UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
Filed by the registrant [X]
Filed by a party other than the registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for use of the
Commission only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive proxy statement
[ ] Definitive additional materials
[ ] Soliciting material under Rule 14a-12
MEMC ELECTRONIC MATERIALS, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
Payment of filing fee (Check the appropriate box):
[X] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
[ ] Fee paid previously with preliminary materials.
- --------------------------------------------------------------------------------
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the form or schedule and the date of its filing.
[MEMC LOGO]
MEMC ELECTRONIC MATERIALS, INC.
501 PEARL DRIVE (CITY OF O'FALLON)
ST. PETERS, MISSOURI 63376
NOTICE OF
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD JUNE 5, 2002
MEMC Electronic Materials, Inc. will hold its 2002 Annual Shareholders'
Meeting at 345 California Street, Suite 3300, San Francisco, California 94104,
on Wednesday, June 5, 2002 at 10:00 a.m., local time, for the following
purposes:
1. To elect directors;
2. To consider and act upon a proposal to approve MEMC's 2001 Equity
Incentive Plan; and
3. To transact such other business as may properly come before the meeting
and all adjournments thereof.
The Board of Directors has fixed April 26, 2002 as the record date for the
determination of the shareholders entitled to notice of, and to vote at, the
annual meeting and all adjournments thereof. A list of shareholders entitled to
vote at the annual meeting will be available for examination by any shareholder
at our executive offices not less than ten days prior to the annual meeting and
at the meeting.
Sincerely,
DAVID L. FLEISHER
Secretary
May 20, 2002
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, SO THAT YOUR SHARES WILL BE
REPRESENTED, PLEASE COMPLETE THE ENCLOSED PROXY CARD, AND SIGN, DATE AND RETURN
IT IN THE ENCLOSED ENVELOPE, WHICH DOES NOT REQUIRE POSTAGE IF MAILED IN THE
UNITED STATES. YOU MAY WITHDRAW YOUR PROXY AT ANY TIME BEFORE IT IS VOTED.
TABLE OF CONTENTS
<Table>
<Caption>
PAGE
NUMBER
------
Proxy Statement -- Voting Procedures........................ 1
Item No. 1 -- Election of Directors......................... 2
Information About Nominees and Continuing Directors......... 3
Certain Beneficial Ownership by Directors and Executive
Officers.................................................. 5
Ownership of MEMC Equity Securities by Certain Beneficial
Owners.................................................... 7
Board of Directors -- Committees............................ 10
Report of Audit Committee................................... 12
Principal Accounting Firm Fees.............................. 13
Compensation and Nominating Committee Report................ 13
Summary Compensation Table.................................. 15
Option Grants in Last Fiscal Year........................... 16
Aggregated Option Exercises in Last Fiscal Year and Fiscal
Year-End Option Values.................................... 17
Stock Price Performance Graph............................... 26
Certain Transactions........................................ 26
Item No. 2 -- Approval of 2001 Equity Incentive Plan........ 33
Shareholder Proposals for 2003 Annual Meeting............... 37
Other Matters............................................... 37
</Table>
i
PROXY STATEMENT -- VOTING PROCEDURES
YOUR VOTE IS VERY IMPORTANT
MEMC is soliciting proxies to be used at our 2002 Annual Shareholders'
Meeting. This proxy statement and the proxy card will be mailed to shareholders
beginning May 20, 2002.
WHO CAN VOTE
Record holders of MEMC common stock on April 26, 2002 may vote at the
annual meeting. On April 26, 2002, there were 70,238,660 shares of common stock
outstanding. The shares of common stock held in our treasury will not be voted.
Each share of common stock is entitled to one vote on each matter submitted to a
vote at the annual meeting.
HOW YOU CAN VOTE
- BY PROXY -- Simply mark your proxy card, date and sign it, and return it
in the envelope provided.
- IN PERSON -- You can come to the annual meeting and cast your vote there.
If your shares are held in the name of your broker, bank or other nominee
and you wish to vote at the annual meeting, you must obtain a legal proxy
or power of attorney from the nominee and present it at the meeting to
establish your right to vote the shares.
