<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 11, 1998
REGISTRATION STATEMENT NO. 333-65973
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------------------------------------
AMENDMENT NO. 1
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 11, 1998
SHARES
MEMC ELECTRONIC MATERIALS, INC. LOGO
MEMC ELECTRONIC MATERIALS, INC.
COMMON STOCK
------------------------
MEMC is distributing to each of its stockholders, other than its majority
stockholder, VEBA Corporation, rights to purchase MEMC common stock at
$[ ] 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.
------------------------
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 $ PER SHARE
------------------------
<TABLE>
<CAPTION>
DEALER MANAGER OFFERING
PUBLIC OFFERING FEES AND ESTIMATED PROCEEDS TO
PRICE REIMBURSED EXPENSES MEMC
--------------- ------------------- -----------
<S> <C> <C> <C>
Per Share.................. $ $ $
Total...................... $ $ $
</TABLE>
See "Plan of Distribution" beginning on page 54 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.
, 1998
<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. We are distributing
rights for every share of MEMC common stock held on , 1998.
WHAT IS A RIGHT?
Each right entitles stockholders to purchase one share of MEMC common stock
at a subscription price of $ 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 $ , 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 $ 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 do not subscribe for more than a total of
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
based on the number of shares subscribed for pursuant to the basic subscription
privilege.
HOW DO I EXERCISE MY RIGHTS?
If you hold your shares directly in your name, you will receive a rights
certificate. You may exercise your rights by completing and signing the purchase
form that appears on the back of your rights certificate. You must then send the
completed and signed form, along with payment in full of the subscription
payment for all shares of MEMC common stock to be purchased through the basic
subscription privilege and, if exercised, the over-subscription privilege, to
Harris Trust and Savings Bank, the subscription agent for the rights offering.
Harris Trust and Savings Bank must receive these documents and the
subscription payment no later than the time and date the rights offering
expires.
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 28 and with the rights certificate and "Instructions for Use of MEMC
Rights Certificates" accompanying this prospectus.
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. You should contact them and request
that they take the necessary and proper actions to sell, transfer or exercise
your rights.
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 on page 32, 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.
2
<PAGE> 4
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 on page 32. 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.
WHEN DOES THE RIGHTS OFFERING EXPIRE?
The rights offering expires 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 a
material event occurs and we need more time to adequately disclose information
to rights holders.
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 VEBA
Corporation'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, you will be able to change your decision
and we may extend the date the rights expire.
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.
ARE THERE ANY CONDITIONS TO THE RIGHTS OFFERING?
No. However, we may terminate the rights offering prior to the time the
rights expire.
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 26.
3
<PAGE> 5
PROSPECTUS SUMMARY
SUMMARY This summary highlights information contained
elsewhere in this prospectus. This summary is not
complete and 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 VEBA Corporation) on , 1998,
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 pursuant
to the basic subscription privilege and
over-subscription privilege described on page 2.
SUBSCRIPTION PRICE $ per share of MEMC common stock.
RECORD DATE , 1998, at 5:00 p.m., New York City
time.
PRINCIPAL STOCKHOLDER --
VEBA
CORPORATION VEBA Corporation, a corporation owned by VEBA AG
and its subsidiaries, owns shares of
MEMC common stock ( % of outstanding shares).
PRIVATE PLACEMENT TO VEBA
CORPORATION On , 1998, we sold shares
of MEMC common stock to VEBA Corporation, at
$ per share, for aggregate proceeds of
approximately $106 million. The sale increased
VEBA Corporation's percentage ownership from
approximately 53.1% to % of the outstanding
shares.
4
<PAGE> 6
REASONS FOR THE RIGHTS
OFFERING We are proceeding with the rights offering to
raise capital and to allow our stockholders (other
than VEBA Corporation) an opportunity to restore
their proportionate interest in MEMC at the same
price per share of common stock as was paid by
VEBA Corporation. If rights holders (other than
VEBA Corporation) purchase all shares of MEMC
common stock offered in the rights offering, VEBA
Corporation will again own approximately 53.1% of
the outstanding shares.
STANDBY AGREEMENT WITH VEBA
CORPORATION
Although we are not distributing any rights to
VEBA Corporation, VEBA Corporation 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, VEBA
Corporation will purchase all of the shares of
MEMC common stock offered in this rights offering
and will own approximately % of the shares of
outstanding MEMC common stock following this
rights offering.
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 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 30. We will not pay interest on
subscription payments.
HOW FOREIGN AND CERTAIN
OTHER
STOCKHOLDERS 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
5
<PAGE> 7
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
should 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.
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 $106
million from the private placement to VEBA
Corporation. We will use the proceeds of the
private placement to VEBA Corporation 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 any 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 VEBA Corporation, we had
outstanding shares of MEMC common stock.
After the private placement, the rights offering
and completion of the standby agreement, we will
have outstanding approximately shares
of MEMC common stock. These numbers do not include
1,783,214 shares issuable upon exercise of
employee stock options (as of November 30, 1998)
and 1,366,644 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" on page 20.
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
Pro forma earnings
(loss) per share:
Basic.............. -- 1.43(4) 2.80(5) -- -- -- --
Diluted............ -- 1.43(4) 2.78(5) -- -- -- --
Pro forma shares used
in earnings (loss)
per share
computation:
Basic.............. -- 23,902,650(4) 31,215,563(5) -- -- -- --
Diluted............ -- 23,902,650(4) 31,441,631(5) -- -- -- --
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(6) AGREEMENT(7)
---------- ------------ ------------------
<S> <C> <C> <C>
BALANCE SHEET DATA:
Working capital............................................. $ 18,097 $ 124,047 $ 215,212
Total assets................................................ 1,747,008 1,852,958 1,944,123
Long-term debt (including current portion).................. 720,985 720,985 720,985
Stockholders' equity........................................ 458,513 564,463 655,628
</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.
Earnings per share information for 1993 is not meaningful.
(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 calculated our earnings per share for 1994 on a pro forma basis using a
calculated number of shares. The calculated number of shares is equal to
the actual number of shares outstanding plus a hypothetical number of
shares. The hypothetical number of shares is equal to $100 million minus
MEMC's net earnings for the prior twelve-month period divided by the
initial public offering price. The $100 million represents a dividend paid
to Huls Corporation (MEMC's then sole stockholder) in April 1995.
(5) We calculated our earnings per share for 1995 on a pro forma basis using a
calculated number of shares. The calculated number of shares is equal to
the actual number of shares outstanding plus a hypothetical number of
shares for the three months ended March 31, 1995. The hypothetical number
of shares is equal to $100 million minus MEMC's net earnings for the prior
twelve-month period prior to March 31, 1995 divided by the initial public
offering price. The $100 million represents the dividend paid to Huls
Corporation in April, 1995.
(6) We adjusted the September 30, 1998 balance sheet data to reflect the
estimated net proceeds of $106.0 million from the private placement to VEBA
Corporation after deducting estimated expenses attributed to the private
placement.
(7) We adjusted the September 30, 1998 balance sheet data to reflect estimated
net proceeds of $197.1 million collectively from the private placement to
VEBA Corporation, 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 23 and "Plan of Distribution" beginning on page
54. 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 We have not reported an operating profit since the
OPERATING third quarter of 1997. We reported an operating
AND NET LOSSES; FUTURE loss in 1997 of $10.4 million. Through the first
LOSSES three quarters of 1998, we had an operating loss
ANTICIPATED 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.
NEGATIVE CASH FLOWS We have incurred negative cash flows from
operations in recent periods and have spent
substantial funds in connection with research and
development programs, capital expenditures and
other operating activities.
NEED FOR SUBSTANTIAL Our business is very capital intensive. We will
CAPITAL need substantial amounts of cash to continue to
INVESTMENTS fund capital expenditures, research and
development, and marketing and customer service
and support. We cannot assure you that, even with
the proceeds from the private placement to, and
standby agreement with, VEBA Corporation and this
rights offering and cash flows from operations, if
any, we will have enough capital to be able to
fund our future operations. Our capital needs
depend on numerous factors, including our
profitability and investment in research and
development and capital expenditures.
SIGNIFICANT ADDITIONAL Historically, we have funded our operations
FUNDING primarily through loans from VEBA AG and its
NEEDS AND RESTRICTIONS ON affiliates, internally generated funds, and our
PLEDGING OUR ASSETS TO MEET initial public offering. To a lesser extent, we
THOSE NEEDS 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 third parties on better terms than those with
VEBA AG and its affiliates.
We cannot assure you that we will be able to
obtain capital in the future to meet our needs. 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.
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
9
<PAGE> 11
support, and capital expenditures. Such reductions
could materially adversely affect our ability to
compete and our business.
NON-CORE BUSINESS OF
VEBA AG; UNCERTAINTY OF
FUTURE CAPITAL FUNDING FROM
VEBA AG 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
22.
VEBA Corporation has also committed to purchase
all of the shares not purchased by other
stockholders in this rights offering, subject to
certain conditions that are customary in a firm
commitment underwriting. However, VEBA AG and its
affiliates are not otherwise obligated to provide
capital to us. We cannot assure you that VEBA AG
and its affiliates will continue to provide
capital to us in the future.
HIGH LEVERAGE AND
SIGNIFICANT
DEBT SERVICE REQUIREMENTS;
REDUCED CASH AVAILABILITY 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 $164.5 million to other lenders.
In addition, our debt service could make us more
vulnerable to industry downturns and competitive
pressures. 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. In addition, the cash flow required to
service our debt may reduce our ability to fund
internal growth and capital requirements.
SEVERE ADVERSE IMPACT OF
SEMICONDUCTOR INDUSTRY
DOWNTURNS
Our business depends in large part upon the market
demand for our customers' semiconductors and
products utilizing semiconductors. The
semiconductor industry experiences: (1) rapid
technological change; (2) product obsolescence;
(3) price erosion; and (4) 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.
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
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resulting downturn in the silicon wafer industry
began in the summer of 1996.
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. If the current downturn continues,
or we experience other downturns in the future,
our business, operating results and financial
condition could be materially adversely affected.
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 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. This 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.
SUBSTANTIAL FLUCTUATIONS IN
OPERATING RESULTS Our quarterly and annual operating results can
fluctuate dramatically. 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: (1)
the timing of orders from major customers; (2)
product mix; (3) competitive pricing pressures;
and (4) 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.
CONTROL OF MEMC BY
VEBA AG 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
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<PAGE> 13
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. VEBA AG's
control could prevent or discourage any
unsolicited acquisition of MEMC and consequently
could adversely affect the market price of MEMC
common stock. 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, VEBA Corporation 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
46. 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, VEBA Corporation and this
rights offering to repay debt under revolving
credit agreements with VEBA AG and its affiliates.
See "Use of Proceeds" beginning on page 23.
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
- 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 22.
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.
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<PAGE> 14
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 "-- Substantial Financial
Commitments to our Taisil Joint Venture" on page
15.
INTENSE COMPETITION IN THE We face intense competition in the silicon wafer
SILICON WAFER INDUSTRY 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. If we cannot compete
effectively with Japanese silicon wafer
manufacturers, our operating results could be
materially adversely affected.
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.
We believe we must continue to make a high level
of investment in research and development,
marketing and customer service and support to
remain a leading supplier of silicon wafers. An
inability to maintain such investments could have
a material adverse effect on our operating
results.
ADVERSE EFFECT OF CURRENCY Over the past few years, the Japanese yen and
EXCHANGE RATES ON Deutsche mark have declined significantly relative
COMPETITION 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.
SIGNIFICANT INVESTMENTS The silicon wafer industry changes rapidly.
NEEDED Changes include requirements for new and more
TO COMPLY WITH CHANGING demanding technology, product specifications and
CUSTOMER SPECIFICATIONS; manufacturing processes. Our ability to remain
RISKS competitive will depend upon our ability to
OF FAILURE TO COMPLY develop technologically 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
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<PAGE> 15
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. If we fail in these
efforts, we could experience a material adverse
effect on our competitive position and operating
results.
LIMITED NUMBER OF PRINCIPAL Historically, we have sold a significant portion
CUSTOMERS 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. Our operating results could materially
suffer if we or PHC experience a significant
reduction in purchases by one or more of our top
customers.
RISKS OF INTERNATIONAL We expect that international sales will continue
OPERATIONS; ADVERSE EFFECT to represent a significant percentage of our total
OF sales. In addition, a significant portion of our
CURRENCY EXCHANGE RATES ON manufacturing operations are located outside of
RESULTS OF OPERATIONS 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. 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.
A number of factors have adversely affected our
results of operations and international sales and
operations in the past, including periodic
economic downturns and fluctuations in interest
and foreign currency exchange rates. The economic
downturns in the Asia Pacific region
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<PAGE> 16
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 (1) the
imposition of governmental controls, (2) export
license requirements, (3) restrictions on the
export of technology, (4) political instability,
(5) trade restrictions and changes in tariffs, and
(6) difficulties in staffing and managing
international operations. As a result, we may need
to modify our current business practices.
SUBSTANTIAL FINANCIAL
COMMITMENTS TO 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
has raised concerns with Taisil's lenders. In
November 1998, Taisil's shareholders made a $20.7
million equity infusion. Our share of the equity
infusion was $10.3 million. Despite this equity
infusion, Taisil's lenders continue to express
concern regarding Taisil's debt-to-equity ratio.
Accordingly, we and our joint venture partners
will likely have to consider additional financing
alternatives to satisfy the concerns of Taisil's
lenders.
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 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 (1) a material adverse change
in Taisil, (2) a reduction below 70% in the
combined ownership of Taisil by the two major
joint venture partners (us and China Steel
Corporation), (3) a material adverse change in us
or China Steel Corporation, (4) a reduction below
50% in VEBA AG's and its affiliates' ownership of
MEMC common stock, or (5) 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 adverse change, or they determine a
material adverse change occurs in the future, in
Taisil or the Company.
DELAYS RESULTING FROM
MANUFACTURING INTERRUPTIONS Interruption of operations at any of our primary
manufacturing facilities could result in delays or
cancellations of shipments of silicon wafers. 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
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<PAGE> 17
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. Interruptions could result in a loss of
customers and could materially adversely affect
our operating results.
LIMITED INTELLECTUAL We believe that the success of our business
PROPERTY PROTECTION; depends in part on our proprietary technology,
NOTICES OF POSSIBLE information and processes and know-how. We
INFRINGEMENT 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
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.
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<PAGE> 18
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
(1) pay substantial damages, (2) seek licenses
from others, or (3) 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 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. The loss of key
personnel or the inability to hire and retain
qualified personnel could have a material adverse
effect on our operating results.
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.
YEAR 2000 RISKS 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
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<PAGE> 19
raw materials and equipment. Failure by our
computer systems could adversely affect our
manufacturing processes and/or our ability to
cost-effectively manage MEMC during the time
required to fix such problems. 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 43.
DEPENDENCE ON CERTAIN We obtain substantially all our requirements for
SUPPLIERS 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.
SIGNIFICANT ENVIRONMENTAL We are subject to a variety of foreign, federal,
REGULATIONS 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. Any failure to comply
with environmental laws could subject us to
substantial liability or could force us to
significantly change our manufacturing operations.
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.
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 We cannot assure you that the public trading
TRADING IN OR market price of MEMC common stock will not decline
EXERCISING RIGHTS 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
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<PAGE> 20
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 VEBA
Corporation'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.
DETERMINATION OF THE
SUBSCRIPTION PRICE 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. 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 value. You should not
consider the subscription price as an indication
of the value of MEMC. See "The Rights
Offering -- Determination of Subscription Price"
on page 33.
DILUTION RESULTING FROM
PRIVATE
PLACEMENT TO VEBA
CORPORATION Each stockholder's ownership interest in MEMC was
substantially diluted as a result of the private
placement of shares to VEBA Corporation. 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 VEBA Corporation. 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;
- 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
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- 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 VEBA Corporation 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.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
The following statements are or may constitute forward-looking statements:
- Statements set forth in this prospectus or in 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: (1) the
manner, timing and estimated savings of restructuring activities and the
voluntary separation program; (2) the transfer of Spartanburg-based
small diameter production activities to other existing locations; (3)
the utilization of the restructuring reserve; (4) product volume for the
fourth quarter of 1998; (5) pricing for the near term; (6) capital
expenditures for 1998 and 1999; (7) our liquidity into 2000; (8) excess
capacity for future periods; (9) the resolution of any intellectual
property infringement claims; (10) the continued support of VEBA AG;
(11) the status and effectiveness of our Year 2000 initiatives; (12) the
outcome of potential litigation; (13) an increase in interest expense on
existing debt with VEBA AG and its affiliates; and (14) 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: (1) the demand for our silicon
wafers; (2) utilization of manufacturing capacity; (3) demand for semiconductors
generally; (4) changes in the pricing environment; (5) general economic
conditions in the Asia Pacific region and Japan; (6) our competitors' actions;
(7) willingness of our customers to re-qualify Spartanburg-based production at
our other locations; (8) the accuracy of our assumptions regarding savings from
restructuring activities; (9) the status and effectiveness of our Year 2000
efforts; (10) changes in interest and exchange rates; and (11) the factors
discussed above under "Risk Factors" beginning on page 9.
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> 22
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 requalify 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. We expect the savings resulting from reduced personnel costs will grow as
we reduce the production and, as a result, the work force, at the Spartanburg
facility. 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 and when the closure of the Spartanburg
facility will occur. 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
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<PAGE> 23
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.
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" on page 20 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:
- this approximately $94 million rights offering;
- the approximately $106 million of equity financing from VEBA Corporation
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 VEBA Corporation and the Rights Offering. On
, 1998, we sold shares of MEMC common stock to VEBA
Corporation at $ per share for aggregate proceeds of approximately $106
million. Prior to the private placement to VEBA Corporation, VEBA Corporation
owned approximately 53.1% of the outstanding shares. Our primary purpose for the
sale to VEBA Corporation 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 VEBA Corporation) an opportunity to restore
their proportionate interest in MEMC at the same price per share of common stock
as was paid by VEBA Corporation.
We sold MEMC common stock to VEBA Corporation before the rights offering in
order to evidence VEBA Corporation's commitment to us and to increase our
working capital and reduce our interest expense. If rights holders (other than
VEBA Corporation) purchase all shares of MEMC common stock offered in the rights
offering, VEBA Corporation 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 the Company 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
9.8%. 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 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
22
<PAGE> 24
we will not allow any encumbrances, such as mortgages and security interests, to
be placed on our properties.
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, VEBA Corporation now directly owns % of
MEMC common stock.
USE OF PROCEEDS
We have received approximately $106 million from the private placement to
VEBA Corporation. 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 $91.2 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 any
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
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<PAGE> 25
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. 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 9, 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 $9 3/4 on December 9, 1998.
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<PAGE> 26
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 VEBA Corporation
and rights offering and the transactions contemplated by the standby agreement
(including application of the net proceeds from such transactions).
<TABLE>
<CAPTION>
SEPTEMBER 30, 1998
-----------------------------------------------
AS ADJUSTED FOR
PRIVATE PLACEMENT,
AS ADJUSTED RIGHTS OFFERING
FOR PRIVATE AND
ACTUAL PLACEMENT STANDBY AGREEMENT
---------- ----------- ------------------
(IN THOUSANDS)
<S> <C> <C> <C>
Debt:
Short-term debt to related parties.............. $ 75,000 $
Short-term debt to third parties................ 27,486
---------- ---------- ----------
Total short-term debt (including current
maturities of long-term debt).............. $ 102,486 $
========== ========== ==========
Long-term debt to related parties............... $ 604,640
Long-term debt to third parties................. 113,788
---------- ---------- ----------
Total long-term debt (excluding current
maturities)................................ $ 718,428
---------- ---------- ----------
Minority interests................................ 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) shares issued (as
adjusted for the private placement) and
shares issued (as adjusted for
the private placement, rights offering and
standby agreement)(1)........................ 414
Additional paid-in capital...................... 574,317
Accumulated deficit............................. (75,541)
Accumulated other comprehensive loss............ (23,392)
Unearned restricted stock awards................ (265)
Treasury stock, at cost: 929,205 shares......... (17,020)
---------- ---------- ----------
Total stockholders' equity................... 458,513
---------- ---------- ----------
Total capitalization......................... $1,227,161
========== ========== ==========
</TABLE>
- ---------------
(1) Excludes 1,786,852 shares of MEMC common stock issuable upon exercise of
employee stock options as of September 30, 1998 and 1,363,006 shares
available for future grant under our Equity Incentive Plan.
25
<PAGE> 27
THE RIGHTS OFFERING
THE RIGHTS
On , 1998, we will distribute to each holder of MEMC common
stock, 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 , 1998. 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.
RIGHTS CERTIFICATES
If you hold your shares directly, you will receive a transferable rights
certificate. As a holder of rights you will be entitled to two subscription
privileges: (1) a basic subscription privilege and (2) an over-subscription
privilege. These privileges are described below.
If you hold your shares in a brokerage account or by a custodian bank, you
will not receive a rights certificate, and your rights must be exercised through
the broker or custodian bank. Brokers or custodian banks holding MEMC common
stock on , 1998, the record date, for more than one beneficial owner
may (after making a proper showing to Harris Trust and Savings Bank) 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 , 1998. See the discussion below beginning under
"-- Exercise of Rights" on page 28.
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 contact your broker or custodian bank to participate in the rights
offering.
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.
MINIMUM INVESTMENT
Your purchase of shares of MEMC common stock pursuant to the rights
offering is not conditioned upon the subscription of any minimum number of
shares by you and the other holders of the rights.
SUBSCRIPTION PRICE
To exercise your rights, you must pay the subscription price of $
per share of MEMC common stock, payable in cash. We cannot assure you that the
MEMC common stock will trade at prices equal to or greater than $ . Nor
can we assure you that, following the issuance of the shares, you will be able
to sell your shares of MEMC common stock purchased in the rights offering at a
price equal to or greater than $ .
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
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<PAGE> 28
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 33.
SUBSCRIPTION PRIVILEGES
Your rights entitle you to (1) the basic subscription privilege and (2) 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 $ 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
$ per share before the time the rights expire, if (1) you exercised
your basic subscription privilege in full and (2) 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) 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 (1) individually and (2) 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:
(1) the number of shares held on , 1998, the record date,
on your behalf;
(2) the number of rights you exercised under your basic subscription
privilege;
(3) that your entire basic subscription privilege held in the same
capacity has been exercised in full; and
(4) the number of shares of MEMC common stock you subscribed for pursuant
to the over-subscription privilege.
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<PAGE> 29
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").
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 maxi-
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<PAGE> 30
mum 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 (1) direct Harris Trust and Savings Bank to attempt to sell your
remaining rights, or (2) 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 31.
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
- 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 , 1998, the record date,
provided the nominee record date holder makes a proper showing to Harris Trust
and Savings Bank.
If you are a beneficial owner of shares of MEMC common stock or rights that
you hold through a nominee record date holder, you should contact the nominee
record date holder and request the nominee record date holder to effect
transactions in accordance with your instructions.
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
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EXPIRE. BECAUSE UNCERTIFIED PERSONAL CHECKS MAY TAKE FIVE BUSINESS DAYS OR MORE
TO CLEAR, WE STRONGLY URGE YOU TO PAY, OR ARRANGE FOR PAYMENT, BY MEANS OF
CERTIFIED OR CASHIER'S CHECK, MONEY ORDER OR WIRE TRANSFER OF FUNDS.
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" beginning on page 33.
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 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 28)
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
28. 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.
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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
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
NO REVOCATION OF EXERCISE OF RIGHTS
Once you have exercised your basic subscription privilege and/or
over-subscription privilege, you may not revoke your exercise, unless the
conditions to VEBA Corporation'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.
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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 , 1998, 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 , 1998, 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-
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subscription privilege) may be made through, the facilities of The Depository
Trust Company ("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 (1) 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 (2) make
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 , 1998 to,
1998. We completed the private placement of shares to VEBA Corporation on
, 1998 at $ 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 VEBA Corporation and the rights offering and the results of
analyses performed by NationsBanc Montgomery Securities LLC to assist us in
determining the appropriate and desirable pricing terms for the private
placement to VEBA Corporation 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 VEBA Corporation 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 54.
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 AND CERTAIN OTHER STOCKHOLDERS
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 , 1998, 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 31. 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
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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. 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 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 -- VEBA CORPORATION
As of , 1998, the record date, VEBA Corporation beneficially
owned approximately shares of the outstanding MEMC common stock ( %
of the outstanding shares). VEBA Corporation is a subsidiary of VEBA AG and its
subsidiaries.
