-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, M6EQtEJeQI+I4XuRXw2bhQ0J9GS6BTFmYS9sOAxnSIQwi4r9wlCn2SJFp+F8bGhx kch78qlM6Ei9ZhBA/P1CSQ== /in/edgar/work/20000810/0000945436-00-000008/0000945436-00-000008.txt : 20000921 0000945436-00-000008.hdr.sgml : 20000921 ACCESSION NUMBER: 0000945436-00-000008 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 8 CONFORMED PERIOD OF REPORT: 20000630 FILED AS OF DATE: 20000810 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MEMC ELECTRONIC MATERIALS INC CENTRAL INDEX KEY: 0000945436 STANDARD INDUSTRIAL CLASSIFICATION: [3674 ] IRS NUMBER: 561505767 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-13828 FILM NUMBER: 691419 BUSINESS ADDRESS: STREET 1: 501 PEARL DR CITY: ST PETERS STATE: MO ZIP: 63376 BUSINESS PHONE: 3142795500 10-Q 1 0001.txt UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) [ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2000 or [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to ------------------------ ------------------------ Commission File Number: 1-13828 -------------------------------------------------- MEMC ELECTRONIC MATERIALS, INC. ------------------------------- (Exact name of registrant as specified in its charter) Delaware 56-1505767 - -------------------------------------------------------------------------------- (State or other jurisdiction of (I. R. S. Employer Identification No.) incorporation or organization) 501 Pearl Drive (City of O'Fallon) St. Peters, Missouri 63376 - -------------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) (636) 474-5000 - -------------------------------------------------------------------------------- (Registrant's telephone number, including area code) - -------------------------------------------------------------------------------- (Former name, former address and former fiscal year, if changed since last report.) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. |X| Yes |_| No The number of shares of the registrant's common stock outstanding at July 31, 2000 was 69,610,900. PART I -- FINANCIAL INFORMATION Item 1. Financial Statements. MEMC ELECTRONIC MATERIALS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited; Dollars in thousands, except share data) Three Months Ended Six Months Ended June 30, June 30, 2000 1999 2000 1999 ---------- ---------- ---------- ---------- Net sales $200,516 $168,043 $393,605 $327,843 Costs of goods sold 174,628 170,009 353,713 343,625 ---------- ---------- ---------- ---------- Gross margin 25,888 (1,966 39,892 (15,782) Operating expenses: Marketing and administration 17,091 17,293 32,685 34,172 Research and development 18,240 19,710 37,628 40,567 ---------- ---------- ---------- ---------- Operating loss (9,443) (38,969) (30,421) (90,521) Nonoperating (income) expense: Interest expense 18,333 15,696 35,814 33,155 Interest income (1,316) (291) (1,692) (733) Royalty income (2,119) (1,458) (4,199) (2,683) Other, net (542) (411) 259 (146) ---------- ---------- ---------- ---------- Total nonoperating expense 14,356 13,536 30,182 29,885 Loss before income taxes, equity in income (loss) of joint ventures and minority interests (23,799) (52,505) (60,603) (120,406) Income taxes (6,426) (16,277) (16,363) (37,326) ---------- ---------- ---------- ---------- Loss before equity in income (loss) of joint ventures and minority interests (17,373) (36,228) (44,240) (83,080) Equity in income (loss) of joint ventures 1,789 (3,891) 716 (8,480) Minority interests 74 807 675 1,994 ---------- ---------- ---------- ---------- Net loss $(15,510) $(39,312) $(42,849) $(89,566) ========== ========== ========== ========== Basic loss per share $ (.22) $ (.58) $ (.62) $ (1.63) ========== ========== ========== ========== Diluted loss per share $ (.22) $ (.58) $ (.62) $ (1.63) ========== ========== ========== ========== Weighted average shares used in computing basic loss per share 69,610,900 67,266,653 69,581,327 54,800,850 ========== ========== ========== ========== Weighted average shares used in computing diluted loss per share 69,610,900 67,266,653 69,581,327 54,800,850 ========== ========== ========== ========== See accompanying notes to consolidated financial statements. MEMC ELECTRONIC MATERIALS, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (Dollars in thousands, except share data) June 30, December 31, 2000 1999 (Unaudited) ------------ ----------- ASSETS Current assets: Cash and cash equivalents $ 16,545 $ 28,571 Accounts receivable, less allowance for doubtful accounts $2,828 and $2,409 in 2000 and 1999, respectively 132,105 111,559 Income taxes receivable - 9,237 Inventories 99,229 98,419 Deferred tax assets, net 13,813 12,905 Prepaid and other current assets 19,905 15,229 ------------ ----------- Total current assets 281,597 275,920 Property, plant and equipment, net of accumulated depreciation of $758,619 and $703,252 in 2000 and 1999, respectively 989,795 1,090,358 Investments in joint ventures 97,970 97,254 Excess of cost over net assets acquired, net of accumulated amortization of $6,628 and $6,466 in 2000 and 1999, respectively 46,396 47,058 Deferred tax asset, net 207,314 183,902 Other assets 57,468 30,089 ------------ ----------- Total assets $ 1,680,540 $ 1,724,581 ============ =========== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Short-term borrowings and current portion of long-term debt $ 50,852 $ 22,163 Accounts payable 73,990 85,704 Accrued liabilities 33,940 29,795 Customer deposits 18,680 16,556 Provision for restructuring costs 10,469 12,839 Income taxes payable 3,696 - Accrued wages and salaries 26,533 22,557 ------------ ----------- Total current liabilities 218,160 189,614 Long-term debt, less current portion 856,829 869,759 Pension and similar liabilities 97,305 95,731 Customer deposits 38,028 48,456 Other liabilities 44,012 44,893 ------------ ----------- Total liabilities 1,254,334 1,248,453 ------------ ----------- Minority interests 42,662 43,337 Commitments and contingencies Stockholders' equity: Preferred stock, $.01 par value, 50,000,000 shares authorized, none issued or outstanding at 2000 or 1999 - - Common stock, $.01 par value, 200,000,000 shares authorized, 70,540,105 and 70,463,505 issued in 2000 and 1999, respectively 705 705 Additional paid-in capital 771,411 770,476 Accumulated deficit (342,166) (299,317) Accumulated other comprehensive loss (29,386) (22,053) Treasury stock, at cost: 929,205 in 2000 and 1999 (17,020) (17,020) ------------ ----------- Total stockholders' equity 383,544 432,791 ------------ ----------- Total liabilities and stockholders' equity $ 1,680,540 $ 1,724,581 ============ =========== See accompanying notes to consolidated financial statements. MEMC ELECTRONIC MATERIALS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited; Dollars in thousands) Six Months Ended June 30, 2000 1999 ---------- ---------- Cash flows from operating activities: Net loss $ (42,849) $ (89,566) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 80,731 79,786 Minority interests (675) (1,994) Equity in (income) loss of joint ventures (716) 8,480 (Gain) loss on sale of property, plant and equipment (1,300) 1,383 Working capital and other (47,785) (71,094) ---------- ---------- Net cash used in operating activities (12,594) (73,005) ---------- ---------- Cash flows from investing activities: Capital expenditures (22,467) (20,271) Proceeds from sale of property, plant and equipment 1,365 3 Equity infusions in joint ventures - (12,052) Notes receivable from affiliates - 9,654 ---------- ---------- Net cash used in investing activities (21,102) (22,666) ---------- ---------- Cash flows from financing activities: Net short-term borrowings (5,575) (6,039) Proceeds from issuance of long-term debt 31,138 8,735 Principal payments on long-term debt (3,926) (86,474) Proceeds from issuance of common stock 935 196,951 ---------- ---------- Net cash provided by financing activities 22,572 113,173 ---------- ---------- Effect of exchange rates on cash and cash equivalents (902) (2,004) ---------- ---------- Net increase (decrease) in cash (12,026) 15,498 Cash and cash equivalents at beginning of period 28,571 16,168 ---------- ---------- Cash and cash equivalents at end of period $ 16,545 $ 31,666 ========== ========== See accompanying notes to consolidated financial statements. MEMC ELECTRONIC MATERIALS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except share data) (1) Basis of Presentation The accompanying unaudited consolidated financial statements of MEMC Electronic Materials, Inc. and Subsidiaries (the Company), in the opinion of management, include all adjustments (consisting of normal, recurring items) necessary to present fairly the Company's financial position and results of operations and cash flows for the periods presented. The consolidated financial statements are presented in accordance with the requirements of Regulation S-X and consequently do not include all disclosures required by generally accepted accounting principles. This report on Form 10-Q, including unaudited consolidated financial statements, should be read in conjunction with the Company's annual report to shareholders for the fiscal year ended December 31, 1999, which contains the Company's audited financial statements for such year and the related management's discussion and analysis of financial condition and results of operations. Operating results for the six-month period ended June 30, 2000 are not necessarily indicative of the results that may be expected for the year ending December 31, 2000. (2) Earnings (loss) per share The numerator for basic and diluted loss per share calculations is net loss for all periods presented. The denominator for the basic and diluted loss per share calculations for the three and six-month periods ended June 30, 2000 and 1999 is the same within each period (the weighted average shares outstanding for each respective period). The Company had 2,859,157 options outstanding at June 30, 2000 which were not included in the computation of diluted loss per share due to the net loss incurred during the three and six month periods ended June 30, 2000. (3) Inventories Inventories consist of the following: June 30, December 31, 2000 1999 Raw materials and supplies $ 44,225 $ 49,537 Goods in process 27,637 23,493 Finished goods 27,367 25,389 ---------- ---------- $ 99,229 $ 98,419 ========== ========== (4) Restructuring Costs During 1998, the Company recorded a charge to operations of $121,670 related to the decisions to close its small diameter wafer facility in Spartanburg, South Carolina, withdraw from its 60%-owned joint venture in a small diameter wafer operation in China and to forego construction of a new 200 millimeter wafer facility at its 75%-owned joint venture in Malaysia. Restructuring activity since the provision for restructuring costs was recorded is as follows: Amount Balance Balance Reversed/ June 30, December 31, Provision Utilized 2000 1999 --------- --------- -------- -------- Asset impairment/write-off: Spartanburg property, plant and equipment $ 36,300 $ 36,300 $ - $ - Malaysian joint venture assets 28,000 27,484 516 530 Chinese joint venture assets 13,800 13,597 203 360 Other infrastructure 3,225 3,225 - - --------- --------- -------- -------- Total 81,325 80,606 719 890 --------- --------- -------- -------- Dismantling and related costs: Dismantling costs 11,345 5,447 5,898 7,260 Costs incurred by equipment suppliers 5,000 5,000 - - Environmental costs 3,500 3,395 105 400 Operating leases 3,000 2,343 657 1,000 Other 3,000 240 2,760 2,864 --------- --------- -------- -------- Total 25,845 16,425 9,420 11,524 --------- --------- -------- -------- Personnel costs 14,500 14,170 330 425 --------- --------- -------- -------- Total restructuring costs $ 121,670 $ 111,201 $ 10,469 $ 12,839 ========= ========= ======== ======== Substantially all of the dismantling and related costs, and the personnel costs included in the $10,469 restructuring reserve are related to the Spartanburg facility. Approximately twenty-five percent of the reserve is expected to be utilized by December 31, 2000. Timing for utilization of the remainder of the reserve is primarily dependent on the timing of the sale of the Spartanburg facility. (5) Comprehensive Loss Comprehensive loss for the three months ended June 30, 2000 and 1999 was $15,721 and $48,212, respectively. Comprehensive loss for the six months ended June 30, 2000 and 1999 was $50,182 and $107,086, respectively. The Company's only adjustment from net loss to comprehensive loss was foreign currency translation adjustments in all periods presented. Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. Net Sales. Net sales increased 19% to $201 million for the second quarter of 2000 from $168 million for the second quarter of 1999. The increase was primarily attributable to a 13% increase in product volume and modest price increases in the second quarter of 2000 compared to the second quarter of 1999. Net sales increased 20% to $394 million for the six months ended June 30, 2000 from $328 million for the six months ended June 30, 1999. The increase was primarily attributable to a 17% increase in product volume and modest price increases. On a geographic basis, product volumes for the three and six-month periods ended June 30, 2000 increased by double digit percentages in all regions except the U.S. market as compared to the three and six-month periods ended June 30, 1999. Product volumes for the U.S. market showed moderate increase in the three and six-month periods ended June 30, 2000 compared to the corresponding June 30, 1999 periods. The Company expects to see moderate increases in product volume as well as modest increases in average selling prices in the next quarter. Coupled with continued cost reductions, the Company's near-term target is to achieve a positive operating profit. Gross Margin. Gross margin improved to 13% in the second quarter of 2000 from negative 1% for the second quarter of 1999. Gross margin improved to 10% in the six months ended June 30, 2000 from negative 5% in the six months ended June 30, 1999. The increase in gross margin in both the three and six -month periods ended June 30, 2000 compared to the corresponding June 30, 1999 periods was primarily attributable to significantly higher volumes coupled with modest price increases and significant cost reductions. The Company expects continued, but gradual, improvements in its cost structure in the next few quarters. Advanced large diameter and epitaxial products represented 54% and 51% of product volume for the second quarters of 2000 and 1999, respectively. Research and development expenses in the 2000 second quarter totaled $18 million, compared to $20 million in the year-ago period. Research and development expenses for the six months ended June 30, 2000 were $38 million, compared to $41 million in the year-ago period. The decrease in expenses is primarily a result of additional 300 mm sales from the Company's pilot line, which sales are being offset against the related research and development expenses. Income Taxes. The Company realized an income tax benefit at the rate of 27% for both the three and six-month periods ended June 30, 2000 and an income tax benefit at the rate of 31% for both the three and six-month periods ended June 30, 1999. The reduced rate of income tax benefit is primarily a result of changes in the composition of the Company's worldwide taxable income. The Company expects an effective tax rate for the year 2000 consistent with the first six months. Equity in Income (Loss) of Joint Ventures. Equity in income (loss) of joint ventures was $2 million in the second quarter of 2000, as compared to a loss of $4 million in the second quarter of 1999. The Company's share of the income of Posco Huls Co., Ltd. (PHC), the Company's 40%-owned, unconsolidated joint venture in South Korea, was $1 million in the second quarter of 2000 compared to a loss of $2 million in the second quarter of 1999. PHC's return to profitability was primarily due to a significant increase in product volume. The Company's share of the income of Taisil Electronic Materials Corporation (Taisil), the Company's 45%-owned, unconsolidated joint venture in Taiwan, was $1 million in the second quarter 2000 compared to a loss of $2 million in the second quarter of 1999. Taisil's improved income was primarily due to a significant increase in average selling price and a 7% increase in product volume in the second quarter of 2000 compared to second quarter of 1999. Equity in income (loss) of joint ventures was $1 million in the six months ended June 30, 2000, as compared to loss of $8 million in the six months ended June 30, 1999. The Company's share of the income of PHC was $0.5 million in the six months ended June 30, 2000 compared to a loss of $4 million in the six months ended June 30, 1999. PHC's income was primarily due to a significant increase in product volume in the six months ended June 30, 2000 compared to the six months ended June 30, 1999. The Company's share of the income of Taisil was $0.5 million in the six months ended June 30, 2000 compared to a loss of $4 million in the six months ended June 30, 1999. Taisil's income was primarily due to a significant increase in product volume and an increase in average selling price in the six months ended June 30, 2000 compared to the six months ended June 30, 1999. Net Loss. Net loss for the three-month periods ended June 30, 2000 and 1999 was approximately $16 million and $39 million, respectively. The reduction in net loss for the three months ended June 30, 2000 was primarily a result of increased gross margin of $28 million and a $6 million increase in joint venture income partially offset by a reduced income tax benefit. The Company had a net loss of $0.22 per share for the quarter ended June 30, 2000 on approximately 69.6 million shares outstanding compared to a net loss of $.58 per share for the quarter ended June 30, 1999 on 67.3 million weighted average shares outstanding. Net loss for the six-month periods ended June 30, 2000 and 1999 was approximately $43 million and $90 million, respectively. The reduction in net loss for the six months ended June 30, 2000 was primarily a result of increased gross margin of $56 million and joint venture income increasing $9 million partially offset by a reduced income tax benefit. The Company had a net loss of $0.62 per share for the six-month period ended June 30, 2000 on approximately 69.6 million shares outstanding compared to a net loss of $1.63 per share for the six-month period ended June 30, 1999 on 54.8 million weighted average shares outstanding. The weighted average shares outstanding reflect the issuance of 15.4 million shares of common stock in a private placement to VEBA Zweite Verwaltungsgesellschaft mbH in March 1999 and 13.6 million shares of common stock in connection with the Company's rights offering in April 1999. Liquidity and Capital Resources. At June 30, 2000, the Company had $17 million of cash and cash equivalents compared to $29 million at December 31, 1999. Cash flows used in operating activities decreased to $13 million for the six months ended June 30, 2000 from $73 million for six months ended June 30, 1999. This $60 million improvement was due primarily to a reduction in operating losses. Accounts receivable of $132 million at June 30, 2000 increased $20 million, or 18%, from $112 million at December 31, 1999. This increase was primarily attributable to the 10% increase in net sales during the second quarter 2000 over fourth quarter 1999. Days' sales outstanding were 60 days at June 30, 2000 compared to 56 days at December 31, 1999 based upon annualized sales for the respective immediately preceding quarters. Inventories increased $1 million, or 1%, from December 31, 1999 to $99 million at June 30, 2000. This increase was primarily due to increased customer managed inventories. Total related inventory reserves for obsolescence, lower of cost or market issues, or other impairments were $15 million at June 30, 2000, compared to $17 million at December 31, 1999. Quarter-end inventories as a percentage of annualized quarterly net sales declined 1% to 12% for the period ended June 30, 2000 compared to the period ended December 31, 1999. The Company's net deferred tax assets increased $24 million in the first six months of 2000 to $221 million at June 30, 2000. The Company provides for income taxes on a quarterly basis based on an estimated annual effective tax rate. The Company estimates that net operating loss carryforwards increased $14 million in the six months ended June 30, 2000. Management believes it is more likely than not that, with its projections of future taxable income and after consideration of the valuation allowance, the Company will generate sufficient taxable income to realize the benefits of the net deferred tax assets existing at June 30, 2000. In order to realize the net deferred tax assets existing at June 30, 2000, the Company will need to generate future taxable income of approximately $615 million over the next 20 years. There can be no assurance, however, that the Company will generate sufficient taxable income to realize the full benefit of the existing net deferred tax assets. At December 31, 1999, the Company's net operating loss carryforwards totaled $647 million, of which $7 million will expire in 2001; $13 million will expire in 2002; $29 million will expire in 2003; $9 million will expire in 2004; $14 million will expire in 2012; $322 million will expire in 2018; and $253 million will expire in 2019. On June 16, 2000, VEBA AG, which through its affiliates is the majority shareholder and principal lender of the Company, merged with VIAG AG. The VEBA/VIAG group, now known as E.ON AG, has stated that its core businesses will be energy and specialty chemicals. E.ON AG's stated intent is to systematically and optimally divest certain non-core businesses, including the Company. The Company intends to work closely with E.ON AG to effectuate an orderly divestiture process that preserves and optimizes the value of the Company. A decrease of ownership interest of E.ON AG and its affiliates may result in annual limitations for federal income tax purposes of the Company's ability to use its tax loss carryforwards under Internal Revenue Code Section 382. Net cash used in investing activities decreased $2 million to $21 million in the six months ended June 30, 2000 compared to the six months ended June 30, 1999. For the six months ended June 30, 2000, cash used by investing activities reflected slightly increased spending on capital projects offset by a reduction in equity infusions in joint ventures and a reduction in notes receivable from affiliates. The capital expenditures in the first six months of 2000 primarily related to the implementation of SAP worldwide and to maintenance capital. The Company expects to continue to tightly control capital expenditures in 2000. At June 30, 2000, the Company had $12 million of committed capital expenditures related to the implementation of SAP worldwide and various manufacturing and technology projects. The Company made no equity infusions into joint ventures in the six months ended June 30, 2000, compared to an equity infusion of $12 million in the six months ended June 30, 1999. Although to date Taisil has an accumulated deficit, the Company does not consider its investment in Taisil to be impaired as of June 30, 2000 based on Taisil's increasing product volumes and capacity utilization, improving operating results, positive operating cash flow generated in 1999 and in the first two quarters of 2000, and positive net income in the quarter ended June 30, 2000. Cash flows provided by financing activities decreased to $23 million in the six months ended June 31, 2000 from $113 million in the six months ended June 31, 1999. The 2000 financing activities consisted primarily of issuance of debt by the Company. In the six months ended June 30, 1999, the financing activities consisted primarily of stock offerings partially offset by repayment of short-term and long-term debt. At June 30, 2000, the Company maintained $947 million of committed long-term loan agreements, of which $907 million was outstanding. The Company also maintained $53 million of short-term lines of credit, of which less than $1 million was outstanding at June 30, 2000. The Company's weighted average cost of borrowing was 8.1% at June 30, 2000 and 7.8% at December 31, 1999. Total debt outstanding increased to $908 million at June 30, 2000 from $892 million at December 31, 1999. The total debt to total capital ratio at June 30, 2000 was 68% as compared to 65% at December 31, 1999. The silicon wafer industry is highly capital intensive. The Company's capital needs depend on numerous factors, including its profitability and investment in capital expenditures and research and development. Management believes that the liquidity provided by existing cash balances and credit facilities, together with cash generated from operations, will be sufficient to satisfy commitments for capital expenditures and operating cash requirements through 2000. If, however, the Company's future financial performance fails to meet management's current expectations, then the Company may require additional financing in order to satisfy planned capital expenditures and operating cash requirements for 2000. There can be no assurance that such financing will be available on terms acceptable to the Company. Historically, the Company has funded its operations primarily through loans from E.ON AG and its affiliates, internally generated funds, and issuances of common stock. To a lesser extent, the Company has raised funds by borrowing money from commercial banks. Under its credit facilities with E.ON AG and its affiliates, the Company cannot pledge any of its assets to secure additional financing without the consent of E.ON AG and its affiliates. The Company's loans from E.ON AG and its affiliates begin to mature in 2001. The Company does not currently anticipate having sufficient funds from operations to repay these loans upon maturity commencing in 2001, and will need to seek and obtain replacement financing. The Company is currently engaged in discussions with its financial advisors regarding additional sources of capital. There can be no assurance that such capital will be available on terms acceptable to the Company or that the Company will be able to refinance its loans with E.ON AG and its affiliates upon maturity. If the Company fails to repay the loans when due the Company will be in default under the loans and E.ON AG and its affiliates could accelerate all amounts outstanding