HOW YOU MAY REVOKE OR CHANGE YOUR VOTE
If you give a proxy, you may revoke it at any time before your shares are
voted. You may revoke your proxy in one of three ways:
- Send in another proxy with a later date;
- Notify our Corporate Secretary in writing before the annual meeting that
you have revoked your proxy; or
- Vote in person at the annual meeting.
SPECIAL VOTING RULES FOR PARTICIPANTS IN MEMC RETIREMENT SAVINGS PLAN
The MEMC Stock Fund holds MEMC common stock as an investment alternative
for participants in the MEMC Retirement Savings Plan. Plan participants may
direct the plan's trustee how to vote the shares held by the plan, but only if
the participant signs and returns a voting direction card. If cards representing
shares held in the plan are not returned, the trustee will vote those shares in
the same proportion as the shares for which signed cards are returned by other
participants.
QUORUM
A majority of the outstanding shares entitled to vote at the annual meeting
represented in person or by proxy will constitute a quorum. Abstentions and
broker non-votes are counted as present for establishing a quorum. A broker
non-vote occurs when a broker returns a proxy card but does not vote on one or
more matters because the broker does not have authority to do so. Shares
represented by proxies that are marked "withhold" with respect to the election
of one or more directors will be counted as present in determining whether there
is a quorum.
VOTE REQUIRED
If a quorum is present at our annual meeting, the following vote is
required for approval of each matter to be voted on:
1
ELECTION OF DIRECTORS A plurality of the shares entitled to vote and
present in person or by proxy at the meeting
must be voted "FOR" each nominee. "Plurality"
means that the nominees who receive the largest
number of votes cast are elected as directors
up to the maximum number of directors to be
elected at the annual meeting. Consequently,
any shares represented by proxies that are
marked "withhold" will have no impact on the
election of directors.
APPROVAL OF 2001 EQUITY
INCENTIVE PLAN A majority of the shares entitled to vote and
present in person or by proxy at the meeting
must be voted "FOR" this matter. Shares
represented by proxies that are marked
"abstain" with respect to this matter will be
treated as shares present and entitled to vote.
This will have the same effect as a vote
against such matter. If a broker indicates on
the proxy that it lacks discretionary authority
as to certain shares to vote on this matter,
the shares will not be considered as present
and entitled to vote with respect to this
matter.
COSTS OF SOLICITATION
We will pay for preparing, printing and mailing this proxy statement.
Proxies may be solicited personally or by telephone by our regular employees
without additional compensation. We will reimburse banks, brokers and other
custodians, nominees and fiduciaries for their costs of sending the proxy
materials to our beneficial owners.
SELECTION OF AUDITORS
We have appointed KPMG LLP as our independent accountant for the current
year ending December 31, 2002. KPMG LLP was our independent accountant for the
year ended December 31, 2001. A representative of KPMG LLP will be present at
the 2002 Annual Shareholders' Meeting, will have an opportunity to make a
statement, if desired, and will be available to respond to appropriate
questions.
ITEM NO. 1 -- ELECTION OF DIRECTORS
The Board of Directors consists of ten members organized into three
classes, with each director elected to serve for a three-year term. There are
three directors in Class I (term expiring in 2002), three directors in Class II
(term expiring in 2003) and four directors in Class III (term expiring in 2004).
Three directors will be elected at our 2002 annual meeting to serve for a
three-year term expiring at our annual meeting in the year 2005. The
Compensation and Nominating Committee has nominated Richard Boyce, John Danhakl
and Nabeel Gareeb for election as Class I (term expiring in 2005) directors at
this meeting. Each nominee is currently serving as a director having been
appointed by the Board to fill vacancies on the Board. Each nominee has
consented to serve for a new term. Each nominee elected as a director will
continue in office until his successor has been elected and qualified. If any
nominee is unable to serve as a director at the time of the annual meeting, the
persons named on the enclosed proxy card may vote for any alternative designated
by the present Board.
