBA group if our president
certifies that our Board of Directors has determined that such
registration would interfere with a material transaction then being
pursued by us.
In addition, except in certain circumstances and subject to certain limitations,
if we propose to register any shares of MEMC common stock under the Securities
Act, VEBA Corporation will be entitled to require us to include all or a portion
of the shares of MEMC common stock which VEBA Corporation owns in such
registration. We will bear the expenses of any such "piggyback" registration,
other than underwriting discounts, commissions and filing fees relating to MEMC
common stock to be sold by VEBA Corporation. In addition, we have agreed to
indemnify any underwriter in connection with any registration made pursuant to
the registration rights agreement against certain liabilities, including
liabilities under the Securities Act.
TREASURY MANAGEMENT
Pursuant to an informal arrangement, we participate in VEBA AG's global
treasury management system. As a condition to our participation, we offer VEBA
AG or an affiliate a right of first refusal to act as our financial intermediary
in transacting our currency hedging activities. As a result of this arrangement,
we have entered into a number of foreign exchange hedging contracts using VEBA
AG or an affiliate as our financial intermediary. We believe that our hedging
arrangements with VEBA AG or an affiliate allow for transactions on terms that
are comparable to terms available from unrelated third party financial
intermediaries. Consistent with our past practice, we may deposit with VEBA
Corporation or certain of its affiliates on a short term basis our
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excess cash on hand at market rates of interest. We believe that the interest
rates received under these short term arrangements are comparable to market
rates received for similar transactions from non-affiliated persons. The
treasury management arrangements may be modified from time to time or terminated
at any time on short notice, either by us or VEBA Corporation or certain
affiliates.
AGENCY AND SERVICES AGREEMENTS WITH AFFILIATED COMPANIES
Through our wholly owned Italian subsidiary, MEMC Electronic Materials,
S.p.A. and certain other foreign subsidiaries, we distribute our silicon
products and silicon products manufactured by affiliated companies in various
European countries and South Korea under certain agency and services agreements
that cover the distribution arrangements. In the agency agreements, affiliates
of VEBA AG provided sales agency, administrative and other related services to
MEMC Electronic Materials, S.p.A. in conjunction with the distribution of
silicon products in the various countries. In return for these services, MEMC
Electronic Materials, S.p.A. paid these affiliates of VEBA AG on a commission or
cost plus commission basis. During 1998, we terminated these agency agreements.
We believe that the terms of the agency agreements were comparable to those that
we could have obtained from unrelated third parties. In 1997, we paid
approximately $2.0 million to affiliates of VEBA AG under these agency
agreements.
PURCHASES AND SALES OF RAW MATERIALS, FINISHED PRODUCTS AND EQUIPMENT
During 1998, we purchased raw materials from an affiliate of VEBA AG
pursuant to a supply contract dated December 31, 1995. The supply contract has a
term of five years. We believe that the prices we pay for raw materials under
this supply contract are not materially different from those which we could
obtain from third parties for similar products. In 1997, we paid approximately
$9.1 million for raw materials purchased under this supply contract.
We also have purchased equipment from Steag Microtech, Inc., an entity in
which VEBA AG holds a significant minority ownership interest. The purchases
were governed by a master equipment agreement dated as of August 1, 1995 which
expired in August 1998. We believe that the terms of the equipment agreement
were comparable to those that we could have obtained from unrelated third
parties. In 1997, we purchased approximately $4.3 million of equipment under the
master equipment agreement.
SAP SOFTWARE SUBLICENSE
We expect to obtain the use of SAP R/3 software to integrate our business
processes through a sublicense from VEBA AG. However, if we were to cease being
an indirect subsidiary of VEBA AG, we may incur higher maintenance charges from
SAP AG or its affiliates because of our inability to continue to benefit from
VEBA AG's volume pricing.
INSURANCE
We participate in a marine cargo insurance policy maintained by VEBA AG or
an affiliate. In 1997, we paid premiums of $71,800 under this policy. We also
participate in a directors and officers liability insurance policy sponsored by
an unrelated third party. Our participation in the directors and officers policy
was arranged by VEBA AG. The premiums on the directors and officers policy are
paid by VEBA AG on our behalf. We reimburse VEBA AG for these premiums. In 1997,
we reimbursed VEBA AG in the amount of $529,600 for premiums paid under this
policy. We believe that the total premiums paid for the marine cargo policy and
the directors and officers policy are comparable to premiums that are available
for unrelated third parties.
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
Bryan Cave LLP, our special counsel, has advised us that the following
discussion as to legal matters is its opinion as to the material United States
federal income tax consequences of the rights offering. Their opinion is based
on current provisions of the U.S. Internal Revenue Code of 1986, as amended,
applicable final, temporary and proposed Treasury Regulations, judicial
authority, and current administrative rulings and pronouncements of the Internal
Revenue Service, and upon the facts concerning MEMC as of today. We cannot
assure you that the Internal Revenue
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Service will not disagree with their opinion, and we are not requesting a ruling
from the Internal Revenue Service. Legislative, judicial or administrative
changes or interpretations may be issued in the future that could alter or
modify their opinion. Such changes or interpretations could be retroactive and
therefore affect the tax consequences to you.
Moreover, the opinion of Bryan Cave LLP does not purport to fully address
all aspects of federal income taxation that may be relevant to you, especially
if you are subject to special treatment under the federal income tax laws. For
example, if you are a bank, dealer in securities, life insurance company,
tax-exempt organization or foreign taxpayer, this discussion may not cover all
relevant tax issues. Also this opinion does not address applicable tax
consequences if you hold MEMC common stock as part of a hedging, straddle,
constructive sale, conversion or other risk reduction transaction. This opinion
also does not address any aspect of state, local or foreign tax laws.
This opinion is only applicable to you if you hold MEMC common stock,
and/or will hold the rights and any shares of MEMC common stock you acquire upon
the exercise of rights, as capital assets (generally, property held for
investment) within the meaning of Section 1221 of the Internal Revenue Code. YOU
SHOULD CONSULT YOUR OWN TAX ADVISORS TO DETERMINE THE SPECIFIC TAX CONSEQUENCES
OF THE RIGHTS OFFERING TO YOU.
ISSUANCE OF THE RIGHTS
If you hold MEMC common stock on the record date, more likely than not you
will not be required to recognize taxable income upon the receipt of the rights.
Subject to certain exceptions, a distribution by a corporation to its
stockholders of rights to acquire stock in the distributing corporation is not
taxable. An exception to this general rule applies in the case of a distribution
which constitutes a "disproportionate distribution" with respect to any class or
classes of stock of the corporation. A distribution of stock rights constitutes
a "disproportionate distribution" if it is a part of a distribution or a series
of distributions (including deemed distributions) that has the effect of the
receipt of property (including cash) by some stockholders and an increase in the
proportionate interests of other stockholders in the assets or earnings and
profits of the distributing corporation.
The distribution of the rights to all stockholders except the VEBA group,
more likely than not, will not constitute a taxable distribution based on
representations by MEMC that:
- the private placement to the VEBA group was made with the expectation of
promptly thereafter making the distribution of rights to the remaining
stockholders, which may be exercised on the same economic terms as the
private placement,
- there is a single class of stock outstanding, and
- there has not been nor is there expected to be any property
distributions to any stockholder in connection with the distribution of
rights.
If despite these representations, the Internal Revenue Service were to
conclude that the distribution of rights is independent from the private
placement to the VEBA group and there were other property distributions to
shareholders in connection with the distribution of rights, based on the absence
of any direct authority, the Internal Revenue Service could treat the
distribution of rights as a taxable distribution, with the result that a person
receiving a right would recognize a dividend, taxable as ordinary income, in an
amount equal to the fair market value of the right received, but only to the
extent of the current and accumulated earnings and profits of MEMC. To the
extent the deemed distribution exceeds the current and accumulated earnings and
profits of MEMC, such excess would be treated first as a nontaxable recovery of
adjusted tax basis in the MEMC common stock with respect to which the right was
distributed and then as gain from the sale or exchange of the MEMC common stock.
A person's tax basis in a right received in a taxable distribution would equal
the fair market value of the right as of the date of distribution of the right.
A person's holding period in the rights would begin on the day following the
date of distribution of the rights. We intend to treat the distribution of
rights as a nontaxable distribution.
Except as provided above, the following discussion assumes that the
distribution of the rights will be treated as a nontaxable distribution.
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BASIS AND HOLDING PERIOD OF THE RIGHTS
If you hold MEMC common stock on the record date, your basis in the rights
received by you will be zero. If, however, either
- the fair market value of the rights on the date we issue the rights is
15% or more of the fair market value (on that same date) of MEMC common
stock (which could occur if unanticipated market demand for rights
develops); or
- you properly elect under Section 307 of the Internal Revenue Code in
your federal income tax return to allocate part of the basis of your
MEMC common stock to the rights;
then your basis in your shares of MEMC common stock will be allocated between
the MEMC common stock and the rights in proportion to the fair market values of
each on the date we issue the rights.
The holding period of your rights will include your holding period (as of
the date of issuance) for the MEMC common stock with respect to which we
distributed the rights to you.
If you purchase rights, your basis in the rights will be equal to your
purchase price for the rights. Your holding period for those rights will begin
on the date following the date you purchase the rights.
TRANSFER OF THE RIGHTS
If you sell or exchange your rights, you generally will recognize gain or
loss equal to the difference between the amount you realized and your basis, if
any, in the rights. Such gain or loss generally will be capital gain or loss so
long as you held the rights as a capital asset at the time of the sale or
exchange. Gain or loss from an asset held for more than one year will generally
be taxable as long term capital gain or loss. If you recognize any such long
term capital gain, the Internal Revenue Service will generally tax such gain at
a maximum rate of 20%.
EXPIRATION OF THE RIGHTS
If your basis in your rights is zero, and you allow your rights to expire
unexercised, you will not recognize any gain or loss.
If you have a basis in your rights and you allow your rights to expire
unexercised, you will recognize a loss equal to the basis of those rights. Any
loss you recognize on the expiration of your rights will be a capital loss if
the MEMC common stock obtainable by you after the exercise of the rights would
be a capital asset.
EXERCISE OF THE RIGHTS; BASIS AND HOLDING PERIOD OF ACQUIRED SHARES
You will not recognize any gain or loss upon the exercise of your rights.
Your basis in each share of MEMC common stock you acquire through exercise of
your rights will equal the sum of the subscription price you paid to exercise
your rights and your basis, if any, in the rights. Your holding period for the
MEMC common stock you acquire through exercise of your rights will begin on the
date you exercise your rights.
SALE OR EXCHANGE OF COMMON STOCK
If you sell or exchange shares of MEMC common stock, you will generally
recognize gain or loss on the transaction. The gain or loss you recognize is
equal to the difference between the amount you realize on the transaction and
your basis in your shares you sold. Such gain or loss generally will be capital
gain or loss so long as you held the shares as a capital asset at the time of
the sale or exchange. Gain or loss from an asset held for more than one year
will generally be taxable as long term capital gain or loss. If you recognize
any such long term capital gain, the Internal Revenue Service will generally tax
such gain at a maximum rate of 20%.
INFORMATION REPORTING AND BACKUP WITHHOLDING
Under the backup withholding rules of the Internal Revenue Code, you may be
subject to 31% backup withholding with respect to any reportable payments made
to you pursuant to the rights offering. You will not be subject to backup
withholding if you:
- Are a corporation or fall within certain other exempt categories and,
when required, demonstrate that fact; or
- Provide a correct taxpayer identification number and certify under
penalties of perjury that your taxpayer identification number is correct
and that you are not subject to backup withholding because
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you previously failed to report all dividends and interest income.
Any amount withheld under these rules will be credited against your federal
income tax liability. We may require you to establish your exemption from backup
withholding or make other arrangements with respect to the payment of backup
withholding.