STOCK SALE TO VEBA CORPORATION
On , 1998, we sold shares of MEMC common stock to
VEBA Corporation at $ , the subscription price, for aggregate
proceeds of approximately $106 million. See "Recent Developments -- Financial
Restructuring Plan -- Private Placement to VEBA Corporation and the Rights
Offering" on page 22.
STANDBY AGREEMENT WITH VEBA CORPORATION
Although we will not distribute any rights to VEBA Corporation, VEBA
Corporation has agreed to purchase at $ 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:
- VEBA must receive a specified opinion of our counsel;
- VEBA 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
VEBA Corporation must be true and correct as of the day the rights
expire.
The number of shares VEBA Corporation purchases will be determined after
all rights holders exercise their basic subscription and over-subscription
privileges. VEBA Corporation will pay for the shares of MEMC common stock it
purchases under the standby agreement on or after the date the rights expire. If
VEBA Corporation purchases any rights, it will not exercise its over-
subscription privilege with respect to those rights.
Assuming no other holders exercise their rights and VEBA Corporation
purchases all unsubscribed shares of MEMC common stock offered hereby, VEBA
Corporation will own
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approximately % of the MEMC common stock issued and outstanding after the
rights offering, based on the number of shares purchased by VEBA Corporation 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 shares of MEMC common stock will be
issued and outstanding. Based on the number of shares purchased by VEBA
Corporation in the private placement and the 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
% increase in the number of outstanding shares of MEMC common stock.
OTHER MATTERS
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 -- Dependence on Certain Suppliers" on page 18.
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 (1) the development and
improvement of large diameter and advanced silicon wafer products, (2)
manufacturing process improvements, and (3) 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.
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
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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. Some of our competitors have substantial
financial, technical, engineering and manufacturing resources, particularly the
very large, well-capitalized Japanese manufacturers. We believe that the
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 is the largest supplier of silicon wafers in
Japan and the world, providing it with the sales and technology base to compete
effectively throughout the world. If we cannot compete effectively with Japanese
silicon wafer manufacturers, our operating results could be materially adversely
affected.
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.
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.
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.
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
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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 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 quarterly royalties based on PHC's net sales. The term of
the agreement by which we provide technical assistance and information and have
granted licenses to PHC was extended from September 30, 1998 to December 31,
1998. We have negotiated an agreement in principle to amend this technical
agreement. This amendment will, among other things, extend the term of the
technical agreement for an additional five years. Under the amendment, we will
receive royalties based on net sales and net income after taxes. The parties
have agreed that the terms of the amendment will be retroactive to October 1,
1998.
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.
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 has raised
concerns with Taisil's lenders. In November 1998, Taisil's shareholders made a
$20.7 million equity infusion. Our share of the equity infusion was $10.3
million. Despite this equity infusion, Taisil's lenders continue to express
concern regarding Taisil's debt-to-equity ratio. Accordingly, we and our joint
venture partners will likely have to consider additional financing alternatives
to satisfy the concerns of Taisil's lenders. See "Risk Factors -- Substantial
Financial Commitments to our Taisil Joint Venture" on page 15.
PROPRIETARY INFORMATION AND INTELLECTUAL PROPERTY
We believe our success depends in part on our proprietary technology,
information and processes and know-how. We generally try to maintain internal
and external protections of our proprietary information and intellectual
property. As of September 30, 1998, we owned of record or beneficially
approximately 106 U.S. patents, of which approximately 14 will expire by 2003,
approximately 22 will expire between 2004 and 2008 and approximately 70 will
expire after 2008. As of September 30, 1998, we owned of record or beneficially
approximately 178 foreign patents, of which approximately 34 will expire by
2003, approximately 80 will expire between 2004 and 2008 and approximately 64
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 89 U.S. and 390 foreign patent applications. However, we cannot
assure you that any of these applications will be granted.
We generally try to protect our intellectual property rights based on trade
secret protection and non-disclosure agreements, which provide only limited
protection. Recently, we have increased
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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 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
competitors will not be able to 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 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 (1) to pay substantial damages, (2) to seek licenses from others, or
(3) to 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.
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 16 and "-- Significant Environmental Regulations" on page 18.
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 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 $1.3 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" on page 20 and "Risk Factors -- Year 2000 Risks" beginning on page
17.
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CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
Our majority stockholder is VEBA Corporation. VEBA Corporation owns
% of the outstanding shares of MEMC common stock, including the
shares of MEMC common stock purchased by VEBA Corporation in the private
placement. VEBA Corporation is owned by VEBA AG and its subsidiaries. On
, 1998, we sold shares of MEMC common stock to VEBA
Corporation at $ per share for aggregate proceeds of approximately $106
million. See "Recent Developments -- Financial Restructuring Plan -- Private
Placement to VEBA Corporation and the Rights Offering" on page 22. VEBA
Corporation 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 VEBA Corporation" beginning on page 34.
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 22. 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 matures in September 1999. Neither we nor
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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 VEBA Corporation 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. VEBA Corporation 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 VEBA Corporation: (1) 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; (2) more than once during any six-month period; and (3) for up
to 90 days after a request from VEBA Corporation 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 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.
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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 substantial 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 $6.9 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 lose the benefits of such a sublicense
and would have to negotiate a direct license from SAP AG or its affiliates for
the continued use of the software.
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 the Company as of today. We
cannot assure you that the Internal Revenue 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.
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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, you should not be
required to recognize taxable income upon the receipt of the rights.
In general, 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 (1) the receipt of
property (including cash) by some stockholders and (2) 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 VEBA Corporation
should not constitute a "disproportionate distribution" taxable as a dividend
based on representations by MEMC that (1) the private placement to VEBA
Corporation 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, (2) there is a single class of
stock outstanding, and (3) there has not been nor is there expected to be any
property distributions to any stockholder in connection with the distribution of
rights.
We intend to treat the distribution of rights as a nontaxable distribution.
If the Internal Revenue Service were to take a contrary position with respect to
this matter, by deeming the distribution of rights to constitute a taxable
distribution, 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.
Except as provided above, the following discussion assumes that the
distribution of the rights will be treated as a nontaxable distribution.
BASIS AND HOLDING PERIOD OF THE RIGHTS
Generally, if you hold MEMC common stock on the record date, your basis in
the rights received by you will be zero. If, however, either
(1) 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
(2) 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;
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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 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 (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 24. 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 VEBA CORPORATION
The shares that will be owned by VEBA Corporation
( shares, if no rights holder other than VEBA Corporation
exercises its rights) are not freely transferable. VEBA Corporation 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, VEBA Corporation may sell, within any three-month period, a number of
shares that does not exceed the greater of (1) one percent of the then
outstanding shares of MEMC common stock and (2) the average weekly trading
volume during the four calendar weeks preceding such sale. We have granted to
VEBA Corporation certain registration rights, as described under "Certain
Relationships and Related Party Transactions -- Registration Rights Agreement"
on page 47.
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 VEBA Corporation 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 submitted to a vote of
stockholders, such
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provisions currently have limited significance to
you. See "Risk Factors -- Control of MEMC by VEBA AG" and "-- Potential
Conflicts of Interest with VEBA AG and its Affiliates" on pages 11 and 12.
Board of Directors
The 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
The 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 (1) a stockholder proposal at an annual
meeting or (2) 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........ $ 932,500
----------
$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 $ .
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
VEBA Corporation 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
55
<PAGE> 57
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 22, 1998 (filed October 22, 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).
56
<PAGE> 58
================================================================================
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................... 20
Recent Developments.................... 21
Use of Proceeds........................ 23
Dividend Policy........................ 24
Price Range of Common Stock............ 24
Capitalization......................... 25
The Rights Offering.................... 26
Business............................... 36
Certain Relationships and Related Party
Transactions......................... 46
Certain Federal Income Tax
Considerations....................... 48
Description of Capital Stock........... 51
Plan of Distribution................... 54
Lawyers................................ 55
Experts................................ 55
Where You Can Find More Information.... 55
</TABLE>
================================================================================
================================================================================
Shares
[MEMC ELECTRONIC MATERIALS, INC. LOGO]
MEMC Electronic
Materials, Inc.
Common Stock
------------------------------------
PROSPECTUS
------------------------------------
NationsBanc Montgomery
Securities LLC
J.P. Morgan & Co.
, 1998
================================================================================
<PAGE> 59
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> 60
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> 61
(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> 62
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 to
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in St. Louis, Missouri, on December 11, 1998
MEMC ELECTRONIC MATERIALS, INC.
By: /s/ JAMES M. STOLZE
------------------------------------
James M. Stolze
Executive Vice President and
Chief Financial Officer
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 11, 1998
- --------------------------------------------- Director (Principal Executive
Ludger H. Viefhues Officer)
* President, Chief Operating Officer December 11, 1998
- --------------------------------------------- and Director
Klaus R. von Horde
/s/ JAMES M. STOLZE Executive Vice President and Chief December 11, 1998
- --------------------------------------------- Financial Officer (Principal
James M. Stolze Financial and Accounting Officer)
* Director December 11, 1998
- ---------------------------------------------
Dr. Hans Michael Gaul
* Director December 11, 1998
- ---------------------------------------------
Helmut Mamsch
* Director December 11, 1998
- ---------------------------------------------
Willem D. Maris
* Director December 11, 1998
- ---------------------------------------------
Paul T. O'Brien
* Director December 11, 1998
- ---------------------------------------------
Dr. Alfred Oberholz
* Director December 11, 1998
- ---------------------------------------------
Michael B. Smith
</TABLE>
*By: /s/ JAMES M. STOLZE
---------------------------------------------------------
James M. Stolze, Attorney-In-Fact
II-4
<PAGE> 63
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<C> <S>
1.1 Form of Dealer Manager Agreement between the Company 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
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)
10.2 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
24.1 Power of Attorney (previously filed)
99.1 Form of Instructions to Stockholders 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
</TABLE>
II-5
<PAGE> 1
EXHIBIT 1.1
DEALER MANAGER AGREEMENT
_____________, 1998
NATIONSBANC MONTGOMERY SECURITIES LLC
J.P. MORGAN SECURITIES INC.
c/o NATIONSBANC MONTGOMERY SECURITIES LLC
600 Montgomery Street
San Francisco, California 94111
Ladies and Gentlemen:
INTRODUCTORY. MEMC Electronic Materials, Inc., a Delaware corporation (the
"Company"), confirms its agreement with and appointment of NationsBanc
Montgomery Securities LLC ("NMS") and J.P. Morgan Securities Inc. (together with
NMS, the "Dealer Managers") to act as dealer managers in connection with the
issuance by the Company to the holders of record other than VEBA Corporation, a
Delaware corporation ("VEBA"), of the common stock, $0.01 par value, of the
Company (the "Common Stock"), of transferable rights (each a "Right" and,
collectively, the "Rights") entitling the holders of such Rights (the "Holders")
to subscribe for shares of Common Stock (each a "Common Share" and,
collectively, the "Common Shares"; such issuance is herein referred to as the
"Rights Offering"). Pursuant to the terms of the Rights Offering, the Company is
issuing each Holder [ ] Rights for each share of Common Stock held by such
Holder on the record date (the "Record Date") set forth in the Prospectus (as
defined herein). Such Rights entitle Holders to acquire during the subscription
period set forth in the Prospectus (the "Subscription Period"), at the price set
forth in such Prospectus (the "Subscription Price"), one Common Share for each
Right exercised on the terms and conditions set forth in such Prospectus, plus
such additional Common Shares as permitted under the oversubscription privilege
as set forth in the Prospectus.
The Company entered into a Purchase Agreement, dated October 22, 1998 (the
"Purchase Agreement"), pursuant to which VEBA (or its permitted transferees) is
obligated to purchase from the Company in a private placement, subject to
certain conditions, a specified number of shares of Common Stock (the "Private
Placement Shares") at the Subscription Price. The Company has also entered into
a Standby Agreement, dated October 22, 1998 (the "Standby Agreement"), pursuant
to which VEBA (or its permitted transferees) is obligated, subject to certain
conditions, to purchase from the Company any of the Shares not purchased by
Holders of the Company in the Rights Offering (the "Standby Shares") at the
Subscription Price.
1.
<PAGE> 2
The Company has prepared and filed with the Securities and Exchange
Commission (the "Commission") a registration statement on Form S-3 (File No.
333-65973) which contains a form of prospectus to be used in connection with the
public offering and sale of the Common Shares. Such registration statement, as
amended, including the financial statements, exhibits and schedules thereto, in
the form filed with the Commission under the Securities Act of 1933 and the
rules and regulations promulgated thereunder (collectively, the "Securities
Act"), including all documents incorporated or deemed to be incorporated by
reference therein and any information deemed to be a part thereof filed pursuant
to the Securities Exchange Act of 1934 and the rules and regulations promulgated
thereunder (collectively, the "Exchange Act") or included pursuant to Rule 430A
and Rule 424(b) under the Securities Act, is called the "Registration
Statement." The term "Effective Date" shall mean each date that the Registration
Statement and any post-effective amendment or amendments thereto became or
becomes effective. "Execution Time" shall mean the date and time that this
Agreement is executed and delivered by the parties hereto. "Preliminary
Prospectus" shall mean any preliminary prospectus included in the Registration
Statement prior to the Effective Date. "Prospectus" shall mean the prospectus
relating to the Common Shares and the Rights that is first filed pursuant to
Rule 424(b) after the Execution Time or, if no filing pursuant to Rule 424(b) is
required, shall mean the form of final prospectus relating to the Shares and the
Rights included in the Registration Statement at the Effective Date. "Rule 424"
refers to such rule under the Securities Act. "Expiration Date" shall mean the
expiration date of the Rights Offering as set forth in the Prospectus. The
letters to beneficial owners of the Common Shares of the Company, forms used to
exercise Rights, any letters from the Company to securities dealers, commercial
banks and other nominees and any newspaper announcements, press releases and
other offering materials and information that the Company may use, approve,
prepare or authorize for use in connection with the Rights Offering, are
collectively referred to hereinafter as the "Supplemental Offering Materials."
The Supplemental Offering Materials have been, or will be, prepared by the
Company, and the preparation of them is the sole responsibility of the Company.
All references in this Agreement to the Registration Statement, a Preliminary
Prospectus, the Prospectus, or any amendments or supplements to any of the
foregoing, shall include any copy thereof filed with the Commission pursuant to
its Electronic Data Gathering, Analysis and Retrieval System ("EDGAR"). All
references in this Agreement to financial statements and schedules and other
information which is "contained," "included" or "stated" (and all other
references of like import) in the Registration Statement, a Preliminary
Prospectus or the Prospectus shall be deemed to mean and include all such
financial statements and schedules and other information which is or is deemed
to be incorporated by reference in the Registration Statement or the Prospectus,
as the case may be; and all references in this Agreement to amendments or
supplements to the Registration Statement or the Prospectus shall be deemed to
mean and include the filing of any document under the Exchange Act which is or
is deemed to be incorporated by reference in the Registration Statement or the
Prospectus, as the case may be.
The Company hereby confirms its agreements with the Dealer Managers as
follows:
2.
<PAGE> 3
SECTION 1. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
hereby represents, warrants and covenants to the Dealer Managers as of the later
of the date hereof and the date of the commencement of the Rights Offering (such
later date being hereinafter referred to as the "Representation Date"), as
follows:
(a) COMPLIANCE WITH REGISTRATION REQUIREMENTS. The Company meets the
requirements for use of Form S-3 under the Securities Act. The Company will use
its best efforts to cause the Registration Statement to be declared effective by
the Commission under the Securities Act. As filed, the Registration Statement
and Prospectus shall contain all required information, with respect to the
Common Shares, the Rights and the offering of the Common Shares and, except to
the extent the Dealer Managers shall agree to a modification, shall be in all
substantive respects in the form furnished to the Dealer Managers prior to the
Execution Time or, to the extent not completed at the Execution Time, shall
contain only such specific additional information and other changes (beyond that
contained in the latest Preliminary Prospectus) as the Company has advised the
Dealer Managers, prior to the Execution Time, will be included or made therein.
The Company has complied and will comply to the Commission's satisfaction with
all requests of the Commission for additional or supplemental information.
On the Effective Date, the Registration Statement will, and when the
Prospectus is first filed in accordance with Rule 424(b) (if required) and on
the Representation Date, the Prospectus (and any supplements thereto) will,
comply in all material respects with the applicable requirements of the
Securities Act and the Exchange Act; on the Effective Date, the Registration
Statement did not or will not contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary in
order to make the statements therein not misleading; and, on the Effective Date,
the Prospectus, if not filed pursuant to Rule 424(b), will not, and on the date
of any filing pursuant to Rule 424(b) and on the Representation Date, the
Prospectus (together with any supplement thereto) will not, include any untrue
statement of a material fact or omit to state a material fact necessary in order
to make the statements therein, in the light of the circumstances under which
they were made, not misleading; provided, however, that the Company makes no
representations or warranties as to the information contained in or omitted from
the Registration Statement or the Prospectus (or any supplement thereto) in
reliance upon and in conformity with information furnished to the Company by or
on behalf of any Dealer Manager specifically for inclusion in the Registration
Statement or the Prospectus (or any supplement thereto), as set forth in Section
8(b). There are no contracts or other documents required to be described in the
Prospectus or to be filed as exhibits to the Registration Statement which have
not been or will not be described or filed as required. The information
contained in the Supplemental Offering Materials is materially accurate and
complete for its intended purposes.
(b) OFFERING MATERIALS FURNISHED TO DEALER MANAGERS. The Company has
delivered to each Dealer Manager, and will deliver to each Dealer Manager on the
Effective Date, one complete copy of the manually signed Registration Statement
and of each consent and certificate of experts filed as a part thereof, and
conformed copies of the Registration Statement
3.
<PAGE> 4
(without exhibits) and Preliminary Prospectuses and the Prospectus, as amended
or supplemented, and copies of the Supplemental Offering Materials, in each case
in such quantities and at such places as the Dealer Managers have reasonably
requested.
(c) DISTRIBUTION OF OFFERING MATERIAL BY THE COMPANY. The Company has not
distributed and will not distribute, prior to the later of the Expiration Date
and the completion of the distribution of the Common Shares, any offering
material in connection with the offering and sale of the Common Shares other
than a Preliminary Prospectus, the Prospectus, the Registration Statement and/or
the Supplemental Offering Materials.
(d) THE DEALER MANAGER AGREEMENT. This Agreement has been duly authorized,
executed and delivered by, and is a valid and binding agreement of, the Company,
enforceable in accordance with its terms (assuming the due execution and
delivery of this Agreement by the Dealer Managers), except as rights to
indemnification or contribution hereunder may be limited by applicable law and
except as the enforcement hereof may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws relating to or affecting the
rights and remedies of creditors or by general equitable principles.
(e) AUTHORIZATION OF THE COMMON SHARES AND PRIVATE PLACEMENT SHARES. The
Common Shares to be purchased by the Holders from the Company have been duly
authorized for issuance and sale pursuant to the Prospectus and the Supplemental
Offering Materials and, when issued and delivered by the Company will be validly
issued, fully paid and nonassessable. The Private Placement Shares and Standby
Shares to be purchased by VEBA (or its permitted transferees) have been duly
authorized for issuance and sale pursuant to the Purchase Agreement and Standby
Agreement, respectively, and, when issued and delivered by the Company will be
validly issued, fully paid and nonassessable.
(f) NO APPLICABLE REGISTRATION OR OTHER SIMILAR RIGHTS. There are no
persons with registration or other similar rights to have any equity or debt
securities registered for sale under the Registration Statement or included in
the offering contemplated by this Agreement, except for such rights as have been
duly waived.
(g) NO MATERIAL ADVERSE CHANGE. Except as otherwise disclosed in the
Prospectus, subsequent to the respective dates as of which information is given
in the Prospectus: (i) there has been no material adverse change, or to the
Company's knowledge any development that could reasonably be expected to result
in a material adverse change, in the condition, financial or otherwise, or in
the earnings, business, operations or prospects, whether or not arising from
transactions in the ordinary course of business, of the Company and its
subsidiaries, considered as one entity (any such change is called a "Material
Adverse Change"); (ii) the Company and its subsidiaries, considered as one
entity, have not incurred any material liability or obligation, indirect, direct
or contingent, not in the ordinary course of business (other than incurring debt
to VEBA AG and/or its affiliates under existing credit facilities described in
the Prospectus), nor entered into any material transaction or agreement not in
the ordinary course of
4.
<PAGE> 5
business ; and (iii) there has been no dividend or distribution of any kind
declared, paid or made by the Company or, except for dividends paid to the
Company or other subsidiaries, any of its subsidiaries on any class of capital
stock or repurchase or redemption by the Company or any of its subsidiaries of
any class of capital stock.
(h) INDEPENDENT ACCOUNTANTS. KPMG Peat Marwick LLP, who have expressed
their opinion with respect to the financial statements (which term as used in
this Agreement includes the related notes thereto) and supporting schedules
filed with the Commission as a part of the Registration Statement and included
in the Prospectus, are independent public or certified public accountants as
required by the Securities Act and Exchange Act.
(i) PREPARATION OF THE FINANCIAL STATEMENTS. The financial statements filed
with the Commission as a part of the Registration Statement and included in the
Prospectus present fairly (i) the consolidated financial position of the Company
and its subsidiaries as of and at the dates indicated and the results of their
operations and cash flows for the periods specified, (ii) the financial position
of Posco Huls Co. Ltd. as of and at the dates indicated and the results of its
operations and cash flows for the periods specified, and (iii) the financial
position of Taisil Electronic Materials Corporation as of and at the dates
indicated and the results of its operations and cash flows for the periods
specified. The supporting schedules included in the Registration Statement
present fairly the information required to be stated therein. Such financial
statements and supporting schedules have been prepared in conformity with (i)
generally accepted accounting principles as applied in the United States with
respect to the Company's consolidated financial statements, (ii) the Financial
Accounting Standards, as approved by the Ministry of Finance and Economy of the
Republic of Korea, with respect to Posco Huls Co. Ltd.'s financial statements,
and (iii) generally accepted accounting principles as applied in the Republic of
China with respect to Taisil Electronic Materials Corporation's financial
statements, in each case as applied on a consistent basis throughout the periods
involved, except as may be expressly stated in the related notes thereto. No
other financial statements or supporting schedules are required to be included
in the Registration Statement. The financial data set forth in the Prospectus
under the captions "Prospectus Summary--Summary Consolidated Financial Data" and
"Five-Year Selected Financial Data" fairly present the information set forth
therein on a basis consistent with that of the audited financial statements
contained in the Registration Statement.
(j) INCORPORATION AND GOOD STANDING OF THE COMPANY AND ITS SUBSIDIARIES.
Each of the Company and its subsidiaries that are corporations has been duly
incorporated and is validly existing as a corporation in good standing under the
laws of the jurisdiction of its incorporation and has corporate power and
authority to own, lease and operate its properties and to conduct its business
as described in the Prospectus and, in the case of the Company, to enter into
and perform its obligations under this Agreement, the Purchase Agreement and the
Standby Agreement. Each of the Company's subsidiaries that is not a corporation
has been duly organized and is validly existing as a legal entity in good
standing under the laws of the jurisdiction of its organization and has the
requisite power and authority to
5.
<PAGE> 6
own, lease and operate its properties and to conduct its business as described
in the Prospectus. Each of the Company and each subsidiary is duly qualified as
a foreign corporation or limited liability company to transact business and is
in good standing in each jurisdiction in which such qualification is required,
whether by reason of the ownership or leasing of property or the conduct of
business, except for such jurisdictions where the failure to so qualify or to be
in good standing would not, individually or in the aggregate, result in a
Material Adverse Change. All of the issued and outstanding capital stock of each
subsidiary has been duly authorized and validly issued, is fully paid and
nonassessable and is owned by the Company, directly or through subsidiaries,
free and clear of any security interest, mortgage, pledge, lien, encumbrance or
claim. The Company does not own or control, directly or indirectly, any
corporation, association or other entity other than the subsidiaries listed in
Exhibit 21 to the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1997 and MEMC Sarl, MEMC GmbH and MEMC U.K. Ltd.
(k) CAPITALIZATION AND OTHER CAPITAL STOCK MATTERS. The authorized, issued
and outstanding capital stock of the Company is as set forth in the Registration
Statement under the caption "Capitalization" (other than for subsequent
issuances, if any, pursuant to employee benefit plans described in the
Registration Statement or upon exercise of outstanding options or warrants
described in the Registration Statement). The Common Stock (including the Common
Shares) conforms in all material respects to the description thereof contained
in the Registration Statement. All of the issued and outstanding shares of
Common Stock have been duly authorized and validly issued, are fully paid and
nonassessable and have been issued in compliance with federal and state
securities laws. None of the outstanding shares of Common Stock were issued in
violation of any preemptive rights, rights of first refusal or other similar
rights to subscribe for or purchase securities of the Company. There are no
authorized or outstanding options, warrants, preemptive rights, rights of first
refusal or other rights to purchase, or equity or debt securities convertible
into or exchangeable or exercisable for, any capital stock of the Company or any
of its subsidiaries other than those accurately described in the Registration
Statement. The description of the Company's stock option, stock bonus and other
stock plans or arrangements, and the options or other rights granted thereunder,
set forth in the Registration Statement accurately and fairly presents in all
material respects the information required to be shown with respect to such
plans, arrangements, options and rights.