under the loans. This would have a material adverse effect on the Company. Recently Issued Accounting Pronouncements. In June 1998, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards (SFAS) No. 133, "Accounting for Derivative Instruments and Hedging Activities." SFAS No. 133 requires the recognition of all derivatives as assets or liabilities within the balance sheet, and requires both the derivatives and the underlying exposure to be recorded at fair value. Any gain or loss resulting from changes in fair value will be recorded as part of the results of operations, or as a component of comprehensive income or loss, depending upon the intended use of the derivative. In July 1999, the Financial Accountings Standards Board changed the effective date of SFAS No. 133 to all fiscal quarters of fiscal years beginning after June 15, 2000. The Company does not believe that the implementation of this Statement will have a material effect on its financial condition or results of operations. Cautionary Statement Regarding Forward-Looking Statements. This Form 10-Q contains "forward-looking" statements within the meaning of the Securities Litigation Reform Act of 1995, including those concerning: the utilization of the restructuring reserve; future pricing; future product volumes; continued cost improvements; near-term target of a positive operating profit; expected effective income tax rate; liquidity through 2000; tight control of capital expenditures in 2000; the Company's ability to generate future taxable income as it relates to the realization of the net deferred tax asset; the Company's intention to work closely with E.ON AG to effect an orderly divestiture process that preserves and optimizes the value of the Company; expectation that the Company will not have sufficient funds from operations to repay loans from E.ON AG and its affiliates upon maturity; and the impact of the implementation of SFAS No. 133. Such statements involve certain risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements. Potential risks and uncertainties include such factors as: market demand for silicon wafers; utilization of manufacturing capacity; ability of the Company to reduce manufacturing costs; demand for semiconductors generally; changes in the pricing environment; general economic conditions; competitors' actions; changes in currency exchange rates; changes in the components of worldwide taxable income; technological changes; changes in product specifications and manufacturing processes; accuracy of management's assumptions regarding the dismantling and sale of the Spartanburg facility; changes in the plans and intentions of third parties, including E.ON AG; changes in financial market conditions; changes in interest rates; and other risks described in the Company's filing with the Securities and Exchange Commission, including the Company's annual report on Form 10-K for the year ended December 31, 1999. Item 3. Quantitative and Qualitative Disclosures About Market Risk. Market risks relating to the Company's operations result primarily from changes in interest rates and changes in foreign exchange rates. The Company enters into currency forward contracts to minimize its transactional currency risks. The Company does not use derivative financial instruments for speculative or trading purposes. There have been no significant changes in the Company's holdings of interest rate sensitive or foreign currency exchange rate sensitive instruments since December 31, 1999. PART II -- OTHER INFORMATION Item 2. Changes in Securities and Use of Proceeds. At the Company's Annual Meeting of Stockholders held on May 9, 2000, the stockholders approved an amendment to the Company's Restated Certificate of Incorporation to change the advance notice required for a stockholder to notify the Company that such stockholder wishes to nominate a person for election as a director at an annual stockholders' meeting. As amended, Section (3)(c) of Article Fifth of the Company's Restated Certificate of Incorporation provides that a stockholder who wishes to nominate a person for election as a director at an annual stockholders' meeting must now notify the Company not less than 90 days nor more than 120 days prior to the anniversary date of the last annual stockholders' meeting. Prior to this amendment, a stockholder was required to notify the Company not less than 60 days nor more than 90 days prior the anniversary date of the last annual stockholders' meeting. Item 4. Submission of Matters to a Vote of Security Holders. The following matters were voted upon at the Annual Meeting of Stockholders held on May 9, 2000, and received the votes set forth below: 1. All of the following persons nominated were elected to serve as directors for terms expiring in 2003 and received the number of votes set forth opposite their respective names: For Withheld Hans Michael Gaul 62,555,881 5,913,234 Helmut Mamsch 68,165,081 304,034 Michael B. Smith 68,170,117 298,998 2. A proposal to amend the Company's 1995 Equity Incentive Plan to increase the number of shares of common stock available under the plan from 3,597,045 to 7,197,045 was approved, receiving 55,965,987 votes FOR and 6,396,160 votes AGAINST, with 144,196 abstentions and 5,962,772 broker non-votes. 3. A proposal to amend the Company's Restated Certificate of Incorporation to change the advance notice required for a stockholder to nominate a person for election to the Company's Board of Directors was approved, receiving 60,901,639 votes FOR and 1,540,119 votes AGAINST, with 64,585 abstentions and 5,962,772 broker non-votes. Item 6. Exhibits and Reports on Form 8-K. (a) Exhibits Exhibit Number Description 3(i) 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) 3(i)(a) Certificate of Amendment of Restated Certificate of Incorporation of the Company as filed with the Secretary of State of the State of Delaware on June 2, 2000 3(ii) Restated By-laws of the Company (incorporated by reference to Exhibit 3(ii) of the Company's Form 10-Q for the Quarter ended June 30, 1999) *10-e(1) Second Amendment to Shareholders' Agreement dated as of April 1, 2000 by and among the Company, MEMC Southwest Inc. ("MEMC Southwest") and Texas Instruments Incorporated ("TI") *10-f(2) First Amendment to TI Purchase Agreement dated as of April 1, 2000 by and among the Company, MEMC Southwest and TI *10-g(2) First Amendment to Lease Agreement dated as of April 1, 2000 between TI and MEMC Southwest *10-g(3) First Amendment to Sublease Agreement dated as of April 1, 2000 between TI and MEMC Southwest **10-cc MEMC Electronic Materials, Inc. 1995 Equity Incentive Plan as Amended and Restated on August 3, 2000 27 Financial Data Schedule (filed electronically with the SEC only) - ------------------------------- * Portions of these Exhibits have been redacted pursuant to a request for confidential treatment filed separately with the Secretary of the Securities and Exchange Commission. ** This Exhibit constitutes a management contract, compensatory plan or arrangement. (b) Reports on Form 8-K During the second quarter of 2000, the Company filed no current reports on Form 8-K. SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. MEMC Electronic Materials, Inc. August 10, 2000 /s/ JAMES M. STOLZE - --------------- --------------------------------- James M. Stolze Executive Vice President and Chief Financial Officer (on behalf of the registrant and as principal financial and accounting officer) EXHIBIT INDEX The exhibits below are numbered in accordance with the Exhibit Table of Item 601 of Regulation S-K. Exhibit Number Exhibit 3(i)(a) Certificate of Amendment of Restated Certificate of Incorporation of the Company as filed with the Secretary of State of the State of Delaware on June 2, 2000 *10-e(1) Second Amendment to Shareholders' Agreement dated as of April 1, 2000 by and among the Company, MEMC Southwest Inc. ("MEMC Southwest") and Texas Instruments Incorporated ("TI") *10-f(2) First Amendment to TI Purchase Agreement dated as of April 1, 2000 by and among the Company, MEMC Southwest and TI *10-g(2) First Amendment to Lease Agreement dated as of April 1, 2000 between TI and MEMC Southwest *10-g(3) First Amendment to Sublease Agreement dated as of April 1, 2000 between TI and MEMC Southwest 10-cc MEMC Electronic Materials, Inc. 1995 Equity Incentive Plan as Amended and Restated on August 3, 2000 27 Financial Data Schedule (filed electronically with SEC only) - ------------------------------- * Portions of these Exhibits have been redacted pursuant to a request for confidential treatment filed separately with the Secretary of the Securities and Exchange Commission. EX-3.(I)(A) 2 0002.txt RESTATED CERTIFICATE OF INCORPORATION CERTIFICATE OF AMENDMENT OF RESTATED CERTIFICATE OF INCORPORATION OF MEMC ELECTRONIC MATERIALS, INC. * * * * * MEMC Electronic Materials, Inc., a corporation organized and existing under and by virtue of the General Corporation Law of the State of Delaware, DOES HEREBY CERTIFY: FIRST: That the Restated Certificate of Incorporation of MEMC Electronic Materials, Inc. is hereby amended by deleting Section 3(c) of Article Fifth in its entirety and substituting in lieu thereof a new Section 3(c) as follows: "(c) Only persons who are nominated in accordance with the following procedures shall be eligible for election as directors of the Corporation, except as may be otherwise provided in this Restated Certificate of Incorporation (as it may be amended from time to time) or the resolution or resolutions adopted by the Board of Directors with respect to the rights of holders of Preferred Stock of the Corporation to nominate and elect a specified number of directors in certain circumstances. Nomination of persons for election to the Board of Directors may be made at any annual meeting of stockholders, or at any special meeting of stockholders called for the purpose of electing directors, (a) by or at the direction of the Board of Directors (or any duly authorized committee thereof) or (b) by any stockholder of the Corporation (i) who is a stockholder of record on the date of the giving of the notice provided for in this Section 3(c) of Article Fifth and on the record date for the determination of stockholders entitled to vote at such meeting and (ii) who complies with the notice procedures set forth in this Section 3(c) of Article Fifth. In addition to any other applicable requirements, for a nomination to be made by a stockholder, such stockholder must have given timely notice thereof in proper written form to the Secretary of the Corporation. To be timely, a stockholder's notice to the Secretary must be delivered to or mailed and received at the principal executive offices of the Corporation (a) in the case of an annual meeting, not less than 90 days nor more than 120 days prior to the anniversary date of the immediately preceding annual meeting of stockholders; provided, however, that in the event that the annual meeting is called for a date that is not within 30 days before or after such anniversary date, in order to be timely, notice by the stockholder must be so received not later than the close of business on the tenth day following the day on which notice of the date of the annual meeting is mailed to stockholders or public disclosure of the date of the annual meeting is made, whichever first occurs, or (b) in the case of a special meeting of stockholders called for the purpose of electing directors, not later than the close of business on the tenth day following the day on which notice of the date of the special meeting is mailed to stockholders or public disclosure of the date of the special meeting is made, whichever first occurs. To be in proper written form, a stockholder's notice to the Secretary must set forth (a) as to each person whom the stockholder proposes to nominate for election as a director, (i) the name, age, business address and residence address of the person, (ii) the principal occupation or employment of the person, (iii) the class or series and number of shares of capital stock of the Corporation which are owned beneficially or of record by the person and (iv) any other information relating to the person that would be required to be disclosed in a proxy statement or other filings required to be made in connection with solicitations of proxies for election of directors pursuant to Section 14 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the rules and regulations promulgated thereunder; and (b) as to the stockholder giving the notice, (i) the name and record address of such stockholder, (ii) the class or series and number of shares of capital stock of the Corporation which are owned beneficially or of record by such stockholder, together with evidence reasonably satisfactory to the Secretary of such beneficial ownership, (iii) a description of all arrangements or understandings between such stockholder and each proposed nominee and any other person or persons (including their names) pursuant to which the nomination(s) are to be made by such stockholder, (iv) a representation that such stockholder intends to appear in person or by proxy at the meeting to nominate the persons named in its notice and (v) any other information relating to such stockholder that would be required to be disclosed in a proxy statement or other filings required to be made