You may not vote for more than three nominees. The persons named on the
enclosed proxy card intend to vote the proxy representing your shares for the
election of the three nominees named above, unless you indicate on the proxy
card that the vote should be withheld or you indicate contrary directions. If
you sign and return the proxy card without giving any direction, the persons
named on the enclosed proxy card will vote the proxy representing your shares
FOR the election of the three nominees named on the proxy card.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR"
THE ELECTION OF THESE NOMINEES AS DIRECTORS.
2
INFORMATION ABOUT NOMINEES AND CONTINUING DIRECTORS
Please review the following information about the nominees and other
directors continuing in office.
NOMINEES FOR ELECTION IN 2002
RICHARD W. BOYCE, DIRECTOR SINCE 2002, AGE 47
Mr. Boyce is a Partner of Texas Pacific Group, a privately held investment firm
and an affiliate of MEMC. From 1997 through 1999, Mr. Boyce was President of
CAF, Inc., a consulting firm that provided operating support and oversight to
various companies controlled by Texas Pacific Group. Mr. Boyce periodically
served between 1997 and 1999 as CEO of J. Crew Group, Inc. He served as interim
CEO, from June to October 1998, and as Chairman, from October 1998 to March
1999, of Favorite Brands International Holding Corp., which filed for protection
under Chapter 11 of the Bankruptcy Code on March 30, 1999. He was a director of
that corporation from 1996 to 1999. Mr. Boyce currently serves on the board of
directors of J. Crew Group, Inc., Del Monte Foods Corporation, ON Semiconductor
Corporation and Punch Group, Ltd.
JOHN G. DANHAKL, DIRECTOR SINCE 2001, AGE 46
Mr. Danhakl has served as a partner at Leonard Green & Partners, a privately
held investment firm and an affiliate of MEMC, since 1995. Mr. Danhakl presently
serves on the board of directors of The Arden Group, Inc., Big 5 Sporting Goods,
Inc., Communications & Power Industries, Inc., Twin Laboratories, Inc., Diamond
Triumph Auto Glass, Inc., Liberty Group Publishing, Leslie's Poolmart, Inc., VCA
Antech, Inc. and Petco Animal Supplies, Inc., and on the board of managers of
AsianMedia Group LLC.
NABEEL GAREEB, DIRECTOR SINCE 2002, AGE 37
Mr. Gareeb joined MEMC as President and Chief Executive Officer in April 2002.
Prior to joining MEMC, Mr. Gareeb was the Chief Operating Officer of
International Rectifier Corporation, a leading supplier of power semiconductors,
where he was responsible for worldwide operations, research and development and
marketing of the core products of the company. He joined International Rectifier
in 1992 as Vice President of Manufacturing and subsequently held other senior
management positions.
CONTINUING DIRECTORS
ROBERT J. BOEHLKE, DIRECTOR SINCE 2001, AGE 60
(Term expiring 2003)
Mr. Boehlke was most recently Executive Vice President and Chief Financial
Officer of KLA-Tencor, a position he held from 1990 until his retirement in June
2000. KLA-Tencor is a supplier of process control and yield management solutions
for the semiconductor manufacturing industry. Mr. Boehlke is a member of the
board of directors of DuPont Photomasks, Inc., Entegris, Inc., LTX Corporation
and Quicklogic Corporation.
JEAN-MARC CHAPUS, DIRECTOR SINCE 2001, AGE 43
(Term expiring 2003)
Mr. Chapus has served as Group Managing Director and Portfolio Manager of Trust
Company of the West, an investment management firm, and President of
TCW/Crescent Mezzanine L.L.C., a private investment fund and an affiliate of
MEMC, since March 1995. Mr. Chapus is a member of the board of directors of
Starwood Hotels and Resorts Worldwide, Inc. and several private companies,
including Magnequench International, Inc. and TCW Asset Management Company.
JAMES G. COULTER, DIRECTOR SINCE 2001, AGE 42
(Term expiring 2004)
Mr. Coulter is a founding partner of Texas Pacific Group, a privately held
investment firm and an affiliate of MEMC, and has been Managing General Partner
of Texas Pacific Group since 1992. Mr. Coulter serves on
3
the board of directors of GlobeSpanVirata and several private companies
including J. Crew Group, Inc., Seagate Technology, Inc., Zhone Technologies and
Evolution Global Partners.