(l) STOCK EXCHANGE LISTING. The Common Stock is registered pursuant to
Section 12(b) of the Exchange Act and is listed, or in the case of the Private
Placement Shares, Common Shares and the Standby Shares, will be listed upon
official notice of issuance, on the New York Stock Exchange (the "NYSE"). The
Rights will be listed on the NYSE upon official notice of issuance. The Company
has taken no action designed to, or to the knowledge of the Company likely to
have the effect of, terminating the registration of the Common Stock under the
Exchange Act or delisting the Common Stock or Rights from the NYSE, nor has the
Company received any notification that the Commission or the NYSE is
contemplating terminating such registration or listing.
6.
<PAGE> 7
(m) NON-CONTRAVENTION OF EXISTING INSTRUMENTS; NO FURTHER AUTHORIZATIONS OR
APPROVALS REQUIRED. Except as disclosed in the Registration Statement, neither
the Company nor any of its subsidiaries is in violation of its charter or
by-laws or is in default (or, with the giving of notice or lapse of time, would
be in default) ("Default") under any indenture, mortgage, loan or credit
agreement, note, contract, franchise, lease or other instrument to which the
Company or any of its subsidiaries is a party or by which it or any of them may
be bound, or to which any of the property or assets of the Company or any of its
subsidiaries is subject (each, an "Existing Instrument"), except for such
Defaults as would not, individually or in the aggregate, result in a Material
Adverse Change. The Company's execution, delivery and performance of this
Agreement, the Purchase Agreement and the Standby Agreement and consummation by
the Company of the transactions contemplated hereby and thereby and by the
Registration Statement (i) will not result in any violation of the provisions of
the charter or by-laws of the Company or any subsidiary, (ii) will not conflict
with or constitute a breach of, or Default or a Debt Repayment Triggering Event
(as defined below) under, or result in the creation or imposition of any lien,
charge or encumbrance upon any property or assets of the Company or any of its
subsidiaries pursuant to, or require the consent of any other party to, any
Existing Instrument, except for such conflicts, breaches, Defaults, liens,
charges or encumbrances as would not, individually or in the aggregate, result
in a Material Adverse Change and (iii) will not result in any violation of any
law, administrative regulation or administrative or court decree applicable to
the Company or any subsidiary, except for such violations as would not
individually or in the aggregate result in a Material Adverse Change. No
consent, approval, authorization or other order of, or registration or filing
with, any court or other governmental or regulatory authority or agency, is
required for the Company's execution, delivery and performance of this
Agreement, the Purchase Agreement and the Standby Agreement and consummation by
the Company of the transactions contemplated hereby and thereby and by the
Registration Statement, except such as have been obtained or made by the Company
and are in full force and effect under the Securities Act, and except for
applicable state securities or blue sky laws and from the National Association
of Securities Dealers, Inc. (the "NASD"). As used herein, a "Debt Repayment
Triggering Event" means any event or condition which gives, or with the giving
of notice or lapse of time would give, the holder of any note, debenture or
other evidence of indebtedness (or any person acting on such holder's behalf)
the right to require the repurchase, redemption or repayment of all or a
material portion of such indebtedness by the Company or any of its subsidiaries.
(n) NO MATERIAL ACTIONS OR PROCEEDINGS. Except as disclosed in the
Registration Statement, there are no legal or governmental actions, suits or
proceedings pending or, to the Company's knowledge, threatened (i) against or
affecting the Company or any of its subsidiaries, (ii) which has as the subject
thereof any officer or director of, or property owned or leased by, the Company
or any of its subsidiaries or (iii) relating to environmental or discrimination
matters, where in any such case (A) there is a reasonable possibility that such
action, suit or proceeding might be determined adversely to the Company or such
subsidiary and (B) any such action, suit or proceeding, if so determined
adversely, would reasonably be expected to result in a Material Adverse Change
or adversely affect the consummation of the
7.
<PAGE> 8
transactions contemplated by this Agreement, the Purchase Agreement or the
Standby Agreement. No material labor dispute with the employees of the Company
or any of its subsidiaries exists or, to the Company's knowledge, is threatened
or imminent.
(o) INTELLECTUAL PROPERTY RIGHTS. Except as disclosed in the Registration
Statement, the Company and its subsidiaries own or possess sufficient
trademarks, trade names, patent rights, copyrights, licenses, approvals, trade
secrets and other similar rights (collectively, "Intellectual Property Rights")
reasonably necessary to conduct their businesses as now conducted; and the
expected expiration of any of such Intellectual Property Rights would not result
in a Material Adverse Change. Except as disclosed in the Registration Statement,
any Preliminary Prospectus and the Prospectus, neither the Company nor any of
its subsidiaries has received any notice of infringement or conflict with
asserted Intellectual Property Rights of others, which infringement or conflict,
if the subject of an unfavorable decision, would result in a Material Adverse
Change.
(p) ALL NECESSARY PERMITS, ETC. The Company and each subsidiary possess
such valid and current certificates, authorizations or permits issued by the
appropriate state, federal or foreign regulatory agencies or bodies necessary to
conduct their respective businesses as presently conducted, except where the
failure to possess such certificates, authorizations or permits, singly or in
the aggregate, could not reasonably be expected to result in a Material Adverse
Change. Neither the Company nor any subsidiary has received any notice of
proceedings relating to the revocation or modification of, or non-compliance
with, any such certificate, authorization or permit which, singly or in the
aggregate, if the subject of an unfavorable decision, ruling, finding or
settlement, would reasonably be expected to result in a Material Adverse Change.
(q) TITLE TO PROPERTIES. The Company and each of its subsidiaries has good
and marketable title to all the properties and assets reflected as owned in the
financial statements referred to in Section 1(i) above (or elsewhere in the
Registration Statement), in each case free and clear of any security interests,
mortgages, liens, encumbrances, equities, claims and other defects, except such
as would not, singly or in the aggregate, reasonably be expected to result in a
Material Adverse Change. The real property, improvements, equipment and personal
property held under lease by the Company or any subsidiary are held under valid
and enforceable leases, with such exceptions as would not, singly or in the
aggregate, reasonably be expected to result in a Material Adverse Change.
(r) TAX LAW COMPLIANCE. The Company and its consolidated subsidiaries have
filed all necessary federal, state and foreign income and franchise tax returns
and have paid all taxes required to be paid by any of them and, if due and
payable, any related or similar assessment, fine or penalty levied against any
of them, except where the failure to make such filings or make such payments,
either individually or in the aggregate, could not reasonably be expected to
result in a Material Adverse Change. The Company has made adequate charges,
accruals and reserves in the applicable financial statements referred to in
Section 1(i) above in
8.
<PAGE> 9
respect of all federal, state and foreign income and franchise taxes for all
periods as to which the tax liability of the Company or any of its consolidated
subsidiaries has not been finally determined.
(s) COMPANY NOT AN "INVESTMENT COMPANY." The Company has been advised of
the rules and requirements under the Investment Company Act of 1940, as amended
(the "Investment Company Act"). The Company is not, and after receipt of payment
for the Common Shares will not be, an "investment company" within the meaning of
Investment Company Act and will conduct its business in a manner so that it will
not become subject to the Investment Company Act.
(t) INSURANCE. Each of the Company and its subsidiaries are insured by
recognized, financially sound and reputable institutions with policies in such
amounts and with such deductibles and covering such risks as are generally
deemed adequate and customary for their businesses including, but not limited
to, policies covering real and personal property owned or leased by the Company
and its subsidiaries against theft, damage, destruction, acts of vandalism and
earthquakes. The Company has no reason to believe that it or any subsidiary will
not be able (i) to renew its existing insurance coverage as and when such
policies expire or (ii) to obtain comparable coverage from similar institutions
as may be necessary or appropriate to conduct its business as now conducted and
at a cost that would not result in a Material Adverse Change.
(u) NO PRICE STABILIZATION OR MANIPULATION. The Company (A) has not taken,
directly or indirectly, any action designed to cause or to result in, or that
has constituted or which might reasonably be expected to constitute, the
stabilization or manipulation of the price of any security of the Company to
facilitate the issuance of the Rights or the sale or resale of the Common
Shares, (B) has not since the filing of the Registration Statement sold, bid for
or purchased, or paid anyone (other than the Dealer Managers) any compensation
for soliciting purchases of, Common Shares of the Company or the Rights and (C)
will not, until the later of the expiration of the Rights or the completion of
the distribution (within the meaning of Regulation M under the Exchange Act) of
the Common Shares, sell, bid for or purchase, apply or agree to pay to any
person (other than the Dealer Managers) any compensation for soliciting another
to purchase any other securities of the Company (except for the solicitation of
the exercises of Rights pursuant to this Agreement). The foregoing shall not
apply to the offer, sale, agreement to sell or delivery with respect to (1)
Common Shares offered and sold upon exercise of the Rights, as described in the
Prospectus, or (2) any shares of Common Stock sold pursuant to the Company's
employee benefit plans.
(v) RELATED PARTY TRANSACTIONS. There are no business relationships or
related-party transactions involving the Company or any subsidiary or any other
person required to be described in the Prospectus which have not been described
as required.
9.
<PAGE> 10
(w) NO UNLAWFUL CONTRIBUTIONS OR OTHER PAYMENTS. Neither the Company nor
any of its subsidiaries nor, to the best of the Company's knowledge, any
employee or agent of the Company or any subsidiary, has made any contribution or
other payment to any official of, or candidate for, any federal, state or
foreign office in violation of any law or of the character required to be
disclosed in the Prospectus.
(x) COMPANY'S ACCOUNTING SYSTEM. The Company maintains a system of
accounting controls sufficient to provide reasonable assurances that (i)
transactions are executed in accordance with management's general or specific
authorization; (ii) transactions are recorded as necessary to permit preparation
of financial statements in conformity with generally accepted accounting
principles as applied in the United States and to maintain accountability for
assets; (iii) access to assets is permitted only in accordance with management's
general or specific authorization; and (iv) the recorded accountability for
assets is compared with existing assets at reasonable intervals and appropriate
action is taken with respect to any differences; except where the failure to
maintain such a system could not reasonably be expected to result in a Material
Adverse Change.
(y) EXCHANGE ACT COMPLIANCE. The documents incorporated or deemed to be
incorporated by reference in the Prospectus, at the time they were or hereafter
are filed with the Commission, complied when filed and will comply when filed in
all material respects with the requirements of the Exchange Act, and, when read
together with the other information in the Prospectus, at the time the
Registration Statement and any amendments thereto become effective and during
the Subscription Period, will not contain an untrue statement of a material fact
or omit to state a material fact required to be stated therein or necessary to
make the fact required to be stated therein or necessary to make the statements
therein, in the light of the circumstances under which they were made, not
misleading.
(z) COMPLIANCE WITH ENVIRONMENTAL LAWS. Except as disclosed in the
Registration Statement and except as would not, individually or in the
aggregate, result in a Material Adverse Change, (i) neither the Company nor any
of its subsidiaries is in violation of any federal, state, local or foreign law
or regulation relating to pollution or protection of human health or the
environment (including, without limitation, ambient air, surface water,
groundwater, land surface or subsurface strata) or wildlife, including without
limitation, laws and regulations relating to emissions, discharges, releases or
threatened releases of chemicals, pollutants, contaminants, wastes, toxic
substances, hazardous substances, petroleum and petroleum products
(collectively, "Materials of Environmental Concern"), or otherwise relating to
the manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of Materials of Environment Concern (collectively,
"Environmental Laws"), which violation includes, but is not limited to,
noncompliance with any permits or other governmental authorizations required for
the operation of the business of the Company or its subsidiaries under
applicable Environmental Laws, or noncompliance with the terms and conditions
thereof, nor has the Company or any of its subsidiaries received any written
communication, whether from a governmental authority, citizens group, employee
or otherwise, that alleges that the Company or
10.
<PAGE> 11
any of its subsidiaries is in violation of any Environmental Law; (ii) there is
no claim, action or cause of action filed with a court or governmental
authority, no investigation with respect to which the Company or its
subsidiaries has received written notice, and no written notice to the Company
or its subsidiaries by any person or entity alleging potential liability for
investigatory costs, cleanup costs, governmental responses costs, natural
resources damages, property damages, personal injuries, attorneys' fees or
penalties arising out of, based on or resulting from the presence, or release
into the environment, of any Material of Environmental Concern at any location
owned, leased or operated by the Company or any of its subsidiaries, now or in
the past (collectively, "Environmental Claims"), pending or, to the Company's
knowledge, threatened against the Company or any of its subsidiaries or any
person or entity whose liability for any Environmental Claim the Company or any
of its subsidiaries has retained or assumed either contractually or by operation
of law; and (iii) to the Company's knowledge, there are no past or present
actions, activities, circumstances, conditions, events or incidents, including,
without limitation, the release, emission, discharge, presence or disposal of
any Material of Environmental Concern, that reasonably could result in a
violation of any Environmental Law or form the basis of a potential
Environmental Claim against the Company or any of its subsidiaries or against
any person or entity whose liability for any Environmental Claim the Company or
any of its subsidiaries has retained or assumed either contractually or by
operation of law.
(aa) PERIODIC REVIEW OF COSTS OF ENVIRONMENTAL COMPLIANCE. In the ordinary
course of its business, the Company conducts a periodic review of the effect of
Environmental Laws on the business, operations and properties of the Company and
its subsidiaries, in the course of which it identifies and evaluates associated
costs and liabilities (including, without limitation, any capital or operating
expenditures required for clean-up, closure of properties or compliance with
Environmental Laws or any permit, license or approval, any related constraints
on operating activities and any potential liabilities to third parties). On the
basis of such review and the amount of its established reserves, the Company has
reasonably concluded that such associated costs and liabilities would not,
individually or in the aggregate, result in a Material Adverse Change.
(bb) ERISA COMPLIANCE. The Company and its subsidiaries and any "employee
benefit plan" (as defined under the Employee Retirement Income Security Act of
1974, as amended, and the regulations and published interpretations thereunder
(collectively, "ERISA")) established or maintained by the Company, its
subsidiaries or their "ERISA Affiliates" (as defined below) are in compliance in
with ERISA except as would not, individually or in the aggregate, result in a
Material Adverse Change. "ERISA Affiliate" means, with respect to the Company or
a subsidiary, any member of any group of organizations described in Sections
414(b),(c),(m) or (o) of the Internal Revenue Code of 1986, as amended, and the
regulations and published interpretations thereunder (the "Code") of which the
Company or such subsidiary is a member. No "reportable event" (as defined under
ERISA) has occurred or is reasonably expected to occur with respect to any
"employee benefit plan" established or maintained by the Company, its
subsidiaries or any of their ERISA Affiliates. Except as disclosed in the
Registration Statement, as of December 31, 1997 no "employee benefit plan"
11.
<PAGE> 12
established or maintained by the Company, its subsidiaries or any of their ERISA
Affiliates, if such "employee benefit plan" were terminated, would have any
"amount of unfunded benefit liabilities" (as defined under ERISA). Neither the
Company, its subsidiaries nor any of their ERISA Affiliates has incurred or
reasonably expects to incur any liability under (i) Title IV of ERISA with
respect to termination of, or withdrawal from, any "employee benefit plan" or
(ii) Sections 412, 4971, 4975 or 4980B of the Code. Each "employee benefit plan"
established or maintained by the Company, its subsidiaries or any of their ERISA
Affiliates that is intended to be qualified under Section 401(a) of the Code is
so qualified and nothing has occurred, whether by action or failure to act,
which would cause the loss of such qualification.
Any certificate signed by an officer of the Company and delivered to a
Dealer Manager or to counsel for the Dealer Managers on the Representation Date
shall be deemed to be a representation and warranty by the Company to each
Dealer Manager as to the matters set forth therein.
SECTION 2. AGREEMENT TO ACT AS DEALER MANAGERS.
(a) APPOINTMENT OF DEALER MANAGERS. On the basis of the representations and
warranties contained herein, and subject to the terms and conditions of the
Rights Offering as set forth in the Prospectus;
(i) The Company hereby appoints the Dealer Managers to solicit, in
accordance with the Securities Act and the Exchange Act, and their
customary practice, the exercise of the Rights, subject to the terms and
conditions of this Agreement and the procedures described in the
Registration Statement; and
(ii) The Company agrees to furnish, or cause to be furnished, to the
Dealer Managers, lists, or copies of those lists, showing the names and
addresses of, and number of shares of Common Stock held by, stockholders as
of the Record Date, and the Dealer Managers agree to use such information
only in connection with the Rights Offering, and not to furnish the
information to any other person except for securities brokers and dealers
that have been requested by the Dealer Managers to solicit exercises of
Rights.
(b) SERVICES OF DEALER MANAGERS. The Dealer Managers agree to provide to
the Company, in addition to the services described in that certain Engagement
Letter among the Company and the Dealer Managers, dated October 20, 1998 (the
"Engagement Letter"), and in paragraph (a) of this Section 2, in accordance with
the Dealer Managers' customary practices those other services in connection with
the Rights Offering customarily performed by investment banks in rights
offerings of a like nature.
(c) STATUS OF DEALER MANAGERS. The Company and the Dealer Managers agree
that the Dealer Managers are independent contractors with respect to the
solicitation of the
12.
<PAGE> 13
exercise of Rights and the performance of the other services to the Company
contemplated by this Agreement.
(d) LIABILITY OF DEALER MANAGERS. In rendering the services contemplated by
this Agreement, the Dealer Managers will not be subject to any liability to the
Company or any of its affiliates, for any act or omission on the part of any
securities broker or dealer (except with respect to the Dealer Managers acting
in such capacity) or any other person, and the Dealer Managers will not be
liable for acts or omissions in performing their obligations under this
Agreement, except for any losses, claims, damages, liabilities and expenses that
are finally judicially determined to have resulted primarily from the bad faith,
willful misconduct or gross negligence of the Dealer Managers of by reason of
the reckless disregard of the obligations and duties of the Dealer Managers
under this Agreement.
(e) DEALER MANAGER FEES. The fees payable to the Dealer Managers for the
services rendered and to be rendered pursuant to Section 2(a) and this Section
2(b) by the Dealer Managers are (i) $1,200,000 ($600,000 to each Dealer Manager)
payable at the closing of the Rights Offering (which amount is also set forth in
the Engagement Letter and shall not be in addition to the fees payable to the
Dealer Managers pursuant to the terms of the Engagement Letter) and (ii) the
reimbursement of the Dealer Manager's out-pocket expenses as described in
Section 4 and Section 6 of this Agreement.
SECTION 3. ADDITIONAL COVENANTS OF THE COMPANY.
The Company further covenants and agrees with each Dealer Manager as
follows:
(a) DEALER MANAGER'S REVIEW OF PROPOSED AMENDMENTS AND SUPPLEMENTS. The
Company will use its best efforts to cause the Registration Statement and any
amendment thereof, to become effective. During such period beginning on the date
hereof and ending on the later of the Expiration Date or such date, as in the
opinion of counsel for the Dealer Managers, the Prospectus is no longer required
by law to be delivered in connection with sales pursuant to the exercise of the
Rights (the "Prospectus Delivery Period"), prior to amending or supplementing
the Registration Statement or the Prospectus (including any amendment or
supplement through incorporation by reference of any report filed under the
Exchange Act), the Company shall furnish to the Dealer Managers for review a
copy of each such proposed amendment or supplement, and the Company shall not
file any such proposed amendment or supplement to which the Dealer Managers
reasonably object in a timely fashion.
(b) SECURITIES ACT COMPLIANCE. After the date of this Agreement, the
Company shall promptly advise the Dealer Managers in writing (i) of the receipt
of any comments of, or requests for additional or supplemental information from,
the Commission, (ii) of the time and date of any filing of any amendment or
post-effective amendment to the Registration Statement or the Prospectus
pursuant to Rule 424(b) or any amendment or supplement to any Preliminary
Prospectus or the Prospectus, (iii) of the time and date that the
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<PAGE> 14
Registration Statement or any post-effective amendment to the Registration
Statement becomes effective and (iv) of the issuance by the Commission of any
stop order suspending the effectiveness of the Registration Statement or any
post-effective amendment thereto or of any order preventing or suspending the
use of any Preliminary Prospectus or the Prospectus, or of any proceedings to
remove, suspend or terminate from listing or quotation the Common Stock from any
securities exchange upon which it is listed for trading or included or
designated for quotation, or of the threatening or initiation of any proceedings
for any of such purposes. If the Commission shall enter any such stop order at
any time, the Company will use its best efforts to obtain the lifting of such
order at the earliest possible moment. Additionally, the Company agrees that it
shall comply with the provisions of Rules 424(b) and 430A, as applicable, under
the Securities Act and will use its reasonable efforts to confirm that any
filings made by the Company under such Rule 424(b) were received in a timely
manner by the Commission.
(c) AMENDMENTS AND SUPPLEMENTS TO THE PROSPECTUS AND OTHER SECURITIES ACT
MATTERS. If, during the Prospectus Delivery Period, any event shall occur or
condition exist as a result of which it is necessary to amend or supplement the
Prospectus in order to make the statements therein, in the light of the
circumstances when the Prospectus is delivered to a purchaser, not misleading,
or if in the reasonable opinion of the Dealer Managers or counsel for the Dealer
Managers it is otherwise necessary to amend or supplement the Prospectus to
comply with law, the Company agrees to promptly prepare (subject to Section 3(a)
hereof), file with the Commission and furnish at its own expense to the Dealer
Managers, amendments or supplements to the Prospectus so that the statements in
the Prospectus as so amended or supplemented will not, in the light of the
circumstances when the Prospectus is delivered to a purchaser, be misleading or
so that the Prospectus, as amended or supplemented, will comply with law.
(d) COPIES OF ANY AMENDMENTS AND SUPPLEMENTS TO THE PROSPECTUS. The Company
agrees to furnish the Dealer Managers, without charge, during the Prospectus
Delivery Period, as many copies of the Prospectus and any amendments and
supplements thereto (including any documents incorporated or deemed incorporated
by reference therein), and as many copies of the Supplementary Offering
Materials, as the Dealer Managers may reasonably request.
(e) BLUE SKY COMPLIANCE. The Company shall qualify or register the Common
Shares for sale under (or obtain exemptions from the application of) the state
securities or blue sky laws or Canadian provincial Securities laws of those
jurisdictions designated by the Dealer Managers, shall comply with such laws and
shall continue such qualifications, registrations and exemptions in effect so
long as required for the distribution of the Common Shares. The Company shall
not be required to qualify as a foreign corporation or to take any action that
would subject it to general service of process in any such jurisdiction where it
is not presently qualified or where it would be subject to taxation as a foreign
corporation. The Company will advise the Dealer Managers promptly of the
suspension of the qualification or registration of (or any such exemption
relating to) the Common Shares for offering, sale or trading in any jurisdiction
or any initiation or threat of any proceeding for any such purpose, and
14.
<PAGE> 15
in the event of the issuance of any order suspending such qualification,
registration or exemption, the Company shall use its best efforts to obtain the
withdrawal thereof at the earliest possible moment.
(f) USE OF PROCEEDS. The Company shall apply the net proceeds from the sale
of the Common Shares sold by it in the manner described under the caption "Use
of Proceeds" in the Prospectus.
(g) TRANSFER AGENT. The Company shall maintain, at its expense, a registrar
and transfer agent for the Common Stock.
(h) EARNINGS STATEMENT. As soon as practicable, the Company will make
generally available to its security holders and to the Dealer Managers an
earnings statement or statements of the Company and its subsidiaries which will
satisfy the provisions of Section 11(a) of the Securities Act and Rule 158
thereunder.
(i) PERIODIC REPORTING OBLIGATIONS. During the Prospectus Delivery Period
the Company shall file, on a timely basis, with the Commission and the New York
Stock Exchange all reports and documents required to be filed under the Exchange
Act.
(j) EXCHANGE ACT COMPLIANCE. During the Prospectus Delivery Period, the
Company will file all documents required to be filed with the Commission
pursuant to Section 13, 14 or 15 of the Exchange Act in the manner and within
the time periods required by the Exchange Act.