in connection with solicitations of proxies for election of directors pursuant to Section 14 of the Exchange Act and the rules and regulations promulgated thereunder. Such notice must be accompanied by a written consent of each proposed nominee to being named as a nominee and to serve as a director if elected. No person shall be eligible for election as a director of the Corporation unless nominated in accordance with the procedures set forth in this Section 3(c) of Article Fifth. If the chairman of the meeting determines that a nomination was not made in accordance with the foregoing procedures, the chairman of the meeting shall declare to the meeting that the nomination was defective and such defective nomination shall be disregarded." SECOND: That said amendment was duly adopted in accordance with the provisions of Section 242 of the General Corporation Law of the State of Delaware. IN WITNESS WHEREOF, said MEMC Electronic Materials, Inc. has caused this certificate to be signed by Helene F. Hennelly, its Corporate Vice President of Corporate Projects and Secretary, an authorized officer of the Corporation, this 30th day of May, 2000. MEMC ELECTRONIC MATERIALS, INC. By: /s/ Helene F. Hennelly ---------------------------------------- Name: Helene F. Hennelly Title: Corporate Vice President of Corporate Projects and Secretary EX-10.E(1) 3 0003.txt SECOND AMENDMENT TO SHAREHOLDERS' AGREEMENT CONFIDENTIAL TREATMENT REQUESTED SECOND AMENDMENT TO SHAREHOLDERS' AGREEMENT This SECOND AMENDMENT TO SHAREHOLDERS' AGREEMENT (the "Second Amendment") is dated as of April 1, 2000, by and among TEXAS INSTRUMENTS INCORPORATED, a Delaware corporation ("TI"), MEMC ELECTRONIC MATERIALS, INC., a Delaware corporation ("MEMC"), and MEMC SOUTHWEST INC., a Delaware corporation ("NUCO"). All terms used herein, unless otherwise defined, shall have the same meanings ascribed to them in the Agreement (as defined below). Recitals WHEREAS, TI and MEMC made and entered into that certain Shareholders' Agreement dated as of May 16, 1995, which was accepted and ratified by NUCO on May 30, 1995, and amended by all parties on April 20, 1999 (the "Agreement"); WHEREAS, TI, MEMC and NUCO wish to amend the Agreement, along with the TI Purchase Agreement, the Lease and the Sublease, for reasons stated in the First Amendment to the TI Purchase Agreement ("First TI Purchase Amendment"); and WHEREAS, Article 34 of the Agreement allows the Agreement to be amended with the written consent of TI, MEMC and NUCO. NOW, THEREFORE, the parties agree as follows: 1. Section 11.02(a)(iii) of the Agreement is deleted in its entirety and the following is substituted in lieu thereof: "(iii) restrict TI from practicing first level epi deposition at TI on Existing Products (as defined in the First TI Purchase Amendment), in a volume not to exceed [CONFIDENTIAL MATERIAL HAS BEEN DELETED AND FILED SEPARATELY WITH SEC] per calendar quarter through 2003, after which date first level epi deposition by TI on Existing Products will not exceed [CONFIDENTIAL MATERIAL HAS BEEN DELETED AND FILED SEPARATELY WITH SEC]" 2. The following is added to Section 11.02(a) immediately preceding the last sentence thereof: "MEMC may elect at its expense to have TI's wafer purchase records audited by an independent third party acceptable to both parties to confirm the volumes set forth in (iii) above. In the event TI acquires 200mm epi reactors for the purpose of applying second level epi and subsequently has excess capacity, TI has the right to utilize these reactors for [CONFIDENTIAL MATERIAL HAS BEEN DELETED AND FILED SEPARATELY WITH SEC] first level epi deposition on products other than Existing Products. In addition, if TI contemplates developing capacity for first level epi deposition on products other than Existing Products, MEMC and TI will negotiate in good faith a plan determining the method and timing in which TI may deposit first level epi on such other products." 3. MEMC and TI agree that they will cause their representatives on the NUCO Board of Directors to approve and/or ratify this Second Amendment, the First TI Purchase Amendment and the amendments to the Lease and Sublease referenced in the second "Whereas" clause above. MEMC and TI further agree that the implementation of such amendments will be regularly reviewed by the NUCO Board of Directors at their meetings. 4. Except as specifically amended by this Second Amendment, all provisions of the Agreement shall remain effective and binding. This Amendment, together with the Agreement, constitutes the entire agreement between the Parties relating to the subject matter hereof and supersedes all prior agreement, oral or written, and all other communications between the Parties. 5. This Amendment shall be governed by the laws of the state of Texas, without regard to any conflicts of law principles that may require the application of the laws of any other jurisdiction. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] IN WITNESS WHEREOF, the parties have executed this Second Amendment as of the date first above written and the terms herein shall be effective as of that date. TEXAS INSTRUMENTS INCORPORATED MEMC ELECTRONIC MATERIALS, INC. By: /s/ K. Balasubramanian By: /s/ Klaus R. von Horde ----------------------------- ----------------------------- Name: K. Balasubramanian Name: Klaus R. von Horde Title: Senior Vice President Title: President and Chief Executive Officer MEMC SOUTHWEST INC. By: /s/ James Lang ----------------------------- Name: James Lang Title: President EX-10.F(2) 4 0004.txt FIRST AMENDMENT TO TI PURCHASE AGREEMENT CONFIDENTIAL TREATMENT REQUESTED FIRST AMENDMENT TO TI PURCHASE AGREEMENT This FIRST AMENDMENT TO TI PURCHASE AGREEMENT (the "First Amendment") is dated as of April 1, 2000, by and among TEXAS INSTRUMENTS INCORPORATED, a Delaware corporation ("TI"), MEMC ELECTRONIC MATERIALS, INC., a Delaware corporation ("MEMC"), and MEMC SOUTHWEST INC., a Delaware corporation ("NUCO"). All terms used herein, unless otherwise defined, shall have the same meanings ascribed to them in the Agreement (as defined below). Recitals WHEREAS, TI, NUCO and MEMC made and entered into the TI Purchase Agreement dated as of June 30, 1995 (the "Agreement"); and WHEREAS, TI, MEMC and NUCO wish to amend the Agreement, the Shareholders' Agreement, the Lease and the Sublease to further strengthen the MEMC/TI relationship, lower the total cost of ownership, provide competitive pricing to TI, and to minimize time and resources required to support the business relationship; and WHEREAS, Section 22.03 of the Agreement allows the Agreement to be amended with the written consent of TI, MEMC and NUCO. NOW, THEREFORE, the parties agree as follows: 1. "Existing Products" means 125mm epi wafers, 125mm polished wafers, 125 mm test monitor wafers, 150 mm epi wafers, 150 mm polished wafers, and 150 mm test monitor wafers 2. Section 4.01(a) of the Agreement is deleted in its entirety and the following is substituted in lieu thereof: "(a) Beginning no later than the end of fourth calendar quarter 2000 and ending December 31, 2005, TI commits to purchase, subject to NUCO's and MEMC's (and its Subsidiaries') material compliance with TI's quality, delivery and service requirements (as described in Section 2.03(c)), and NUCO and MEMC (and its Subsidiaries) commit to sell to TI in the aggregate, a minimum each year of the lesser of (i) [CONFIDENTIAL MATERIAL HAS BEEN DELETED AND FILED SEPARATELY WITH SEC] of TI's worldwide needs of such Existing Products offered for sale by MEMC (and its Subsidiaries) or NUCO, or (ii) [CONFIDENTIAL MATERIAL HAS BEEN DELETED AND FILED SEPARATELY WITH SEC] (the "Existing Product Loading Commitment"). If either NUCO or MEMC (or its Subsidiaries) cannot supply a specific Existing Product needed by TI, TI's Existing Product Loading Commitment stated in this section 4.01(a) shall be decreased in equal proportion. Unless mutually agreed differently, TI shall initiate a volume ramp to MEMC and NUCO in the second calendar quarter 2000 and shall make an effort to reach the Existing Product Loading Commitment by the end of the third calendar quarter 2000. After 2005, MEMC and TI will negotiate in good faith whether the purchase agreement for Existing Products will be continued, and if so, on what terms." 3. Section 4.01(b) is deleted in its entirety and the following is substituted in lieu thereof: "MEMC and TI shall mutually agree on a [CONFIDENTIAL MATERIAL HAS BEEN DELETED AND FILED SEPARATELY WITH SEC] for NUCO's Existing Facility." 4. The second sentence of Section 4.01(d) of the Agreement is deleted in its entirety. 5. In the second sentence of Section 4.03(a), the parenthetical phrase is deleted and replaced with the following: "(unless such shortfall is solely attributable to NUCO or MEMC, including, but not limited to, NUCO's inability to supply products or to materially comply with TI's quality, delivery and service requirements, as described in Section 2.03(c))" 6. Section 4.03(b) is deleted in its entirety. 7. The following is added as Section 4.05 to Article IV of the Agreement. "Purchases from Other MEMC Sites. TI agrees to qualify the existing MEMC (and its Subsidiaries') manufacturing sites (Novara, Kuala Lumpur, St. Peters, Utsonimiya) at TI's expense. If reasonably requested by MEMC, TI agrees to qualify Existing Products manufactured at MEMC (and its Subsidiaries') manufacturing sites at MEMC's expense and at TI's actual cost not to exceed Seventy-Five Thousand U.S. Dollars (US$75,000) per product qualification. MEMC and NUCO can elect to supply TI qualified MEMC product from any TI qualified MEMC (and Subsidiaries) site and TI's purchases of Existing Products manufactured at such sites shall count towards the fulfillment of TI's Existing Product Loading Commitment." 8. Section 10.01 (a) and (b) are deleted in their entirety and the following is substituted in lieu thereof: "(a) Beginning April 1, 2000, the price to be paid by TI to NUCO and MEMC (and its Subsidiaries) in a calendar quarter for each product in the six product families (125mm epi, 125 mm polished, etc.) comprising the Existing Products shall be [CONFIDENTIAL MATERIAL HAS BEEN DELETED AND FILED SEPARATELY WITH SEC] than the "Benchmark Price" for that product family, defined as the [CONFIDENTIAL MATERIAL HAS BEEN DELETED AND FILED SEPARATELY WITH SEC] for sales of that product family in the previous calendar quarter to [CONFIDENTIAL MATERIAL HAS BEEN DELETED AND FILED SEPARATELY WITH SEC] who purchased from [CONFIDENTIAL MATERIAL HAS BEEN DELETED AND FILED SEPARATELY WITH SEC] in that product family in the previous calendar quarter. The Benchmark Price and the price to be paid by TI shall be in U.S. Dollars. Beginning July 1, 2000, the price paid by TI for any product family in a given quarter shall [CONFIDENTIAL MATERIAL HAS BEEN DELETED AND FILED SEPARATELY WITH SEC]. If the calculation of the TI price demonstrates a putative TI price that is [CONFIDENTIAL MATERIAL HAS BEEN DELETED AND FILED SEPARATELY WITH SEC]. A sample price calculation is attached hereto as Exhibit A. "(b) During the term of this Amendment and for two succeeding years, TI may elect, at its expense, to have MEMC's and its Subsidiaries' customer sales records audited by an independent third party acceptable to both parties to confirm that the Benchmark Price has been calculated using the methodology described in Exhibit A and if the audit reveals that MEMC did not follow the described methodology and the result is a discrepancy in the amount paid by TI, NUCO or MEMC, as the case may be, shall pay TI any overpayments and TI shall pay MEMC or NUCO, as the case may be, any underpayments. If the discrepancy is an overpayment by TI exceeding Fifty Thousand U.S. Dollars (US$50,000) in a quarter, MEMC shall pay the cost of the audit attributable to such quarter(s). Details of the audit report shall remain confidential between MEMC and the independent third party." 9. In Section 14.01, each occurrence of "QDCS" shall be replaced with the following: " product quality, delivery and service". 10. Schedule 1.00 of the Agreement shall be amended to include Section 4.01 (a) and (b), Section 4.05, and Section 10.01 (a) and (b). With respect to any sales of Existing Products by MEMC or any MEMC Subsidiary to TI, the parties agree that the terms and conditions of the Agreement shall apply to such sales (except that TI's right of first refusal in Section 4.01(d) shall not apply to MEMC or its Subsidiaries). 11. TI will request the consent of Meridian Trust Company and Bankers Trust Company to the Sublease amendment. NUCO agrees that once TI has obtained such consent, NUCO will promptly exercise its option to renew both the Lease and the Sublease for the first Renewal Term (as defined in the Lease and Sublease). TI and NUCO agree that the deadline for exercise by NUCO of such renewal options is hereby extended to August 31, 2000. If TI is unable to obtain the aforementioned consents prior to August 31, 2000, TI and NUCO shall negotiate in good faith a further extension of such deadline. 12. Except as specifically amended by this First Amendment, all provisions of the Agreement shall remain effective and binding. This Amendment, together with the Agreement, constitutes the entire agreement between the Parties relating to the subject matter hereof and supersedes all prior agreement, oral or written, and all other communications between the Parties. 