JOHN MARREN, DIRECTOR SINCE 2001, AGE 39
(Term expiring 2004)
Mr. Marren has been Chairman of the Board of MEMC since November 2001. Mr.
Marren is a Partner of Texas Pacific Group, a privately held investment firm and
an affiliate of MEMC. From 1997 through April 2000, Mr. Marren was Managing
Director and Co-Head of Technology Investment Banking at Morgan Stanley. Mr.
Marren serves on the board of directors of GlobeSpanVirata, ON Semiconductor
Corporation, Zilog, Inc., and Zhone Technologies Inc.
C. DOUGLAS MARSH, DIRECTOR SINCE 2001, AGE 56
(Term expiring 2003)
Mr. Marsh has been employed with ASM Lithography, Inc., a supplier of
photolithography equipment to the semiconductor industry, since 1988 and
currently holds the position of Vice President Business Integration & U.S.
Institutional Investor Relations. Mr. Marsh serves on the board of directors of
ATMI, Inc.
WILLIAM E. STEVENS, DIRECTOR SINCE 2001, AGE 59
(Term expiring 2004)
Mr. Stevens currently serves as Chairman of BBI Group, Inc., a private
equity investment firm. Mr. Stevens served as Chairman and Chief Executive
Officer of the Wesmark Group from 1999 to 2001. From 1996 to 1999, Mr. Stevens
was an Executive Vice President with Mills & Partners, a private equity and
leveraged investment firm. Mr. Stevens serves on the board of directors of
McCormick & Company, Incorporated.
WILLIAM D. WATKINS, DIRECTOR SINCE 2002, AGE 49
(Term expiring 2004)
Mr. Watkins has served as President and Chief Operating Officer of Seagate
Technology, a manufacturer of disc drives and disc drive components, since May
2000. Mr. Watkins joined Seagate Technology as Executive Vice President,
Recording Media Group in February 1996 in connection with Seagate's merger with
Conner Peripherals. In October 1997, Mr. Watkins took on additional
responsibility as Executive Vice President of the Disc Drive Operations, and in
August 1998 was appointed to the position of Chief Operating Officer, with
responsibility for the Seagate's disc drive manufacturing, recording media, and
recording head operations. Mr. Watkins was promoted to President of Seagate in
May 2000 with additional responsibility of product research and development.
4
CERTAIN BENEFICIAL OWNERSHIP BY
DIRECTORS AND EXECUTIVE OFFICERS
The following table lists the beneficial ownership of MEMC common stock,
our Series A Cumulative Convertible Preferred Stock and the membership interest
in TPG Wafer Holdings LLC, MEMC's parent company, as of March 31, 2002 by each
of our directors, certain executive officers and all directors and executive
officers as a group. Except as indicated below, each person has the sole power
to vote and transfer his or her shares or interests.
<Table>
<Caption>
NUMBER OF SHARES PERCENTAGE OF NUMBER OF PERCENTAGE INTEREST
OF MEMC MEMC SHARES OF PERCENTAGE OF IN TPG WAFER
COMMON STOCK OUTSTANDING PREFERRED STOCK OUTSTANDING HOLDINGS
NAME BENEFICIALLY OWNED COMMON STOCK BENEFICIALLY OWNED PREFERRED STOCK BENEFICIALLY OWNED
---- ------------------ ------------- ------------------ --------------- -------------------
Robert J. Boehlke.... -- -- -- -- --
Richard W. Boyce..... -- -- -- -- --
Jean-Marc Chapus..... 182,182,192(1)(2) 90.0%(1)(2) 260,000(1)(2) 100%(1)(2) 19.7%(2)
James G. Coulter..... 182,182,192(1)(3) 90.0%(1)(3) 260,000(1)(3) 100%(1)(3) 60.6%(3)
John G. Danhakl...... 182,182,192(1)(4) 90.0%(1)(4) 260,000(1)(4) 100%(1)(4) 19.7%(4)
C. Douglas Marsh..... -- -- -- -- --
John Marren.......... -- -- -- -- --
William E. Stevens... -- -- -- -- --
William D. Watkins... -- -- -- -- --
Klaus R. von Horde... 294,750(5) * -- -- --
James M. Stolze...... 171,208(6) * -- -- --
John P. DeLuca....... 163,208(7) * -- -- --
Julius R. Glaser..... 65,800(8) * -- -- --
Jonathan P. Jansky... 92,750(9) * -- -- --
All directors and
executive officers
as a group (17
persons)........... 183,018,949(1)-(9) 90.1%(1)-(9) 260,000(1)-(4) 100%(1)-(4) 100%(2)-(4)
</Table>
- ---------------
* Represents less than 1% of MEMC's outstanding common stock as of March 31,
2002.