(k) LISTING OF RIGHTS AND COMMON SHARES. The Company will use its best
efforts to cause the Rights to be admitted to trading on a short term basis, and
the Shares to be duly authorized for listing, by the New York Stock Exchange on
or prior to the Record Date.
(l) SOLICITATION INFORMATION. The Company will, or will cause the
Subscription Agent, as defined in the Prospectus, to, advise the Dealer Managers
of the names and addresses of the Holders of Rights, and the number of Rights
held by them, on the Record Date, from time to time during the period of the
Rights Offering, as to all of the names and addresses of transferees of Rights
and the number of Rights transferred, and all exercises by Holders of Rights,
the total number of Rights exercised by each Holder, indicating the total number
of Rights verified to be in proper form for exercise, rejected for exercise and
being processed, and as to such other information as the Dealer Managers may
reasonably request; and will notify the Dealer Managers, not later than 5:00
P.M., New York City time, on the first business day following the Expiration
Date, of the total number of Rights exercised and Shares related thereto, the
total number of Rights verified to be in proper form for exercise, rejected for
exercise and being processed, and as to such other information as the Dealer
Managers may reasonably request.
15.
<PAGE> 16
(m) NO STABILIZATION. The Company will not take, directly or indirectly,
any action designed to cause or to result in, or that has constituted or which
might reasonably be expected to constitute, the stabilization or manipulation of
the price of any security of the Company to facilitate the issuance of the
Rights or the sale or resale of the Shares.
SECTION 4. PAYMENT OF EXPENSES. In addition to the compensation to the
Dealer Managers as described Section 2(e)(i), or otherwise in connection with
the Rights Offering, the Company agrees to pay directly, or reimburse the Dealer
Managers for, all reasonable costs, fees and expenses incurred in connection
with the performance of the Company's and the Dealer Managers' respective
obligations hereunder and in connection with the transactions contemplated
hereby, including without limitation (i) all expenses incident to the issuance
and delivery of the Common Shares (including all printing and engraving costs),
(ii) all fees and expenses of the registrar and transfer agent of the Common
Stock and the Subscription Agent, (iii) all necessary issue, transfer and other
stamp taxes in connection with the issuance and sale of the Common Shares to the
Holders, (iv) all fees and expenses of the Company's counsel, independent public
or certified public accountants and other advisors, (v) all costs and expenses
incurred in connection with the preparation, printing, filing, shipping and
distribution of the Registration Statement (including financial statements,
exhibits, schedules, consents and certificates of experts), each Preliminary
Prospectus and the Prospectus, and all amendments and supplements thereto, the
Supplemental Offering Materials, (vi) all filing fees, attorneys' fees and
expenses incurred by the Company in connection with qualifying or registering
(or obtaining exemptions from the qualification or registration of) all or any
part of the Common Shares for offer and sale under the state securities or blue
sky laws or the provincial securities laws of Canada, and, if requested by the
Dealer Managers, preparing and printing a "Blue Sky Survey" or memorandum, and
any supplements thereto advising the Dealer Managers of such qualifications,
registrations and exemptions, (vii) the filing fees incident to the NASD's
review and approval of the Dealer Managers' participation in the offering and
distribution of the Common Shares, (viii) all fees and expenses of counsel for
the Dealer Managers, (ix) the fees and expenses associated with listing the
Common Shares and Rights on the New York Stock Exchange, (x) all travel
expenses, postage, facsimile and telephone charges incurred by the Company or
the Dealer Managers; and (xi) all other fees, costs and expenses referred to in
Item 14 of Part II of the Registration Statement. The Company shall be liable
for the foregoing payments whether or not the Rights Offering or the
transactions contemplated thereby are commenced, withdrawn, terminated or
cancelled; provided, however, that the Company shall not be obligated to
reimburse the Dealer Managers for costs and expenses incurred by the Dealer
Managers which, when aggregated with the costs and expenses reimbursed to the
Dealer Managers pursuant to the terms of the Engagement Letter, exceed $400,000.
SECTION 5. CONDITIONS OF THE OBLIGATIONS OF THE DEALER MANAGERS. The
obligations of the Dealer Managers hereunder shall be subject to the accuracy of
the representations and warranties on the part of the Company set forth in
Section 1 hereof as of the Execution Time, as of the Representation Date and at
all times during the Rights Offering, to the timely performance
16.
<PAGE> 17
by the Company of its covenants and other obligations hereunder, and to each of
the following additional conditions:
(a) ACCOUNTANTS' COMFORT LETTER. On the Representation Date, the Dealer
Managers shall have received from KPMG Peat Marwick LLP, independent public or
certified public accountants for the Company, a letter dated the Representation
Date addressed to the Dealer Managers, in form and substance previously agreed
to by the Dealer Managers, containing statements and information of the type
ordinarily included in accountant's "comfort letters" to underwriters, delivered
according to Statement of Auditing Standards No. 72 (or any successor bulletin),
with respect to the audited and unaudited financial statements and certain
financial information contained in the Registration Statement and the
Prospectus.
(b) COMPLIANCE WITH REGISTRATION REQUIREMENTS; NO STOP ORDER; NO OBJECTION
FROM NASD. For the period from and after the Effective Date and prior to the
Expiration Date:
(i) the Registration Statement shall have become effective; the
Company shall have filed the Prospectus with the Commission (including the
information required by Rule 430A under the Securities Act) in the manner
and within the time period required by Rule 424(b) under the Securities
Act; or the Company shall have filed a post-effective amendment to the
Registration Statement containing the information required by such Rule
430A, and such post-effective amendment shall have become effective;
(ii) no stop order suspending the effectiveness of the Registration
Statement, or any post-effective amendment to the Registration Statement,
shall be in effect and no proceedings for such purpose shall have been
instituted or threatened by the Commission; and
(iii) the NASD shall have raised no objection to the fairness and
reasonableness of the Dealer Manager terms and arrangements.
(c) NO MATERIAL ADVERSE CHANGE OR RATINGS AGENCY CHANGE. For the period
from and after the date of this Agreement, in the judgment of the Dealer
Managers, there shall not have occurred any Material Adverse Change.
(d) OPINION OF COUNSEL FOR THE COMPANY. On the Representation Date the
Dealer Managers shall have received the favorable opinion of Bryan Cave LLP,
special counsel for the Company, and such other counsel reasonably acceptable to
the Dealer Managers, dated as of the Representation Date, the form of which is
attached as Exhibit A.
(e) OPINION OF COUNSEL FOR THE DEALER MANAGERS. On the Representation Date
the Dealer Managers shall have received the favorable opinion of Cooley Godward
LLP,
17.
<PAGE> 18
counsel for the Dealer Managers, dated as of the Representation Date, with
respect to the matters set forth in paragraphs (i), (vii) (with respect to
subparagraph (i) only), (ix), (x) (xi) and (xiii) (with respect to the captions
"Description of Capital Stock" and "Plan of Distribution" under subparagraph (i)
only), (xii), and the next-to-last paragraph of Exhibit A.
(f) OFFICERS' CERTIFICATE. On the Representation Date the Dealer Managers
shall have received a written certificate executed by the Chief Executive
Officer or President of the Company and the Chief Financial Officer of the
Company, dated as of the Representation Date and in the name of and on behalf of
the Company, to the effect set forth in subsections (b)(ii) of this Section 5,
and further to the effect that:
(i) for the period from and after the date of this Agreement and prior
to the Representation Date, there has not occurred any Material Adverse
Change;
(ii) the representations, warranties and covenants of the Company set
forth in Section 1 of this Agreement are true and correct with the same
force and effect as though expressly made on and as of the Representation
Date; and
(iii) the Company has complied in all material respects with all the
agreements and satisfied in all material respects all the conditions on its
part to be performed or satisfied at or prior to the Representation Date.
(g) ADDITIONAL DOCUMENTS. On the Representation Date, the Dealer Managers
and counsel for the Dealer Managers shall have received such information,
documents and opinions as they may reasonably require for the purposes of
enabling them to pass upon the issuance and sale of the Common Shares as
contemplated herein, or in order to evidence the accuracy of any of the
representations and warranties, or the satisfaction of any of the conditions or
agreements, herein contained.
If any condition specified in this Section 5 is not satisfied when and as
required to be satisfied, this Agreement may be terminated by the Dealer
Managers by notice to the Company at any time, which termination shall be
without liability on the part of any party to any other party, except that
Section 4, Section 6, Section 8 and Section 9 shall at all times be effective
and shall survive such termination.
SECTION 6. REIMBURSEMENT OF DEALER MANAGERS' EXPENSES. If this Agreement is
terminated by the Dealer Managers pursuant to Section 5, Section 7 or Section
10(vii), or if the sale of the Common Shares to the Holders is not consummated
because of any refusal, inability or failure on the part of the Company to
perform any agreement herein or to comply with any provision hereof or to
consummate the transactions contemplated hereby, the Company agrees to reimburse
the Dealer Managers, severally, upon demand for all out-of-pocket expenses that
shall have been reasonably incurred by the Dealer Managers in connection with
the proposed Rights Offering and sale of the Common Shares, including but not
limited to those expenses set forth in
18.
<PAGE> 19
Section 4 hereof; provided, however, that the Company shall not be obligated to
reimburse the Dealer Managers for costs and expenses incurred by the Dealer
Managers which, when aggregated with the costs and expenses reimbursed to the
Dealer Managers pursuant to the terms of the Engagement Letter, exceed $400,000.
SECTION 7. EFFECTIVENESS OF THIS AGREEMENT.
This Agreement shall not become effective until the later of (i) the
execution of this Agreement by the parties hereto and (ii) notification by the
Commission to the Company and the Dealer Managers of the effectiveness of the
Registration Statement under the Securities Act.
Prior to such effectiveness, this Agreement may be terminated by any party
by notice to each of the other parties hereto, and any such termination shall be
without liability on the part of (a) the Company to any Dealer Manager, except
that the Company shall be obligated to reimburse the expenses of the Dealer
Managers pursuant to Sections 4 and 6 hereof, (b) any Dealer Manager to the
Company, or (c) any party hereto to any other party except that the provisions
of Section 8 and Section 9 shall at all times be effective and shall survive
such termination.
SECTION 8. INDEMNIFICATION.
(a) INDEMNIFICATION OF THE DEALER MANAGERS. The Company agrees to indemnify
and hold harmless each Dealer Manager, its officers and employees, and each
person, if any, who controls any Dealer Manager within the meaning of Section 15
of the Securities Act and Section 20 of the Exchange Act against any loss,
claim, damage, liability or expense, as incurred, to which such Dealer Manager
or such controlling person may become subject, arising out of or in connection
with the services rendered by the Dealer Managers to the Company in their
capacities as dealer managers, under the Securities Act, the Exchange Act or
other federal or state statutory law or regulation, or at common law or
otherwise (including in settlement of any litigation, if such settlement is
effected with the written consent of the Company), insofar as such loss, claim,
damage, liability or expense (or actions in respect thereof as contemplated
below) arises out of or is based (i) upon any untrue statement or alleged untrue
statement of a material fact contained in the Registration Statement, or any
amendment thereto, including any information deemed to be a part thereof
pursuant to Rule 430A under the Securities Act, or the omission or alleged
omission therefrom of a material fact required to be stated therein or necessary
to make the statements therein not misleading; or (ii) upon any untrue statement
or alleged untrue statement of a material fact contained in any Preliminary
Prospectus or the Prospectus (or any amendment or supplement thereto), or the
omission or alleged omission therefrom of a material fact necessary in order to
make the statements therein, in the light of the circumstances under which they
were made, not misleading; or (iii) in whole or in part upon any failure of the
Company to perform its obligations hereunder or under law; and to reimburse each
Dealer Manager and each such controlling person for any and all expenses
(including the fees and disbursements of counsel chosen by NMS) as such expenses
are reasonably incurred by such
19.
<PAGE> 20
Dealer Manager or such controlling person in connection with investigating,
defending, settling, compromising or paying any such loss, claim, damage,
liability, expense or action; provided, however, that the foregoing indemnity
agreement shall not apply to any loss, claim, damage, liability or expense to
the extent, but only to the extent, arising out of or based upon any untrue
statement or alleged untrue statement or omission or alleged omission made in
reliance upon and in conformity with information furnished to the Company by the
Dealer Managers expressly for use in the Registration Statement, any Preliminary
Prospectus or the Prospectus (or any amendment or supplement thereto) as set
forth in Section 8(b). The indemnity agreement set forth in this Section 8(a)
shall be in addition to any liabilities that the Company may otherwise have.
(b) INDEMNIFICATION OF THE COMPANY, ITS DIRECTORS AND OFFICERS. Each Dealer
Manager agrees, severally and not jointly, to indemnify and hold harmless the
Company, each of its directors, each of its officers who signed the Registration
Statement and each person, if any, who controls the Company within the meaning
of Section 15 of the Securities Act or Section 20 of the Exchange Act, against
any loss, claim, damage, liability or expense, as incurred, to which the
Company, or any such director, officer or controlling person may become subject,
under the Securities Act, the Exchange Act, or other federal or state statutory
law or regulation, or at common law or otherwise (including in settlement of any
litigation, if such settlement is effected with the written consent of such
Dealer Manager), insofar as such loss, claim, damage, liability or expense (or
actions in respect thereof as contemplated below) arises out of or is based upon
any untrue or alleged untrue statement of a material fact contained in the
Registration Statement, any Preliminary Prospectus or the Prospectus (or any
amendment or supplement thereto), or arises out of or is based upon the omission
or alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, in each case
to the extent, but only to the extent, that such untrue statement or alleged
untrue statement or omission or alleged omission was made in the Registration
Statement, any Preliminary Prospectus, the Prospectus (or any amendment or
supplement thereto), in reliance upon and in conformity with information
furnished to the Company by the Dealer Managers expressly for use therein; and
to reimburse the Company, or any such director, officer or controlling person
for any legal and other expenses as such expenses are reasonably incurred by the
Company, or any such director, officer or controlling person in connection with
investigating, defending, settling, compromising or paying any such loss, claim,
damage, liability, expense or action. The Company hereby acknowledges that the
only information that the Dealer Managers have furnished to the Company
expressly for use in the Registration Statement, any Preliminary Prospectus or
the Prospectus (or any amendment or supplement thereto) are the statements set
forth under the caption "Plan of Distribution" in the Prospectus in the first
three sentences of the paragraph relating to possible stabilizing transactions
and the last sentence of the last paragraph; and the Dealer Managers confirm
that such statements are correct. The indemnity agreement set forth in this
Section 8(b) shall be in addition to any liabilities that each Dealer Manager
may otherwise have.
20.
<PAGE> 21
(c) NOTIFICATIONS AND OTHER INDEMNIFICATION PROCEDURES. Promptly after
receipt by an indemnified party under this Section 8 of notice of the
commencement of any action, such indemnified party will, if a claim in respect
thereof is to be made against an indemnifying party under this Section 8, notify
the indemnifying party in writing of the commencement thereof, but the omission
so to notify the indemnifying party will not relieve it from any liability which
it may have to any indemnified party for contribution or otherwise than under
the indemnity agreement contained in this Section 8 or to the extent it is not
prejudiced as a proximate result of such failure. In case any such action is
brought against any indemnified party and such indemnified party seeks or
intends to seek indemnity from an indemnifying party, the indemnifying party
will be entitled to participate in, and, to the extent that it shall elect,
jointly with all other indemnifying parties similarly notified, by written
notice delivered to the indemnified party promptly after receiving the aforesaid
notice from such indemnified party, to assume the defense thereof with counsel
reasonably satisfactory to such indemnified party; provided, however, if the
defendants in any such action include both the indemnified party and the
indemnifying party and the indemnified party shall have reasonably concluded
that a conflict may arise between the positions of the indemnifying party and
the indemnified party in conducting the defense of any such action or that there
may be legal defenses available to it and/or other indemnified parties which are
different from or additional to those available to the indemnifying party, the
indemnified party or parties shall have the right to select separate counsel to
assume such legal defenses and to otherwise participate in the defense of such
action on behalf of such indemnified party or parties. Upon receipt of notice
from the indemnifying party to such indemnified party of such indemnifying
party's election so to assume the defense of such action and approval by the
indemnified party of counsel, the indemnifying party will not be liable to such
indemnified party under this Section 8 for any legal or other expenses
subsequently incurred by such indemnified party in connection with the defense
thereof unless (i) the indemnified party shall have employed separate counsel in
accordance with the proviso to the next preceding sentence (it being understood,
however, that the indemnifying party shall not be liable for the expenses of
more than one separate counsel (together with local counsel), approved by the
indemnifying party (NMS in the case of Section 8(b) and Section 9) which
approval shall not unreasonably be withheld, representing the indemnified
parties who are parties to such action) or (ii) the indemnifying party shall not
have employed counsel reasonably satisfactory to the indemnified party to
represent the indemnified party within a reasonable time after notice of
commencement of the action, in each of which cases the fees and expenses of
counsel shall be at the expense of the indemnifying party.
(d) SETTLEMENTS. The indemnifying party under this Section 8 shall not be
liable for any settlement of any proceeding effected without its written
consent, which written consent shall not be unreasonably withheld, but if
settled with such consent or if there be a final judgment for the plaintiff, the
indemnifying party agrees to indemnify the indemnified party against any loss,
claim, damage, liability or expense by reason of such settlement or judgment.
Notwithstanding the foregoing sentence, if at any time an indemnified party
shall have requested an indemnifying party to reimburse the indemnified party
for reasonable fees and expenses of counsel as contemplated by Section 8(c)
hereof, the indemnifying party agrees that it shall be
21.
<PAGE> 22
liable for any settlement of any proceeding effected without its written consent
if (i) such settlement is entered into more than 30 days after receipt by such
indemnifying party of the aforesaid request (and reasonably satisfactory
documentation thereof) and notice of such proposed settlement and (ii) such
indemnifying party shall not have reimbursed the indemnified party in accordance
with such request prior to the date of such settlement. No indemnifying party
shall, without the prior written consent of the indemnified party, effect any
settlement, compromise or consent to the entry of judgment in any pending or
threatened action, suit or proceeding in respect of which any indemnified party
is or could have been a party and indemnity was or could have been sought
hereunder by such indemnified party, unless such settlement, compromise or
consent includes an unconditional release of such indemnified party from all
liability on claims that are the subject matter of such action, suit or
proceeding.
SECTION 9. CONTRIBUTION.
If the indemnification provided for in Section 8 is for any reason held to
be unavailable to or otherwise insufficient to hold harmless an indemnified
party in respect of any losses, claims, damages, liabilities or expenses
referred to therein, then each indemnifying party shall contribute to the
aggregate amount paid or payable by such indemnified party, as incurred, as a
result of any losses, claims, damages, liabilities or expenses referred to
therein (i) in such proportion as is appropriate to reflect the relative
benefits received by the Company, on the one hand, and the Dealer Managers, on
the other hand, from the offering of the Common Shares pursuant to this
Agreement or (ii) if the allocation provided by clause (i) above is not
permitted by applicable law, in such proportion as is appropriate to reflect not
only the relative benefits referred to in clause (i) above but also the relative
fault of the Company, on the one hand, and the Dealer Managers, on the other
hand, in connection with the statements or omissions or inaccuracies in the
representations and warranties herein which resulted in such losses, claims,
damages, liabilities or expenses, as well as any other relevant equitable
considerations. The relative benefits received by the Company, on the one hand,
and the Dealer Managers, on the other hand, in connection with the offering of
the Common Shares contemplated by this Agreement shall be deemed to be in the
same respective proportions as the total net proceeds from the offering of the
Common Shares contemplated by this Agreement (before deducting expenses)
received by the Company, and the total Dealer Manager fees and reimbursed
expenses received by the Dealer Managers, in each case as set forth on the front
cover page of the Prospectus, bear to the aggregate public offering price of the
Common Shares as set forth on such cover. The relative fault of the Company, on
the one hand, and the Dealer Managers, on the other hand, shall be determined by
reference to, among other things, whether any such untrue or alleged untrue
statement of a material fact or omission or alleged omission to state a material
fact or any such inaccurate or alleged inaccurate representation or warranty
relates to information supplied by the Company, on the one hand, or the Dealer
Managers, on the other hand, and the parties' relative intent, knowledge, access
to information and opportunity to correct or prevent such statement or omission.
22.
<PAGE> 23
The amount paid or payable by a party as a result of the losses, claims,
damages, liabilities and expenses referred to above shall be deemed to include,
subject to the limitations set forth in Section 8(c), any legal or other fees or
expenses reasonably incurred by such party in connection with investigating or
defending any action or claim. The provisions set forth in Section 8(c) with
respect to notice of commencement of any action shall apply if a claim for
contribution is to be made under this Section 9; provided, however, that no
additional notice shall be required with respect to any action for which notice
has been given under Section 8(c) for purposes of indemnification.
The Company and the Dealer Managers agree that it would not be just and
equitable if contribution pursuant to this Section 9 were determined by pro rata
allocation (even if the Dealer Managers were treated as one entity for such
purpose) or by any other method of allocation which does not take account of the
equitable considerations referred to in this Section 9.
Notwithstanding the provisions of this Section 9, no Dealer Manager shall
be required to contribute any amount in excess of the fees actually received by
such Dealer Manager in connection with the transactions contemplated by this
Agreement. No person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Securities Act) shall be entitled to contribution from
any person who was not guilty of such fraudulent misrepresentation. The Dealer
Managers' obligations to contribute pursuant to this Section 9 are several, and
not joint, in proportion to their respective fees received as such fees are
described under the caption "Plan of Distribution" in the Prospectus. For
purposes of this Section 9, each officer and employee of a Dealer Manager and
each person, if any, who controls a Dealer Manager within the meaning of the
Securities Act and the Exchange Act shall have the same rights to contribution
as such Dealer Manager, and each director of the Company, each officer of the
Company who signed the Registration Statement, and each person, if any, who
controls the Company with the meaning of the Securities Act and the Exchange Act
shall have the same rights to contribution as the Company.
SECTION 10. TERMINATION OF THIS AGREEMENT. This Agreement may be terminated
by the Dealer Managers by notice given to the Company if at any time prior to
the Expiration Date (i) trading or quotation in any of the Company's securities
shall have been suspended or limited by the Commission or by the New York Stock
Exchange, or trading in securities generally on either the Nasdaq Stock Market
or the New York Stock Exchange shall have been suspended or limited, or minimum
or maximum prices shall have been generally established on any of such stock
exchanges by the Commission or the NASD; (ii) a general banking moratorium shall
have been declared by any of federal or New York authorities; (iii) there shall
have occurred any outbreak or escalation of national or international
hostilities or any crisis or calamity, or any substantial change in the United
States or international financial markets, or any substantial change or
development involving a prospective substantial change in United States' or
international political, financial or economic conditions, as in the judgment of
the Dealer Managers is material and adverse and makes it impracticable to market
the Common Shares in the manner and on the terms described in the Prospectus or
to enforce contracts for the sale of
23.
<PAGE> 24
securities; (iv) in the judgment of the Dealer Managers there shall have
occurred any Material Adverse Change; (v) the Company shall have sustained a
loss by strike, fire, flood, earthquake, accident or other calamity of such
character as in the judgment of the Dealer Managers may interfere materially
with the conduct of the business and operations of the Company regardless of
whether or not such loss shall have been insured; (vi) if one or more of the
conditions set forth in Section 5 provided for therein are not met and the
Dealer Managers have given the Company notice thereof; or (vii) the Company
amends the terms of the Rights Offering in a manner unacceptable to the Dealer
Managers. Any termination pursuant to this Section 10 shall be without liability
on the part of (a) the Company to any Dealer Manager, except that the Company
shall be obligated to reimburse the expenses of the Dealer Managers pursuant to
Sections 4 and 6 hereof, (b) any Dealer Manager to the Company, or (c) of any
party hereto to any other party except that the provisions of Section 8 and
Section 9 shall at all times be effective and shall survive such termination.
SECTION 11. REPRESENTATIONS AND INDEMNITIES TO SURVIVE DELIVERY. The
respective indemnities, agreements, representations, warranties and other
statements of the Company, of its officers and of the Dealer Managers will
remain in full force and effect, regardless of any investigation made by or on
behalf of any Dealer Manager or the Company or any of its or their partners,
officers or directors or any controlling person, as the case may be, and will
survive any termination of this Agreement.
SECTION 12. REFERENCE TO DEALER MANAGERS. The Company agrees that any
reference to the Dealer Managers in the Prospectus or the Supplemental Offering
Materials, or any other release, publication or communication to any party
outside the Company is subject to the Dealer Managers' prior approval, which
shall not be unreasonably withheld. If the Dealer Managers resign or are
terminated prior to the dissemination of the Prospectus or the Supplemental
Offering Materials, or any other release, publication or communication, no
reference shall be made therein to the Dealer Managers without their prior
written consent, except as may be required by law.