YOU SHOULD CONSULT YOUR OWN TAX ADVISORS REGARDING THE CONSEQUENCES OF THE
RIGHTS OFFERING TO YOUR PARTICULAR TAX SITUATION, INCLUDING STATE AND LOCAL
INCOME AND OTHER TAX LAWS.
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DESCRIPTION OF CAPITAL STOCK
The following is a summary of our capital stock and highlights some of the
provisions of our Certificate of Incorporation and By-Laws. We have also
summarized a provision of the General Corporation Law of Delaware (commonly
known as the DGCL). Since the terms of our Certificate of Incorporation and
By-Laws, and the DGCL may differ from the general information we are providing,
you should only rely on the actual provisions of the Certificate of
Incorporation, the By-Laws or the DGCL. If you would like to read the
Certificate of Incorporation or By-Laws, they are on file with the Securities
and Exchange Commission.
GENERAL
Our authorized capital stock consists of 200,000,000 shares of common
stock, par value $0.01 per share, and 50,000,000 shares of preferred stock, par
value $0.01 per share.
COMMON STOCK
As a holder of MEMC common stock, you are entitled to one vote for each
share held of record on all matters submitted to a vote of the stockholders. You
are entitled to receive dividends declared by our Board of Directors. The right
of our Board of Directors to declare dividends, however, is subject to the
rights of any holders of our preferred stock and the availability of sufficient
funds to pay the dividends. See "Dividend Policy" on page 27. If we liquidate
MEMC, you will be entitled to share ratably with the other stockholders in the
distribution of all assets that we have left after we pay all of our
liabilities, and all of our obligations to the holders of preferred stock. You
have no preemptive rights to subscribe for additional shares of MEMC and no
right to convert your MEMC common stock into any other securities. In addition,
you do not have the benefit of a sinking fund for your shares of MEMC common
stock. Your MEMC common stock is not redeemable by us.
PREFERRED STOCK
Your rights as a holder of MEMC common stock may be affected by any
preferred stock that we may issue. As of the date of this prospectus, we have
not issued any preferred stock and we do not have any plans to issue any
preferred stock in the future. However, our Board of Directors is authorized to
issue up to 50,000,000 shares of preferred stock. The issuance of preferred
stock could adversely affect your voting power as a holder of MEMC common stock
and could have the effect of delaying, deferring or impeding a change in control
of MEMC.
If we authorize the issuance of preferred stock, our Board of Directors has
the authority to determine whether any or all shares of authorized preferred
stock should be issued as a class without series or in one or more series and to
fix the rights, preferences, privileges and restrictions of the preferred stock.
The rights and restrictions on the preferred stock may include dividend rights,
conversion rights, voting rights, terms of redemption, liquidation preferences
and the number of shares constituting any series.
SHARES OWNED BY THE VEBA GROUP
The [32,961,212] shares that will be owned by the VEBA group ([43,112,565]
shares, if no rights holder other than the VEBA group exercises its rights) are
not freely transferable. The VEBA group may not sell its shares without
registration under the Securities Act of 1933 unless an exemption from
registration is available, such as under Rule 144. Under Rule 144, the VEBA
group may sell, within any three-month period, a number of shares that does not
exceed the greater of one percent of the then outstanding shares of MEMC common
stock and the average weekly trading volume during the four calendar weeks
preceding such sale. We have granted to the VEBA group certain registration
rights, as described under "Certain Relationships and Related Party
Transactions -- Registration Rights Agreement" on page 49.
PROVISIONS OF THE CERTIFICATE OF INCORPORATION AND BY-LAWS THAT MAY HAVE
ANTI-TAKEOVER EFFECTS
Certain provisions of our Certificate of Incorporation and By-Laws may have
an anti-takeover effect. These provisions may delay, defer or make more
difficult a takeover attempt of MEMC that you may consider not to be in your
best interest. However, because the VEBA group can currently (and after the
rights offering will continue to be able to) elect all members of our Board of
Directors and control the outcome of most matters
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submitted to a vote of stockholders, such provisions currently have limited
significance to you. See "Risk Factors -- VEBA AG's Control of MEMC Could
Prevent a Favorable Acquisition of MEMC" on page 12 and "Risk Factors --
Potential Conflicts of Interest with VEBA AG and its Affiliates" on page 12.
Board of Directors
Our Certificate of Incorporation provides the following concerning our
Board of Directors:
- The Board of Directors is divided into three classes; each class
contains a relatively equal number of members;
- Members of the Board of Directors serve in staggered three-year terms,
so approximately one-third of the members are elected annually;
- The number of members on the Board of Directors is between five and
fifteen;
- Directors may be removed with or without cause by the holders of a
majority of the shares of capital stock then entitled to vote at an
election of directors; and
- Vacancies on the Board of Directors may be filled by a majority of the
remaining members of the Board of Directors, unless any director
determines that the stockholders should fill the vacancy.
Stockholder Consents and Special Meetings
Our Certificate of Incorporation provides that you and the other
stockholders may take action only by unanimous written consent if the action is
not taken at a meeting of stockholders. Our By-Laws provide that special
meetings of stockholders may be called only upon the request of the holders of a
majority of the outstanding MEMC common stock, by the Chairman of the Board or
by a majority of the Board of Directors.
Stockholder Proposals or Nominations
To bring a stockholder proposal you must follow the procedures set forth in
our By-Laws and to nominate a candidate to our Board of Directors, you must
follow the procedures set forth in our Certificate of Incorporation. The advance
notice procedures bringing either a stockholder proposal at an annual meeting or
a stockholder nomination for a candidate for the Board of Directors at an annual
meeting or special meeting called for the purpose of electing directors, are
summarized as follows:
- Your proposal or nomination must be received by our Secretary not less
than 60 days and not more than 90 days before (after the 1999 annual
meeting this period for a stockholder proposal will be not less than 90
days and not more than 120 days before) the anniversary date of the
previous annual meeting of stockholders, or
- If the meeting is not held within 30 days of the anniversary date of the
previous annual meeting or if the meeting is a special meeting called
for the purpose of electing directors, then your proposal or nomination
must be received by the Secretary within 10 days after the notice of the
meeting is mailed to stockholders.
You must include the following information in your notice of a stockholder
proposal:
- A brief reasoned description of the business to be brought at the
meeting;
- Your name and record address;
- The class and number of shares of capital stock you own either of record
or beneficially;
- A description of any agreements you may have with other persons in
connection with the proposal; and
- A representation that you will appear in person or by proxy at the
meeting.
Your notice of a nomination of a candidate to our Board of Directors must
include the following:
- The name, age, business address and residence of the nominee;
- The principal occupation of the nominee;
- The class and number of shares of our capital stock the nominee owns;
- Your name and record address;
- The class and number of shares of capital stock you own;
- A description of any agreements you may have with the nominee;
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- A representation that you will appear in person or by proxy at the
meeting; and
- Other information regarding the nominee and yourself as required by the
Securities Exchange Act of 1934, as amended.
Limitation of Liability of Directors
The Certificate of Incorporation limits the Directors' liability to
stockholders and MEMC. Specifically, a director is not liable to MEMC or you, as
one of its stockholders, for monetary damages for breach of fiduciary duty as a
director, except for liability for a director's
- Breach of his or her duty of loyalty to MEMC or our stockholders;
- Acts or omissions that are either not in good faith or which involve his
or her intentional misconduct or a knowing violation of law;
- Unlawful dividend payments or stock redemptions or repurchases pursuant
to Section 174 of the DGCL; and
- Participation in a transaction from which he or she received an improper
personal benefit.
The effect of these provisions on you is to eliminate your rights and our
rights (through stockholders' derivative suits on behalf of MEMC) to recover
monetary damages against a director for breach of fiduciary duty as a director
(including breaches resulting from grossly negligent behavior), except in the
situations described above. These provisions, however, will not limit the
liability of directors to you under federal securities laws.
SECTION 203 OF DELAWARE GENERAL CORPORATION LAW
Because we are a Delaware corporation, Delaware law may have an effect on
your rights as a stockholder. In particular, Section 203 of the DGCL prohibits
certain transactions between a Delaware corporation and an "interested
stockholder." An interested stockholder is defined as a person who, together
with any affiliates or associates of such person, beneficially owns, directly or
indirectly, 15% or more of the outstanding voting shares of a Delaware
corporation. This provision prohibits certain business combinations between an
interested stockholder and a corporation for a period of three years after the
date the interested stockholder becomes an interested stockholder. The term
"business combination" is broadly defined to include mergers, consolidations,
sales or other dispositions of assets having a total value in excess of 10% of
the consolidated assets of the corporation, and certain transactions that would
increase the interested stockholder's proportionate share ownership in the
corporation.
This prohibition is effective unless:
- The business combination is approved by the corporation's board of
directors prior to the time the interested stockholder becomes an
interested stockholder;
- The interested stockholder acquired at least 85% of the voting stock of
the corporation (other than stock held by directors who are also
officers or by certain employee stock plans) in the transaction in which
it becomes an interested stockholder; or
- The business combination is approved by a majority of the board of
directors and by the affirmative vote of 66 2/3% of the outstanding
voting stock that is not owned by the interested stockholder.
In general, the prohibitions do not apply to business combinations with
persons who became interested stockholders prior to the corporation becoming
subject to Section 203, which generally takes place when a corporation's voting
stock becomes publicly traded or is held of record by more that 2,000
stockholders. VEBA Corporation is not subject to the restrictions on "business
combinations" under Section 203. Moreover, for purposes of Section 203, our
Board of Directors has approved of the transfer of shares of MEMC common stock
by VEBA Corporation to VEBA AG or one of its specified subsidiaries. Because of
this approval, we may engage in the future in any "business combination" with
either of these parties as well as VEBA Corporation.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for MEMC common stock and the rights is
Harris Trust and Savings Bank, 111 West Monroe, P.O. Box 755, Chicago, Illinois
60690.
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PLAN OF DISTRIBUTION
We are making this rights offering directly to you, the holders of MEMC
common stock. We have retained NationsBanc Montgomery Securities LLC and J.P.
Morgan Securities Inc. to act as the dealer managers in connection with the
rights offering. The dealer managers have accompanied us on meetings that we
have had with certain investors after the filing of the registration statement
to solicit their participation in the rights offering, and may continue to
solicit participation by investors throughout the rights offering. The dealer
managers are not obligated, and do not intend, to purchase any of the shares
offered in the rights offering.
We will pay the dealer managers a fee of $1,200,000. We have agreed to pay
NationsBanc Montgomery Securities LLC $500,000 in connection with certain
additional advisory services it is performing. In addition, we will reimburse an
estimated $270,000 of the dealer managers' expenses incurred in connection with
the rights offering.
The total compensation MEMC will pay to the dealer managers, including
reimbursement of estimated expenses, is as follows:
<TABLE>
<S> <C>
NationsBanc Montgomery Securities
LLC............................. $1,237,500
J.P. Morgan Securities Inc........ $ 732,500
----------
$1,970,000
==========
</TABLE>
We will pay Morrow & Co., Inc., the information agent, a fee of $14,000 and
Harris Trust and Savings Bank, the subscription agent, a fee of $20,000.
We estimate that our total expenses in connection with the rights offering,
including fees to the dealer managers, Morrow & Co., Inc., and Harris Trust and
Savings Bank, will be $2,635,005.
We have agreed to indemnify the dealer managers for certain liabilities,
including civil liabilities under the Securities Act of 1933. We have also
agreed to contribute to payments that the dealer managers may need to make
arising out of such liabilities.
Other than the dealer managers, we have not employed any brokers, dealers
or underwriters in connection with the solicitation of exercise of rights.
Except as described in this section, we are not paying any other commissions,
fees or discounts in connection with the rights offering. Some of our employees
may solicit responses from you as a holder of rights, but we will not pay our
employees any commissions or compensation for such services other than their
normal employment compensation.