(1) Assumes the exercise or conversion in full of the warrants to purchase MEMC
common stock and the Series A Cumulative Convertible Preferred Stock. TPG
Wafer Holdings LLC ("TPG Wafer Holdings") directly holds 49,959,970 shares
of MEMC common stock and 260,000 shares of Series A Cumulative Convertible
Preferred Stock, convertible into 115,555,555 shares of MEMC common stock,
excluding accrued but unpaid dividends that may be convertible into shares
of MEMC common stock and assuming shareholder approval of the Series A
Cumulative Convertible Preferred Stock. See "CERTAIN
TRANSACTIONS -- Restructuring Agreement -- Shareholder Approval." TPG Wafer
Partners LLC ("TPG Wafer Partners"), TPG Wafer Management LLC ("TPG Wafer
Management"), Green Equity Investors III, L.P. ("GEI"), Green Equity
Investors Side III, L.P. ("GEI Side"), TCW/Crescent Mezzanine Partners III,
L.P. ("TCW Partners"), TCW/Crescent Mezzanine Trust III ("TCW Trust") and
TCW/Crescent Mezzanine Partners III Netherlands, L.P. ("TCW Netherlands")
collectively hold 16,666,667 warrants which will be exercisable assuming
shareholder approval of the warrants. See "CERTAIN
TRANSACTIONS -- Restructuring Agreement -- Shareholder Approval."
(2) TCW Partners, TCW Trust and TCW Netherlands, collectively hold a 19.7%
membership interest in TPG Wafer Holdings. Jean-Marc Chapus is an officer
and director of TCW Asset Management Company and is affiliated with other
TCW entities. Mr. Chapus is also a limited partner of TCW Partners. Mr.
Chapus may be deemed to have investment powers and beneficial ownership with
respect to the equity securities held by TCW Partners, TCW Trust and TCW
Netherlands.
5
(3) TPG Wafer Partners and TPG Wafer Management collectively hold a 60.6%
membership interest in TPG Wafer Holdings. James G. Coulter is a director,
officer and shareholder of TPG Advisors III, Inc. ("TPG Advisors III"),
which is the general partner of TPG GenPar III, L.P., which in turn is the
sole general partner of each of TPG Partners III, L.P. ("Partners III"), TPG
Parallel III, L.P. ("Parallel III"), TPG Investors III, L.P. ("Investors
III"), FOF Partners III, L.P. ("FOF"), FOF Partners III-B, L.P. ("FOF B")
and the sole member of TPG GenPar Dutch, L.L.C., which is the general
partner of TPG Dutch Parallel III, C.V. ("Dutch Parallel III"). Mr. Coulter
is also a director, officer and shareholder of T(3) Advisors, Inc. ("T(3)
Advisors"), which is the general partner of T(3) GenPar, L.P., which in turn
is the sole general partner of each of T(3) Partners, L.P. ("T(3)
Partners"), T(3) Parallel, L.P. ("T(3) Parallel"), T(3) Investors, L.P.