SECTION 13. NOTICES. All communications hereunder shall be in writing and
shall be mailed, hand delivered or telecopied and confirmed to the parties
hereto as follows:
If to the Dealer Managers:
NationsBanc Montgomery Securities LLC
600 Montgomery Street
San Francisco, California 94111
Facsimile: 415-249-5558
Attention: Richard A. Smith
with a copy to:
24.
<PAGE> 25
NationsBanc Montgomery Securities LLC
600 Montgomery Street
San Francisco, California 94111
Facsimile: (415) 249-5553
Attention: David A. Baylor, Esq.
If to the Company:
MEMC Electronic Materials, Inc.
501 Pearl Drive (City of O'Fallon)
P.O. Box 8
St. Peters, MO 63376
Facsimile: (314) 279-5158
Attention: James M. Stolze
Chief Financial Officer
Any party hereto may change the address for receipt of communications by giving
written notice to the others.
SECTION 14. SUCCESSORS. This Agreement will inure to the benefit of and be
binding upon the parties hereto, and to the benefit of the employees, officers
and directors and controlling persons referred to in Section 8 and Section 9,
and in each case their respective successors, and no other person will have any
right or obligation hereunder.
SECTION 15. PARTIAL UNENFORCEABILITY. The invalidity or unenforceability of
any Section, paragraph or provision of this Agreement shall not affect the
validity or enforceability of any other Section, paragraph or provision hereof.
If any Section, paragraph or provision of this Agreement is for any reason
determined to be invalid or unenforceable, there shall be deemed to be made such
minor changes (and only such minor changes) as are necessary to make it valid
and enforceable.
SECTION 16. GOVERNING LAW PROVISIONS; CONSENT TO JURISDICTION.
(a) GOVERNING LAW PROVISIONS. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK
APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED IN SUCH STATE.
(b) CONSENT TO JURISDICTION. Any legal suit, action or proceeding arising
out of or based upon this Agreement or the transactions contemplated hereby may
be instituted in the federal courts of the United States of America located in
or the courts of the State of New York in each case located in the City of New
York (collectively, the "Specified Courts"), and each party irrevocably submits
to the non-exclusive jurisdiction of such courts in any such suit, action
25.
<PAGE> 26
or proceeding. Service of any process, summons, notice or document by mail to
such party's address set forth above shall be effective service of process for
any suit, action or other proceeding brought in any such court. The parties
irrevocably and unconditionally waive any objection to the laying of venue of
any suit, action or other proceeding in the Specified Courts and irrevocably and
unconditionally waive and agree not to plead or claim in any such court that any
such suit, action or other proceeding brought in any such court has been brought
in an inconvenient forum.
SECTION 17. GENERAL PROVISIONS. This Agreement constitutes the entire
agreement of the parties to this Agreement with respect to the services to the
Company of the Dealer Managers in their capacities as dealer managers and
supersedes all prior written or oral and all contemporaneous oral agreements,
understandings and negotiations with respect to the subject matter hereof. This
Agreement may be executed in two or more counterparts, each one of which shall
be an original, with the same effect as if the signatures thereto and hereto
were upon the same instrument. This Agreement may not be amended or modified
unless in writing by all of the parties hereto, and no condition herein (express
or implied) may be waived unless waived in writing by each party whom the
condition is meant to benefit. The Table of Contents and the Section headings
herein are for the convenience of the parties only and shall not affect the
construction or interpretation of this Agreement.
Each of the parties hereto acknowledges that it is a sophisticated business
person who was adequately represented by counsel during negotiations regarding
the provisions hereof, including, without limitation, the indemnification
provisions of Section 8 and the contribution provisions of Section 9, and is
fully informed regarding said provisions. Each of the parties hereto further
acknowledges that the provisions of Sections 8 and 9 hereto fairly allocate the
risks in light of the ability of the parties to investigate the Company, its
affairs and its business in order to assure that adequate disclosure has been
made in the Registration Statement, any Preliminary Prospectus and the
Prospectus (and any amendments and supplements thereto), as required by the
Securities Act and the Exchange Act.
26.
<PAGE> 27
If the foregoing is in accordance with your understanding of our agreement,
kindly sign and return to the Company the enclosed copies hereof, whereupon this
instrument, along with all counterparts hereof, shall become a binding agreement
in accordance with its terms.
Very truly yours,
MEMC ELECTRONIC MATERIALS, INC.
--------------------------------------
[Title]
The foregoing Dealer Manager Agreement is hereby confirmed and accepted by
the Dealer Managers in San Francisco, California as of the date first above
written.
NATIONSBANC MONTGOMERY SECURITIES LLC
J.P. MORGAN SECURITIES INC.
BY NATIONSBANC MONTGOMERY SECURITIES LLC
By:
- -------------------------------------------
[Title]
27.
<PAGE> 28
EXHIBIT A
Opinion of counsel for the Company to be delivered pursuant to Section 5(d)
of the Dealer Manager Agreement.
References to the Prospectus in this Exhibit A include any supplements
thereto at the Representation Date.
(i) The Company is a corporation validly existing and in good standing
under the laws of the State of Delaware.
(ii) The Company has corporate power and authority to own, lease and
operate its properties and to conduct its business as described in the
Prospectus and to enter into and perform its obligations under the Dealer
Manager Agreement, the Purchase Agreement and the Standby Agreement.
(iii) To such counsel's knowledge, the Company is duly qualified as a
foreign corporation to transact business and is in good standing in the State of
Missouri.
(iv) Each of MEMC Southwest Inc. and MEMC Pasadena, Inc. is a corporation
validly existing and in good standing under the laws of the State of Delaware,
and each of such corporations (collectively, the "U.S. Subsidiaries") has
corporate power and authority to own, lease and operate its properties and to
conduct its business.
(v) All of the issued and outstanding capital stock of each such U.S.
Subsidiary has been duly authorized and validly issued, is fully paid and
non-assessable and is owned of record by the Company, directly or through
subsidiaries, and, to the knowledge of such counsel, free and clear of any
security interest, mortgage, pledge, lien, encumbrance or any pending or
threatened claim.
(vi) The authorized, issued and outstanding capital stock of the Company is
as set forth in the Prospectus under the caption "Capitalization" (except for
subsequent issuances pursuant to reservations, agreements or employee benefit
plans referred to in the Prospectus, or pursuant to exercise of options referred
to in the Prospectus).
(vii) No stockholder of the Company or any other person has any preemptive
right, right of first refusal or other similar right to subscribe for or
purchase shares of Common Stock of the Company arising (i) by operation of the
charter or by-laws of the Company or the General Corporation Law of the State of
Delaware or (ii) to the knowledge of such counsel, pursuant to any agreement to
which the Company is a party.
28.
<PAGE> 29
(viii) The Dealer Manager Agreement has been duly authorized, executed and
delivered by, and is a valid and binding agreement of, the Company, enforceable
in accordance with its terms, except as Sections 8 and 9 of the Agreement as to
which such counsel need not express an opinion and except as the enforcement
thereof may be limited by bankruptcy, insolvency, reorganization, moratorium or
other similar laws relating to or affecting creditors' rights generally or by
general equitable principles.
(ix) The Common Shares to be issued by the Company pursuant to the Rights
Offering, the Purchase Agreement and the Standby Agreement have been duly
authorized for issuance and sale and, when issued and delivered by the Company
as set forth in the Prospectus, the Purchase Agreement or the Standby Agreement,
as applicable, against payment of the consideration set forth therein, will be
validly issued, fully paid and nonassessable.
(x) Such counsel has been advised by the staff of the Commission that the
Registration Statement has been declared effective by the Commission under the
Securities Act. To the knowledge of such counsel, no stop order suspending the
effectiveness of the Registration Statement has been issued under the Securities
Act and no proceedings for such purpose have been instituted or are pending or
are threatened by the Commission. Any required filing of the Prospectus and any
supplement thereto pursuant to Rule 424(b) under the Securities Act has been
made in the manner and within the time period required by such Rule 424(b).
(xi) The Registration Statement, the Prospectus (including any document
incorporated by reference therein), and each amendment or supplement to the
Registration Statement and the Prospectus (including any document incorporated
by reference therein), as of their respective effective or issue dates (other
than the financial statements and schedules and other financial and statistical
data included (or incorporated by reference) therein or omitted therefrom, as to
which no opinion need be rendered) comply as to form in all material respects
with the applicable requirements of the Securities Act.
(xii) The Common Shares and Rights have been approved for listing on the
New York Stock Exchange.
(xiii) The statements (i) in the Prospectus (directly or by incorporation
by reference therein) under the captions "Risk Factors--Restrictive Covenants
Tied to Change of Control" and "--Risks of Taisil Joint Venture," "Recent
Developments," "The Rights Offering--Stock Sale to VEBA Corporation" and
"--Standby Agreement," "Business--Joint Ventures," "Certain Relationships and
Related Transactions," "Certain Federal Income Tax Considerations," "Description
of Capital Stock," "Item 5 - Other Events" (Current Report on Form 8-K filed
October 22, 1998), "Item 2 - Properties" (Annual Report on Form 10-K/A filed
October 22, 1998), and "Employment Agreements" (pages 16 through 18 of the Proxy
Statement for the 1998 Annual Meeting of the Company), and (ii) in Item 15 of
Part II of the Registration Statement, insofar as such statements constitute
matters of law or summaries of legal matters, the Company's charter or by-law
provisions, documents, agreements or legal proceedings, has been
29.
<PAGE> 30
reviewed by such counsel and fairly present and summarize, in all material
respects, the matters, provisions, documents, agreements or proceedings referred
to therein.
(xiv) To the knowledge of such counsel, there are no legal or governmental
actions, suits or proceedings pending or threatened which are required to be
disclosed in the Registration Statement, other than those disclosed therein.
(xv) To the knowledge of such counsel, there are no Existing Instruments
required to be described or referred to in the Registration Statement or to be
filed as exhibits thereto other than those described or referred to therein or
filed or incorporated by reference as exhibits thereto.
(xvi) No consent, approval, authorization or other order of, or
registration or filing with, any federal or Missouri court, regulatory body or
other governmental authority or agency, is required for the execution, delivery
and performance of the Dealer Manager Agreement, the Purchase Agreement and
Standby Agreement by the Company and consummation of the transactions
contemplated thereby and by the Prospectus, except as required under the
Securities Act, applicable state securities or blue sky laws and from the NASD.
(xvii) The execution and delivery of the Dealer Manager Agreement, the
Purchase Agreement and the Standby Agreement by the Company and the performance
by the Company of its obligations thereunder (other than performance by the
Company of its obligations under the indemnification and contribution sections
of such agreements, as to which no opinion need be rendered) (i) have been duly
authorized by all necessary corporate action on the part of the Company; (ii)
will not result in any violation of the provisions of the charter or by-laws of
the Company; (iii) will not constitute a breach of, or Default or a Debt
Repayment Triggering Event under, or result in the creation or imposition of any
lien, charge or encumbrance upon any property or assets of the Company or any of
its subsidiaries, to the knowledge of such counsel, pursuant to any agreement
filed as an exhibit to the Registration Statement or any document incorporated
by reference therein; or (iv) to the knowledge of such counsel, will not result
in any violation of any federal or Missouri law, administrative regulation or
administrative or court decree recognized by such counsel as applicable to the
Company.
(xviii) The Company is not, and after receipt of payment for the Common
Shares will not be, an "investment company" within the meaning of Investment
Company Act.
(xix) Except as disclosed in the Prospectus under the caption "Risk
Factors--Shares Eligible for Future Sale," to the knowledge of such counsel,
there are no persons with registration or other similar rights to have any
equity or debt securities registered for sale under the Registration Statement
or included in the offering contemplated by the Dealer Manager Agreement except
for such rights as have been duly waived.
30.
<PAGE> 31
(xx) Each document filed pursuant to the Exchange Act (other than the
financial statements and schedules and other financial and statistical data
included therein or omitted therefrom, as to which no opinion need be rendered)
and incorporated or deemed to be incorporated by reference in the Prospectus, as
amended, complied when so amended and filed as to form in all material respects
with the Exchange Act.
In addition, such counsel shall state that they have participated in
conferences with officers and other representatives of the Company,
representatives of the independent public or certified public accountants for
the Company and with representatives of the Dealer Managers at which the
contents of the Registration Statement and the Prospectus, and any supplements
or amendments thereto, and related matters were discussed and, although such
counsel is not passing upon and does not assume any responsibility for the
accuracy, completeness or fairness of the statements contained in the
Registration Statement or the Prospectus (other than as specified above), and
any supplements or amendments thereto, on the basis of the foregoing, nothing
has come to their attention which would lead them to believe that either the
Registration Statement or any amendments thereto, at the time the Registration
Statement or such amendments became effective, contained an untrue statement of
a material fact or omitted to state a material fact required to be stated
therein or necessary to make the statements therein not misleading or that the
Prospectus, as of its date or at the Representation Date, as the case may be,
contained an untrue statement of a material fact or omitted to state a material
fact necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading (it being understood
that such counsel need express no belief as to the financial statements or
schedules or other financial, statistical or other data or schedules derived
therefrom, included or incorporated by reference in or omitted from the
Registration Statement or the Prospectus or any amendments or supplements
thereto).
In rendering such opinion, such counsel may rely (A) as to matters
involving the application of laws of any jurisdiction other than the laws of the
State of Missouri, the Delaware General Corporation Law, or the federal law of
the United States, to the extent they deem proper and specified in such opinion,
upon the opinion (which shall be dated the Representation Date), shall be
reasonably satisfactory in form and substance to the Dealer Managers, shall
expressly state that the Dealer Managers may rely on such opinion as if it were
addressed to them and shall be furnished to the Dealer Managers) of other
counsel of good standing whom they believe to be reliable and who are reasonably
satisfactory to counsel for the Dealer Managers; and (B) as to matters of fact,
to the extent they deem proper, on certificates of responsible officers of the
Company and public officials; provided, however, that any opinion that relates
to the Delaware General Corporation Law may be delivered by Richards Layton &
Finger, P.A. In addition, the foregoing opinion may contain customary
assumptions and qualifications.
31.
<PAGE> 32
_______________ Shares
MEMC ELECTRONIC MATERIALS, INC.
Common Stock
Dealer Manager Agreement
dated [___], 1998
<PAGE> 33
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
Section 1. Representations and Warranties of the Company...................... 3
(a) Compliance with Registration Requirements.......................... 3
(b) Offering Materials Furnished to Dealer Managers.................... 3
(c) Distribution of Offering Material By the Company................... 4
(d) The Dealer Manager Agreement....................................... 4
(e) Authorization of the Common Shares and Private Placement Shares.... 4
(f) No Applicable Registration or Other Similar Rights................. 4
(g) No Material Adverse Change......................................... 4
(h) Independent Accountants............................................ 5
(i) Preparation of the Financial Statements............................ 5
(j) Incorporation and Good Standing of the Company and its Subsidiaries. 5
(k) Capitalization and Other Capital Stock Matters..................... 6
(l) Stock Exchange Listing............................................. 6
(m) Non-Contravention of Existing Instruments; No Further
Authorizations or Approvals Required............................... 7
(n) No Material Actions or Proceedings................................. 7
(o) Intellectual Property Rights....................................... 8
(p) All Necessary Permits, etc......................................... 8
(q) Title to Properties................................................ 8
(r) Tax Law Compliance................................................. 8
(s) Company Not an "Investment Company."............................... 9
(t) Insurance.......................................................... 9
(u) No Price Stabilization or Manipulation............................. 9
(v) Related Party Transactions......................................... 9
(w) No Unlawful Contributions or Other Payments........................ 10
(x) Company's Accounting System........................................ 10
(y) Exchange Act Compliance............................................ 10
(z) Compliance with Environmental Laws................................. 10
(aa) Periodic Review of Costs of Environmental Compliance............... 11
</TABLE>
i.
<PAGE> 34
<TABLE>
<S> <C> <C>
(bb) ERISA Compliance.................................................... 11
Section 2. Agreement to Act as Dealer Managers................................. 12
(a) Appointment of Dealer Managers...................................... 12
(b) Services of Dealer Managers......................................... 12
(c) Status of Dealer Managers........................................... 12
(d) Liability of Dealer Managers........................................ 13
(e) Dealer Manager Fees................................................. 13
Section 3. Additional Covenants of the Company................................. 13
(a) Dealer Manager's Review of Proposed Amendments and Supplements...... 13
(b) Securities Act Compliance........................................... 13
(c) Amendments and Supplements to the Prospectus and Other
Securities Act Matters.............................................. 14
(d) Copies of any Amendments and Supplements to the Prospectus.......... 14
(e) Blue Sky Compliance................................................. 14
(f) Use of Proceeds..................................................... 15
(g) Transfer Agent...................................................... 15
(h) Earnings Statement.................................................. 15
(i) Periodic Reporting Obligations...................................... 15
(j) Exchange Act Compliance............................................. 15
(k) Listing of Rights and Common Shares................................. 15
(l) Solicitation Information............................................ 15
(m) No Stabilization.................................................... 16
Section 4. Payment of Expenses................................................. 16
Section 5. Conditions of the Obligations of the Dealer Managers................ 16
(a) Accountants' Comfort Letter......................................... 17
(b) Compliance with Registration Requirements; No Stop
Order; No Objection from NASD....................................... 17
(c) No Material Adverse Change or Ratings Agency Change................. 17
(d) Opinion of Counsel for the Company.................................. 17
(e) Opinion of Counsel for the Dealer Managers.......................... 17
(f) Officers' Certificate............................................... 18
</TABLE>
ii.
<PAGE> 35
<TABLE>
<S> <C> <C>
(g) Additional Documents.................................................. 18
Section 6. Reimbursement of Dealer Managers' Expenses............................ 18
Section 7. Effectiveness of this Agreement....................................... 19
Section 8. Indemnification....................................................... 19
(a) Indemnification of the Dealer Managers................................ 19
(b) Indemnification of the Company, its Directors and Officers............ 20
(c) Notifications and Other Indemnification Procedures.................... 21
(d) Settlements........................................................... 21
Section 9. Contribution.......................................................... 22
Section 10. Termination of this Agreement......................................... 23
Section 11. Representations and Indemnities to Survive Delivery................... 24
Section 12. Reference to Dealer Managers.......................................... 24
Section 13. Notices............................................................... 24
Section 14. Successors............................................................ 25
Section 15. Partial Unenforceability.............................................. 25
Section 16. Governing Law Provisions; Consent to Jurisdiction..................... 25
(a) Governing Law Provisions.............................................. 25
(b) Consent to Jurisdiction............................................... 25
Section 17. General Provisions.................................................... 26
</TABLE>
iii.
<PAGE> 1
Exhibit 4.1
552715 11 2
--------------- CUSIP NUMBER
RIGHTS CERTIFICATE NUMBER
---------------
NUMBER OF RIGHTS REPRESENTED
SUBSCRIPTION PRICE: $ PER SHARE
---
[Name of Rights holder]
[Address Line 1]
[Address Line 2]
[Address Line 3]
MEMC ELECTRONIC MATERIALS, INC.
RIGHTS CERTIFICATE TO SUBSCRIBE FOR SHARES OF COMMON STOCK
FOR HOLDERS OF RECORD ON , 199
-------- -
EXERCISABLE ON OR BEFORE 5:00 P.M., NEW YORK CITY TIME, ON , 199 ,
UNLESS EXTENDED BY THE COMPANY. ---------- -
MEMC Electronic Materials, Inc., a Delaware corporation (the "Company"), is
conducting a rights offering (the "Rights Offering") which entitles the holders
(other than VEBA Corporation or its permitted transferees) of the Company's
common stock, $0.01 par value per share (the "Common Stock"), as of the close of
business on _____, 199_ (the "Record Date") to receive ____ transferable rights
(each, a "Right") for each share of Common Stock held of record on the Record
Date. Each Right entitles the holder thereof to subscribe for and purchase one
share of Common Stock (the "Basic Subscription Privilege") at a subscription
price of $ __ per share. If any shares of Common Stock are not purchased by the
Rights holders pursuant to such Rights holders' Basic Subscription Privileges
(the "Excess Shares"), any Rights holder fully exercising such Rights holder's
Basic Subscription Privilege may purchase an additional number of the Excess
Shares, if so specified by such Rights holder on Form 1 or on separate
instructions accompanying this Rights Certificate delivered to the Subscription
Agent pursuant to the terms and conditions of the Rights Offering (or if the
aggregate subscription price delivered or transmitted by such Rights holder
exceeds the aggregate subscription price for all shares for which such Rights
holder would be entitled to subscribe pursuant to such Rights Holder's Basic
Subscription Privilege), subject to proration (the "Over-Subscription
Privilege") as described in the prospectus (the "Prospectus") dated December __,
1998. No fractional Rights or cash in lieu thereof will be issued or paid. Set
forth above is the number of Rights evidenced by this Rights Certificate that
the Rights holder is entitled to exercise pursuant to such Rights holder's Basic
Subscription Privilege.
MEMC ELECTRONIC MATERIALS, INC.
By:
- ----------------------------- --------------------------
Secretary President
<PAGE> 2
Countersigned:
HARRIS TRUST AND SAVINGS BANK
By:
-------------------------------
Authorized Signature
FOR A MORE COMPLETE DESCRIPTION OF THE TERMS AND CONDITIONS OF THE RIGHTS
OFFERING, PLEASE REFER TO THE PROSPECTUS, WHICH IS INCORPORATED HEREIN BY
REFERENCE. COPIES OF THE PROSPECTUS ARE AVAILABLE UPON REQUEST FROM THE
INFORMATION AGENT, MORROW & CO., INC., AT (800) 566-9061. CAPITALIZED TERMS USED
BUT NOT DEFINED HEREIN SHALL HAVE THE RESPECTIVE MEANINGS ASCRIBED TO SUCH TERMS
IN THE PROSPECTUS.
THIS RIGHTS CERTIFICATE MUST BE RECEIVED BY THE SUBSCRIPTION AGENT, HARRIS TRUST
AND SAVINGS BANK, WITH PAYMENT IN FULL BY 5:00 P.M., NEW YORK CITY TIME, ON
________, 199_ (UNLESS EXTENDED IN THE SOLE DISCRETION OF THE COMPANY) (AS IT
MAY BE EXTENDED, THE "EXPIRATION DATE"). ANY RIGHTS NOT EXERCISED PRIOR TO THE
EXPIRATION DATE WILL BE NULL AND VOID. ANY SUBSCRIPTION FOR SHARES OF COMMON
STOCK IN THE RIGHTS OFFERING MADE HEREBY IS IRREVOCABLE, EXCEPT AS DESCRIBED IN
THE PROSPECTUS. HARRIS TRUST AND SAVINGS BANK WILL ISSUE CERTIFICATES
REPRESENTING SHARES OF COMMON STOCK PURCHASED PURSUANT TO THE RIGHTS OFFERING AS
SOON AS PRACTICABLE FOLLOWING THE EXPIRATION DATE.
Some or all of the Rights represented by this Rights Certificate may be
exercised by duly completing Form 1; and may be transferred to a designated
transferee or assigned to a bank or broker to sell for you by duly completing
Form 2; and may be transferred to the Subscription Agent to sell for you by duly
completing Form 3. Rights holders are advised to review the Prospectus and
instructions, copies of which are available from the Information Agent, Morrow &
Co., Inc., before exercising, assigning, transferring or selling their Rights.
The registered owner whose name is inscribed hereon or its assigns, is
entitled to subscribe for shares of Common Stock upon the terms and subject to
the conditions set forth in the Prospectus and instructions relating to the use
hereof.
THE RIGHTS CERTIFICATE IS TRANSFERABLE, AND MAY BE COMBINED OR DIVIDED (BUT ONLY
INTO RIGHTS CERTIFICATES EVIDENCING FULL RIGHTS) AT THE OFFICE OF HARRIS TRUST
AND SAVINGS BANK.
RIGHTS HOLDERS SHOULD BE AWARE THAT IF THEY CHOOSE TO EXERCISE, ASSIGN, TRANSFER
OR SELL ONLY PART OF THEIR RIGHTS, THEY MAY NOT RECEIVE A NEW RIGHTS CERTIFICATE
IN SUFFICIENT TIME TO EXERCISE THE REMAINING RIGHTS EVIDENCED THEREBY.
<PAGE> 3
FORM 1
EXERCISE AND SUBSCRIPTION: The undersigned hereby irrevocably exercises one or
more Rights to subscribe for shares of Common Stock as indicated below, on the
terms and subject to the conditions specified in the Prospectus, receipt of
which is hereby acknowledged.*
(a) Number of shares subscribed for pursuant to the Basic Subscription
Privilege
_______ X $___.__ = $________ payment. (One Right needed to subscribe
for one share.)