Until the distribution of the MEMC common stock in the rights offering is
completed, the rules of the Securities and Exchange Commission may limit the
ability of the dealer managers to bid for and purchase MEMC common stock. As an
exception to these rules, the dealer managers are permitted to engage in certain
transactions that stabilize the price of the MEMC common stock so long as
stabilizing bids do not exceed a specified maximum. The dealer managers do not
currently intend to engage in stabilizing transactions. However, if they do
engage in stabilizing transactions, such transactions will occur on the New York
Stock Exchange and in compliance with the rules of the SEC, and will consist of
bids or purchases for the purpose of pegging, fixing or maintaining the price of
the MEMC common stock. In general, purchases of a security for the purpose of
stabilization could cause the price of the security to be higher than it might
be in the absence of such purchases. Neither we nor either of the dealer
managers makes any representation or prediction as to the direction or magnitude
of any effect that the transactions described above may have on the price of the
MEMC common stock. In addition, neither we nor either of the dealer managers
makes any representation that the dealer managers will engage in such
transactions or that such transactions, once commenced, will not be discontinued
without notice.
The dealer managers are also acting as our financial advisors in connection
with the rights offering. In their capacity as financial advisors, they have
advised us regarding the size, pricing and structure of the private placement to
the VEBA group and the rights offering. Their advice has included assistance in
determining the purchase price for the private placement, the subscription
price, and the impact of the private placement and the rights offering on us and
our stockholders from a financial point of view. They
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have also discussed with management and the special committee of the Board of
Directors the possible effects of the private placement and the rights offering.
NationsBanc Montgomery Securities LLC also performed analyses to assist us in
determining the appropriate and desirable pricing terms for the private
placement and the rights offering. The dealer managers are not making a
recommendation as to whether or not you should exercise your rights. You should
make your decision based on your own assessment as to whether to exercise your
rights.
The dealer managers or some of their affiliates have performed in the past
and may perform in the future other financial advisory and investment banking
services for us. We have paid, and may in the future pay, such parties
compensation for their services. In addition, affiliates of J.P. Morgan
Securities Inc. have performed financial advisory and investment banking
services for VEBA AG and its affiliates, and a retired vice chairman and
director of an affiliate of J.P. Morgan Securities Inc. is a member of the
supervisory board of VEBA AG.
LAWYERS
Bryan Cave LLP, St. Louis, Missouri, represented the Company in connection
with the rights offering. Cooley Godward LLP, Palo Alto, California, represented
the dealer managers in connection with the rights offering.
EXPERTS
KPMG Peat Marwick LLP, independent auditors, audited our consolidated
financial statements and schedule as of December 31, 1997 and 1996 and for each
of the three years in the period ended December 31, 1997. We incorporate by
reference those financial statements in this prospectus with the permission of
KPMG and rely on KPMG's reports given upon their authority as experts in
accounting and auditing.
KPMG San Tong Corp., independent auditors, audited PHC's financial
statements as of December 31, 1996 and 1997 and for the years then ended. We
incorporate by reference those financial statements in this prospectus with the
permission of KPMG San Tong Corp. and rely on their report given upon their
authority as experts in accounting and auditing.
KPMG Peat Marwick, independent auditors, audited Taisil Electronic
Materials Corporation's financial statements as of and for the year ended
December 31, 1997. We incorporate by reference those financial statements in
this prospectus with the permission of KPMG Peat Marwick and rely on their
report given upon their authority as experts in accounting and auditing.
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the SEC a Registration Statement on Form S-3 under the
Securities Act of 1933 covering the shares of MEMC common stock to be issued in
the rights offering. As allowed by SEC rules, this prospectus does not contain
all of the information set forth in the registration statement. Our descriptions
in this prospectus concerning the contents of any contract, agreement or
documents are not necessarily complete. For those contracts, agreements or
documents that we filed as exhibits to the registration statement, you should
read the exhibit for a more complete understanding of the document or subject
matter involved.
Because we are subject to the informational requirements of the Securities
Exchange Act of 1934, we file reports, proxy statements and other information
with the SEC. You may read and copy the registration statement, including the
attached exhibits and schedules, and any reports, proxy statements or other
information that we file at the SEC's public reference room in Washington, D.C.
at 450 Fifth Street, N.W., 20549. You can request copies of these documents by
writing to the SEC and paying a duplicating charge. Please call the SEC at
1-800-SEC-0330 for further information on the operation of its public reference
rooms in other cities. The SEC makes
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our filings available to the public on its Internet site (http://www.sec.gov).
In addition, you may inspect such reports and other information at the offices
of the New York Stock Exchange, 20 Broad Street, New York, New York 10005.
The SEC allows us to "incorporate by reference" information into this
prospectus, which means that we can disclose important information to you by
referring you to other documents that we filed separately with the SEC. You
should consider the incorporated information as if we reproduced it in this
prospectus, except for any information directly superseded by information
contained in this prospectus.
We incorporate by reference into this prospectus the following documents
(SEC File No. 1-13828), which contain important information about us and our
business and financial results:
- our Annual Report on Form 10-K for the fiscal year ended December 31,
1997, as amended on Form 10-K/A filed on October 22, 1998 and on Form
10-K/A filed on December 10, 1998;
- our Quarterly Reports on Form 10-Q for the quarters ended March 31,
1998, June 30, 1998 and September 30, 1998;
- our Current Reports on Form 8-K dated April 14, 1998 (filed April 14,
1998), October 21, 1998 (filed October 22, 1998), October 22, 1998
(filed October 27, 1998); and
- the description of the MEMC common stock contained in our Registration
Statement on Form 8-A filed with the SEC on June 21, 1995.
We may file additional documents with the SEC pursuant to Sections 13(a),
13(c), 14 or 15(d) of the Securities Exchange Act of 1934 on or after the date
of this prospectus and before the expiration of the rights offering. The SEC
allows us to incorporate by reference into this prospectus such documents. You
should consider any statement contained in this prospectus (or in a document
incorporated into this prospectus) to be modified or superseded to the extent
that a statement in a subsequently filed document modifies or supersedes such
statement.
YOU MAY GET COPIES OF ANY OF THE INCORPORATED DOCUMENTS (EXCLUDING
EXHIBITS, UNLESS THE EXHIBITS ARE SPECIFICALLY INCORPORATED) AT NO CHARGE TO YOU
BY WRITING OR CALLING SAMUEL W. DUGGAN, DIRECTOR, INVESTOR RELATIONS, MEMC
ELECTRONIC MATERIALS, INC., 501 PEARL DRIVE (CITY OF O'FALLON), ST. PETERS,
MISSOURI 63376 (TELEPHONE: (314) 279-5500).
59
<PAGE> 61
- ------------------------------------------------------
- ------------------------------------------------------
MEMC ELECTRONIC MATERIALS, INC. HAS NOT AUTHORIZED ANY PERSON TO GIVE YOU
INFORMATION THAT DIFFERS FROM THE INFORMATION IN THIS PROSPECTUS. YOU SHOULD
RELY SOLELY ON THE INFORMATION CONTAINED IN THIS PROSPECTUS. THIS PROSPECTUS IS
NOT AN OFFER TO SELL THESE SECURITIES, AND WE ARE NOT SOLICITING OFFERS TO BUY
THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE OF THESE SECURITIES IS NOT
PERMITTED. THE INFORMATION IN THIS PROSPECTUS IS ACCURATE ONLY AS OF THE DATE OF
THIS PROSPECTUS, EVEN IF THE PROSPECTUS IS DELIVERED TO YOU AFTER THE PROSPECTUS
DATE, OR YOU BUY MEMC COMMON STOCK AFTER THE PROSPECTUS DATE.
------------------------------------
TABLE OF CONTENTS
------------------------------------
<TABLE>
<CAPTION>
Page
-------
<S> <C>
Questions & Answers About the Rights
Offering............................. 2
Prospectus Summary..................... 4
Risk Factors........................... 9
Cautionary Statement Regarding Forward-
Looking Statements................... 22
Recent Developments.................... 24
Use of Proceeds........................ 26
Dividend Policy........................ 27
Price Range of Common Stock............ 27
Capitalization......................... 28
The Rights Offering.................... 29
Business............................... 39
Certain Relationships and Related Party
Transactions......................... 48
Certain Federal Income Tax
Considerations....................... 50
Description of Capital Stock........... 54
Plan of Distribution................... 57
Lawyers................................ 58
Experts................................ 58
Where You Can Find More Information.... 58
</TABLE>
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
[10,151,352] Shares
MEMC ELECTRONIC MATERIALS, INC. LOGO
MEMC Electronic
Materials, Inc.
Common Stock
------------------------------------
PROSPECTUS
------------------------------------
NationsBanc Montgomery
Securities LLC
J.P. Morgan & Co.
, 1999
- ------------------------------------------------------
- ------------------------------------------------------
<PAGE> 62
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the estimated expenses in connection with
the issuance and distribution of the securities offered hereby.
<TABLE>
<S> <C>
SEC Registration Fee........................................ $ 26,105
NASD Filing Fee............................................. 9,900
NYSE Listing Fee............................................ 75,000
Dealer Manager Fees and Expenses............................ 1,970,000
Subscription Agent Fee...................................... 20,000
Information Agent Fee....................................... 14,000
Printing and Engraving Expenses............................. 100,000
Legal Fees and Expenses..................................... 250,000
Accounting Fees and Expenses................................ 125,000
Miscellaneous............................................... 45,000
----------
Total..................................................... $2,635,005
==========
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 102(b)(7) of the Delaware General Corporation Law permits a
corporation to provide in its certificate of incorporation that a director of
the corporation shall not be personally liable to the corporation or its
stockholders for monetary damages for breach of fiduciary duty as a director,
except for liability (i) for any breach of the director's duty of loyalty to the
corporation or its stockholders, (ii) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (iii) for
payments of unlawful dividends or unlawful stock repurchases or redemptions, or
(iv) for any transaction from which the director derived an improper personal
benefit. The Company's Restated Certificate of Incorporation contains such a
provision.
Section 145 of the Delaware General Corporation Law provides that a
corporation may indemnify directors and officers as well as other employees and
individuals against expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement in connection with specified actions, suits or
proceedings, whether civil, criminal, administrative or investigative (other
than an action by or in the right of the corporation -- a "derivative action"),
if they acted in good faith and in a manner they reasonably believed to be in or
not opposed to the best interests of the corporation, and, with respect to any
criminal action or proceeding, had no reasonable cause to believe their conduct
was unlawful. A similar standard is applicable in the case of derivative
actions, except that indemnification only extends to expenses (including
attorneys' fees) incurred in connection with defense or settlement of such
action, and the statute requires court approval before there can be any
indemnification where the person seeking indemnification has been found liable
to the corporation. The Company's Restated Certificate of Incorporation contains
such a provision.
ITEM 16. EXHIBITS
See Index to Exhibits.
II-1
<PAGE> 63
ITEM 17. UNDERTAKINGS
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of this registration statement (or the most recent
post-effective amendment hereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in this registration statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than a 20 percent change
in the maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement;
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in this registration statement
or any material change to such information in this registration
statement;
provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not
apply if the information required to be included in a post-effective
amendment by those paragraphs is contained in periodic reports filed with
or furnished to the Commission by the registrant pursuant to Section 13 or
Section 15(d) of the Securities Exchange Act of 1934 that are incorporated
by reference in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(b) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in this
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
II-2
<PAGE> 64
(d) The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of this Registration Statement in reliance upon Rule 430A and contained in
a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
Registration Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
II-3
<PAGE> 65
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Amendment No. 2 to
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in St. Louis, Missouri, on December 31, 1998
MEMC ELECTRONIC MATERIALS, INC.