13. Each Party hereto, its successors, shareholders and assigns, release and forever discharge and hold harmless each other Party, its successors, shareholders and assigns, jointly and severally, of and from any and all manner of claims whatsoever because of any manner of thing done, or omitted to be done, existing at any time prior to and including the date of this Amendment, in law, in equity or otherwise, liquidated or unliquidated, known or unknown, suspected or unsuspected, arising from or related to loading commitment, pricing, QDCS, or practices of epi production. Nothing in this Agreement shall be construed as an admission of liability of any Party, all such liability being expressly denied. 14. This Amendment shall be governed by the laws of the state of Texas, without regard to any conflicts of law principles that may require the application of the laws of any other jurisdiction. In no event shall the UN Convention on Contracts for the International Sale of Goods be applicable to the transactions under the Amendment. IN WITNESS WHEREOF, the parties have executed this First Amendment as of the date first above written and the terms herein shall be effective as of that date. TEXAS INSTRUMENTS INCORPORATED MEMC ELECTRONIC MATERIALS, INC. By: /s/ K. Balasubramanian By: /s/ Klaus R. von Horde ------------------------------ --------------------------------- Name: K. Balasubramanian Name: Klaus R. von Horde Title: Senior Vice President Title: President and Chief Executive Officer MEMC SOUTHWEST INC. By: /s/ James Lang ------------------------------ Name: James Lang Title: President EX-10.G(2) 5 0005.txt FIRST AMENDMENT TO LEASE AGREEMENT CONFIDENTIAL TREATMENT REQUESTED FIRST AMENDMENT TO LEASE AGREEMENT This FIRST AMENDMENT TO LEASE AGREEMENT (the "First Amendment") is dated as of April 1, 2000, by and among TEXAS INSTRUMENTS INCORPORATED, a Delaware corporation ("Lessor") and MEMC SOUTHWEST INC., a Delaware corporation ("Lessee"). All terms used herein, unless otherwise defined, shall have the same meanings ascribed to them in the Lease (as defined below). Recitals WHEREAS, Lessor and Lessee made and entered into that certain Lease Agreement Covering Silicon Wafer Operations Premises dated as of June 30, 1995 (the "Lease"); and WHEREAS, in connection with the [CONFIDENTIAL MATERIAL HAS BEEN DELETED AND FILED SEPARATELY WITH SEC], Lessor and Lessee wish to amend the Lease to allow for early termination by Lessee; and WHEREAS, Article 35 of the Lease allows the Lease to be amended with the written consent of Lessor and Lessee. NOW, THEREFORE, the parties agree as follows: 1. The following shall be added at the end of Article 24: "Notwithstanding anything else to the contrary herein, effective January 1, 2002, Lessee shall have the right to terminate this Lease upon at least twelve (12) months prior written notice to Lessor. In the event the Lease is terminated pursuant to this provision prior to the end of the then current term, Lessee shall be responsible for all Rent up to and including the date of termination. Rent shall be prorated for any partial month of occupancy on the basis of 365 days per year. The foregoing termination shall be permitted solely in connection with [CONFIDENTIAL MATERIAL HAS BEEN DELETED AND FILED SEPARATELY WITH SEC]." 2. Except as specifically amended by this First Amendment, all provisions of the Lease shall remain effective and binding. This Amendment, together with the Lease, constitutes the entire agreement between the Parties relating to the subject matter hereof and supersedes all prior agreement, oral or written, and all other communications between the Parties. IN WITNESS WHEREOF, the parties have executed this First Amendment as of the date first above written and the terms herein shall be effective as of that date. Lessor: Lessee: TEXAS INSTRUMENTS INCORPORATED MEMC SOUTHWEST INC. By: /s/ K. Balasubramanian By: /s/ James Lang --------------------------- ------------------------------- Name: K. Balasubramanian Name: James Lang Title: Senior Vice President Title: President EX-10.G(3) 6 0006.txt FIRST AMENDMENT TO SUBLEASE AGREEMENT CONFIDENTIAL TREATMENT REQUESTED FIRST AMENDMENT TO SUBLEASE AGREEMENT This FIRST AMENDMENT TO SUBLEASE AGREEMENT (the "First Amendment") is dated as of April 1, 2000, by and among TEXAS INSTRUMENTS INCORPORATED, a Delaware corporation ("Sublessor") and MEMC SOUTHWEST INC., a Delaware corporation ("Sublessee"). All terms used herein, unless otherwise defined, shall have the same meanings ascribed to them in the Sublease (as defined below). Recitals WHEREAS, Sublessor and Sublessee made and entered into that certain Sublease Agreement Covering Silicon Wafer Operations Premises dated as of June 30, 1995 (the "Sublease"); and WHEREAS, in connection with the [CONFIDENTIAL MATERIAL HAS BEEN DELETED AND FILED SEPARATELY WITH SEC], Sublessor and Sublessee wish to amend the Sublease to allow for early termination by Sublessee; and WHEREAS, Article 35 of the Sublease allows the Sublease to be amended with the written consent of Sublessor and Sublessee. NOW, THEREFORE, the parties agree as follows: 1. The following shall be added at the end of Article 24: "Notwithstanding anything else to the contrary herein, effective January 1, 2002, Sublessee shall have the right to terminate this Sublease upon at least twelve (12) months prior written notice to Sublessor. In the event the Sublease is terminated pursuant to this provision prior to the end of the then current term, Sublessee shall be responsible for all Rent up to and including the date of termination. Rent shall be prorated for any partial month of occupancy on the basis of 365 days per year. The foregoing termination shall be permitted solely in connection with [CONFIDENTIAL MATERIAL HAS BEEN DELETED AND FILED SEPARATELY WITH SEC]" 2. Except as specifically amended by this First Amendment, all provisions of the Sublease shall remain effective and binding. This Amendment, together with the Sublease, constitutes the entire agreement between the Parties relating to the subject matter hereof and supersedes all prior agreement, oral or written, and all other communications between the Parties. IN WITNESS WHEREOF, the parties have executed this First Amendment as of the date first above written and the terms herein shall be effective as of that date. Sublessor: Sublessee: TEXAS INSTRUMENTS INCORPORATED MEMC SOUTHWEST INC. By: /s/ K. Balasubramanian By: /s/ James Lang --------------------------- ----------------------------- Name: K. Balasubramanian Name: James Lang Title: Senior Vice President Title: President EX-10.CC 7 0007.txt 1995 EQUITY INCENTIVE PLAN AS AMENDED MEMC Electronic Materials, Inc. 1995 EQUITY INCENTIVE PLAN as Amended and Restated on August 3, 2000 1. Purpose. The purpose of the MEMC Electronic Materials, Inc. 1995 Equity Incentive Plan as amended and restated herein (the "Plan") is to provide an additional incentive to officers, other eligible key employees and directors of MEMC Electronic Materials, Inc., a Delaware corporation (the "Company"), and its Subsidiaries (as hereinafter defined) upon whom responsibilities for the successful operation, administration and management of the Company rest and whose present or potential contributions are important to the continued success of the Company, and to enable the Company to attract and retain in its employ and as directors highly qualified persons for the successful conduct of its business. It is intended that this purpose will be effected through the granting of incentive and nonqualified Stock Options, Restricted Stock Awards, or Performance Share Awards, as provided herein (as each term is hereinafter defined and collectively defined as the "Awards"). 2. Definitions. For purposes of the Plan, the following terms shall be defined as follows: "Affiliate" and "Associate" have the respective meanings ascribed to such terms in Rule 12b-2 promulgated under the Exchange Act. "Award" means an award to an Eligible Employee (as hereinafter defined) in the form of Stock Options, Restricted Stock Awards, or Performance Share Awards. "Award Agreement" means an agreement granting an Award and containing such terms and conditions as the Committee deems appropriate and that are not inconsistent with the terms of the Plan. "Beneficial Owner" has the meaning ascribed to such term in Rule 13d-3 promulgated under the Exchange Act. "Board" means the Board of Directors of the Company. A "Change in Control" of the Company shall be deemed to have occurred when (A) any Person (other than (x) the Company, any Subsidiary of the Company, or any Parent of the Company including VEBA AG, Huls Corporation and any of their Affiliates or (y) any employee benefit plan of the Company or of any Subsidiary of the Company, or any Person or entity organized, appointed or established by the Company or any Subsidiary of the Company for or pursuant to the terms of any such plan, alone or together with its Affiliates and Associates) shall become the Beneficial Owner of twenty percent (20%) or more of the then outstanding shares of Common Stock or the Combined Voting Power of the Company's then outstanding voting securities (except pursuant to an offer for all outstanding shares of Common Stock at a price and upon such terms and conditions as a majority of the Continuing Directors determine to be in the best interests of the Company and its shareholders (other than the Person on whose behalf the offer is being made) (an "Acquiring Person")), or (B) during any period of two (2) consecutive years, individuals who at the beginning of such period constitute the Board, and any new director (other than a director who is a representative or nominee of an Acquiring Person) whose election by the Board or nomination for election by the Company's shareholders was approved by a vote of at least a majority of the directors then still in office who either were directors at the beginning of the period or whose election or nomination for election was previously so approved (collectively, the "Continuing Directors"), cease for any reason to constitute a majority of the Board. Notwithstanding the foregoing, no Change in Control shall be deemed to have occurred if VEBA AG and any of its Affiliates are the Beneficial Owners of fifty percent (50%) or more of the Combined Voting Power of the Company's then outstanding voting securities and designees of VEBA AG and its Affiliates constitute a majority of the Board. "Code" means the Internal Revenue Code of 1986, as amended. "Combined Voting Power" means the combined voting power of the Company's then outstanding voting securities. "Committee" means the Compensation Committee appointed by the Board pursuant to Section 3(a) hereof to administer the Plan. "Common Stock" means the Voting Common Stock, par value $.01 per share, of the Company. "Disability" means, with respect to any Participant, that, as a result of incapacity due to physical or mental illness, such Participant is, or is reasonably likely to become, unable to perform his or her duties for more than six (6) consecutive months or six (6) months in the aggregate during any twelve (12) month period. "Exchange Act" means the Securities Exchange Act of 1934, as amended. "Fair Market Value" means, on any given date, the closing price of the shares of Common Stock, as reported on the New York Stock Exchange for such date or such national securities exchange as may be designated by the Board or, if Common Stock was not traded on such date, on the next preceding day on which Common Stock was traded. "Incentive Stock Option" means a Stock Option which is an "incentive stock option" within the meaning of Section 422 of the Code and designated by the Committee as an Incentive Stock Option in an Award Agreement. "Nonqualified Stock Option" means a Stock Option which is not an Incentive Stock Option. "Parent" means any corporation which is a "parent corporation" within the meaning of Section 424(e) of the Code with respect to the Company. "Participant" means an Eligible Employee to whom an Award has been granted under the Plan. "Performance Share Award" means a conditional Award of shares of Common Stock granted to an Eligible Employee pursuant to Section 9 hereof. "Person" means any person, entity or "group" within the meaning of Section 13(d)(3) or Section 14(d)(2) of the Exchange Act. "Restricted Stock Award" means an Award of shares of Common Stock granted to an Eligible Employee pursuant to Section 8 hereof. "Retirement" means retirement from active employment with the Company and its Subsidiaries on or after the attainment of age 55, or such other retirement date as may be approved by the Committee for purposes of the Plan and specified in the applicable Award Agreement, but shall not include the termination of the directorship of a nonemployee director. "Stock Option" means an Award to purchase shares of Common Stock granted to an Eligible Employee pursuant to Section 7 hereof. "Subsidiary" means any corporation which is a "subsidiary corporation" within the meaning of Section 424(f) of the Code with respect to the Company. "Ten Percent Shareholder" means an Eligible Employee who, at the time an Incentive Stock Option is to be granted to him or her, owns (within the meaning of Section 422(b)(6) of the Code,) stock possessing more than ten percent (10%) of the total Combined Voting Power of all classes of stock of the Company, or of a Parent or a Subsidiary. "Window Period" means the ten (10) business day period in each fiscal quarter of the Company commencing on the third (3rd) business day following the release for publication of the Company's quarterly or annual sales and earnings for the next preceding fiscal quarter or year, as the case may be, and ending on the twelfth (12th) business day following such date of release. 