("T(3) Investors") and the sole member of TPG GenPar Dutch, L.L.C., which is
the general partner of T(3) Dutch Parallel C.V. ("T(3) Dutch"). In addition,
Mr. Coulter is a director, officer and shareholder of T(3) Advisors II,
Inc., which is the general partner of T(3) GenPar II, L.P., which in turn is
the sole general partner of each of T(3) Partners II, L.P. ("T(3) Partners
II") and T(3) Parallel II, L.P. ("T(3) Parallel II"). Partners III, Parallel
III, Investors III, FOF, FOF B, Dutch Parallel III, T(3) Partners, T(3)
Parallel, T(3) Investors, T(3) Dutch, T(3) Partners II and T(3) Parallel II
(collectively, the "TPG Funds") are members of TPG Wafer Partners, which in
turn is a member of TPG Wafer Holdings, and also the managing member of TPG
Wafer Management. TPG Advisors III, T(3) Advisors and T(3) Advisors II and
the TPG Funds may be deemed, pursuant to Rule 13d-3 under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), to beneficially own
all of the securities held by TPG Wafer Holdings and TPG Wafer Partners. Mr.
Coulter, by virtue of his positions with TPG Advisors III, T(3) Advisors and
T(3) Advisors II, may be deemed to have investment powers and beneficial
ownership with respect to the equity securities held by TPG Wafer Holdings
and TPG Wafer Partners.
(4) Green Equity Investors III, L.P. ("GEI") and Green Equity Investors Side
III, L.P. collectively hold a 19.7% membership interest in TPG Wafer
Holdings. John G. Danhakl is a member and manager of GEI Capital III, L.L.C.
("GEI Capital"), which is the general partner of GEI and GEI Side. Mr.
Danhakl is also a Vice President of LGP Management, Inc. ("LGPM"), the
general partner of Leonard Green & Partners, L.P. ("LGP"), which is an
affiliate of GEI Capital and the management company of GEI and GEI Side. GEI
Capital, GPM and LGP may be deemed pursuant to Rule 13d-3 under the Exchange
Act, to beneficially own all of the securities held by GEI and GEI Side. Mr.
Danhakl, by virtue of his positions with GEI Capital and LGPM, may be deemed
to have investment powers and beneficial ownership with respect to the
equity securities held by GEI and GEI Side.
(5) All of these shares may be acquired by the holder within 60 days of March
31, 2002.
(6) Includes 136,704 shares that may be acquired within 60 days of March 31,
2002 and 8,000 shares as to which his spouse has shared voting and
investment power.
(7) Includes 146,704 shares that may be acquired within 60 days of March 31,
2002 (including shares that may be acquired pursuant to the exercise of
options that vested on January 31, 2002, the effective date of Dr. DeLuca's
retirement from MEMC).
(8) Includes 65,800 shares that may be acquired within 60 days of March 31, 2002
(including shares that may be acquired pursuant to the exercise of options
that vested on February 28, 2002, the effective date of Mr. Glaser's
termination of employment from MEMC).
(9) Includes 90,550 shares that may be acquired within 60 days of March 31, 2002
and 2,200 shares as to which his spouse has shared voting and investment
power.
6
OWNERSHIP OF MEMC EQUITY SECURITIES
BY CERTAIN BENEFICIAL OWNERS
The following table lists the persons known by us to beneficially own 5% or
more of our common stock and 5% or more of our Series A Cumulative Convertible
Preferred Stock, each as of March 31, 2002.