By: /s/ HELENE F. HENNELLY
------------------------------------
Helene F. Hennelly
Corporate Vice President,
General Counsel and Secretary
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to Registration Statement has been signed by the following persons in the
capacities on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
* Chief Executive Officer and December 31, 1998
- --------------------------------------------- Director (Principal Executive
Ludger H. Viefhues Officer)
* President, Chief Operating Officer December 31, 1998
- --------------------------------------------- and Director
Klaus R. von Horde
* Executive Vice President and Chief December 31, 1998
- --------------------------------------------- Financial Officer (Principal
James M. Stolze Financial and Accounting Officer)
* Director December 31, 1998
- ---------------------------------------------
Dr. Hans Michael Gaul
* Director December 31, 1998
- ---------------------------------------------
Helmut Mamsch
* Director December 31, 1998
- ---------------------------------------------
Willem D. Maris
* Director December 31, 1998
- ---------------------------------------------
Paul T. O'Brien
* Director December 31, 1998
- ---------------------------------------------
Dr. Alfred Oberholz
* Director December 31, 1998
- ---------------------------------------------
Michael B. Smith
</TABLE>
*By: /s/ HELENE F. HENNELLY
---------------------------------------------------------
Helene F. Hennelly, Attorney-In-Fact
II-4
<PAGE> 66
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C>
*1.1 Form of Dealer Manager Agreement among MEMC and NationsBanc
Montgomery Securities LLC and J.P. Morgan Securities Inc.
3.1 Restated Certificate of Incorporation of the Company
(incorporated by reference to Exhibit 3-a of the Company's
Form 10-Q for the quarter ended June 30, 1995 (File No.
1-13828))
3.2 Restated By-laws of the Company (incorporated by reference
to Exhibit 3-b of the Company's Form 10-Q for the quarter
ended September 30, 1995 (File No. 1-13828))
*4.1 Form of Rights Certificate to Subscribe for Shares of Common
Stock of the Company
5.1 Opinion of Bryan Cave LLP
5.1(a) Opinion of Richards, Layton & Finger, P.A.
*8.1 Tax Opinion of Bryan Cave LLP
10.1 Purchase Agreement dated October 22, 1998 between the
Company and VEBA Corporation (incorporated by reference to
Exhibit 2 of the Schedule 13D dated October 30, 1998 filed
by VEBA Aktiengesellschaft and VEBA Corporation with respect
to the Company)
10.1(a) First Amendment to Purchase Agreement
10.2 Standby Agreement dated October 22, 1998 between the Company
and VEBA Corporation (incorporated by reference to Exhibit 3
of the Schedule 13D dated October 30, 1998 filed by VEBA
Aktiengesellschaft and VEBA Corporation with respect to the
Company)
23.1 Consents of Bryan Cave LLP (included in Exhibits 5.1 and
8.1)
23.2 Consent of KPMG Peat Marwick LLP
23.3 Consent of KPMG San Tong Corp.
23.4 Consent of KPMG Peat Marwick
23.5 Consent of Richards, Layton & Finger, P.A. (included in
Exhibit 5.1(a))
24.1 Power of Attorney (previously filed with the Registration
Statement on October 22, 1998)
*99.1 Form of Instructions for Use of MEMC Rights Certificates
*99.2 Form of Notice of Guaranteed Delivery for Subscription
Rights
*99.3 Form of DTC Participant Over-Subscription Exercise Form
*99.4 Announcement of Rights Offering Distributed to Record and
Beneficial Holders on December 7, 1998
99.5 Form of Letter to Stockholders Who Are Record Holders
99.6 Form of Letter to Stockholders Who Are Beneficial Holders
99.7 Form of Letter to Clients of Stockholders Who Are Beneficial
Holders
*99.8 Form of Nominee Holder Certification Form
*99.9 Substitute Form W-9 for Use with the Rights Offering
99.10 Form of Beneficial Owner Election Form
99.11 Form of Subscription Agent Agreement by and between MEMC and
Harris Trust and Savings Bank
99.12 Information Agent Agreement, dated December 7, 1998, by and
between MEMC and Morrow & Co., Inc.
99.13 Consent of NationsBanc Montgomery Securities LLC
</TABLE>
- ---------------
* Filed with Amendment No. 1 on December 22, 1998.
II-5
<PAGE> 1
EXHIBIT 5.1
[LETTERHEAD OF BRYAN CAVE LLP]
December 31, 1998
Board of Directors
MEMC Electronic Materials, Inc.
501 Pearl Drive (City of O'Fallon)
St. Peters, Missouri 63376
Gentlemen:
We are acting as special counsel to MEMC Electronic Materials, Inc., a
Delaware corporation (the "Company"), in connection with its Registration
Statement on Form S-3 filed with the Securities and Exchange Commission under
the Securities Act of 1933, as amended (the "Act"), on October 22, 1998, as
amended on December 11, 1998 and December 31, 1998 (Registration No. 333-65973)
(the "Registration Statement"). The Registration Statement covers the
registration of $93,900,000 of shares of the Company's common stock, par value
$0.01 per share (the "Common Stock"), and of transferable rights which are
exercisable for the Common Stock (the "Rights"). The Company proposes to issue
the Common Stock upon the exercise of the Rights, which will be distributed pro
rata to eligible holders of record of the Company's common stock other than VEBA
Corporation or its permitted transferees (the "Rights Offering").
In connection herewith, we have examined and relied without independent
investigation as to matters of fact upon such certificates of public officials,
such statements and certificates of officers of the Company and such other
corporate records, documents, certificates and instruments as we have deemed
necessary or appropriate in order to enable us to render the opinions expressed
herein. We have assumed the genuineness of all signatures on all documents
examined by us, the authenticity of all documents submitted to us as originals
and the conformity to authentic originals of all documents submitted to us as
certified or photostatted copies.
Based upon the foregoing and in reliance thereon and subject to the
effectiveness of the Registration Statement, we are of the opinion that:
(i) Upon distribution of the Rights pursuant to the Rights Offering, as
described in the Registration Statement and the Prospectus
constituting a part of the Registration Statement (the "Prospectus"),
then such Rights will be duly authorized and validly issued;
(ii) the Rights are valid and binding obligations of the Company; and
(iii) Upon issuance and sale against payment therefor pursuant to the
Rights Offering, as described in the Registration Statement and the
Prospectus, then such shares of Common Stock will be duly authorized,
validly issued, fully paid and non-assessable.
<PAGE> 2
Board of Directors
MEMC Electronic Materials, Inc.
December 31, 1998
Page 2
This opinion is not rendered with respect to any laws other than the Law of
the State of Delaware and the Act. We have relied on an opinion of Richards,
Layton & Finger, P.A. with respect to Delaware law to us of even date herewith
with respect to matters set forth in paragraphs (i), (ii) and (iii) above.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to our firm under the caption
"Lawyers" in the Prospectus filed as a part of the Registration Statement. We
also consent to your filing copies of this opinion as an exhibit to the
Registration Statement with agencies of such states as you deem necessary in the
course of complying with the laws of such states regarding the offering and sale
of such shares of Common Stock and the issuance of such Rights. In giving this
consent, we do not admit that we are in the category of persons whose consent is
required under Section 7 of the Act or the rules and regulations of the
Securities and Exchange Commission thereunder.
Very truly yours,
BRYAN CAVE LLP
<PAGE> 1
EXHIBIT 5.1(a)
[LETTERHEAD OF RICHARDS, LAYTON & FINGER, P.A.]
December 31, 1998
Bryan Cave LLP
One Metropolitan Square
211 N. Broadway, Suite 3600
St. Louis, Missouri 63102
Ladies and Gentlemen:
We have acted as special Delaware counsel to MEMC Electronic Materials,
Inc., a Delaware corporation (the "Company"), in connection with a Registration
Statement on Form S-3 filed with the Securities and Exchange Commission under
the Securities Act of 1933, as amended, on October 22, 1998, as amended on
December 11, 1998 and December 31, 1998 (Registration No. 333-65973) (the
"Registration Statement"). The Registration Statement covers the registration of
a number of shares of the Company's common stock, par value $.01 per share,
equal to 93,900,000 divided by the subscription price for each such share (those
shares covered by the Registration Statement being hereinafter referred to as
the "Common Stock"), and of transferable rights which are exercisable for the
Common Stock at the subscription price (the "Rights"). The Company proposes to
issue the Common Stock upon the exercise of the Rights, which will be
distributed pro rata to holders of record of the Company's common stock, par
value $.01 per share, other than VEBA Corporation (the "Rights Offering"). In
this connection, you have requested our opinions as to certain matters under
Delaware law.
For the purpose of rendering our opinions as stated herein, we have
been furnished and have reviewed the following documents:
(i) the Restated Certificate of Incorporation of the Company as filed
with the Secretary of State of the State of Delaware on July 12, 1995 (the
"Certificate of Incorporation");
<PAGE> 2
Bryan Cave LLP
December 31, 1998
Page 2
(ii) the Restated By-laws of the Company, dated as of August 30, 1996
(the "By-laws");
(iii) the Registration Statement and the prospectus (the "Prospectus")
constituting a part of the Registration Statement;
(iv) the Unanimous Written Consents of the Board of Directors (the
"Board") of the Company, dated as of September 11, 1998, October 9, 1998 and
October 19, 1998 (the "Board Consents"); and
(v) Minutes of Meetings of the Special Committee (the "Committee") of
the Board held on September 21, 1998, October 2, 1998, October 9, 1998, October
14, 1998, October 20, 1998, and October 21, 1998, and certain resolutions (the
"Later Resolutions") to be adopted by the Committee prior to the time when the
final form of Registration Statement and Prospectus become effective
(collectively, the "Committee Consents" and, together with the Board Consents,
the "Consents").
With respect to the foregoing documents, we have assumed: (a) the
genuineness of all signatures, and the incumbency, authority, legal right and
power and legal capacity under all applicable laws and regulations, of the
officers and other persons and entities signing each of said documents as or on
behalf of the parties thereto; (b) the authenticity of all documents submitted
to us as originals; (c) the conformity to authentic originals of all documents
submitted to us as certified, conformed, photostatic or other copies; and (d)
that the foregoing documents, in the forms submitted to us for our review, have
not been and will not be altered or amended in any respect material to our
opinions as expressed herein, except to the extent that the Registration
Statement and Prospectus are amended prior to their effectiveness to fill in
certain blanks currently appearing therein. For the purpose of rendering our
opinions as expressed herein, we have not reviewed any document other than the
documents set forth above, and we assume there exists no provision of any such
other document that bears upon or is inconsistent with our opinions as expressed
herein. We have conducted no independent factual investigation of our own, but
rather have relied solely upon the foregoing documents, the statements and
information set forth therein, and the additional matters recited or assumed
herein, all of which we assume to be true, complete and accurate in all material
respects.
In addition to the foregoing, for the purpose of rendering our opinions
as expressed herein, we have, with your consent, assumed the following matters:
(1) that the Company is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware;
<PAGE> 3
Bryan Cave LLP
December 31, 1998
Page 3
(2) that, as amended prior to their effectiveness to fill in certain
blanks currently appearing therein, the Registration Statement and the
Prospectus will be duly executed and delivered by the Company;
(3) that the due authorization, execution and delivery of the
Registration Statement and the Prospectus by the Company, and the consummation
of the transactions contemplated thereby, will not violate or conflict with any
provision of any judgment, order, writ, injunction or decree of any court or
governmental authority, or violate or result in a breach of or constitute a
default or require any consent (other than such consents as have been duly
obtained) under, any provision of any other agreement, contract, instrument or
obligation to which the Company is a party or by which the Company or any of the
Company's properties is bound; and
(4) that the Certificate of Incorporation and By-laws constitute the
certificate of incorporation and by-laws, respectively, of the Company as
currently in effect.
Based upon and subject to the foregoing and upon our review of such
matters of law as we have deemed necessary and appropriate in order to render
our opinions as expressed herein, and subject to the assumptions, limitations,
exceptions and qualifications set forth herein, it is our opinion that:
1. Upon distribution of the Rights pursuant to the Rights Offering, as
described in the Registration Statement and the Prospectus, such Rights will be
duly authorized and validly issued.