3. Administration of the Plan. (a) The Plan shall be administered by the Committee, which shall be comprised of no fewer than two members of the Board who shall be appointed from time to time by the Board. Members of the Committee shall serve at the pleasure of the Board and the Board may from time to time remove members from, or add members to, the Committee. All determinations of the Committee at a meeting shall be made by a majority of the members in attendance. Any decision or determination reduced to writing and signed by all the members shall be fully as effective as if it had been made by a majority vote at a meeting duly called and held. No member of the Committee shall be personally liable for any action, determination or interpretation made in good faith with respect to the Plan, and all members of the Committee shall be indemnified by the Company to the fullest extent permitted by the certificate of incorporation or by-laws of the Company or applicable Delaware law with respect to any such action, determination or interpretation. (b) Within the limitations described herein, the Committee shall administer the Plan, select the Eligible Employees to whom Awards will be granted, determine the number and type of Awards to be granted to each such Eligible Employee, determine the terms and conditions applicable to each Award (which need not be identical), make any amendment or modification to any Award Agreement consistent with the terms of the Plan, and interpret, construe and implement the provisions of the Plan. The Committee shall have the authority to adopt rules and regulations for administering the Plan which shall not be inconsistent with the terms of the Plan. Decisions of the Committee shall be binding on the Company, on all Eligible Employees and Participants and all other persons having any interest in the Plan. The Company shall effect the granting of Awards under the Plan in accordance with the determinations made by the Committee, which shall be evidenced by an Award Agreement. (c) The Committee shall have the authority to adopt such rules and regulations and to add such terms, conditions and sub-schemes to the Plan as it deems necessary or desirable to permit or facilitate the granting of Awards under the Plan to, or obtain favorable tax treatment for, Eligible Employees resident for tax purposes in jurisdictions outside the United States; provided, however, that any such rule, regulation, term, condition or sub-scheme shall not be inconsistent with the terms of the Plan. (d) Any act that the Committee is authorized to perform hereunder may instead be performed by the Board at its discretion, and to the extent that the Board so acts, references in the Plan to the Committee shall refer to the Board as applicable. In addition, the Committee in its discretion may delegate its authority to grant Awards pursuant to Section 3(b) to an officer or committee of officers, subject to specific limits and guidelines established by the Committee at the time of such delegation. In addition, the Committee in its discretion may delegate its authority to an officer or committee of officers to amend Award Agreements for purposes of delaying the start of the period during which a Participant may exercise his or her Stock Options following termination of employment if the Participant is in possession of material nonpublic information regarding the Company at the time of his or her termination of employment. 4. Duration of Plan. The Plan shall remain in effect until terminated by the Board of Directors and thereafter until all Awards granted under the Plan are satisfied by the issuance of shares of Common Stock or the payment of cash or are terminated under the terms of the Plan or under the Award Agreement entered into in connection with the grant thereof. Notwithstanding the foregoing, no Awards may be granted under the Plan after the tenth anniversary of the Effective Date (as hereinafter defined). 5. Shares of Stock Subject to the Plan. Subject to the provisions of Section 13(b) (relating to adjustment for changes in capital stock) there are reserved for issuance under the Plan an aggregate of 7,197,045 shares of Common Stock, less the number of shares that may be reserved for issuance under the Company's Retirement Savings Plan or under any broad-based employee stock purchase plan (the "Plan Maximum"). Such shares may be authorized but unissued or treasury shares. Stock underlying outstanding Stock Options, Restricted Stock Awards, or Performance Share Awards will reduce the Plan Maximum while such Stock Options, Restricted Stock Awards, or Performance Share Awards are outstanding. Shares underlying expired, canceled or forfeited Stock Options, Restricted Stock Awards, or Performance Share Awards shall be added back to the Plan Maximum. When the exercise price of Stock Options is paid by delivery of shares of Common Stock of the Company, or if the Committee approves the withholding of shares from a distribution in payment of the exercise price, the Plan Maximum shall be reduced by the net (rather than the gross) number of shares issued pursuant to such exercise, regardless of the number of shares surrendered or withheld in payment. If the Committee approves the payment of cash to an optionee equal to the difference between the fair market value and the exercise price of stock subject to a Stock Option, or if a Performance Share Award is paid in cash, the Plan Maximum shall be increased by the number of shares with respect to which such payment is applicable. Restricted Stock issued pursuant to the Plan will reduce the Plan Maximum while outstanding even while subject to restrictions. Shares of Restricted Stock shall be added back to the Plan Maximum if such Restricted Stock is forfeited or is returned to the Company as part of a restructuring of benefits granted pursuant to the Plan. 6. Maximum Number of Shares per Eligible Employee. To satisfy the requirements under Section 162(m) of the Code, no Eligible Employee whose Performance Award the Committee reasonably believes will be subject to Section 162(m) of the Code shall receive a grant of Awards with respect to more than 325,000 shares of Common Stock in any Plan year. 7. Eligible Employees. Awards may be granted by the Committee to individuals ("Eligible Employees") who are either directors or salaried employees of the Company or a Subsidiary with potential to contribute to the future success of the Company or its Subsidiaries. Awards shall not be affected by any change of duties or positions so long as the holder continues to be an employee or director of the Company or of a Subsidiary. 8. Stock Options. Stock Options granted under the Plan may be in the form of Incentive Stock Options or Nonqualified Stock Options. Stock Options granted under the Plan shall be subject to the following terms and conditions and shall contain such additional terms and conditions, not inconsistent with the terms of the Plan, as the Committee shall deem appropriate: (a) Award Agreement. Stock Options shall be evidenced by an Award Agreement in such form and containing such terms and conditions as the Committee deems appropriate and which are not inconsistent with the terms of the Plan. (b) Terms of Stock Options Generally. Subject to the terms of the Plan and the applicable Award Agreement, each Stock Option shall entitle the Participant to whom such Stock Option was granted to purchase, upon payment of the relevant exercise price, the number of shares of Common Stock specified in the Award Agreement. (c) Exercise Price. The Exercise Price per share of Common Stock purchasable under a Stock Option shall be determined by the Committee at the time of grant and set forth in the Award Agreement. (d) Option Term. The term of each Stock Option shall be fixed by the Committee and set forth in the Award Agreement; provided, however, that a Stock Option shall not be exercisable after the expiration of ten (10) years after the date the Stock Option is granted (five (5) years in the case of an Incentive Stock Option granted to a Ten Percent Shareholder). (e) Exercisability. A Stock Option shall be exercisable at such time or times and subject to such terms and conditions as shall be determined by the Committee. The Committee may provide that Stock Options shall be exercisable in whole or in part based upon length of service or attainment of specified performance criteria. The Committee, in its sole discretion, may provide for the acceleration of vesting of a Stock Option, in whole or in part, based on such factors or criteria (including specified performance criteria) as the Committee may determine. (f) Method of Exercise. A Stock Option may be exercised, in whole or in part, by giving written notice of exercise to the Company specifying the number of shares to be purchased. Such notice shall be accompanied by payment in full of the exercise price either by cash, certified or bank check, note or other instrument acceptable to the Committee. Except as set forth in Section 8(i) hereof, as determined by the Committee in its sole discretion, payment of the exercise price may also be made in full or in part in shares of Common Stock with a Fair Market Value (determined as of the date of exercise of such Stock Option and, where such shares are withheld (as described below), net of the applicable exercise price) at least equal to such full or partial payment. Common Stock used to pay the exercise price may be shares that are already owned by the Participant, or the Company may withhold shares of Common Stock that would otherwise have been received by the Participant upon exercise of the Stock Option. In its discretion, the Committee may also permit any Participant to exercise an Option through a "cashless exercise" procedure involving a broker or dealer approved by the Committee, provided that the Participant has delivered an irrevocable notice of exercise (the "Notice") to the broker or dealer and such broker or dealer agrees: (A) to sell immediately the number of shares of Common Stock specified in the Notice to be acquired upon exercise of the Option in the ordinary course of its business, (B) to pay promptly to the Company the aggregate exercise price (plus the amount necessary to satisfy any applicable tax liability) and (C) to pay to the Participant the balance of the proceeds of the sale of such shares over the amount determined under clause (B) of this sentence, less applicable commissions and fees; provided, however, that the Committee may modify the provisions of this sentence to the extent necessary to conform the exercise of the Option to Regulation T under the Exchange Act. The manner in which the exercise price may be paid may be subject to certain conditions specified by the Committee. If requested by the Committee, the Participant shall deliver the Award Agreement evidencing an exercised Stock Option to the Secretary of the Company, who shall endorse thereon a notation of such exercise and return such Award Agreement to the Participant exercising the Option. No fractional shares (or cash in lieu thereof) shall be issued upon exercise of a Stock Option and the number of shares that may be purchased upon exercise shall be rounded to the nearest number of whole shares. (g) Rights as Shareholder. A Participant shall have no rights as a shareholder with respect to any shares of Common Stock issuable upon exercise of a Stock Option until a certificate or certificates evidencing the shares of Common Stock shall have been issued to the Participant and, subject to Sections 13(b) and 13(c), no adjustment shall be made for dividends or distributions or other rights in respect of any share for which the record date is prior to the date on which the Participant shall become the holder of record thereof. (h) Special Rule for Incentive Stock Options. With respect to Incentive Stock Options granted under the Plan, if the aggregate Fair Market Value (determined as of the date the Incentive Stock Option is granted) of the number of shares with respect to which Incentive Stock Options are exercisable for the first time by a Participant during any calendar year under all plans of the Company or a Parent or Subsidiary exceeds One Hundred Thousand Dollars ($100,000) or such other limit as may be required by the Code, such Incentive Stock Options shall be treated, to the extent of such excess, as Nonqualified Stock Options. No Incentive Stock Option shall be granted to any person who is not an employee at the time of grant. (i) Payment Alternatives for Section 16 Persons. Persons subject to Section 16 of the Exchange Act shall have the unfettered right (but not the obligation) to pay the exercise price in full or in part in shares of Common Stock with a Fair Market Value (determined