(b) Number of shares subscribed for pursuant to the Over-Subscription
Privilege
_______ X $___.__ = $________ payment.
By exercising this Over-Subscription Privilege, the undersigned Rights holder
hereby represents and certifies that the undersigned has fully exercised its
Basic Subscription Privilege received in respect of shares of Common Stock held
in the capacity described on the face of the Rights Certificate.
(c) Total Subscription (total number of shares on lines (a) and (b)
multiplied by the Subscription Price) = $__________ payment.
METHOD OF PAYMENT (CHECK AND COMPLETE APPROPRIATE BOX(ES)):
[_] Check, bank draft, or money order payable to "Harris Trust
and Savings Bank, as Subscription Agent": or
[_] Wire transfer of immediately available funds directed to The
Chase Manhattan Bank, New York, NY ABA No. 021 000 021. Account:
617-999988 (marked: MEMC Electronic Materials, Inc.
Subscription).
(d) If the Rights being exercised pursuant to the Basic Subscription
Privilege do not account for all of the Rights represented by the Rights
Certificate (check only one):
[_] Deliver to the undersigned a new Rights Certificate
evidencing the remaining unexercised Rights to which the
undersigned is entitled.
[_] Deliver one or more Rights Certificates in accordance with
the undersigned's Form 2 instructions (which include any
required signature guarantees).
[_] Sell the remaining unexercised Rights in accordance with the
undersigned's Form 3 instructions (which include any
required signature guarantees).
<PAGE> 4
[_] Do not deliver any new Rights Certificates to me; instead,
deliver such Rights Certificates in accordance with the
undersigned's Form 4 instructions (which include any
required signature guarantees).
(e) If Notice of Guaranteed Delivery procedures are being utilized:
[_] Check here if Rights are being exercised pursuant to the
Notice of Guaranteed Delivery delivered to the Subscription
Agent prior to the date hereof and complete the following:
Name(s) of Registered Holder(s)
---------------------------------
Window Ticket Number (if any)
-----------------------------------
Date of Execution of Notice of Guaranteed Delivery
--------------
Name of Institution Which Guaranteed Delivery
-------------------
* If the aggregate Subscription Price enclosed or transmitted is insufficient to
purchase the total number of shares of Common Stock included in lines (a) and
(b), or if the number of shares being subscribed for is not specified, the
Rights holder exercising this Right Certificate shall be deemed to have
subscribed for the maximum amount of shares of Common Stock that could be
subscribed for with the aggregate Subscription Price received. If the number of
shares of Common Stock to be subscribed for pursuant to the Over-Subscription
Privilege is not specified and the amount enclosed or transmitted exceeds the
aggregate Subscription Price for all shares which may be purchased pursuant to
the Basic Subscription Privilege represented by this Rights Certificate (the
"Subscription Excess"), the Rights holder exercising this Rights Certificate
shall be deemed to have exercised the Over-Subscription Privilege to purchase,
to the extent available, that number of whole shares of Common Stock equal to
the quotient obtained by dividing the Subscription Excess by the Subscription
Price, subject to the limit on the number of shares a Rights holder may purchase
pursuant to the Over-Subscription Privilege. To the extent any portion of the
aggregate Subscription Price enclosed or transmitted remains after the foregoing
procedures, such funds shall be mailed to the Rights holder without interest or
deduction as soon thereafter as practicable.
Rights holder's Signature(s)
--------------------------------------
Rights holder's Signature(s)
--------------------------------------
(If held jointly)
Telephone No. ( )
-------------------------------------------------
<PAGE> 5
FORM 2
TO TRANSFER SOME OR ALL OF YOUR UNEXERCISED RIGHTS TO A DESIGNATED TRANSFEREE,
OR TO ASSIGN SOME OR ALL OF YOUR UNEXERCISED RIGHTS TO A BANK OR BROKER TO SELL
FOR YOU:
For value received, ______ Rights represented by this Rights Certificate are
hereby assigned to (please print name and address and Taxpayer Identification
Number (see Instructions to Substitute Form W-9 accompanying this Rights
Certificate) of transferee in full (see instructions below regarding the
transfer of all or a portion of your unexercised Rights to more than one
person):
Name:
---------------------------------
Address:
------------------------------
------------------------------
Taxpayer Identification Number:
---------------------------------
Signature(s) of Transferor(s):
------------------------------------
Signature(s) of Transferor(s):
------------------------------------
(If held jointly)
Signature(s) Guaranteed By:
----------------------------------------
Eligible Institution
Proceeds from the sale of Rights may be subject to withholding of U.S. taxes
unless the seller's certified U.S. taxpayer identification number (or
certificate regarding foreign status) is on file with the Subscription Agent and
the seller is not otherwise subject to U.S. backup withholding.
If you desire to transfer or assign all or a portion of the unexercised Rights
represented by this Rights Certificate to more than one person, attach separate
instructions to the Subscription Agent regarding such transfer(s) in accordance
with Paragraph 3(d) of the "Instructions For Use of MEMC Electronic Materials,
Inc. Rights Certificates." Note that any such request will require a signature
guarantee from an Eligible Institution (as defined in the Instructions), unless
such requirement is waived by the Subscription Agent in its sole and absolute
discretion.
<PAGE> 6
If not all of the Rights represented by this Rights Certificate are exercised
pursuant to Form 1, transferred to a designated transferee or assigned to a bank
or broker to sell for you pursuant to Form 2 or transferred to the Subscription
Agent to sell for you pursuant to Form 3, the Subscription Agent will issue a
new Rights Certificate to the transferor for the remaining Rights not so
exercised, transferred, assigned or sold unless otherwise separately instructed,
subject to the terms of the Rights Offering, as described in the Prospectus.
<PAGE> 7
FORM 3
TO SELL SOME OR ALL OF YOUR UNEXERCISED RIGHTS THROUGH THE SUBSCRIPTION AGENT:
The undersigned hereby authorizes the Subscription Agent to sell _______ Rights
represented by the Rights Certificate but not exercised on Form 1, upon the
terms and conditions described in the Prospectus, and to deliver to the
undersigned a check for the proceeds, if any, from the sale thereof, less any
applicable brokerage commissions, taxes or other direct expenses of sale (see
instructions below regarding the sale of only a portion of your unexercised
Rights). The Subscription Agent's obligation to execute orders is subject to its
ability to find buyers for the Rights.
Proceeds from the sale of Rights may be subject to withholding of U.S. taxes
unless the seller's certified U.S. taxpayer identification number (or
certificate regarding foreign status) is on file with the Subscription Agent and
the seller is not otherwise subject to U.S. backup withholding.
In order to sell Rights through the Subscription Agent, you must complete and
sign the substitute Form W-9, as provided in Section 8 of the "Instructions For
Use of MEMC Electronic Materials, Inc. Rights Certificates".
Rights holder's Signature(s):
-----------------------------------
Rights holder's Signature(s):
-------------------------------
(If held jointly)
Signatures Guaranteed by:
--------------------------------------
Eligible Institution
If you desire to sell only a portion of the unexercised Rights represented by
this Rights Certificate, attach separate instructions to the Subscription Agent
regarding such sale(s) in accordance with Paragraph 3(f) of the Instructions.
Note that any such request will require a signature guarantee from an Eligible
Institution (as defined in the Instructions), unless such requirement is waived
by the Subscription Agent in its sole and absolute discretion.
If not all of the Rights represented by this Rights Certificate are exercised
pursuant to Form 1, transferred to a designated transferee or assigned to a bank
or broker to sell for you pursuant to Form 2 or sold by the Subscription Agent
pursuant to Form 3, the Subscription Agent will issue a new Rights Certificate
to the transferor for the remaining Rights not so exercised, transferred,
assigned or sold unless otherwise instructed, subject to the terms of the Rights
Offering, as described in the Prospectus.
<PAGE> 8
FORM 4
DELIVERY INSTRUCTIONS: Address for mailing of Common Stock or new Rights
Certificate or any cash payment in accordance with the Prospectus if other than
shown on this reverse hereof:
Name:
--------------------------------------
Address:
-----------------------------------
Rights holder's Signature(s):
-----------------------------------
Rights holder's Signature(s):
-----------------------------------
(If held jointly)
Signatures Guaranteed by:
--------------------------------------
Eligible Institution
If the addressee above is not an Eligible Institution (as defined in the
"Instructions For Use of MEMC Electronic Materials, Inc. Rights Certificates")
or the Rights holder named on this Rights Certificate, then the Rights holder
completing this Form 4 must have an Eligible Institution guarantee such Rights
holder's signature.
<PAGE> 1
EXHIBIT 5.1
[LETTERHEAD OF BRYAN CAVE LLP]
December 10, 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 10, 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; and
(ii) 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 10, 1998
Page 2
This opinion is not rendered with respect to any laws other than the
General Corporation Law of the State of Delaware and the Act. We are not
admitted to practice in Delaware. In rendering this opinion, we have relied on
an opinion of Richards, Layton & Finger, P.A. to us of even date herewith.
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 8.1
[LETTERHEAD OF BRYAN CAVE LLP]
December 10, 1998
Board of Directors
MEMC Electronic Materials, Inc.
501 Pearl Drive (City of O'Fallon)
St. Peters, Missouri 63376
Ladies and Gentlemen:
We have acted as special counsel to MEMC Electronic Materials, Inc., a
Delaware corporation (the "Company"), in connection with the offering (the
"Offering") of transferable short-term subscription rights to purchase the
Company's common stock, entitling the holder thereof to purchase up to
$93,900,000 shares of common stock, par value $0.01 per share of the Company as
described in the Registration Statement (Form S-3) filed with the Securities and
Exchange Commission on October 22, 1998, as amended (the "Registration
Statement"). In connection therewith, our opinion confirms that the discussion
of the federal income tax consequences contained in the Registration Statement
under the caption "Certain Federal Income Tax Considerations" sets forth our
opinion and fairly describes the material federal income tax consequences of the
Offering. Except as otherwise indicated herein, all capitalized terms used in
this letter have the same meaning assigned to them in the Registration
Statement.
In rendering our opinion, 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, the Registration
Statement and such other documents, certificates and instruments as we have
considered relevant for purposes of this opinion. We have assumed without
independent verification that the Registration Statement is accurate and
complete in all material respects and our opinion is expressly conditioned on,
among other things, the accuracy as of the date hereof, and the continuing
accuracy, of all of such facts, information, covenants, statements and
representations through and as of the date of consummation of the Offering. Any
material changes in the facts referred to, set forth or assumed herein or in the
Registration Statement may affect the conclusions stated herein.
We have assumed the genuineness of all signatures on all documents examined
by us, the legal capacity of all natural persons who executed such documents,
the authenticity of all documents submitted to us as originals, the conformity
to original documents of all documents
<PAGE> 2
MEMC Board of Directors
December 10, 1998
Page 2
submitted to us as certified or photostatic copies and the authenticity of the
originals of such documents.
In rendering our opinion, we have considered the applicable provisions of
the Internal Revenue Code of 1986, as amended (the "Code"), Treasury Regulations
promulgated thereunder by the Treasury Department (the "Regulations), pertinent
judicial authorities, rulings of the Internal Revenue Service and such other
authorities as we have considered relevant. It should be noted that such laws,
Code, Regulations, judicial decisions and administrative interpretations are
subject to change at any time and, in some circumstances, with retroactive
effect. A material change in any of the authorities upon which our opinion is
based could affect our conclusions herein.
Based solely upon the foregoing and in reliance thereon and subject to the
exceptions, limitations and qualifications stated herein, we confirm that the
statements contained in the Registration Statement under the caption "Certain
Federal Income Tax Considerations" insofar as such statements constitute matters
of law or legal conclusions, as qualified therein, are our opinion and that such
statements fairly describe the material federal income tax consequences of the
Offering and are true, correct and complete in all material respects.
Except as expressly set forth above, we express no other opinion. We
consent to the filing of this opinion as Exhibit 8.1 to the Registration
Statement and to the reference to this firm in the Registration Statement under
the caption "Certain Federal Income Tax Considerations." In giving such consent,
we do not thereby admit that we are in the category of persons whose consent is
required under Section 7 of the Securities Act of 1933 or the rules and
regulations of the Securities and Exchange Commission.
Very truly yours,
Bryan Cave LLP
<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. 1 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 10, 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. 1 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 10, 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. 1 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 10, 1998
<PAGE> 1
Exhibit 99.1
INSTRUCTIONS FOR USE OF MEMC ELECTRONIC MATERIALS, INC.
RIGHTS CERTIFICATES
CONSULT MORROW & CO., INC. OR YOUR BANK OR BROKER
AS TO ANY QUESTIONS
The following instructions relate to a rights offering (the
"Rights Offering") by MEMC Electronic Materials, Inc., a Delaware corporation
(the "Company"), to the holders (other than VEBA Corporation or its permitted
transferees) of its common stock, par value $0.01 per share (the "Common
Stock"), as described in the Company's prospectus dated December __, 1998 (the
"Prospectus"). Holders of record of shares of the Common Stock at the close of
business on December __, 1998 (the "Record Date") are receiving ____
transferable subscription rights (collectively, the "Rights") for each share of
the Common Stock held by them on the Record Date. An aggregate of approximately
_____ Rights exercisable to purchase an aggregate of approximately ______ shares
of the Common Stock are being distributed in connection with the Rights
Offering. Each whole Right is exercisable, upon payment of $____ in cash (the
"Subscription Price"), to purchase one share of the Common Stock (the "Basic
Subscription Privilege"). In addition, subject to the proration described below,
each Rights holder who fully exercises the Basic Subscription Privilege also has
the right to subscribe at the Subscription Price for additional shares of Common
Stock (the "Over-Subscription Privilege"). The shares of Common Stock will be
available for purchase pursuant to the Over-Subscription Privilege only to the
extent that all the shares are not subscribed for through the exercise of the
Basic Subscription Privilege by the Expiration Date, as defined below. If the
shares of Common Stock so available (the "Excess Shares") are not sufficient to
satisfy all subscriptions pursuant to the Over-Subscription Privilege, the
available shares will be allocated pro rata among Rights holders exercising
their Over-Subscription Privileges in proportion to the number of shares each
such Rights holder has purchased pursuant to his or her respective Basic
Subscription Privilege; provided, however, that if such pro rata allocation
results in any Rights holder being allocated a greater number of Excess Shares
than such Rights holder subscribed for pursuant to the exercise of such Rights
holder's Over-Subscription Privileges, then such Rights holder will be allocated
only such number of Excess Shares as such Rights holder subscribed for, and the
remaining Excess Shares will be allocated among all other Rights holders
exercising Over-Subscription Privileges. VEBA Corporation has agreed, subject to
certain conditions, to purchase at the Subscription Price all shares of Common
Stock not purchased by Rights holders in the Rights Offering. See discussion set
forth under "The Rights Offering" in the Prospectus.
No fractional Rights or cash in lieu thereof will be issued or
paid. The number of Rights distributed by the Company has been rounded up to the
nearest whole number in order to avoid issuing fractional Rights. Record Date
Nominee Holders (as defined on page ___ of the Prospectus) of Common Stock 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
<PAGE> 2
would otherwise have been entitled if they had been direct record holders of
Common Stock on the Record Date, provided such Record Date Nominee Holder makes
a proper showing to the Subscription Agent, as determined in the Subscription
Agent's sole and absolute discretion.
The Rights will expire at 5:00 p.m., New York City time, on
____________, 199_, unless extended as described in the Prospectus (the
"Expiration Date"). The Rights will trade on the New York Stock Exchange under
the symbol "WFRRT".
The number of Rights to which you are entitled is printed on
the face of your Rights Certificate. You should indicate your wishes with regard
to the exercise, assignment, transfer or sale of your Rights by completing the
appropriate form or forms on your Rights Certificate and returning it to the
Subscription Agent in the envelope provided.
YOUR RIGHTS CERTIFICATE MUST BE RECEIVED BY THE SUBSCRIPTION
AGENT, OR GUARANTEED DELIVERY REQUIREMENTS WITH RESPECT TO YOUR RIGHTS
CERTIFICATE MUST BE COMPLIED WITH, AND PAYMENT OF THE SUBSCRIPTION PRICE,
INCLUDING FINAL CLEARANCE OF ANY CHECKS, MUST BE RECEIVED BY THE SUBSCRIPTION
AGENT, ON OR BEFORE 5:00 P.M., NEW YORK CITY TIME, ON THE EXPIRATION DATE. YOU
MAY NOT REVOKE ANY EXERCISE OF A RIGHT, EXCEPT UNDER THE CIRCUMSTANCES DESCRIBED
IN THE PROSPECTUS.
1. SUBSCRIPTION PRIVILEGE.
To exercise Rights, complete Form 1 and deliver your properly
completed and executed Rights Certificate, together with payments in full of the
Subscription Price for each share of Common Stock subscribed for pursuant to the
Basic Subscription Privilege and the Over-Subscription Privilege, to the
Subscription Agent.
Payment of the Subscription Price must be made in U.S. dollars
for the full number of shares of Common Stock being subscribed for by (a)
certified or personal 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 (b) wire transfer of same day funds to the account
maintained by the Subscription Agent for such purpose at The Chase Manhattan
Bank, New York, NY, ABA No. 021 000 021, Account: 617-999988: (marked "MEMC
Electronic Materials, Inc. Subscription"). The Subscription Price will be deemed
to have been received by the Subscription Agent only upon (i) the clearance of
any uncertified check, (ii) the receipt by the Subscription Agent of any
certified check or bank draft drawn upon a U.S. bank or of any postal,
telegraphic or express money order or (iii) the receipt of collected funds in
the Subscription Agent's account designated above.
If paying by uncertified personal check, please note that the
funds paid thereby may take five business days or more to clear. Accordingly,
Rights holders who wish to pay the Subscription Price by means of an uncertified
personal check are urged to make payment sufficiently in advance of the
Expiration Date to ensure that such payment is received and clears by such date
and are urged to consider payment by means of certified or cashier's check,
money order or wire transfer of funds.
2
<PAGE> 3
Alternatively, you may cause a written guarantee substantially
in the form enclosed herewith (the "Notice of Guaranteed Delivery") from a
commercial bank, trust company, securities broker or dealer, credit union,
savings association or other eligible guarantor institution which is a member of
or a participant in a signature guarantee program acceptable to the Subscription
Agent (each of the foregoing being an "Eligible Institution"), to be received by
the Subscription Agent at or prior to the Expiration Date, together with payment
in full of the applicable Subscription Price. Such Notice of Guaranteed Delivery
must state your name, the number of Rights represented by your Rights
Certificate, the number of Rights being exercised pursuant to the Basic
Subscription Privilege and the number of shares of Common Stock, if any, being
subscribed for pursuant to the Over-Subscription Privilege, and will guarantee
the delivery to the Subscription Agent of your properly completed and executed
Rights Certificate within one New York Stock Exchange trading day following the
date of the Notice of Guaranteed Delivery. If this procedure is followed, your
Rights Certificate must be received by the Subscription Agent within one New
York Stock Exchange trading day of the Notice of Guaranteed Delivery. Additional
copies of the Notice of Guaranteed Delivery may be obtained upon request from
Harris Trust and Savings Bank, at the address, or by calling the telephone
number, indicated below.
Banks, brokers, trusts, depositaries or other nominee holders
of the Rights who exercise the Rights and the Over-Subscription Privilege on
behalf of beneficial owners of Rights will be required to certify to the
Subscription Agent and the Company on a Nominee Holder Certification Form, in
connection with the exercise of the Over-Subscription Privilege, as to the
aggregate number of Rights that have been exercised, and the number of shares
that are being subscribed for pursuant to the Over-Subscription Privilege, by
each beneficial owner of Rights on whose behalf such nominee holder is acting.
If more shares of the Common Stock are subscribed for pursuant to the
Over-Subscription Privilege than are available for sale, such shares will be
allocated, as described above, among persons exercising the Over-Subscription
Privilege in proportion to such persons' exercise of Rights pursuant to the
Basic Subscription Privilege.
The address and telecopier numbers of the Subscription Agent
are as follows:
<TABLE>
<S> <C> <C>
Facsimile Transmission
By Mail: (Eligible Institutions only): By Hand or Overnight Courier:
Harris Trust and Savings Bank Harris Trust and Savings
c/o Harris Trust Company of (212) 701-7636 Bank
New York c/o Harris Trust Company of
Post Office Box 1010 To confirm receipt of New York
New York, New York 10268- facsimile only: Wall Street Plaza
1010 88 Pine Street, 19th Floor
(212) 701-7624 New York, New York 10005
</TABLE>
3
<PAGE> 4
The address and telephone numbers of the Information Agent,
for inquiries, information or requests for additional documentation are as
follows:
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
If you exercise less than all of the Rights evidenced by your
Rights Certificate by so indicating on Form 1 of your Rights Certificate, you
may either (a) use Form 2 to transfer your remaining unexercised Rights to a
designated transferee or to assign them to a bank or broker to sell for you, (b)
use Form 3 to direct the Subscription Agent to attempt to sell the unexercised
Rights, (c) attach separate instructions to the Subscription Agent directing an
alternate disposition of your unexercised Rights (which instructions must be
guaranteed by an Eligible Institution) or (d) the Subscription Agent will issue
you a new Rights Certificate evidencing the unexercised Rights (see Paragraph 3
of these Instructions For Use of MEMC Electronic Materials, Inc. Rights
Certificate). However, if you choose to have a new Rights Certificate sent to
you, you may not receive any such new Rights Certificate in sufficient time to
permit you to exercise, assign, transfer or sell the Rights evidenced thereby.
If you have not indicated the number of Rights being exercised, or if you have
not forwarded full payment of the Subscription Price for the number of Rights
that you have indicated are being exercised, you will be deemed to have
exercised the Basic Subscription Privilege with respect to the maximum number of
whole Rights which may be exercised for the Subscription Price payment
transmitted or delivered by you, and to the extent that the Subscription Price
payment transmitted or delivered by you exceeds the product of the Subscription
Price multiplied by the number of Rights evidenced by the Rights Certificate(s)
transmitted or delivered by you (such excess being the "Subscription Excess"),
you will be deemed to have exercised your Over-Subscription Privilege to
purchase, to the extent available, that number of whole shares of the Common
Stock equal to the quotient obtained by dividing the Subscription Excess by the
Subscription Price, subject to the limit on the number of shares a Rights holder
may purchase pursuant to the Over-Subscription Privilege.
2. DELIVERY OF COMMON STOCK.
The following deliveries and payments will be made to the
address shown on the face of your Rights Certificate unless you provide
instructions to the contrary on Form 4.
(a) Basic Subscription Privilege. As soon as practicable after
the valid exercise of the Rights, the Subscription Agent will mail to each
exercising Rights holder certificates representing shares of Common Stock
purchased pursuant to the Basic Subscription Privilege.
4
<PAGE> 5
(b) Over-Subscription Privilege. As soon as practicable after
the Expiration Date, the Subscription Agent will mail to each Rights holder who
validly exercises the Over-Subscription Privilege the number of shares of Common
Stock allocated to such Rights holder pursuant to the Over-Subscription
Privilege. See "The Rights Offering--Subscription Privileges--Over-Subscription
Privilege" in the Prospectus.
(c) Cash Payments. As soon as practicable after the Expiration
Date, the Subscription Agent will mail to each Rights holder who exercises the
Over-Subscription Privilege any excess funds, without interest or deduction,
received in payment of the Exercise Price for each share of the Common Stock
that is subscribed for by, but not allocated to, such Rights holder pursuant to
the Over-Subscription Privilege.
3. TO SELL OR TRANSFER RIGHTS.
(a) Sale of All Rights through a Bank or Broker. To have a
bank or broker sell all the unexercised Rights evidenced by a Rights Certificate
for you, so indicate on Form 2 and deliver your properly completed and executed
Rights Certificate to your bank or broker. Your Rights Certificate should be
delivered to your bank or broker in ample time for it to be processed by the
Subscription Agent. If Form 2 is completed without designating a transferee, the
Subscription Agent may thereafter treat the bearer of the Rights Certificate as
the absolute owner of all of the Rights evidenced by such Rights Certificate for
all purposes, and neither the Subscription Agent nor the Company shall be
affected by any notice to the contrary.