2. Upon issuance and sale against payment therefor pursuant to the
Rights Offering, as described in the Registration Statement and the Prospectus,
the Common Stock will be duly authorized, validly issued, fully paid and
non-assessable.
3. None of the issuance and sale of the Common Stock, the issuance of
the Rights, the execution, delivery or performance of the Registration Statement
or the Prospectus by the Company, or the consummation by the Company of the
transactions contemplated by the Rights Offering constitutes or will constitute
a violation of the General Corporation Law of the State of Delaware.
The foregoing opinions are subject to the following limitations,
exceptions and qualifications:
A. We are admitted to practice law in the State of Delaware and do not
hold ourselves out as being experts on the law of any other jurisdiction. The
foregoing
<PAGE> 4
Bryan Cave LLP
December 31, 1998
Page 4
opinions are limited to the laws of the State of Delaware, and we have
not considered and express no opinion on the effect of the laws of any other
state or jurisdiction, including state or federal laws relating to securities or
other federal laws, or the rules and regulations of stock exchanges or of any
other regulatory body. In addition, we have not considered and express no
opinion as to the applicability of or any compliance with the Delaware
Securities Act, 6 Del. C. Section 7301 et seq., or any rules or regulations
promulgated thereunder.
B. For purposes of our opinions as stated above, we have assumed: (A)
that the Board Consents (i) were duly executed as of September 11, 1998, October
9, 1998 and October 19, 1998, respectively, (ii) except as otherwise noted
therein, have not been modified, amended or revoked and are in full force and
effect on the date hereof, and (iii) have been duly filed with the minutes of
the proceedings of the Board; (B) that the Committee Consents (i) were duly
adopted by the Committee at the September 21, 1998, October 2, 1998, October 9,
1998, October 14, 1998, October 20, 1998 and October 21, 1998 meetings of the
Committee, respectively (or, in the case of the Later Resolutions, will be duly
adopted prior to the time when the final form of Registration Statement and
Prospectus become effective), (ii) except as otherwise noted therein, have not
been modified, amended or revoked and are in full force and effect on the date
hereof (or, in the case of the Later Resolutions, will be in full force and
effect as of the time when the final form of Registration Statement and
Prospectus become effective), and (iii) have been duly filed with the minutes of
the proceedings of the Board (or, in the case of the Later Resolutions, will
have been duly filed with the minutes of the proceedings of the Board prior to
the time when the final form of Registration Statement and Prospectus become
effective); and (C) that the Consents are the only resolutions adopted by the
Board or any committee thereof relating to the Registration Statement, the
Prospectus and the matters addressed in this opinion.
C. For purposes of our opinions as stated above, we have assumed that
the number of shares of Common Stock issuable upon exercise of the Rights will
not, in the aggregate, exceed the authorized number of shares of common stock,
par value $.01 per share, of the Company, at any such time, which are not then
issued, subscribed for, reserved, or committed for issuance, and that the number
of shares of common stock, par value $.01 per share, of the Company issued
pursuant to the Purchase Agreement (as referenced in the Committee Consent of
October 21, 1998), the Standby Agreement (as referenced in the Committee Consent
of October 21, 1998), and the exercise of the Rights shall not exceed
150,000,000 or produce gross proceeds to the Company in excess of $200,000,000.
We understand that you may wish to rely on our opinions as set forth
herein in rendering certain opinions to the Company and may wish to file this
opinion as an exhibit to the Registration Statement, and we expressly consent to
such reliance and such filing. Except as set forth in the immediately preceding
sentence, the foregoing opinions are rendered solely
<PAGE> 5
Bryan Cave LLP
December 31, 1998
Page 5
for your benefit in connection with the matters addressed herein and, without
our prior written consent, may not be relied upon by you for any other purpose
or be furnished or quoted to, or be relied upon by, any other person or entity
for any purpose.
Very truly yours,
Richards, Layton & Finger, P.A.
CSB/DSC
<PAGE> 1
Exhibit 10.1(a)
FIRST AMENDMENT
TO
PURCHASE AGREEMENT
THIS FIRST AMENDMENT TO PURCHASE AGREEMENT (the "Amendment") is entered
into as of December 29, 1998, by and among VEBA Corporation, a Delaware
corporation ("VEBA"), and MEMC Electronic Materials, Inc., a Delaware
corporation (the "Company").
RECITALS
A. The Company and VEBA entered into that certain Purchase Agreement
dated as of October 22, 1998 (the "Purchase Agreement"), pursuant to which the
Company agreed to sell and VEBA agreed to purchase shares of Common Stock of the
Company on the terms and conditions set forth therein;
B. Section 2 of the Purchase Agreement provides that the Closing shall
not occur later than December 30, 1998; and
C. The parties hereto desire to amend Section 2 of the Purchase
Agreement to extend the date after which the Closing (as defined in the Purchase
Agreement) shall not occur.
NOW, THEREFORE, in consideration of the recitals and the mutual
covenants, representations, warranties, conditions and agreements hereinafter
expressed, the parties agree as follows:
AMENDMENT
1. Section 2 of the Purchase Agreement is amended by deleting the date
"December 30, 1998" in the proviso of the first sentence, and replacing it with
"February 15, 1999".
2. Except as modified herein, all terms and conditions of the Purchase
Agreement shall remain in full force and effect.
3. This Amendment shall be governed by, and construed in accordance
with, the laws of the State of New York.
<PAGE> 2
IN WITNESS WHEREOF, each of the parties hereto has caused this
Amendment to be executed as of the date first above written.
VEBA CORPORATION
By /s/ H.H. Puetthoff
---------------------------
Name: H.H. Puetthoff
Title: President
MEMC ELECTRONIC MATERIALS INC.
By /s/ Helene F. Hennelly
---------------------------
Name: Helene F. Hennelly
Title: Corporate Vice President,
General Counsel & Secretary
2
<PAGE> 1
Exhibit 23.2
Independent Auditors' Consent
The Board of Directors
MEMC Electronic Materials, Inc.:
We consent to incorporation by reference in the registration statement on
Amendment No. 2 to Form S-3 of MEMC Electronic Materials, Inc. of our
reports dated January 26, 1998, relating to the consolidated balance sheets of
MEMC Electronic Materials, Inc. and subsidiaries as of December 31, 1997 and
1996, and the related consolidated statements of operations, stockholders'
equity, and cash flows for each of the years in the three-year period ended
December 31, 1997, and the related schedule, which reports appear in or are
incorporated by reference therein in the December 31, 1997 annual report on Form
10-K of MEMC Electronic Materials, Inc. and to the reference to our firm under
the heading "Experts" in the registration statement.
/s/ KPMG Peat Marwick LLP
St. Louis, Missouri
December 30, 1998
<PAGE> 1
Exhibit 23.3
Independent Auditors' Consent
The Stockholders and Board of Directors
POSCO HULS Co., Ltd.:
We consent to incorporation by reference in the registration statement on
Amendment No. 2 to Form S-3 of MEMC Electronic Materials, Inc. of our report
dated January 10, 1998, relating to the balance sheets of POSCO HULS Co., Ltd.
as of December 31, 1997 and 1996, and the related statements of earnings,
appropriation (disposition) of retained earnings (deficit), and cash flows for
the years ended December 31, 1997 and 1996, which report appears in the
December 31, 1997 annual report on Form 10-K of MEMC Electronic Materials, Inc.
and to the reference to our firm under the heading "Experts" in the
registration statement.
/s/KPMG San Tong Corp.
Seoul, Korea
December 30, 1998
<PAGE> 1
Exhibit 23.4
Independent Auditors' Consent
The Board of Directors
Taisil Electronic Materials Corporation:
We consent to incorporation by reference in the registration statement on
Amendment No. 2 to Form S-3 of MEMC Electronic Materials, Inc. of our report
dated January 14, 1998, relating to the balance sheet of Taisil Electronic
Materials Corporation as of December 31, 1997, and the related statements of
operations, changes in stockholders' equity, and cash flows for the year ended
December 31, 1997, which report appears in the December 31, 1997 annual report
on Form 10-K of MEMC Electronic Materials, Inc. and to the reference to our firm
under the heading "Experts" in the registration statement.
/s/ KPMG Peat Marwick
Taipei, Taiwan
December 30, 1998
<PAGE> 1
EXHIBIT 99.5
MEMC ELECTRONIC MATERIALS, INC.
Dear Stockholders:
We are sending you this letter as a holder of our common stock, in
connection with our distribution of transferable rights to acquire our common
stock as described in the enclosed prospectus.
Enclosed are copies of the following documents:
1. The Prospectus;
2. The Rights Certificate;
3. The "Instructions for Use of MEMC Electronic
Materials, Inc. Rights Certificates" (including Guidelines For
Certification of Taxpayer Identification Number on Substitute
Form W-9);
4. A Notice of Guaranteed Delivery for Rights
Certificates issued by MEMC Electronic Materials, Inc.; and
5. A return envelope addressed to Harris Trust and Savings Bank,
the Subscription Agent.
To participate in the rights offering, we suggest that you act promptly.
Very truly yours,
MEMC ELECTRONIC MATERIALS, INC.
<PAGE> 1
EXHIBIT 99.6
MEMC ELECTRONIC MATERIALS, INC.
To Securities Dealers, Commercial Banks,
Trust Companies and Other Nominees:
We are sending you this letter in connection with our offering to our
stockholders (except for VEBA Corporation and its affiliates) of transferable
rights to purchase our common stock. We have described the rights and the
rights offering in the enclosed prospectus and evidenced the rights by a
rights certificate registered in your name or the name of your nominee.
We are asking you to contact your clients for whom you hold our common
stock registered in your name or in the name of your nominee to obtain
instructions with respect to the rights. We have enclosed several copies of the
following documents for you to use:
1. The Prospectus;
2. The "Instructions for Use of MEMC Electronic Materials, Inc.
Rights Certificates" (including Guidelines For Certification of
Taxpayer Identification Number on Substitute Form W-9);
3. A form letter which may be sent to your clients for whose accounts
you hold Common Stock registered in your name or the name of your
nominee,
4. A Beneficial Owner Election Form, on which you may obtain your
clients' instructions with regard to the Rights;
5. A Nominee Holder Certification Form;
6. A Notice of Guaranteed Delivery for Rights Certificates
issued by MEMC Electronic Materials, Inc.;
7. A DTC Participant Over-Subscription Exercise Form; and
8. A return envelope addressed to Harris Trust and Savings Bank.
We request that you act promptly. You may obtain additional copies of
the enclosed materials and may request assistance or information from the
Information Agent, Morrow & Co., Inc. Their toll-free telephone number is (800)
566-9061. Banks and brokerage firms, please call (800) 662-5200.
Very truly yours,
MEMC ELECTRONIC MATERIALS, INC.
YOU ARE NOT AN AGENT OF HARRIS TRUST AND SAVINGS BANK, NOR OF ANY OTHER PERSON
(INCLUDING US) WHO IS DEEMED TO BE MAKING OR WHO IS MAKING OFFERS OF OUR COMMON
STOCK IN THE RIGHTS OFFERING, AND YOU ARE NOT AUTHORIZED TO MAKE ANY STATEMENTS
ON THEIR OR OUR BEHALF, EXCEPT FOR STATEMENTS MADE IN THE PROSPECTUS.
<PAGE> 1
EXHIBIT 99.7
To Our Clients:
We are sending this letter because we hold shares of MEMC Electronic
Materials, Inc. common stock for you. MEMC has commenced an offering of
transferable rights to purchase its common stock, as described in the enclosed
prospectus.
We have enclosed your copy of the following documents:
1. The Prospectus; and
2. The Beneficial Owner Election Form.
We urge you to read these documents carefully before instructing us to
exercise, sell or otherwise transfer your rights. WE WILL ACT ON YOUR BEHALF
ACCORDING TO YOUR INSTRUCTIONS.