<Table>
<Caption>
AMOUNT AND NATURE OF TITLE PERCENT
NAME AND ADDRESS OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP OF CLASS OF CLASS
- ------------------------------------ -------------------- --------- --------
TPG Wafer Holdings LLC......................... 182,182,192(1)(2) Common 90%(1)
301 Commerce Street 260,000(1)(2) Preferred 100%
Suite 3300
Fort Worth, TX 76102
TPG Wafer Partners LLC......................... 182,182,192(1)(2)(3) Common 90%(1)
301 Commerce Street 260,000(1)(2)(3) Preferred 100%
Suite 3300
Fort Worth, TX 76102
TPG Advisors III, Inc.......................... 182,182,192(1)(4) Common 90%(1)
301 Commerce Street 260,000(1)(4) Preferred 100%
Suite 3300
Fort Worth, TX 76102
T(3) Advisors, Inc............................. 182,182,192(1)(4) Common 90%(1)
301 Commerce Street 260,000(1)(4) Preferred 100%
Suite 3300
Fort Worth, TX 76102
T(3) Advisors II, Inc.......................... 182,182,192(1)(4) Common 90%(1)
301 Commerce Street 260,000(1)(4) Preferred 100%
Suite 3300
Fort Worth, TX 76102
Green Equity Investors III, L.P................ 182,182,192(1)(2)(3) Common 90%(1)
11111 Santa Monica Blvd 260,000(1)(2)(3) Preferred 100%
Suite 2000
Los Angeles, CA 90025
Green Equity Investors Side III, L.P........... 182,182,192(1)(2)(3) Common 90%(1)
11111 Santa Monica Blvd 260,000(1)(2)(3) Preferred 100%
Suite 2000
Los Angeles, CA 90025
GEI Capital III, L.L.C......................... 182,182,192(1) Common 90%(1)
11111 Santa Monica Blvd 260,000(1) Preferred 100%
Suite 2000
Los Angeles, CA 90025
LGP Management, Inc............................ 182,182,192(1)(5) Common 90%(1)
11111 Santa Monica Blvd 260,000(1)(5) Preferred 100%
Suite 2000
Los Angeles, CA 90025
Leonard Green & Partners, L.P.................. 182,182,192(1)(5) Common 90%(1)
11111 Santa Monica Blvd 260,000(1)(5) Preferred 100%
Suite 2000
Los Angeles, CA 90025
TCW/Crescent Mezzanine Partners III, L.P....... 182,182,192(1)(2)(3)(6) Common 90%(1)
11100 Santa Monica Blvd 260,000(1)(2)(3)(6) Preferred 100%
Suite 2000
Los Angeles, CA 90025
</Table>
7
<Table>
<Caption>
AMOUNT AND NATURE OF TITLE PERCENT
NAME AND ADDRESS OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP OF CLASS OF CLASS
- ------------------------------------ -------------------- --------- --------
TCW/Crescent Mezzanine Trust III............... 182,182,192(1)(2)(3)(6) Common 90%(1)
11100 Santa Monica Blvd 260,000(1)(2)(3)(6) Preferred 100%
Suite 2000
Los Angeles, CA 90025
TCW/Crescent Mezzanine Partners III
Netherlands, L.P............................. 182,182,192(1)(2)(3)(6) Common 90%(1)
11100 Santa Monica Blvd 260,000(1)(2)(3)(6) Preferred 100%
Suite 2000
Los Angeles, CA 90025
State of Wisconsin Investment Board............ 6,147,000(7) Common 8.8%
P. O. Box 7842
Madison, WI 53707
</Table>
- ---------------
(1) Based on information contained in a Schedule 13D jointly filed with the
Securities and Exchange Commission by TPG Wafer Holdings LLC ("TPG Wafer
Holdings"), TPG Wafer Partners LLC ("TPG Wafer Partners"), TPG Advisors III,
Inc., T(3) Advisors, Inc., T(3) Advisors II, Inc., Green Equity Investors
III, L.P., Green Equity Investors Side III, L.P., GEI Capital III, L.L.C.,
LGP Management, Inc., Leonard Green & Partners, L.P., TCW/Crescent Mezzanine
Partners III, L.P., TCW/Crescent Mezzanine Trust III, The TCW Group, Inc.,
TCW Asset Management Company and TCW/Crescent Mezzanine III, LLC (the "Joint
Filers") on November 23, 2001 and Amendment No. 1 to such Schedule 13D filed
by the Joint Filers and TCW/Crescent Mezzanine III Netherlands, L.P. on
January 31, 2002. Assumes the exercise or conversion in full of the warrants
to purchase MEMC common stock and Series A Cumulative Convertible Preferred
Stock, excluding accrued but unpaid dividends that may be convertible into
shares of MEMC common stock and assuming shareholder approval of the Series
A Cumulative Convertible Preferred Stock and the warrants. See "CERTAIN
TRANSACTIONS -- Restructuring Agreement -- Shareholder Approval." TPG Wafer
Holdings is the record owner of 49,959,970 shares of common stock and
260,000 shares of Series A Cumulative Convertible Preferred Stock. The
reporting persons have shared voting power and investment power over all
182,182,192 shares.