as of the date of exercise of such Stock Option and, where such shares are withheld (as described below), net of the applicable exercise price) at least equal to such full or partial payment. Common Stock used to pay the exercise price may be shares that are already owned by the Participant who is subject to Section 16 of the Exchange Act, or such Participant shall have the right but not the obligation to direct the Company to withhold shares of Common Stock that would otherwise have been received by such Participant upon exercise of the Stock Option. It is the intent of this provision that the transactions described in this subsection qualify for the exemption from short-swing profit liability under Section 16 of the Exchange Act pursuant to the "disposition to the issuer" exemption set forth at Rule 16b-3(e) promulgated under Section 16 of the Exchange Act. 9. Restricted Stock Awards. Restricted Stock Awards granted under the Plan shall be subject to the following terms and conditions and shall contain such additional terms and conditions, not inconsistent with the Plan, as the Committee shall deem appropriate: (a) Award Agreement. Restricted Stock Awards shall be evidenced by an Award Agreement in such form and containing such restrictions, terms and conditions as the Committee deems appropriate and which are not inconsistent with the terms of the Plan, including, without limitation, restrictions on the sale, assignment, transfer or other disposition of such shares and provisions requiring that a Participant forfeit such shares upon a termination of employment or directorship for specified reasons within a specified period of time. (b) Terms of Restricted Stock Awards Generally. Restricted Stock Awards may be granted under the Plan in such form as the Committee may from time to time approve. Restricted Stock Awards may be granted for no consideration or such consideration as the Committee deems appropriate. Restricted Stock Awards may be granted alone or in addition to other Awards under the Plan. Subject to the terms of the Plan, the Committee shall determine the number of shares of Common Stock subject to each Restricted Stock Award granted to a Participant, and the Committee may impose different terms and conditions on any particular Restricted Stock Award granted to any Participant. Each Participant receiving a Restricted Stock Award shall be issued a certificate or certificates in respect of such shares of Common Stock at the time of grant. Such certificate shall be registered in the name of such Participant, and shall bear an appropriate legend referring to the terms, conditions and restrictions applicable to such Award. The Committee may require that the certificate or certificates evidencing such shares be held in custody by the Company until the restrictions thereon shall have lapsed, and that, as a condition of any Restricted Stock Award, the Participant shall have delivered a stock power, endorsed in blank, relating to the Common Stock covered by such Award. (c) Restriction Period. Restricted Stock Awards shall provide that, in order for a Participant to vest in such Awards, such Participant must remain in the employment or directorship of the Company or its Subsidiaries, subject to such exceptions as the Committee may determine in its sole discretion for specified reasons for a period commencing on the date of the Award and ending on such later date or dates as the Committee may designate at the time of the Award and set forth in the Award Agreement (the "Restriction Period"). During the Restriction Period, a Participant may not sell, assign, transfer, pledge, encumber or otherwise dispose of shares of Common Stock received under a Restricted Stock Award. The Committee, in its sole discretion, may provide for the lapse of restrictions in installments during the Restriction Period and may waive or accelerate such restrictions in whole or in part, based on such factors or criteria, including specified performance criteria, as the Committee may determine. Upon expiration of the applicable Restriction Period (or lapse of restrictions during the Restriction Period), the Participant shall be vested in the Restricted Stock Award, or applicable portion thereof. (d) Rights as Shareholder. Except as otherwise provided by the Committee in its sole discretion, a Participant shall have, with respect to the shares of Common Stock received under a Restricted Stock Award, all of the rights of a shareholder of the Company, including the right to vote the shares and the right to receive any cash dividends. Stock dividends issued with respect to shares covered by a Restricted Stock Award shall be treated as additional shares under the Restricted Stock Award and shall be subject to the same restrictions and other terms and conditions that apply to the shares with respect to which such dividends are issued. 10. Performance Share Awards. Performance Share Awards granted under the Plan shall be subject to the following terms and conditions and shall contain such additional terms and conditions, not inconsistent with the Plan, as the Committee shall deem appropriate: (a) Award Agreement. Performance Share Awards shall be evidenced by an Award Agreement in such form and containing such terms and conditions as the Committee deems appropriate and which are not inconsistent with the terms of the Plan. Each Award Agreement shall set forth the number of shares of Common Stock to be received by a Participant upon satisfaction of certain specified performance criteria and subject to such other terms and conditions as the Committee deems appropriate. (b) Terms of Performance Share Awards Generally. Performance Share Awards may be granted under the Plan in such form as the Committee may from time to time approve. Performance Share Awards may be granted for no consideration or such consideration as the Committee deems appropriate. Performance Share Awards may be granted alone or in addition to other Awards under the Plan. Subject to the terms of the Plan, the Committee shall determine the number of shares of Common Stock subject to each Performance Share Award granted to a Participant. (c) Performance Goals. Performance Share Awards shall provide that, in order for a Participant to be entitled to receive shares of Common Stock under such Award, the Company and/or the Participant must achieve certain specified performance goals ("Performance Goals") over a designated performance period ("Performance Period"). The Performance Goals and Performance Period shall be established by the Committee in its sole discretion. The Committee shall establish the Performance Goals for each Performance Period before, or as soon as practicable after, the commencement of the Performance Period. In setting Performance Goals, the Committee may use such measures as net earnings, operating earnings or income, absolute and/or relative return on equity or assets, earnings per share, cash flow, pretax profits, earnings growth, revenue growth, comparison to peer companies, any combination of the foregoing, or such other measure or measures of performance, including individual measures of performance, in such manner as it deems appropriate. Prior to the end of a Performance Period, with respect to any Participant the deductibility of whose Performance Award will not, in the reasonable belief of the Committee, be subject to Section 162(m) of the Code, the Committee may, in its discretion, adjust the performance objectives to reflect a Change in Capitalization (as hereinafter defined) or any other event which may materially affect the performance of the Company, a Subsidiary or a division, including, but not limited to, market conditions or a significant acquisition or disposition of assets or other property by the Company, a Subsidiary or a division. With respect to any Participant, the deductibility of whose Performance Award may, in the reasonable belief of the Committee, be subject to Section 162(m) of the Code, the Committee shall not be entitled to exercise the discretion conferred upon it in the preceding sentence to the extent the existence or exercise of such discretion would result in a loss of tax deductibility under such Section 162(m) of the Code. The extent to which a Participant is entitled to payment of a Performance Share Award at the end of the Performance Period shall be determined by the Committee, in its sole discretion, based on the Committee's determination of whether the Performance Goals established by the Committee in the granting of such Performance Share Award have been met. (d) Payment of Awards. Payment in settlement of a Performance Share Award shall be made as soon as practicable following the conclusion of the respective Performance Period, or at such other time as the Committee shall determine, in shares of Common Stock. (e) Rights as Shareholder. Except as otherwise provided by the Committee in the applicable Award Agreement, a Participant shall have no rights as a shareholder with respect to a Performance Share Award until a certificate or certificates evidencing the shares of Common Stock shall have been issued to the Participant following the conclusion of the Performance Period, and, subject to Sections 13(b) and 13(c), no adjustment shall be made for dividends or distributions or other rights in respect of any share for which the record date is prior to the date on which the Participant shall become the holder of record thereof. 11. Termination of Employment. (a) Disability or Retirement. Except as may otherwise be provided by the Committee in its sole discretion at the time of grant or subsequent thereto, if a Participant's employment with the Company and its Subsidiaries terminates by reason of Retirement or if a Participant's employment (or, with respect to a nonemployee director, his directorship) terminates by reason of Disability, (i) any Stock Option held by the Participant may thereafter be exercised, to the extent it was exercisable on the date of termination, for a period (the "Exercise Period") of one (1) year from the date of such Disability or Retirement or until the expiration of the stated term of the Stock Option, whichever period is shorter, and to the extent not exercisable on the date of termination, such Stock Option shall be forfeited; provided, however, that if a Participant terminates employment by reason of Retirement and such Participant holds an Incentive Stock Option, the Exercise Period shall not exceed the shorter of three (3) months from the date of Retirement and the remainder of the stated term of such Incentive Stock Option; provided further, however, that if the Participant dies during the Exercise Period, any unexercised Stock Option held by such Participant may thereafter be exercised to the extent it was exercisable on the date of Disability or Retirement, by the legal representative or beneficiary of the Participant, for a period of one (1) year from the date of such death or until the expiration of the stated term of such Stock Option, whichever period is shorter (or, in the case of an Incentive Stock Option, for a period equal to the remainder of the Exercise Period), and (ii) if such termination is prior to the end of the applicable Restriction Period (with respect to a Restricted Stock Award) or Performance Period (with respect to a Performance Share Award), the number of shares of Common Stock subject to such Award which have not been earned as of the date of Disability or Retirement shall be forfeited. In determining whether to exercise its discretion under the first sentence of this Section 11(a) with respect to an Incentive Stock Option the Committee may consider the provisions of Section 422 of the Code. (b) Death. Except as may otherwise be provided by the Committee in its sole discretion at the time of grant or subsequent thereto, if a Participant's employment or directorship with the Company and its Subsidiaries terminates by reason of death, (i) any Stock Option held by the Participant may thereafter be exercised, to the extent it was exercisable on the date of death, by the legal representative or beneficiary of the Participant, for a period of one (1) year from the date of the Participant's death or until the expiration of the stated term of such Stock Option, whichever period is shorter, and to the extent not exercisable on the date of death, such Stock Option shall be forfeited and (ii) if such termination is prior to the end of the applicable Restriction Period (with respect to a Restricted Stock Award) or Performance Period (with respect to a Performance Share Award), the number of shares of Common Stock subject to such Award which have not been earned as of the date of death shall be forfeited. (c) Other Terminations. Unless the Committee determines otherwise in its sole discretion at the time of grant or subsequent thereto, if a Participant's employment or directorship with the Company and its Subsidiaries terminates for any reason other than death, Disability or Retirement, (i) any Stock Option held by the Participant may thereafter be exercised, to the extent it was exercisable on the date of termination, for a period of sixty (60) days from the date of such termination or until the expiration of the stated term of such Stock Option, whichever period is shorter, and to the extent not exercisable on the date of termination, such Stock Option shall be forfeited, and (ii) if such termination is prior to the end of the applicable Restriction Period (with respect to a Restricted Stock Award) or Performance Period (with respect to a Performance Share Award), the number of shares of Common Stock subject to such Award which have not been earned as of the date of such termination shall be forfeited. In determining whether to exercise its discretion under the first sentence of this Section 10(c) with respect to an Incentive Stock Option, the Committee may consider the provisions of Section 422 of the Code. 12. Non-transferability of Awards. No Awards under the Plan or any rights or interests therein may be sold, transferred, assigned, pledged or otherwise encumbered or disposed of except by will or the laws of descent and distribution; provided, however, that with respect to any Award that is not an Incentive Stock Option, the foregoing restrictions shall not apply to the extent determined by the Committee in its sole discretion at the time of grant and set forth in the applicable Award Agreement; provided further, however, that if so determined by the Committee, a Participant may, in the manner established by the Committee, designate a beneficiary to exercise the rights of the Participant with respect to any Award upon the death of the Participant. During the lifetime of a Participant, Stock Options shall be exercisable only by, and payments in settlement of Awards shall be payable only to, the Participant. 