<PAGE> 1
EXHIBIT 99.10
BENEFICIAL OWNER ELECTION FORM
I (we) acknowledge receipt of your letter and the enclosed materials
relating to the offering of shares of common stock, par value $0.01 per share
(the "Common Stock"), of MEMC Electronic Materials, Inc. (the "Company").
In this form, I (we) instruct you whether to exercise, sell or transfer
rights to purchase the Common Stock distributed with respect to the Company's
Common Stock held by you for my (our) account, pursuant to the terms and subject
to the conditions set forth in the prospectus dated ____, 1999 (the
"Prospectus").
BOX 1. [_] Please do not exercise rights for shares of the Common Stock.
BOX 2. [_] Please exercise rights for shares of the Common Stock as set
forth below:
<TABLE>
<CAPTION>
NUMBER
OF RIGHTS SUBSCRIPTION PRICE PAYMENT
--------- ------------------ -------------------
<S> <C> <C> <C>
Basic Subscription
Privilege: _____ X $[_____] = $______ (Line 1)
Over-Subscription
Privilege: _____ X $[_____] = $______ (Line 2)
</TABLE>
By exercising this Over-Subscription Privilege, I (we) hereby represent and
certify that I (we) have fully exercised my (our) Basic Subscription Privilege
received in respect of shares of Common Stock held in the below-described
capacity.
Total Payment Required = $_______ (Sum of Lines
1 and 2; must equal
total of amounts in
Boxes 3 and 4)
BOX 3. [_] Payment in the following amount is enclosed: ____________
BOX 4. [_] Please deduct payment from the following account maintained by
you as follows:
___________________________ ____________________________
Type of Account Account No.
Amount to be deducted: $ ____________________
Date: __________________, 1999 _______________________________
<PAGE> 2
BOX 5. [_] Please sell _____ of my Rights.
BOX 6. [_] Please have Harris Trust and Savings Bank effect my specific
instructions that I have attached hereto and for which I have had an Eligible
Institution guarantee my signature.
Signature(s):__________________________________
Signature(s):__________________________________
(If held jointly)
Please type or print name(s) below:
_______________________________
_______________________________
Signature(s) Guaranteed by:_________________________________
Eligible Institution
<PAGE> 1
Exhibit 99.11
MEMC ELECTRONIC MATERIALS, INC.
501 Pearl Drive (City of O'Fallon)
St. Peters, Missouri 63376
SUBSCRIPTION AGENT AGREEMENT
("Agreement")
December __, 1998
Harris Trust and Savings Bank
c/o Harris Trust Company of New York
88 Pine Street, 19th Floor
New York, New York 10005
ATTN: REORGANIZATION DEPARTMENT
Re: MEMC Electronic Materials, Inc. - Rights Offering
Ladies and Gentlemen:
MEMC Electronic Materials, Inc. a Delaware corporation (the "Company")
is distributing to the holders of record (except VEBA Corporation ("VEBA")) of
its common stock, par value $.01 per share, (the "Common Stock") at the close of
business on _____ (the "Record Date"), rights to subscribe for and purchase
(each, a "Right," and collectively, the "Rights") shares of Common Stock (the
"Additional Common Stock") at a purchase price of _____ per share of Additional
Common Stock (the "Subscription Price") upon the terms and conditions set forth
in the Prospectus (a copy of which is attached hereto as Exhibit 1) (the "Rights
Offering"). The term "Subscribed" shall mean submitted for purchase from the
Company by a stockholder in accordance with the terms of the Rights Offering,
and the term "Subscription" shall mean any such submission. The Rights Offering
will expire at 5:00 p.m. New York City time, on _____, 1999 (the "Expiration
Time"), unless the Company shall have extended the period of time for which the
Rights Offering is open, in which event the term "Expiration Time" shall mean
the latest time and date at which the Rights Offering, as so extended by the
Company from time to time, shall expire.
The Company filed a Registration Statement relating to the Rights and
the Additional Common Stock with the Securities and Exchange Commission under
the Securities Act of 1933, as amended, on October 22, 1998, as amended on
December __, 1998 (the "Registration Statement"). The Registration Statement was
declared effective on December __, 1998. The terms of the Additional Common
Stock are more fully described in the Prospectus forming part
<PAGE> 2
of the Registration Statement as it was declared effective. Copies of the
Prospectus, the Instructions For Use of MEMC Electronic Materials, Inc. Rights
Certificate (the "Instructions") and the Notice of Guaranteed Delivery are
attached hereto and incorporated herein by reference as Exhibit 1, Exhibit 2 and
Exhibit 3, respectively. Promptly after the Record Date, the transfer agent for
the Company will provide you with a list of holders of Common Stock as of the
Record Date (the "Record Stockholders List").
The Rights are evidenced by transferable Rights Certificates
(individually, a "Rights Certificate," and collectively, the "Rights
Certificates"), a copy of the form of which is attached hereto as Exhibit 4. The
Rights Certificates entitle the holders thereof to Subscribe, upon payment of
the Subscription Price, for one Additional Share for each Right evidenced by a
Rights Certificate (the "Basic Subscription Privilege"). Fractional Rights will
not be issued to holders of Common Stock. If a holder of Common Stock is
entitled to receive a fractional Right, such holder's Rights shall be rounded up
to the nearest whole Right. No fractional Rights will be issued. Brokers or
custodian banks holding MEMC common stock on the Record Date for more than one
beneficial owner may (after making a proper showing to the Subscription Agent)
exercise the number of Rights to which all such beneficial owners in the
aggregate otherwise would have been entitled if they had been direct record
holders of such common stock on the Record Date. The Rights Offering includes an
over-subscription privilege entitling the holder of a Rights Certificate, if
said holder fully exercises its Basic Subscription Privilege, to Subscribe and
pay the Subscription Price for additional shares of Additional Common Stock (the
"Over-Subscription Privilege"). Reference is made to the Prospectus under "The
Rights Offering-Subscription Privileges" for a complete description of the Basic
Subscription Privilege and the Over-Subscription Privilege.
The Company hereby appoints you as Subscription Agent (the
"Subscription Agent") for the Rights Offering and agrees with you as follows:
1. As Subscription Agent, you are authorized and directed to:
A. Prepare and issue the Rights Certificates in accordance
with this Agreement in the names of the holders of the
Common Stock of record on the Record Date (except VEBA),
keep such records as are necessary for the purpose of
recording such issuance, and furnish a copy of such records
to the Company. You shall affix such identifying
information as you deem necessary to identify each
particular Rights holder upon return of the executed
Rights Certificates. The Rights Certificates may be signed
on your behalf by the manual or facsimile signature of a
Vice President or Assistant Vice President of the
Subscription Agent, or by the manual signature of any of
your other authorized officers.
B. Keep or cause to be kept books for registration of Rights
and transfer of Rights. Such books will show the names and
addresses of the respective Rights holders and assignees
or transferees and the number of Rights that have been
granted or held.
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<PAGE> 3
C. Promptly after you receive the Record Stockholders
List:
(i) mail or cause to be mailed, by first class
mail, to each holder of Common Stock of
record on the Record Date whose address of
record is within the United States (except
VEBA) each of the following, (i) a Rights
Certificate evidencing the Rights to which
such stockholder is entitled under the
Rights Offering, (ii) a copy of the
Prospectus, (iii) a Letter of Instruction,
(iv) a Notice of Guaranteed Delivery and (v)
a return envelope addressed to you, as the
Subscription Agent; and
(ii) you shall refrain from mailing Rights
Certificates issuable to any holder of
common stock of record on the Record Date
whose address of record is outside the
United States, or is an A.P.O. or F.P.O.
address, and hold such Rights Certificates
for the account of such stockholder subject
to such stockholder making satisfactory
arrangements with you for the exercise or
other disposition of the Rights evidenced
thereby, and follow the instructions of
such stockholder for the exercise, sale or
other disposition of such Rights if such
instructions are received at or before
11:00 a.m., New York City Time,
on _______________.
D. Accept Subscriptions upon the due exercise (including
payment of the Subscription Price) on or prior to the
Expiration Time in accordance with the terms of the
Prospectus, the Letter of Instruction, and the Rights
Certificate.
E. Subject to the next sentence, accept Subscriptions
from Rights holders whose Rights Certificates are
alleged to have been lost, stolen or destroyed upon
receipt by you of an affidavit of theft, loss or
destruction and a bond of indemnity in form and
substance satisfactory to us, accompanied by payment
of the Subscription Price for the total number of
shares of Additional Common Stock subscribed for by
such Rights holder. Upon receipt of such affidavit
and bond of indemnity and compliance with any other
applicable requirements, stop orders shall be placed
on said Rights Certificates and you shall withhold
delivery of the shares of Additional Common
Stock Subscribed for until after the Rights
Certificates have expired and it has been determined
that the Rights evidenced by the Rights Certificates
have not otherwise been purported to have been
exercised or otherwise surrendered.
F. Accept Subscriptions, unless you have further
authorization or direction from the Company, only if
you have procured supporting legal papers or other
proof of authority to sign (including without
limitation proof of
3
<PAGE> 4
appointment of a fiduciary or other person acting in
a representative capacity), and only if you have
procured the signatures of co-fiduciaries,
co-representatives or any other appropriate person:
(i) if the Rights Certificate is registered in
the name of a fiduciary and is executed by
and the Additional Common Stock is to be
issued in the name of such fiduciary;
(ii) if the Rights Certificate is registered in
the name of joint tenants and is executed by
one of the joint tenants, provided the
certificate representing the Additional
Common Stock is issued in the names of, and
is to be delivered to, such joint tenants;
(iii) if the Rights Certificate is registered in
the name of a corporation and is executed by
a person in a manner which appears or
purports to be done in the capacity of an
officer, or agent thereof, provided the
Additional Common Stock is to be issued in
the name of such corporation; or
(iv) if the Rights Certificate is registered in
the name of an individual and is executed by
a person purporting to act as such
individual's executor, administrator or
personal representative, provided, the
Additional Common Stock is to be registered
in the name of the subscriber as executor or
administrator of the estate of the deceased
registered holder and there is no evidence
indicating the subscriber is not the duly
authorized representative that he purports
to be.
G. Accept Subscriptions not accompanied by Rights
Certificates if submitted by a firm having
membership in the New York Stock Exchange or another
national securities exchange or by a commercial bank
or trust company having an office in the United
States together with the Notice of Guaranteed
Delivery and accompanied by proper payment for the
total number of shares of Additional Common Stock
Subscribed for by such holder; provided that such
firm complies with the Guaranteed Delivery Procedures
set forth in the Prospectus under the heading "Rights
Offering - Guaranteed Delivery Procedures."
H. Accept Subscriptions even though unaccompanied by
Rights Certificates, under the circumstances and in
compliance with the terms and conditions set forth in
the Prospectus under the heading "Rights Offering -
Exercise of Rights" and "Guaranteed Delivery
Procedures."
I. Refer to the Company for specific instructions as to
acceptance or rejection, of Subscriptions received
after the Expiration Time,
4
<PAGE> 5
Subscriptions not authorized to be accepted pursuant
to this paragraph 1, and Subscriptions otherwise
failing to comply with the requirements of the
Prospectus and the terms and conditions of the
Rights Certificate.