(b) Sale of Less than All Unexercised Rights through a Bank or
Broker. Because your bank or broker cannot issue Rights Certificates, if you
wish to sell less than all of the unexercised Rights evidenced by a Rights
Certificate, so indicate on Form 2, and either you or your bank or broker must
separately instruct the Subscription Agent as to the action to be taken with
respect to the unexercised Rights not sold. Such instructions should be
accompanied by a stock power authorizing such transfer and should be guaranteed
by an Eligible Institution. Alternatively, you or your bank or broker must first
have your Rights Certificate divided into Rights Certificates of appropriate
denominations by following the instructions in Paragraph 4 of these
instructions. Each Rights Certificate evidencing the number of Rights you intend
to sell can then be transferred by your bank or broker in accordance with the
instructions in Paragraph 3(a).
(c) Transfer of All or Less than All Unexercised Rights to One
Designated Transferee. To transfer all of your unexercised Rights to a
designated transferee other than a bank or broker, you must complete Form 2 in
its entirety, execute the Rights Certificate and have your signature guaranteed
by an Eligible Institution. A Rights Certificate that has been properly
transferred in its entirety may be exercised by a new holder without having a
new Rights Certificate issued. If you wish to transfer less than all of your
unexercised Rights to one designated transferee, execute the Rights Certificate
and separately instruct the Subscription Agent as to the action to be taken with
respect to the unexercised Rights not transferred. Such instructions should be
accompanied by stock power(s) authorizing such transfer(s) and should be
guaranteed by an Eligible Institution. If no such instructions are received,
the Subscription Agent will issue you a new Rights Certificate evidencing the
unexercised Rights. If Form 2 is completed without designating a transferee,
the Subscription Agent may thereafter treat the bearer of the Rights Certificate
as the absolute owner of all of the Rights evidenced by such Rights Certificate
for all purposes, and neither the Subscription Agent nor the Company shall be
affected by any notice to the contrary.
5
<PAGE> 6
(d) Transfer of All or Less than All Unexercised Rights to
More than One Designated Transferee. Because only the Subscription Agent can
issue Rights Certificates, if you wish to transfer all or less than all of the
unexercised Rights evidenced by your Rights Certificate to more than one
designated transferee, so indicate one such transfer on Form 2 and separately
instruct the Subscription Agent as to the action to be taken with respect to the
remaining unexercised Rights. Such instructions should be accompanied by stock
power(s) authorizing such transfer(s) and should be guaranteed by an Eligible
Institution. Alternatively, you can divide your Rights Certificate into Rights
Certificates of appropriate smaller denominations by following the instructions
in Paragraph 4 below. Each Rights Certificate evidencing the number of Rights
you intend to transfer can then be transferred by following the instructions in
Paragraph 3(c).
(e) Sale of All Unexercised Rights Through the Subscription
Agent. To sell all unexercised Rights evidenced by a Rights Certificate through
the Subscription Agent, so indicate on Form 3 and deliver your properly
completed and executed Rights Certificate to the Subscription Agent. The
Subscription Agent's obligation to execute sell orders is subject to its ability
to find buyers for the Rights. No assurance can be given that a market will
develop for the Rights or that the Subscription Agent will be able to sell any
Rights.
(f) Sale of Less than All Unexercised Rights Through the
Subscription Agent. If you wish to sell less than all of the unexercised Rights
evidenced by a Rights Certificate, so indicate on Form 3 and separately instruct
the Subscription Agent as to the action to be taken with respect to the
unexercised Rights not sold. Such instructions should be accompanied by stock
power(s) authorizing such transfer(s) and should be guaranteed by an Eligible
Institution. Alternatively, you may have your Rights Certificate divided into
Rights Certificates of appropriate denominations by following the instructions
in Paragraph 4 below. The Rights Certificate evidencing the number of
unexercised Rights you intend to transfer can then be transferred by following
the instructions in Paragraph 3(e). If the Subscription Agent sells any of your
Rights, such Rights will be deemed to have been sold at the weighted average
sale price of all Rights sold by the Subscription Agent, less your pro rata
portion of any applicable brokerage commissions, taxes and other expenses.
Promptly following the Expiration Date, the Subscription Agent will send the
holder a check for the net proceeds from the sale of any Rights sold. The
Subscription Agent's obligation to execute sell orders is subject to its ability
to find buyers for the Rights. No assurance can be given that a market will
develop for the Rights or that the Subscription Agent will be able to sell any
Rights.
4. TO HAVE A RIGHTS CERTIFICATE DIVIDED INTO SMALLER DENOMINATIONS.
Send your Rights Certificate, together with complete separate
instructions (including specification of the denominations into which you wish
your Rights to be divided), signed by you, to the Subscription Agent, allowing a
sufficient amount of time for new Rights Certificates to be issued and returned
so that they can be used prior to the Expiration Date. Alternatively, you may
assign your unexercised Rights to a bank or broker to effect such actions on
your behalf. YOUR SIGNATURE MUST BE GUARANTEED BY AN ELIGIBLE INSTITUTION IF ANY
OF THE NEW RIGHTS CERTIFICATES ARE TO BE ISSUED IN A NAME OTHER THAN THAT IN
WHICH THE OLD RIGHTS
6
<PAGE> 7
CERTIFICATE WAS ISSUED. Rights Certificates may not be divided into fractional
Rights, and any instruction to do so will be rejected. As a result of delays in
the mail, the time of the transmittal, the necessary processing time and other
factors, you or your transferee may not receive such new Rights Certificate(s)
in time to enable the Rights holder to complete a sale, exercise or transfer by
the Expiration Date. Neither the Company nor the Subscription Agent will be
liable to either a transferor or transferee for any such delays.
Record Date Nominee Holders of Common Stock 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 would otherwise have
been entitled if they had been direct record holders of Common Stock on the
Record Date, provided such Record Date Nominee Holder makes a proper showing to
the Subscription Agent, as determined in the Subscription Agent's sole and
absolute discretion.
5. EXECUTION.
(a) Execution by Registered Holder(s). The signature on the
reverse of the Rights Certificate must correspond with the name of the
registered holder exactly as it appears on the Rights Certificate without any
alteration or change whatsoever. If the Rights Certificate is registered in the
names of two or more joint owners, all of such owners must sign. Persons who
sign the Rights Certificate in a representative or other fiduciary capacity must
indicate their capacity when signing and, unless waived by the Subscription
Agent in its sole and absolute discretion, must present to the Subscription
Agent satisfactory evidence of their authority to so act.
(b) Execution by Person Other than Registered Holder. If the
Rights Certificate is executed by a person other than the holder named on the
face of the Rights Certificate, proper evidence of authority of the person
executing the Rights Certificate must accompany the same unless, for good cause,
the Subscription Agent dispenses with proof of authority.
(c) Signature Guarantees. Your signature must be guaranteed by
an Eligible Institution if you wish to have a bank or broker or the Subscription
Agent sell less than all of your unexercised Rights, as specified in Paragraphs
3(b) and/or 3(f), or to transfer all or less than all of your Rights to any
designated transferee(s) other than a bank or broker, as specified in Paragraphs
3(c) or 3(d) above, or if you specify special payment or delivery instructions
pursuant to Form 4.
6. METHOD OF DELIVERY.
The method of delivery of Rights Certificates and payment of
the Subscription Price to the Subscription Agent will be at the election and
risk of the Rights holder, but, if sent by mail, it is recommended that they be
sent by registered mail, properly insured, with return receipt requested, and
that a sufficient number of days be allowed to ensure delivery to the
Subscription Agent and the clearance of any checks sent in payment of the
Subscription Price prior to 5:00 p.m., New York City time, on the Expiration
Date.
7
<PAGE> 8
7. SPECIAL PROVISIONS RELATING TO THE DELIVERY OF RIGHTS THROUGH THE DEPOSITORY
TRUST COMPANY.
In the case of holders of Rights that are held of record
through The Depository Trust Company ("DTC"), exercises of the Basic
Subscription Privilege (but not the Over-Subscription Privilege) may be effected
by instructing DTC to transfer Rights (such Rights being "DTC Exercised Rights")
from the DTC account of such holder to the DTC account of the Subscription
Agent, together with payment of the Subscription Price for each share of Common
Stock subscribed for pursuant to the Basic Subscription Privilege. The
Over-Subscription Privilege in respect of DTC Exercised Rights may not be
exercised through DTC. The holder of a DTC Exercised Right may exercise the
Over-Subscription Privilege in respect of such DTC Exercised Right by properly
executing and delivering to the Subscription Agent at or prior to 5:00 p.m., New
York City time, on the Expiration Date, a DTC Participant Over-Subscription
Exercise Form and a Nominee Holder Certification Form, available from the
Subscription Agent, together with payment of the appropriate Subscription Price
for the number of shares of Common Stock for which the Over-Subscription
Privilege is to be exercised.
If a Notice of Guaranteed Delivery relates to Rights with
respect to which exercise of the Basic Subscription Privilege will be made
through DTC and such Notice of Guaranteed Delivery also relates to the exercise
of the Over-Subscription Privilege, a DTC Participant Over-Subscription
Exercise Form and a Nominee Holder Certification Form must also be received by
the Subscription Agent in respect of such exercise of the Over-Subscription
Privilege on or prior to the Expiration Date.
8. SUBSTITUTE FORM W-9.
Each Rights holder who elects to exercise, sell or transfer
the Rights through the Subscription Agent and those foreign stockholders who
allow the Subscription Agent to sell such foreign holder's Rights should provide
the Subscription Agent with a correct Taxpayer Identification Number ("TIN") or
with evidence of such Rights holder's exemption from backup withholding on
Substitute Form W-9, which is included with these Instructions. Additional
copies of Substitute Form W-9 may be obtained upon request from the Subscription
Agent at the address, or by calling the telephone number indicated above.
Failure to provide the information on the form may subject such holder to 31%
federal income tax withholding with respect to (i) dividends that may be paid by
the Company on shares of Common Stock purchased upon the exercise of Rights (for
those holders exercising Rights), or (ii) funds to be remitted to Rights holders
in respect of Rights sold by the Subscription Agent (for those holders electing
to have the Subscription Agent sell their Rights for them).
8
<PAGE> 1
EXHIBIT 99.2
NOTICE OF GUARANTEED DELIVERY
FOR
RIGHTS CERTIFICATES
ISSUED BY
MEMC ELECTRONIC MATERIALS, INC.
This form, or one substantially equivalent hereto, must be used to exercise
Rights pursuant to the Rights Offering described in the prospectus dated
____________, 199_ (the "Prospectus") of MEMC Electronic Materials, Inc., a
Delaware corporation (the "Company"), if a holder of Rights cannot deliver the
rights certificates evidencing the Rights (the "Rights Certificate(s)"), to the
Subscription Agent listed below (the "Subscription Agent") at or prior to 5:00
p.m., New York City time, on ___________, 199_, unless extended (the "Expiration
Date"). Such form must be delivered by hand or sent by facsimile transmission or
mail to the Subscription Agent, and must be received by the Subscription Agent
on or prior to the Expiration Date. See the discussion set forth under "The
Rights Offering--Exercise of Rights" in the Prospectus.
Payment of the Subscription Price of $____ per share for each share of
common stock, $0.01 par value per share (the "Common Stock"), of the Company
subscribed for upon exercise of such Rights must be received by the Subscription
Agent in the manner specified in the Prospectus at or prior to 5:00 p.m., New
York City time, on the Expiration Date if the Rights Certificate evidencing such
Rights is being delivered pursuant to the procedure for guaranteed delivery
thereof. See the discussion set forth under "The Rights Offering--Guaranteed
Delivery Procedures" in the Prospectus. All undefined capitalized terms used
herein have the definition ascribed to them in the Prospectus.
<TABLE>
<S> <C> <C>
The Subscription Agent is:
Harris Trust and Savings Bank
Facsimile Transmission
By Mail: (Eligible Institutions only): By Hand or Overnight Courier:
Harris Trust and Harris Trust and Savings Bank
Savings Bank c/o Harris Trust Company of
c/o Harris Trust (212) 701-7636 New York
Company of New York Wall Street Plaza
P.O. Box 1010 To confirm receipt of facsimile 88 Pine Street, 19th Floor
New York, New York only: New York, New York 10005
10268-1010
(212) 701-7624
</TABLE>
<PAGE> 2
The address, telephone and telecopier numbers of the Information Agent, for
inquiries, information or requests for additional documentation is as follows:
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
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR
TRANSMISSION VIA A FACSIMILE MACHINE OTHER THAN AS SET FORTH ABOVE DOES NOT
CONSTITUTE A VALID DELIVERY.
Ladies and Gentlemen:
The undersigned hereby represents that he or she is the holder of Rights
Certificate(s) representing ___________ Rights and that such Rights
Certificate(s) cannot be delivered to the Subscription Agent at or before 5:00
p.m., New York City time, on the Expiration Date. Upon the terms and subject to
the conditions set forth in the Prospectus, receipt of which is hereby
acknowledged, the undersigned hereby elects to exercise (i) the Basic
Subscription Privilege to subscribe for one share of Common Stock per Right with
respect to _______ of the Rights represented by such Rights Certificate and (ii)
the Over-Subscription Privilege relating to each such Right to subscribe, to the
extent that shares ("Excess Shares") are not subscribed for pursuant to
exercises under the Basic Subscription Privilege, for an aggregate of up to
_______ Excess Shares. The undersigned understands that payment of the
Subscription Price of $_____.__ per share for each share of the Common Stock
subscribed for pursuant to the Basic Subscription Privilege and
Over-Subscription Privilege must be received by the Subscription Agent at or
before 5:00 p.m., New York City time, on the Expiration Date and represents that
such payment, in the aggregate amount of $_________, either (check appropriate
box):
[_] is being delivered to the Subscription Agent herewith
or
[_] has been delivered separately to the Subscription Agent;
and is or was delivered in the manner set forth below (check appropriate box
and complete information relating thereto);
[_] wire transfer of funds
2
<PAGE> 3
--name of transferor institution ____________________________________
--date of transfer __________________________________________________
--confirmation number (if available) ________________________________
[_] uncertified check (Payment by uncertified check will not be deemed to have
been received by the Subscription Agent until such check has cleared.
Holders paying by such means are urged to make payment sufficiently in
advance of the Expiration Date to ensure that such payment clears by such
date).
[_] certified check
[_] bank draft (cashier's check)
[_] money order
--name of maker _____________________________________________________
--date of check, draft or money order number ________________________
--bank on which check is drawn or issuer of money order _____________
Signature(s)______________________________________________________________
Name(s)___________________________________________________________________
__________________________________________________________________________
__________________________________________________________________________
(PLEASE TYPE OR PRINT)
__________________________________________________________________________
Address(es)_______________________________________________________________
(ZIP CODE)
Area Code and Tel. No(s)._________________________________________________
Rights Certificate No(s). (if available)__________________________________
__________________________________________________________________________
3
<PAGE> 4
GUARANTEE OF DELIVERY
(NOT TO BE USED FOR RIGHTS CERTIFICATE SIGNATURE GUARANTEE)
The undersigned, a member firm of a registered national securities exchange or
member of the National Association of Securities Dealers, Inc., commercial bank
or trust company having an office or correspondent in the United States, or
other eligible guarantor institution which is a member of or a participant in a
signature guarantee program acceptable to the Subscription Agent, guarantees
that the undersigned will deliver to the Subscription Agent the certificates
representing the Rights being exercised hereby, with any required signature
guarantees and any other required documents, all within one (1) New York Stock
Exchange trading day after the date hereof.
__________________________________________________________________________
__________________________________________________________________________
__________________________________________________________________________
(ADDRESS)
__________________________________________________________________________
(AREA CODE AND TELEPHONE NUMBER)
Dated:______________________________________________________________, 1998
__________________________________________________________________________
(NAME OF FIRM)
__________________________________________________________________________
(AUTHORIZED SIGNATURE)
The institution which completes this form must communicate the guarantee to the
Subscription Agent and must deliver the Rights Certificates to the Subscription
Agent within the time period shown herein. Failure to do so could result in a
financial loss to such institution.
4
<PAGE> 1
Exhibit 99.3
MEMC ELECTRONIC MATERIALS, INC.
RIGHTS OFFERING
____________________
DTC PARTICIPANT OVER-SUBSCRIPTION EXERCISE FORM
_____________________
THIS FORM IS TO BE USED ONLY BY DEPOSITORY TRUST COMPANY PARTICIPANTS TO
EXERCISE THE OVER-SUBSCRIPTION PRIVILEGE IN RESPECT OF RIGHTS WITH RESPECT TO
WHICH THE BASIC SUBSCRIPTION PRIVILEGE WAS EXERCISED AND DELIVERED IN FULL
THROUGH THE FACILITIES OF THE DEPOSITORY TRUST COMPANY. ALL OTHER EXERCISES OF
OVER-SUBSCRIPTION PRIVILEGES MUST BE EFFECTED BY THE DELIVERY OF RIGHTS
CERTIFICATES.
______________________
THE TERMS AND CONDITIONS OF THE RIGHTS OFFERING ARE SET FORTH IN THE COMPANY'S
PROSPECTUS DATED ____________, 199_ (THE "PROSPECTUS") AND ARE INCORPORATED
HEREIN BY REFERENCE. COPIES OF THE PROSPECTUS ARE AVAILABLE UPON REQUEST FROM
THE COMPANY AND THE SUBSCRIPTION AGENT.
_______________________
VOID UNLESS RECEIVED BY THE SUBSCRIPTION AGENT WITH PAYMENT IN FULL BY 5:00
P.M., NEW YORK CITY TIME, ON ____________________, 1999 UNLESS EXTENDED.
1. The undersigned hereby certifies to MEMC Electronic Materials, Inc.
(the "Company") and Harris Trust and Savings Bank, as the Subscription
Agent, that it is a participant in The Depository Trust Company ("DTC")
and that it has either (i) exercised in full the Basic Subscription
Privilege in respect of Rights and delivered such exercised Rights to
the Subscription Agent by means of transfer to the DTC account of the
Subscription Agent designated in the Prospectus, or (ii) delivered to
the Subscription Agent a Notice of Guaranteed Delivery in respect of
the exercise in full of the Basic Subscription Privilege and will
deliver the Rights called for in such Notice of Guaranteed Delivery to
the Subscription Agent by means of transfer to such DTC account of the
Subscription Agent.
2. The undersigned hereby exercises the Over-Subscription Privilege to
purchase, to the extent available, ________ shares of Common Stock and
certifies to the Company and the Subscription Agent that such
Over-Subscription Privilege is being exercised for the account or
accounts of persons (which may include the undersigned) on whose behalf
the Basic Subscription Privilege was exercised in full.
3. The undersigned understands that payment of the Subscription Price of
$____ per share for each share of Common Stock subscribed for pursuant
to the Over-Subscription Privilege must be received by the Subscription
Agent at or before the Expiration Date and
<PAGE> 2
represents that such payment, in the aggregate amount of $_____________
(check appropriate box)
[ ] has been or is being delivered to the Subscription Agent
pursuant to the Notice of Guaranteed Delivery referred to
above;
[ ] is being delivered to the Subscription Agent herewith;
or
[ ] has been delivered separately to the Subscription agent;
and, in the case of funds not delivered pursuant to a Notice of Guaranteed
Delivery, is or was delivered in the manner set forth below (check appropriate
box and complete information relating thereto):
[ ] wire transfer funds;
Name of transferor institution _______________________________
Date of transfer _____________________________________________
Confirmation number (if available ____________________________
[ ] uncertified check (Payment by uncertified check will not be deemed to
have been received by the Subscription Agent until such check has
cleared. Holders paying by such means are urged to make payment
sufficiently in advance of the Expiration Date to ensure that such
payment clears by such date).
[_] certified check
[_] bank draft (cashier's check)
[_] money order
--name of maker _____________________________________________________
--date of check, draft or money order number ________________________
--bank on which check is drawn or issuer of money order _____________
____________________________________________
Basic Subscription Confirmation Number
____________________________________________
DTC Participant Number
____________________________________________
Name of DTC Participant
By: _______________________________________
Name:
Title:
Date: _________________, 199_
PARTICIPANTS EXERCISING THE OVER-SUBSCRIPTION PRIVILEGE PURSUANT HERETO MUST
SEPARATELY SUBMIT A NOMINEE HOLDER CERTIFICATION FORM TO THE SUBSCRIPTION AGENT.
2
<PAGE> 1
EXHIBIT 99.4
[LETTERHEAD OF MEMC ELECTRONIC MATERIALS, INC.]
December 7, 1998
IMPORTANT ANNOUNCEMENT TO THE HOLDERS OF COMMON STOCK
OF MEMC ELECTRONIC MATERIALS, INC.
This is to advise you that MEMC Electronic Materials, Inc. (the "Company")
intends to make a rights offering (the "Rights Offering"), and has filed a
Registration Statement on Form S-3 (the "Registration Statement") in connection
therewith with the Securities and Exchange Commission. The Company proposes to
distribute to holders of its outstanding Common Stock, other than VEBA
Corporation or its permitted transferees, at no cost, transferable subscription
rights (the "Rights") to purchase before the Rights expire additional shares of
the Common Stock, at a subscription price (the "Subscription Price") to be
determined. It is proposed that holders of the Common Stock will receive a
number of Rights to be determined for each share of Common Stock held by them as
of the close of business on the record date, which is expected to be no earlier
than December 18, 1998, but which has not yet been determined and may be later.
Additional information regarding the Rights Offering, including the subscription
price, the distribution rate, the record date and the expiration date, will be
communicated in a press release on the effective date of the Registration
Statement. The Company recommends that you watch for such subsequent press
release.
As soon as practicable after the close of business on the record date, a
Rights Certificate and a related set of instructions explaining the procedure
for exercising, selling or transferring the Rights, together with the
Prospectus, will be mailed to you. The terms of the Rights Offering will be more
completely described in the Prospectus. If these documents do not arrive within
a reasonable time after the record date, please notify the Information Agent,
Morrow & Co., Inc., at 445 Park Avenue, 5th Floor, New York, NY, 10022, or by
telephone at (800) 566-9061. Banks and brokers may call (800) 662-5200. The
Rights Offering has not yet commenced. Therefore, there is no action to take at
this time.
The Registration Statement relating to the Rights and the underlying Common
Stock has not yet become effective. These securities may not be sold nor may
offers to buy be accepted prior to the time the Registration Statement becomes
effective. This notice shall not constitute an offer to sell or the solicitation
of an offer to buy nor shall there be any sale of such Rights or Common Stock in
any state in which such offer, solicitation or sale would be unlawful prior to
registration or qualification under the securities laws of any such state.
Although you are not required to take any action at this time, you should
be prepared to act promptly or to have someone authorized to act for you when
you receive your Rights Certificate. Whether you anticipate exercising, selling,
or transferring your Rights, you should bear in mind that in order for an
exercise to be valid, the payment of the Subscription Price for Rights being
exercised must be received by the Subscription Agent and any such payments by
uncertified check must have cleared before the Rights Offering expires.
Very truly yours,
/s/ Helene F. Hennelly
----------------------------
Helene F. Hennelly
Secretary
<PAGE> 1
EXHIBIT 99.5
MEMC ELECTRONIC MATERIALS, INC.
COMMON SHARES
INITIALLY OFFERED PURSUANT TO RIGHTS
DISTRIBUTED TO STOCKHOLDERS OF
MEMC ELECTRONIC MATERIALS, INC.
Dear Stockholders:
This letter is being distributed to all holders of common stock, par value
$0.01 per share (the "Common Stock"), of record on __________, 1998 (the "Record
Date"), of MEMC Electronic Materials, Inc. (the "Company"), other than VEBA
Corporation or its transferees, in connection with a distribution of
transferable rights ("Rights") to acquire the Common Stock at a subscription
price of $_________ per share for each share of the Common Stock.
Each beneficial owner of the Common Stock is entitled to ___ Rights for
each share of Common Stock owned. All fractional Rights will be rounded up to
the nearest whole number.
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.
Your prompt action is requested. The Rights will expire at 5:00 P.M., New
York City time, on _______________, 1998, unless extended by the Company (the
"Expiration Date").
To exercise the Rights, a properly completed and executed Rights
Certificate (unless the guaranteed delivery procedures are complied with) and,
in any event, payment in full for all of the Rights exercised thereby must be
delivered to the Subscription Agent as indicated in the Prospectus prior to 5:00
P.M., New York City time, on the Expiration Date.
Additional copies of the enclosed materials may be obtained from Morrow &
Co., Inc., the Information Agent. Their toll-free telephone number is (800)
566-9061.
Very truly yours,
MEMC ELECTRONIC MATERIALS, INC.
<PAGE> 1
EXHIBIT 99.6
MEMC ELECTRONIC MATERIALS, INC.
COMMON SHARES
INITIALLY OFFERED PURSUANT TO RIGHTS
DISTRIBUTED TO STOCKHOLDERS OF
MEMC ELECTRONIC MATERIALS, INC.