13. Recapitalization or Reorganization. (a) The existence of the Plan, the Award Agreements and the Awards granted hereunder shall not affect or restrict in any way the right or power of the Company or the shareholders of the Company to make or authorize any adjustment, recapitalization, reorganization or other change in the Company's capital structure or its business, any merger or consolidation of the Company, any issue of stock or of options, warrants or rights to purchase stock or of bonds, debentures, preferred or prior preference stocks whose rights are superior to or affect the Common Stock or the rights thereof or which are convertible into or exchangeable for Common Stock, or the dissolution or liquidation of the Company, or any sale or transfer of all or any part of its assets or business, or any other corporate act or proceeding, whether of a similar character or otherwise. (b) Notwithstanding any provision of the Plan or any Award Agreement, in the event of any change in the outstanding Common Stock by reason of a stock dividend, recapitalization, reorganization, merger, consolidation, stock split, combination or exchange of shares (a "Change in Capitalization"), (i) such proportionate adjustments as may be necessary (in the form determined by the Committee in its sole discretion) to reflect such change shall be made to prevent dilution or enlargement of the rights of Participants under the Plan with respect to (a) the aggregate number of shares of Common Stock for which Awards in respect thereof may be granted under the Plan, (b) the aggregate number of shares of Common Stock which are subject to Awards hereunder without the approval of the Board pursuant to Section 5 hereof, (c) the number of shares of Common Stock covered by each outstanding Award, and (d) the exercise or Award prices in respect thereof and (ii) the Committee may make such other adjustments, consistent with the foregoing, as it deems appropriate in its sole discretion. (c) Upon the occurrence of a merger of, or consolidation involving, the Company in which the Common Stock is converted into securities of another corporation or into cash, or any other transaction that results in the Common Stock no longer being publicly traded, at the sole discretion of the Committee, and on such terms and conditions as it deems appropriate, the Committee may provide either by the terms of an Award granted under the Plan or by a resolution adopted prior to the occurrence of such event that upon such event, such Award shall be assumed by the successor corporation, or a Parent or Subsidiary thereof, or shall be substituted for by a similar Award, covering the stock of the successor corporation, or a Parent or Subsidiary thereof, with appropriate adjustments as to the number and kind of shares and exercise or Award prices. 14. Change in Control. In the event of a Change in Control and except as the Committee (as constituted immediately prior to such Change in Control) may otherwise determine in its sole discretion, (i) all Stock Options then outstanding shall become fully exercisable as of the date of the Change in Control, whether or not then exercisable, (ii) all restrictions and conditions of all Restricted Stock Awards then outstanding shall lapse as of the date of the Change in Control and (iii) all Performance Share Awards shall be deemed to have been fully earned as of the date of the Change in Control. 15. Amendment of the Plan. The Board may at any time and from time to time terminate, modify, or amend the Plan in any respect, except that no termination, modification or amendment shall be effective without shareholder approval if such approval is required to comply with any law, regulation or stock exchange rule. No termination or amendment of the Plan shall, without the consent of a Participant to whom any Awards shall previously have been granted, adversely affect his or her rights under such Awards. 16. Miscellaneous. (a) Tax Withholding. (i) The Company and its Subsidiaries shall have the right to deduct from any cash payment made under the Plan any federal, state or local taxes of any kind required to be withheld with respect to such payment. It shall be a condition to the obligation of the Company to deliver shares of Common Stock pursuant to any Award under the Plan that the recipient of such Award pay to the Company such amount as may be required by the Company for the purpose of satisfying any liability for any such withholding taxes. Any Award granted under the Plan may require the Company, or permit the recipient of such Award to elect, in accordance with any applicable rules established by the Committee, to withhold or to pay all or a part of the amount of such withholding taxes in shares of Common Stock, provided, however, that regardless of whether set forth in the Award Agreement, any person subject to Section 16 of the Exchange Act shall have the unfettered right but not the obligation to direct and compel the Company to withhold, or to accept from such person, such number of shares of Common Stock valued at the Fair Market Value on the date of such payment as is necessary to pay, in whole or in part, such person's withholding tax obligation. Except for elections made by persons subject to Section 16 of the Exchange Act, elections by all other Participants may be denied by the Committee in its sole discretion, or may be made subject to certain conditions specified by the Committee. Neither the Board of Directors nor the Committee shall have any discretion with respect to the elections by persons subject to Section 16 of the Exchange Act in order that such transactions shall qualify for the exemption from short-swing profit liability pursuant to the "disposition to the issuer" exemption set forth at Rule 16b-3(e) promulgated under Section 16 of the Exchange Act. (ii) The applicable Award Agreement for an Incentive Stock Option shall provide that if a Participant makes a disposition, within the meaning of Section 424(c) of the Code and the regulations promulgated thereunder, of any share of Common Stock issued to such Participant pursuant to the exercise of an Incentive Stock Option within the two (2)-year period commencing on the day after the date of the grant or within the one (1)-year period commencing on the day after the date of transfer of such share of Common Stock to the Participant pursuant to such exercise, the Participant shall, within ten (10) days of such disposition, notify the Company thereof, by delivery of written notice to the Company at its principal executive office. (b) Loans. On such terms and conditions as shall be approved by the Committee, the Company may directly or indirectly lend money to a Participant to accomplish the purposes of the Plan, including to assist such Participant to acquire or carry shares of Common Stock acquired upon the exercise of Stock Options granted hereunder, and the Committee may also separately lend money to any Participant to pay taxes with respect to any of the transactions contemplated by the Plan. (c) No Right to Grants or Employment. No Eligible Employee or Participant shall have any claim or right to receive grants of Awards under the Plan. Nothing in the Plan or in any Award or Award Agreement shall confer upon any employee of the Company or any Subsidiary any right to continued employment with the Company or any Subsidiary, as the case may be, or interfere in any way with the right of the Company or a Subsidiary to terminate the employment of any of its employees at any time, with or without cause. (d) Unfunded Plan. The Plan shall be unfunded and the Company shall not be required to segregate any assets that may at any time be represented by Awards under the Plan. Any liability of the Company to any person with respect to any Award under the Plan shall be based solely upon any contractual obligations that may be effected pursuant to the Plan. No such obligation of the Company shall be deemed to be secured by any pledge of, or other encumbrance on, any property of the Company. (e) Other Employee Benefit Plans. Payments received by a Participant under any Award made pursuant to the provisions of the Plan shall not be included in, nor have any effect on, the determination of benefits under any other employee benefit plan or similar arrangement provided by the Company. (f) Securities Law Restrictions. The Committee may require each Eligible Employee purchasing or acquiring shares of Common Stock pursuant to a Stock Option or other Award under the Plan to represent to and agree with the Company in writing that such Eligible Employee is acquiring the shares for investment and not with a view to the distribution thereof. All certificates for shares of Common Stock delivered under the Plan shall be subject to such stock-transfer orders and other restrictions as the Committee may deem advisable under the rules, regulations, and other requirements of the Securities and Exchange Commission, the New York Stock Exchange or any other stock exchange upon which the Common Stock is then listed, and any applicable federal or state securities law, and the Committee may cause a legend or legends to be put on any such certificates to make appropriate reference to such restrictions. No shares of Common Stock shall be issued hereunder unless the Company shall have determined that such issuance is in compliance with, or pursuant to an exemption from, all applicable federal and state securities laws. (g) Compliance with Rule 16b-3. Notwithstanding anything contained in the Plan or any Award Agreement to the contrary, if the consummation of any Award under the Plan would result in the possible imposition of liability on a Participant pursuant to Section 16(b) of the Exchange Act, the Committee shall have the right, in its sole discretion, but shall not be obligated, to defer such transaction to the extent necessary to avoid such liability, but in no event for a period in excess of 180 days. (h) Deductibility Under Code Section 162(m). Awards granted under the Plan to Eligible Employees which the Committee reasonably believes may be subject to Section 162(m) of the Code shall not be exercisable, and payment under the Plan in connection with such an Award shall not be made, unless and until the Committee has determined in its sole discretion that such exercise or payment would no longer be subject to Section 162(m) of the Code. (i) Award Agreement. Each Eligible Employee receiving an Award under the Plan shall enter into an Award Agreement in a form specified by the Committee agreeing to the terms and conditions of the Award and such other matters as the Committee shall, in its sole discretion, determine. In the event of any conflict or inconsistency between the Plan and any such Award Agreement, the Plan shall govern, and the Award Agreement shall be interpreted to minimize or eliminate any such conflict or inconsistency. (j) Costs of Plan. The costs and expenses of administering the Plan shall be borne by the Company. (k) Governing Law. Except as to matters of federal law, the Plan and all actions taken thereunder shall be governed by and construed in accordance with the laws of the State of Delaware without giving effect to conflicts of law principles. (l) Effective Date. The Plan as amended and restated herein shall be effective on August 3, 2000 (the "Effective Date"). EX-27 8 0008.txt FINANCIAL DATA SCHEDULE
5 This schedule contains summary financial information extracted from SEC Form 10-Q and is qualified in its entirety by reference to such financial statements. 1000 6-MOS DEC-31-2000 JUN-30-2000 16,545 0 134,933 2,828 99,229 281,597 1,748,414 758,619 1,680,540 198,160 876,829 0 0 705 382,839 1,680,540 393,605 393,605 353,713 353,713 0 0 35,814 (60,603) (16,363) (42,849) 0 0 0 (42,849) (.62) (.62)
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