J. Upon acceptance of a Subscription:
(i) Hold all funds received from Rights holders
in a special interest bearing account for
the benefit of the Company. Promptly
following the Expiration Time you shall
distribute to the Company the funds in such
account (including interest thereon) and
issue certificates for shares of Additional
Common Stock issuable to those Rights
holders whose Subscriptions have been
accepted;
(ii) Advise the Company daily by telecopy and
confirm by letter to the attention of
James M. Stolze (the "Company
Representative"), with copies to the
Company's counsel, VEBA, NationsBanc
Montgomery Securities LLC, J.P. Morgan
Securities Inc., and counsel for the Dealer
Managers as to the total number of shares of
Additional Common Stock Subscribed for,
total number of Rights sold, total number
of Rights partially Subscribed for and the
amount of funds received, with cumulative
totals for each; and in addition advise the
Company Representative, by telephone
confirmed by telecopy, of the amount of
funds received identified in accordance
with (a) above, deposited, available or
transferred in accordance with (a) above,
with cumulative totals, in each case at the
address and numbers set forth in paragraph
19 hereof; and
(iii) as promptly as possible but in any event on
or before 8:00 a.m., New York City time, on
the day following the Expiration Time,
advise the Company Representative in
accordance with (ii) above of the number of
shares Subscribed for, the number of
Subscription guarantees received and the
number of shares of unsubscribed Additional
Common Stock.
K. Upon completion of the Rights Offering, you shall
issue certificates for shares of Additional Common
Stock for which Rights holders have Subscribed.
L. Sell Rights for Rights holders as follows:
(i) Upon receipt of appropriate instructions
from a Rights holder and a properly executed
Rights Certificate before 11:00 a.m., New
York City time, on the fifth business day
before the Expiration Time, you may sell the
Rights on the New York Stock Exchange or any
other investment channel.
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<PAGE> 6
(ii) If you fill less than all sales orders you
timely receive, you shall prorate the sales
proceeds among the Rights holders based upon
the total number of Rights you were timely
instructed to sell, irrespective of the time
each such instruction was received by you.
(iii) Promptly upon completion of the Rights
Offering, you shall send each Rights holder
who timely instructed you to sell Rights on
its behalf, a check in an amount equal to
the number of Rights sold times the weighted
average price of all Rights you sold in
accordance with the terms of such sale under
"The Rights Offering--Method of Transferring
and Selling Rights--Sales of Rights Through
Harris Trust Savings Bank" in the
Prospectus.
(iv) In the event you do not fill all or any of
the requests by Rights holders to sell
Rights by the third business day prior to
the expiration time, you shall mail to each
such Rights holder a new Rights Certificate
representing the number of Rights not sold
by you for such Rights holder.
M. Transfer Rights for Rights holders as follows:
(i) You shall register the transfer, from time
to time, of any outstanding Rights upon the
Register, upon surrender of the Rights
Certificate evidencing such rights for
transfer, properly endorsed with signatures
properly guaranteed and accompanied by
appropriate instructions for transfer.
Upon any such transfer, you shall issue a
new Rights Certificate representing an
equal aggregate number of Rights to the
transferee and you shall cancel the
surrendered Rights Certificate. You shall
deliver the canceled Rights Certificates to
the Company upon its request.
(ii) You shall not be required to register a
transfer if such transfer will result in the
issuance of a Rights Certificate for a
fraction of a Right.
(iii) You are authorized to countersign and to
deliver, in accordance with the terms of
this Agreement, the new Rights Certificates
required to be issued pursuant to the
provisions hereof, and the Company will
supply you with Rights Certificates duly
executed on behalf of the Company for such
purpose.
2. (a) A Rights Certificate shall be issued to each holder of
Common Stock as of the Record Date (except VEBA). You are the Transfer Agent and
Registrar for the Rights Certificates and you shall keep books and records of
the registration and transfers and exchanges
6
<PAGE> 7
of rights Certificates (such books and records are hereinafter called the
"Rights Certificate Register").
(b) You shall promptly mail or deliver a copy of the
Prospectus (i) to each assignee or transferee of Rights Certificates upon your
receipt of appropriate documents to register the assignment or transfer thereof,
and (ii) to persons other than the registered holder of the Rights Certificates
if certificates for shares of Additional Common Stock are issued to such
persons.
(c) All Rights Certificates issued upon any registration of
transfer or exchange of Rights Certificates shall be the valid obligations of
the Company, evidencing the same obligations, and entitled to the same benefits
under this Agreement, as the Rights Certificates surrendered for such
registration of transfer or exchange.
(d) Any Rights Certificate when duly endorsed in blank shall
be deemed negotiable, and when a Rights Certificate shall have been so endorsed
the holder thereof may be treated by the Company, you and all other persons
dealing therewith as the absolute owner, thereof for any purpose and as the
person entitled to exercise the rights represented thereby, any notices to the
contrary notwithstanding, but until such transfer is registered in the Rights
Certificate Register, the Company and you may treat the registered holder
thereof as the owner for all purposes.
3. You will follow your regular procedures to attempt to reconcile any
discrepancies between the number of shares of Additional Common Stock that any
Rights Certificate may indicate are to be issued to a stockholder and the number
that the Record Stockholders List indicates may be issued to such stockholder.
In any instance where you cannot reconcile such discrepancies by following such
procedures, you will consult with the Company for instructions as to the number
of shares of Additional Common Stock, if any, you are authorized to issue. In
the absence of such instructions, you are authorized not to issue any shares of
Additional Common Stock to such stockholder.
4. You will examine the Rights Certificates received by you as
Subscription Agent to ascertain whether they appear to you to have been
completed and executed in accordance with the procedures set forth in the
Prospectus and the Letter of Instructions. In the event you determine that any
Rights Certificate does not appear to you to have been properly completed or
executed, or where the Rights Certificates do not appear to you to be in proper
form for Subscription, or any other irregularity in connection with the
Subscription appears to you to exist, you will follow, where possible, your
regular procedures to attempt to cause such irregularity to be corrected. You
are not authorized to waive any irregularity in connection with the
Subscription, unless you shall have received notification, duly dated and signed
by an authorized officer of the Company, indicating that any irregularity in
such Rights Certificate has been cured or waived and that such Rights
Certificate has been accepted by the Company. If any such irregularity is
neither corrected nor waived, you will return to the subscribing stockholder (at
your option by either first class mail under a blanket surety bond or insurance
protecting you and the Company from losses or liabilities arising out of the
non-receipt or non-delivery of
7
<PAGE> 8
Rights Certificates or by registered mail insured separately for the value of
such Rights Certificates) to such Rights holder's address as set forth in the
Subscription, any Rights Certificates surrendered in connection therewith and
any other documents received with such Rights Certificates, and a letter of
notice to be furnished by the Company explaining the reasons for the return of
the Rights Certificate and other documents.
5. Each document received by you relating to your duties under this
Agreement shall be date and time stamped by you immediately upon your receipt
thereof.
6. (a) For so long as this Agreement shall be in effect, the
Company will reserve for issuance and keep available free from preemptive rights
a sufficient number of shares of Additional Common Stock to permit the exercise
in full of all Rights issued pursuant to the Rights Offering. Subject to the
terms and conditions of this Agreement, you in your capacity as transfer agent
for the Common Stock, shall issue certificates evidencing the appropriate number
of shares of Additional Common Stock as required from time to time in order to
effectuate the Subscriptions.
(b) The Company shall endeavor to take action, including
without limitation, obtaining the authorization, consent, lack of objection,
registration or approval of any governmental authority, or the taking of any
other action under the laws of the United States of America or any political
subdivision thereof, to insure that all shares of Additional Common Stock
issuable upon the exercise of the Rights at the time of delivery of the
certificates therefor (subject to payment of the Subscription Price) will be
duly and validly issued and fully paid and non-assessable shares of Common
Stock, free from all preemptive rights and taxes, liens, charges and security
interests created by or imposed upon the Company with respect thereto.
(c) The Company shall endeavor to take action necessary or
appropriate to obtain and keep effective all registrations, permits, consents
and approvals of the Securities and Exchange Commission and any other
governmental agency or authority and make such filings under Federal and state
laws which may be necessary to appropriate in connection with the issuance,
sale, transfer and delivery of Rights Certificates or Additional Common Stock
issued upon exercise of Rights.
7. If certificates representing shares of Additional Common Stock are
to be delivered by you to a person other than the person in whose name a
surrendered Rights Certificate is registered, you will issue no certificate for
Additional Common Stock until the Rights Certificate so surrendered has been
properly endorsed (or otherwise put in proper form for transfer) and the person
requesting such exchange has paid any transfer or other taxes or governmental
charges required by reason of the issuance of a certificate for Additional
Common Stock in a name other than that of the registered holder of the Rights
Certificate surrendered, or has established to your satisfaction that any such
tax or charge either has been paid or is not payable.
8. Should any issue arise regarding federal income tax reporting or
withholding, you will take such action as the Company instructs you in writing.
8
<PAGE> 9
9. The Company may terminate this Agreement at any time by so notifying
you in writing. You may terminate this Agreement upon 30 days' prior notice to
the Company. Upon any such termination, you shall be relieved and discharged of
any further responsibilities with respect to your duties hereunder. Upon payment
of all your outstanding fees and expenses, you will forward to the Company or
its designee promptly any Rights Certificate or other document relating to your
duties hereunder that you may receive after your appointment has so terminated.
Paragraphs 9, 10 and 14 of this Agreement shall survive any termination of this
Agreement.
10. As Subscription Agent for the Company hereunder you:
(a) shall have and shall perform no duties or obligations
other than those specifically set forth in this
Agreement or as may subsequently be agreed in writing
by you and the Company;
(b) shall have no obligation to issue any shares of
Additional Common Stock unless the Company shall have
provided a sufficient number of certificates for such
Additional Common Stock;
(c) shall be regarded as making no representations and
having no responsibilities as to the validity,
sufficiency, value or genuineness of any Rights
Certificates surrendered to you hereunder or shares
of Additional Common Stock issued in exchange
therefor, and will not be required to or be
responsible for and will make no representations as
to, the validity, sufficiency, value or genuineness
of the Rights Offering;
(d) shall not take any legal action hereunder, without
the prior written approval of the Company, and where
the taking of such action might, in your judgment,
subject or expose you to any expense or liability you
shall not be required to act unless you shall have
been furnished with an indemnity reasonably
satisfactory to you;
(e) may rely on and shall be authorized and protected in
acting in good faith or failing in good faith to act
upon any certificate, instrument, opinion, notice,
letter, telex, facsimile transmission or other
document or security delivered to you and reasonably
believed by you to be genuine and to have been signed
by the proper party or parties;
(f) shall not be liable or responsible for any recital or
statement contained in the Prospectus or any other
documents relating thereto;
(g) shall not be liable or responsible for any failure on
the part of the Company to comply with any of its
covenants and obligations relating to the Rights
Offering, including without limitation obligations
under applicable securities laws;
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<PAGE> 10
(h) may rely on and shall be authorized and protected in
acting in good faith or in good faith failing to act
based upon and in accordance with the written,
telephonic or oral instructions with respect to any
matter relating to you acting as Subscription Agent
covered by this Agreement (or supplementing or
qualifying any such actions) of officers of the
Company authorized hereunder to act for the Company;
(i) may consult with counsel satisfactory to you, and the
advice of such counsel shall be full and complete
authorization and protection in respect of any action
taken, suffered, or omitted by you hereunder in good
faith and in accordance with the advice of such
counsel;
(j) may perform any of your duties hereunder either
directly or by or through agents or attorneys
selected by you in good faith and with reasonable
care;
(k) are not authorized, and shall have no obligation, to
pay any brokers, dealers or soliciting fees to any
person;
(l) shall not at any time advise any person exercising or
selling, considering exercising or selling, pursuant
to the Rights Offering as to the wisdom of making
such an exercise or sale or as to the market value of
any security exercised or sold; and
(m) acknowledge that the closing of the Rights Offering
will occur on the day immediately following the
Expiration Time, even if such date falls on a
Saturday or Sunday, and you shall do all acts
necessary under this Agreement to facilitate such
closing.