To Securities Dealers, Commercial Banks,
Trust Companies and Other Nominees:
This letter is being distributed to securities dealers, commercial banks, trust
companies and other nominees in connection with the offering by MEMC Electronic
Materials, Inc. (the "Company") of _____ shares of common stock, par value $0.01
per share (the "Common Stock"), of the Company, at a subscription price of
$_____ per share for each share of the Common Stock, pursuant to transferable
subscription rights (the "Rights") initially distributed to holders of record of
the Common Stock as of the close of business on __________, 1998 (the "Record
Date"), other than VEBA Corporation or its transferees. The Rights are described
in the prospectus dated ________, 199_ (the "Prospectus") and evidenced by a
Rights Certificate registered in your name or the name of your nominee.
Each beneficial owner of shares of the Common Stock registered in your name or
the name of your nominee is entitled to one Right for each share of the Common
Stock owned by such beneficial owner. All fractional Rights will be rounded up
to the nearest whole number. If you hold shares for the account(s) of more than
one beneficial owner, you 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 the Record Date, provided
you make a proper showing to the Subscription Agent. No fractional Rights or
cash in lieu thereof will be issued or paid.
We are asking you to contact your clients for whom you hold the Common Stock
registered in your name or in the name of your nominee to obtain instructions
with respect to the Rights.
Please keep in mind the following dates:
<TABLE>
<CAPTION>
Event Date
----------------------------------------- ----
<S> <C>
Record Date
Subscription and Final Payment for Shares through
Expiration of the Offer _____, 199_, unless extended
</TABLE>
Enclosed are copies of the following documents:
1. The Prospectus;
<PAGE> 2
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, with space provided for obtaining such clients' instructions
with regard to the Rights;
4. A Nominee Holder Certification Form;
5. A Notice of Guaranteed Delivery for Rights Certificates
issued by MEMC Electronic Materials, Inc.;
6. A DTC Participant Over-Subscription Exercise Form; and
7. A return envelope addressed to Harris Trust and Savings Bank, the
Subscription Agent.
Your prompt action is requested. The Rights will expire at 5:00 P.M., New York
City time, on _________, 1998, unless extended by the Company (the "Expiration
Date").
To exercise the Rights, a properly completed and executed Rights Certificate
(unless the guaranteed delivery procedures are complied with) and payment in
full for all Rights exercised thereby must be delivered to the Subscription
Agent as indicated in the Prospectus prior to 5:00 P.M., New York City time, on
the Expiration Date. Exercise of the Over-Subscription Privilege must be
accompanied by a properly completed and executed DTC Participant
Over-Subscripion Exercise Form and Nominee Holder Certification Form.
Additional copies of the enclosed materials may be obtained from, and Rights
holders requesting assistance or information may call 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.
NOTHING HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU OR ANY PERSON
AS AN AGENT OF MEMC ELECTRONIC MATERIALS, INC., THE SUBSCRIPTION AGENT OR ANY
OTHER PERSON MAKING OR DEEMED TO BE MAKING OFFERS OF THE COMMON STOCK ISSUABLE
UPON VALID EXERCISE OF THE RIGHTS, NOR SHALL ANYTHING AUTHORIZE YOU OR ANY OTHER
PERSON TO MAKE ANY STATEMENTS ON BEHALF OF ANY OF THEM WITH RESPECT TO THE
OFFERING, EXCEPT FOR STATEMENTS MADE IN THE PROSPECTUS.
<PAGE> 1
Exhibit 99.7
MEMC ELECTRONIC MATERIALS, INC.
COMMON SHARES
INITIALLY OFFERED PURSUANT TO RIGHTS
DISTRIBUTED TO STOCKHOLDERS OF
MEMC ELECTRONIC MATERIALS, INC.
To Our Clients:
Enclosed for your consideration are a prospectus dated __________, 1998
(the "Prospectus"), and the "Instructions for Use of MEMC Electronic Materials,
Inc. Rights Certificates" relating to the offer by MEMC Electronic Materials,
Inc. (the "Company") of shares of common stock, par value $0.01 per share (the
"Common Stock"), of the Company, at a subscription price of $____ per share for
each share of the Common Stock, in cash, pursuant to transferable subscription
rights (the "Rights") initially distributed to holders of record ("Record
Owners") of shares of the Common Stock as of the close of business on
__________, 199__ (the "Record Date"), other than VEBA Corporation or its
permitted transferees. All undefined capitalized terms used herein have the
definition ascribed to them in the accompanying Prospectus.
As described in the Prospectus, you will receive ________ transferable
Rights for each share of the Common Stock carried by us in your account as of
the Record Date. Each Right will entitle you to subscribe for one share of
Common Stock (the "Basic Subscription Privilege") at a subscription price of
$_________.__ per share (the "Subscription Price"). You will also have the right
(the "Over-Subscription Privilege"), subject to proration, to subscribe for
shares of the Common Stock available after satisfaction of all subscriptions
pursuant to Basic Subscription Privileges ("Excess Shares"), at the Subscription
Price. If there are insufficient Excess Shares to satisfy all exercised
Over-Subscription Privileges, Excess Shares will be allocated pro rata among all
the holders of the Rights exercising Over-Subscription Privileges, in proportion
to the number of shares each such holder has purchased pursuant to his or her
respective Basic Subscription Privilege. Your election to exercise the
Over-Subscription Privilege must be made at the time you exercise the Basic
Subscription Privilege in full.
Rights are transferable and holders that wish to sell their Rights may do
so. The Rights will trade on the New York Stock Exchange (the "NYSE") up to and
including the close of business on the last trading day prior to the Expiration
Date under the symbol, "WFRRT." It is anticipated that the Rights will trade on
a "when issued" basis up to and including the Record Date.
THE MATERIALS ENCLOSED ARE BEING FORWARDED TO YOU AS THE BENEFICIAL OWNER
OF SHARES OF THE COMMON STOCK CARRIED BY US IN YOUR ACCOUNT BUT NOT REGISTERED
IN YOUR NAME.
1
<PAGE> 2
EXERCISES AND SALES OF THE RIGHTS MAY BE MADE BY ONLY US AS THE RECORD OWNER AND
PURSUANT TO YOUR INSTRUCTIONS.
Accordingly, we request instructions as to whether you wish us to elect to
exercise any of your Rights to subscribe for shares of Common Stock, or to sell
or otherwise transfer any Rights, to which you are entitled pursuant to the
terms and subject to the conditions set forth in the enclosed Prospectus and
"Instructions for Use of MEMC Electronic Materials, Inc. Rights Certificates."
However, we urge you to read these documents carefully before instructing us to
exercise or sell the Rights.
Your instructions to us should be forwarded as promptly as possible in
order to permit us to exercise or sell Rights on your behalf in accordance with
the provisions of the offering. The offering will expire at 5:00 P.M., New York
City time, on ___________, 1998, unless the offering is extended by the Company.
Once you have exercised a Right, such exercise may not be revoked, except as
described in the Prospectus. If you wish to have us, on your behalf, exercise
the Rights for any shares of the Common Stock to which you are entitled, or sell
such Rights, please so instruct us by completing, executing and returning to us
the instruction form on the reverse side of this letter.
ANY QUESTIONS OR REQUESTS FOR ASSISTANCE CONCERNING THE RIGHTS OFFERING
SHOULD BE DIRECTED TO THE INFORMATION AGENT, MORROW & CO., INC. THEIR TOLL
FREE TELEPHONE NUMBER IS (800) 566-9061.
2
<PAGE> 3
INSTRUCTIONS
The undersigned acknowledge(s) receipt of your letter and the enclosed
materials referred to therein 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").
This will 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 the account of the undersigned, pursuant to the terms and
subject to the conditions set forth in the Prospectus and the related
"Instructions for Use of MEMC Electronic Materials, Inc. Rights Certificates".
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, the undersigned beneficial
Rights holder hereby represents and certifies that the undersigned has fully
exercised its 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: __________________, 1998 _______________________________
3
<PAGE> 4
BOX 5. [_] Please sell _____ of my Rights.
BOX 6. [_] Please cause the Subscription Agent to effect my specific
instructions that I have attached hereto and for which I have had an Eligible
Institution guarantee my signature in accordance with Paragraphs 3 and 4 of the
Instructions.
Beneficial Rights holder's Signature(s):__________________________________
Beneficial Rights holder's Signature(s):__________________________________
(If held jointly)
Please type or print name(s) below:
_______________________________
_______________________________
Signature(s) Guaranteed by:_________________________________
Eligible Institution
4
<PAGE> 1
EXHIBIT 99.8
MEMC ELECTRONIC MATERIALS, INC.
NOMINEE HOLDER CERTIFICATION
The undersigned, a bank, broker, trustee, depositary or other nominee of
Rights ("Rights") to purchase shares of Common Stock ("Common Stock") of MEMC
Electronic Materials, Inc. (the "Company") pursuant to the Rights Offering
described and provided for in the Company's prospectus dated _________, 199_,
(the "Prospectus"), hereby certifies to the Company and to Harris Trust and
Savings Bank, as Subscription Agent for such Rights Offering, that (1) the
undersigned has exercised, on behalf of the beneficial owners thereof (which may
include the undersigned), the number of Rights specified below pursuant to the
basic subscription privilege (as defined in the Prospectus) on behalf of
beneficial owners of Rights who have subscribed for the purchase of additional
shares of Common Stock pursuant to the over-subscription privilege (as defined
in the Prospectus), listing separately below each such exercised basic
subscription privilege and the corresponding over-subscription privilege
(without identifying any such beneficial owner), and (2) each such beneficial
owner's basic subscription privilege has been exercised in full:
<TABLE>
<CAPTION>
NUMBER OF SHARES RIGHTS EXERCISED PURSUANT TO NUMBER OF SHARES SUBSCRIBED
OWNED ON THE BASIC SUBSCRIPTION FOR PURSUANT TO
RECORD DATE PRIVILEGE OVER-SUBSCRIPTION PRIVILEGE
- ---------------- ---------------------------- ---------------------------
<S> <C> <C>
1._____________ ____________________________ ___________________________
2._____________ ____________________________ ___________________________
3._____________ ____________________________ ___________________________
4._____________ ____________________________ ___________________________
5._____________ ____________________________ ___________________________
6._____________ ____________________________ ___________________________
7._____________ ____________________________ ___________________________
8._____________ ____________________________ ___________________________
9._____________ ____________________________ ___________________________
</TABLE>
Provide the following information if applicable:
- ----------------------------------------------
Depository Trust Company ("DTC")
Participant Number
[PARTICPANT]
By: ___________________________________________
Name:
Title:
______________________________________________
DTC Basic Subscription Confirmation
Number(s)
<PAGE> 1
EXHIBIT 99.9
IMPORTANT TAX INFORMATION
Under United States federal income tax law, dividend payments and other
distributions that may be made by the Company on shares of Common Stock issued
upon the exercise of Rights may be subject to backup withholding, and each
Rights holder who either exercises or sells Rights should provide the
Subscription Agent (as the Company's agent) with such Rights holder's correct
Taxpayer Identification Number ("TIN") on Substitute Form W-9 below. If such
Rights holder is an individual, the TIN is his or her Social Security Number
("SSN"). If the Subscription Agent, which is also the transfer agent for the
Company, is not provided with the correct TIN in connection with such payments,
the Rights holder may be subject to a $50.00 penalty imposed by the Internal
Revenue Service (the "IRS").
Exempt Rights holders (including, among others, all corporations and
certain foreign individuals) are not subject to these backup withholding and
reporting requirements. In general, in order for a foreign individual to
qualify as an exempt recipient, such Rights holder must submit a statement,
signed under the penalties of perjury, attesting to that individual's exempt
status. Such statements can be obtained from the Subscription Agent. See the
enclosed Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9 for additional instructions.
If backup withholding applies, the Company or the Subscription Agent, as
the case may be, will be required to withhold 31% of any such payments made to
the Rights holder. Backup withholding is not an additional tax. Rather, the
tax liability of persons subject to backup withholding will be reduced by the
amount of tax withheld. If withholding results in an overpayment of taxes, a
refund may be obtained.
PURPOSE OF SUBSTITUTE FORM W-9
A person who is required to file an information return with the IRS must
get your TIN to report, for example, income paid to you. Use Form W-9 to give
your correct TIN to the payer (the person requesting your TIN) and, when
applicable, (1) to certify the TIN you are using is correct (or you are waiting
for a number to be issued), (2) to certify you are not subject to backup
withholding, or (3) to claim exemption from backup withholding if you are an
exempt payee. To prevent backup withholding, a Rights holder is required to
notify the Subscription Agent of such Rights holder's correct TIN by completing
the form below certifying that the TIN provided on Substitute Form W-9 is
correct (or that such Rights holder is awaiting a TIN).
NOTE: If a payer gives you a form other than a W-9 to request your TIN,
you must use the payer's form if it is substantially similar to Form W-9.
WHAT IS BACKUP WITHHOLDING? Persons making certain payments to you must
withhold and pay to the IRS 31% of such payments under certain conditions.
This is called "backup withholding." Payments that may be subject to backup
withholding include interest, dividends, broker and barter exchange
transactions, rents, royalties, nonemployee pay, and
<PAGE> 2
certain payments from fishing boat operators. Real estate transactions are not
subject to backup withholding.
If you give the payer your correct TIN, make proper certifications, and
report all your taxable interest and dividends on your tax return, payments you
receive will not be subject to backup withholding. Payments you receive WILL
be subject to backup withholding if:
1. You do not furnish your TIN to the payer, or
2. The IRS tells the payer that you furnished an incorrect TIN, or
3. The IRS tells you that you are subject to backup withholding because
you did not report all your interest and dividends on your tax return (for
reportable interest and dividends only), or
4. You did not certify to the payer that you are not subject to backup
withholding under 3 above (for reportable interest and dividend accounts opened
after 1983 only), or
5. You did not certify your TIN when required. See the chart below for
details.
Certain payees and payments are exempt from backup withholding and
information reporting. See below.
WHAT NUMBER TO GIVE THE SUBSCRIPTION AGENT
Each Rights holder is required to give the Subscription Agent the SSN or
Employer Identification Number ("EIN") of the record owner of the Rights. If
the Rights are in more than one name or are not in the name of the actual
owner, consult the enclosed Guidelines for Certification of Taxpayer
Identification Number on Substitute Form W-9 for additional guidelines on which
number to report.
2
<PAGE> 3
Note: All references herein to sections are to the indicated sections of the
Internal Revenue Code of 1986, as amended.
PAYER'S NAME: Harris Trust and Savings Bank
Substitute FORM W-9 PART I - Taxpayer Identification No. Part II - For
Payees Exempt from
Backup Withholding
(see enclosed
Guidelines)
Department of the
Treasury
Internal Revenue
Service
Payer's Request for
Taxpayer
Identification
Number ("TIN")
and Certification
Enter your TIN in the appropriate
box and certify by signing and
dating below. For most
individuals, this is your Social
Security Number ("SSN"); for other
entities, it is your Employer
Identification Number ("EIN"). If ___________________
you do not have an SSN, see "How to Social Security
Obtain a Taxpayer Identification Number
Number" in the enclosed Guidelines or
Note: If the account is in more ___________________
than one name, see the chart on Employer
page __ of the enclosed Guidelines Identification
to determine whose number to enter. Number
(If awaiting TIN,
write "Applied
for")
Certification - Under penalties of perjury, I certify that:
(1) The number shown on this form is my correct Taxpayer Identification
Number (or I am waiting for a number to be issued to me), and
3
<PAGE> 4
(2) I am not subject to backup withholding because: (a) I am exempt from
backup withholding, or (b) I have not been notified by the Internal
Revenue Service ("IRS") that I am subject to backup withholding as a
result of a failure to report all interest or dividends, or (c) the IRS
has notified me that I am no longer subject to backup withholding.
Certification Instructions - You must cross out item (2) above if you have been
notified by the IRS that you are subject to backup withholding because of
underreporting of interest or dividends on your tax return. However, if after
being notified by the IRS that you were subject to backup withholding, and you
received another notification from the IRS that you are no longer subject to
backup withholding, do not cross out item (2).
SIGNATURE ________________________________________ DATE ____________ , 199__
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP
WITHHOLDING OF 31% OF ANY REPORTABLE PAYMENTS MADE TO YOU PURSUANT TO THE
RIGHTS OFFERING. PLEASE REVIEW THE ENCLOSED "GUIDELINES FOR CERTIFICATION
OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9" FOR ADDITIONAL
DETAILS.
4
<PAGE> 5
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
GUIDELINES FOR DETERMINING THE PROPER IDENTIFICATION NUMBER TO GIVE THE
PAYER--Social Security Numbers ("SSNs") have nine digits separated by two
hyphens: i.e., 000-00-0000. Employer Identification Numbers ("EINs") have
nine digits separated by only one hyphen: i.e., 00-0000000. The table below
will help determine the number to give the payer.
FOR THIS TYPE OF ACCOUNT: GIVE THE NAME AND SOCIAL
SECURITY NUMBER OR EMPLOYER
IDENTIFICATION NUMBER OF
1. Individual The individual
2. Two or more individuals (joint account) The actual owner of the
account or, if combined
funds, the first individual
on the account (1)
3. Custodian account of a minor (Uniform Gift The minor (2)
to Minors Act)
4. a. The usual revocable savings trust The grantor-trustee (1)
(grantor is also trustee)
b. The so-called trust account that is not a The actual owner (1)
legal or valid trust under State law
5. Sole proprietorship The owner (3)
6. A valid trust, estate, or pension trust Legal entity (4)
7. Corporation The corporation
8. Association, club, religious, charitable, The organization
education or other tax-exempt organization
9. Partnership The partnership
10. A broker or registered nominee The broker or nominee
11. Account with the Department of Agriculture The public entity
in the name of a public entity (such as State
or local government, school district, or
prison) that receives agricultural program
payments.
5
<PAGE> 6
(1) List first and circle the name of the person whose number you furnish.
If only one person on a joint account has an SSN, that person's number must
be furnished.
(2) Circle the minor's name and furnish the minor's SSN.
(3) You must show your individual name, but you may also enter your business
or "doing business as" name. You may use either your SSN or EIN (if you
have one).
(4) List first and circle the name of the legal trust, estate or pension
trust (Do not furnish the TIN of the personal representative or trustee
unless the legal entity itself is not designated in the account title).
NOTE: If no name is circled when more than one name is listed, the number will
be considered to be that of the first name listed.
HOW TO GET A TIN
If you do not have a TIN, apply for one immediately. To apply for an
SSN, obtain Form SS-5, Application for a Social Security Number Card, at the
local office of the Social Security Administration. Get Form W-7, Application
for IRS Individual Taxpayer Information Number, to apply for an Individual TIN
or Form SS-4, Application for Employer Identification Number, to apply for an
EIN. You can get Forms W-7 and SS-4 from the IRS by calling 1-800-TAX-FORM
(1-800-829-3676).
If you do not have a TIN, write, "Applied For" in the space for the TIN,
sign and date the form, and give it to the payer. For interest and dividend
payments and certain payments made with respect to readily tradable
instruments, you will, generally have 60 days to get a TIN and give it to the
payer. If the payer does not receive your TIN within 60 days, backup
withholding, if applicable, will begin and continue until you furnish your TIN.
NOTE: Writing, "Applied For" on the form means that you have already
applied for a TIN OR that you intend to apply for one soon.
As soon as you receive your TIN, complete another Form W-9, include your
TIN, sign and date the form, and give it to the payer.
PAYEES EXEMPT FROM BACKUP WITHHOLDING
Individuals (including sole proprietors) are NOT exempt from backup
withholding. Corporations are exempt from backup withholding for certain
payments, such as interest and dividends.
6
<PAGE> 7
If you are exempt from backup withholding, you should still complete
Substitute Form W-9 to avoid possible erroneous backup withholding. Enter your
correct TIN in Part 1, write "Exempt" in Part 2, and sign and date the form.
If you are a nonresident alien or a foreign entity not subject to backup
withholding, give the requester a completed Form W-8, Certificate of Foreign
Status.
The following is a list of payees exempt from backup withholding and for
which no information reporting is required. For interest and dividends, all
listed payees are exempt except item (9). For broker transactions, payees
listed in (1) through (13) and a person registered under the Investment
Advisers Act of 1940 who regularly acts as a broker are exempt. Payments
subject to reporting under sections 6041 and 6041A are generally exempt from
backup withholding only if made to payees described in items (1) through (7),
except a corporation that provides medical and health care services or bills
and collects payments for such services is not exempt from backup withholding
or information reporting. Only payees described in items (2) through (6) are
exempt from backup withholding for barter exchange transactions and patronage
dividends.
(1) A corporation.
(2) An organization exempt from tax under section 501(a), or an individual
retirement plan ("IRA"), or a custodial account under section 403(b)(7),
if the account satisfies the requirements of section 401(f)(2).
(3) The United States or any of its agencies or instrumentalities.
(4) A state, the District of Columbia, a possession of the United States, or
any of their subdivisions or instrumentalities.
(5) A foreign government, a political subdivision of a foreign government, or
any of their agencies instrumentalities.
(6) An international organization or any of its agencies or
instrumentalities.
(7) A foreign central bank of issue.
(8) A dealer in securities or commodities registered in the United States,
the District of Columbia, or a possession of the United States.
(9) A futures commission merchant registered with the Commodity Futures
Trading Commission.
(10) A real estate investment trust.
(11) An entity registered at all times during the tax year under the
Investment Company Act of 1940.
(12) A common trust fund operated by a bank under section 584(a).
7
<PAGE> 8
(13) A financial institution.
(14) A middleman known in the investment community as a nominee or who is
listed in the most recent publication of the American Society of Corporate
Secretaries, Inc., Nominee List.
(15) An exempt charitable remainder trust, or a non-exempt trust described in
section 4947(a)(1).
Payment of dividends and patronage dividends not generally subject to
backup withholding include the following:
- - Payments to non-resident aliens subject to withholding under section 1441.
- - Payments to partnerships not engaged in a trade or business in the
United States and which have at least one non-resident partner.
- - Payments of patronage dividends where the amount received is not paid in
money.
- - Payments made by certain foreign organizations.
- - Payments made to a nominee.
Payments of interest not generally subject to backup withholding
include the following:
- - Payments of interest or obligations issued by individuals. Note: You may
be subject to backup withholding if this interest is $600 or more and is
paid in the course of the payer's trade or business and you have not
provided your current TIN to the payer.
- - Payments of tax-exempt interest (including exempt-interest dividends
under section 852)
- - Payments described in section 6049(b)(5) to non-resident aliens.
- - Payments on tax-free covenant bonds under section 1451.
- - Payments made by certain foreign organizations.
- - Payments made to a nominee.
Exempt payees described above should file Form W-9 to avoid possible erroneous
backup withholding. FILE THIS FORM WITH THE PAYER, FURNISH YOUR TAXPAYER
IDENTIFICATION NUMBER. WRITE "EXEMPT" ON THE FACE OF THE FORM, SIGN AND DATE
THE FORM AND RETURN IT TO THE PAYER.
8
<PAGE> 9
Certain payments that are not subject to information reporting are also
not subject to backup withholding. For details, see sections 6041, 6041A,
6042, 6044, 6045, 6049, 6050A and 6060N, and their regulations.
PRIVACY ACT NOTICE. Section 6109 requires you to give your correct
TIN to persons who must file information returns with the IRS to report
interest, dividends, and certain other income paid to you, mortgage interest
you paid, the acquisition or abandonment of secured property, cancellation of
debt, or contributions you made to an IRA. The IRS uses the numbers for
identification purposes and to help verify the accuracy of your tax return.
The IRS may also provide this information to the Department of Justice
for civil and criminal litigation and to cities, states, and the District of
Columbia to carry out their tax laws.
You must provide your TIN whether or not you are required to file a tax
return. Payers must generally withhold 31% of taxable interest, dividends, and
certain other payments to a payee who does not give a TIN to a payer. Certain
penalties may also apply.
PENALTIES
(1) FAILURE TO FURNISH TIN. If you fail to furnish your TIN to a payer,
you are subject to a penalty of $50 for each such failure unless your failure
is due to reasonable cause and not to willful neglect.
(2) CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING. If
you make a false statement with no reasonable basis which results in no
imposition of backup withholding, you are subject to a penalty of $500.
(3) CRIMINAL PENALTY FOR FALSIFYING INFORMATION. Falsifying
certifications or affirmations may subject you to criminal penalties including
fines and/or imprisonment.
(4) MISUSE OF TINS. If the payer discloses or uses TINs in violation of
Federal law, the payer may be subject to civil and criminal penalties.
FOR ADDITIONAL INFORMATION, CONTACT YOUR TAX CONSULTANT
OR THE INTERNAL REVENUE SERVICE
9