11. In the event any question or dispute arises with respect to the
proper interpretation of the Rights Offering or your duties hereunder or the
rights of the Company or of any stockholders surrendering Rights Certificates
pursuant to the Rights Offering, you shall not be required to act and shall not
be held liable or responsible for your refusal to act until the question or
dispute has been judicially settled (and, if appropriate, you may file a suit in
interpleader or for a declaratory judgment for such purpose) by final judgment
rendered by a court of competent jurisdiction, binding on all parties interested
in the matter which is not longer subject to review or appeal, or settled by a
written document in form and substance satisfactory to you and executed by the
Company and each such stockholder and party. In addition, you may require for
such purpose, but shall not be obligated to require, the execution of such
written settlement by all the Rights holders and all other parties that may have
a interest in the settlement.
12. Any instructions given to you orally, as permitted by any provision
of this Agreement, shall be confirmed in writing by the Company as soon as
practicable. You shall not be liable or responsible and shall be fully
authorized and protected for acting in good faith, or failing in good faith to
act, in accordance with any oral instructions which do not conform with the
written confirmation received in accordance with this paragraph 12.
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<PAGE> 11
13. Whether or not any Rights Certificates are surrendered to you, for
your services as Subscription Agent hereunder, the Company shall pay to you
compensation of [$15,000.00] together with reimbursement for your reasonable
out-of-pocket expenses, including reasonable fees and disbursements of counsel,
subject to receipt of reasonably satisfactory documentation thereof.
14. The Company covenants to indemnify and hold you and your officers,
directors, employees, agents, contractors, subsidiaries and affiliates harmless
form and against any loss, liability, damage or expense incurred (a) without
negligence, misconduct or bad faith and (b) as a result of your acting or
failing to act in accordance with the terms of this Agreement upon the Company's
instructions, arising out of or in connection with the Rights Offering and
including without limitation the costs and expenses of defending and appealing
against any action, proceeding, suit or claim in the premises. In no case shall
the Company be liable under this indemnity with respect to any action,
proceeding, suit or claim against you unless the Company shall be notified by
you, by letter or by telex or facsimile transmission confirmed by letter, of the
written assertion of any action, proceeding, suit or claim made or commenced
against you promptly after you shall have been served with the summons or other
first legal process or have received the first written assertion giving
information as to the nature and basis of the action, proceeding, suit or claim,
but failure so to notify the Company shall not release the Company of any
liability which it may otherwise have on account of this Agreement. The Company
shall be entitled to participate at its own expense in the defense of any such
action, proceeding, suit or claim. In the event that the Company assumes such
defense, the Company shall not thereafter be liable for the fees and expenses of
any additional counsel that you retain, so long as the Company shall retain
counsel satisfactory to you, in the exercise of your reasonable judgment to
defend such suit. You agree not to settle any claim or litigation in connection
with any claim or liability with respect to which you may seek indemnification
from the Company without the prior written consent of the Company.
15. If any provision of this Agreement shall be held illegal, invalid,
or unenforceable by any court, this Agreement shall be construed and enforced as
if such provision had not been contained herein and shall be deemed an Agreement
among us to the full extent permitted by applicable law.
16. The Company represents and warrants that (a) it is a duly
incorporated, validly existing and in good standing under the laws of its
jurisdiction of incorporation, (b) the making and consummation of the Rights
Offering and the execution, delivery and performance of all transactions
contemplated thereby (including, without limitation this Agreement) have been
duly authorized by all necessary corporate action and will not result in a
breach of or constitute a default under the certificate or incorporation or
bylaws of the Company or any indenture agreement or instrument to which it is a
party or is bound, (c) this Agreement has been duly executed and delivered by
the Company and constitutes the legal, valid, binding and enforceable obligation
of the Company, (d) the Rights Offering will comply in all material respects
with all applicable requirements of law and (e) to the best of its knowledge,
there is no litigation pending or threatened as of the date hereof in connection
with the Rights Offering.
11
<PAGE> 12
17. In the event that any claim of inconsistency between this Agreement
and the terms of the Rights Offering arise as they may form time to time be
amended, the terms of the Rights Offering shall control, except with respect to
the duties, liabilities and rights, including compensation and indemnification
of you as Subscription Agent, which shall be controlled by the terms of this
Agreement.
18. Set forth in Exhibit 5 hereto is a list of the names and specimen
signatures of the persons authorized to act for the Company under this
Agreement. The Secretary of the Company shall, from time to time, certify to you
the names and signatures of any other persons authorized to act for the Company
under this Agreement.
19. Except as expressly set forth elsewhere in this Agreement, all
notices, instructions and communications under this Agreement shall be in
writing, shall be effective upon receipt, and shall be addressed:
A. If to the Company:
Chief Financial Officer
MEMC Electronic Materials, Inc.
501 Pearl Drive (City of O'Fallon)
St. Peters, Missouri 63376
Attention: James M. Stolze
Telephone: (314) 279-5920
Facsimile: (314) 279-5162
B. If to the Company's Counsel:
Bryan Cave LLP
211 North Broadway, Suite 3600
St. Louis, Missouri 63102-2750
Attention: R. Randall Wang, Esq.
Telephone: (314) 259-2000
Facsimile: (314) 259-2020
C. If to the Subscription Agent:
Harris Trust and Savings Bank
c/o Harris Trust Company of New York
88 Pine Street, New York, New York 10005
Attention: Mark B. Zimkind
Telephone: (212) 605-1479
Facsimile: (212) 702-1132
12
<PAGE> 13
D. If to VEBA Corporation:
VEBA Corporation
605 Third Avenue
New York, NY 10158
Attention: Heinz- Helmer Putthoff
Telephone: (212) 922-2700
Facsimile: (212) 922-2798
E. If to NationsBanc Montgomery Securities, LLC:
NationsBanc Montgomery Securities, Inc.
600 Montgomery Street
San Francisco, California 94111
Attention: Chet Bozdog
Telephone: (415) 627-2883
Facsimile: (415) 913-5512
F. If to J.P. Morgan:
J.P. Morgan Securities, Inc.
227 W. Monroe
Suite 2000
Chicago, Illinois 60606
Attention: Rob Collins
Telephone: (312) 541-3392
Facsimile: (312) 541-3379
G. If to Counsel to the Dealer Managers:
Cooley Godward LLP
Five Palo Alto Square
3000 El Camino Real
Palo Alto, California 94306
Attention: Patrick A. Pohlen, Esq.
Telephone: (650) 843-5004
Facsimile: (650) 857-0663
or to such other addresses and/or facsimile numbers as may be specified from
time to time in a written notice given by such party.
20. This Agreement shall be governed by and construed in accordance
with the laws of the State of New York without giving effect to conflict of laws
rules or principles, and shall
13
<PAGE> 14
inure to the benefit of and be binding upon the successors and assigns of the
parties hereto; provided that this Agreement may not be assigned by either party
without the prior written consent of the other party.
21. No provision of this Agreement may be amended, modified or waived,
except in a written document signed by both parties.
22. This Agreement may be executed in two or more counterparts, each of
which shall be deemed to be an original and all of which taken together shall
constitute one and the same agreement.
Please acknowledge receipt of this Agreement, the Prospectus, the
Instructions, Notice of Guaranteed Delivery and Rights Certificate with respect
to the Rights Offering, and confirm the arrangements herein provided, by signing
and returning the enclosed copy hereof, whereupon this Agreement and your
acceptance of the terms and conditions herein provided shall constitute a
binding Agreement between us.
Very truly yours,
MEMC ELECTRONIC MATERIALS, INC.
By: ____________________________________
Name:
Title:
Accepted as of the date above first written:
HARRIS TRUST AND SAVINGS BANK,
AS SUBSCRIPTION AGENT
By: ________________________________________
Name: Mark B. Zimkind
Title: Vice President
14
<PAGE> 15
HARRIS TRUST AND SAVINGS BANK
Exhibit 1 Prospectus
Exhibit 2 Letter of Instruction
Exhibit 3 Notice of Guaranteed Delivery
Exhibit 4 Form of Rights Certificate
Exhibit 5 Incumbency Certificate
15
<PAGE> 1
Exhibit 99.12
[LETTERHEAD OF MORROW & CO., INC]
December 7, 1998
MEMC Electronic Materials, Inc.
501 Pearl Drive
St. Peters, MO 63376
This letter will serve as the agreement under which you will retain us to act as
Information Agent in connection with your Rights Offering (the "Offer") to
shareholders of MEMC Electronic Materials, Inc.
The services we will perform on your behalf will include the consultation and
preparation in connection with the Offer, the delivery of material to brokers,
banks, nominees and institutions, acting as Information Agent in connection with
the Offer. These services will also include receiving calls from shareholders,
and telephoning holders of record and non-objecting beneficial owners ("NOBOs").
For the above services our fee will be $5,000.00. Our fee assumes that there is
no counter offer. One half of the fee ($2,500.00) is earned and due upon the
signing of this agreement; in addition, an advance against disbursements of
$10,000.00 is due as well. The balance of our fee will be payable upon the
initial expiration of the Offer. Additional disbursements incurred by us on your
behalf will be payable monthly or upon the expiration of the Offer. Included in
the disbursements will be our charges for calls received from shareholders and
for the telephone solicitation of holders of record and NOBOs. The charge is
$6.50 per call and includes labor and all related telephone expenses (covers up
to three rounds of calls).
This agreement covers the period from December 1, 1998 through February 28,
1999. Thereafter, this agreement will be extended for a monthly fee of
$1,000,00.
<PAGE> 2
MORROW & CO., INC.
You agree to indemnify and hold us harmless against any loss, damage, expense
(including reasonable legal fees and expenses), liability or claim relating to
or arising out of our performance of this agreement except where we, or our
employees, fail to comply with this agreement; provided, however, that you shall
not be obliged to indemnify us or hold us harmless against any such loss,
damage, expense, liability, or claim which results from negligence, bad faith or
willful misconduct on our part or of any of our employees.
At your election, you may assume the defense of any such action. We shall
advise you in writing of any such liability or claim promptly after receipt of
any notice of any action or claim for which we may be entitled to
indemnification hereunder.
This agreement shall be construed and enforced in accordance with the laws of
the State of New York and shall inure to the benefit of, and the obligations
created hereby shall be binding upon, the successors and assigns of the parties
hereto.
If any provision of this agreement shall be held illegal, invalid or
unenforceable by any court, this agreement shall be construed and enforced as if
that provision had not been contained herein and shall be deemed an agreement
among us to the full extent permitted by applicable law.
Please acknowledge receipt of this agreement and confirm the arrangements herein
provided by signing and returning the enclosed copy to the undersigned,
whereupon this agreement and your acceptance of the terms and conditions herein
provided shall constitute a binding agreement among us.
Accepted Very truly yours,
MEMC Electronic Materials, Inc. MORROW & CO., INC.
By: /s/ Helene F. Hennelly By: /s/ Gerard J. Mucha
--------------------------- ---------------------------
Title: Corp V.P., Secretary & Title: Sr. V.P.
General Counsel
Date: 12/15/98
<PAGE> 1
Exhibit 99.13
CONSENT OF NATIONSBANC MONTGOMERY SECURITIES LLC
We hereby consent to the inclusion of our name in Amendment No. 2 to
the Registration Statement on Form S-3 relating to the proposed rights offering
of MEMC Electronic Materials, Inc., a Delaware corporation, and to the
references to our analyses performed for the Special Committee of the Board of
Directors of MEMC Electronic Materials, Inc. in the Registration Statement under
the captions "The Rights Offering -- Determination of Subscription Price" and
"Plan of Distribution." In giving such consent, we do not admit that we come
within the category of persons whose consent is required under Section 7 of the
Securities Act of 1933, as amended, or the rules and regulations issued by the
Securities and Exchange Commission thereunder (collectively, the "Securities
Act") nor do we admit that we are experts with respect to any part of such
Registration Statement within the meaning of the term "expert" as used in the
Securities Act.
NATIONSBANC MONTGOMERY SECURITIES LLC
By: /s/ David DeRuff
----------------------------------
David DeRuff
Senior Managing Director
December 30, 1998