(2) These entities and TPG Wafer Management LLC ("TPG Wafer Management") have
entered into the Amended and Restated LLC Operating Agreement of TPG Wafer
Holdings, dated as of November 13, 2001 and as amended on January 25, 2002,
which provides that TPG Wafer Partners shall be the managing member of TPG
Wafer Holdings and conduct the business and affairs of TPG Wafer Holdings.
This includes voting of the equity securities that TPG Wafer Holdings holds
except as set forth herein and in footnote (3) to this table. These entities
and TPG Wafer Management have also entered into a Members' Agreement, dated
as of November 13, 2001 and as amended on January 25, 2002, providing for,
among other things, an agreement by TPG Wafer Partners not to cause TPG
Wafer Holdings to vote its shares of common stock without the prior written
consent of the other parties to the LLC Operating Agreement on certain
matters. The Members' Agreement also provides that TCW/ Crescent Mezzanine
Partners III, L.P., TCW/Crescent Mezzanine Trust III and TCW/Crescent
Mezzanine Partners III Netherlands, L.P. may nominate one individual to our
Board of Directors, Green Equity Investors III, L.P. and Green Equity
Investors Side III, L.P. may nominate one individual to our Board, and TPG
Wafer Partners agrees to cause TPG Wafer Holdings to vote its shares of
common stock in favor of the election of such individuals as our directors.
(3) These entities and TPG Wafer Management (each a guarantor) have entered into
an Intercreditor Agreement, dated as of December 21, 2001, providing for,
among other things, the assignment of any participation interests in the
note of our Italian subsidiary, the senior subordinated secured notes and
the warrants held by any guarantor to the other non-defaulting guarantors
pro rata in the of certain defaults of such guarantor under their guarantees
to our Citibank revolving credit agreement; TPG Wafer Partners' right of
first offer to any participation interests in the note of our Italian
subsidiary, the senior subordinated secured notes or the warrants that any
guarantor wishes to transfer; the guarantors' tag-
8
along rights to any transfer by TPG Wafer Partners or its affiliates of the
note of our Italian subsidiary, the senior subordinated secured notes or the
warrants; and TPG Wafer Partners' rights to cause the holders of
participation interests in the notes of our Italian subsidiary, the senior
subordinated secured notes or the warrants to sell such securities if TPG
Wafer Partners wishes to sell its securities.
(4) David Bonderman, James G. Coulter and William S. Price, III are directors,
officers and the sole shareholders of TPG Advisors III, Inc. ("TPG Advisors
III"), which is the general partner of TPG GenPar III, L.P., which in turn
is the sole general partner of each of TPG Partners III, L.P. ("Partners
III"), TPG Parallel III, L.P. ("Parallel III"), TPG Investors III, L.P.
("Investors III"), FOF Partners III, L.P. ("FOF") and FOF Partners III-B,
L.P. ("FOF B") and the sole member of TPG GenPar Dutch, L.L.C., which is the
general partner of TPG Dutch Parallel III, C.V. ("Dutch Parallel III"). Mr.
Bonderman, Mr. Coulter and Mr. Price are also directors, officers and the
sole shareholders of T(3) Advisors, Inc. ("T(3) Advisors"), which is the
general partner of T(3) GenPar, L.P., which in turn is the sole general
partner of each of T(3) Partners, L.P. ("T(3) Partners"), T(3) Parallel,
L.P. ("T(3) Parallel") and T(3) Investors, L.P. ("T(3) Investors") and the
managing member of T(3) GenPar Dutch, L.L.C., which is the general partner
of T(3) Dutch Parallel C.V. ("T(3) Dutch"). In addition, Mr. Bonderman, Mr.
Coulter and Mr. Price are also directors, officers and the sole shareholders
of T(3) Advisors II, Inc. ("T(3) Advisors II"), which is the general partner
of T(3) GenPar II, L.P., which in turn is the sole general partner of each
of T(3) Partners II, L.P. ("T(3) Partners II") and T(3) Parallel II, L.P.
("T(3) Parallel II"). Partners III, Parallel III, Investors III, FOF, FOF B,
Dutch Parallel III, T(3) Partners, T(3) Parallel, T(3) Investors, T(3)
Dutch, T(3) Partners II and T(3) Parallel II (collectively, the "TPG Funds")
are members of TPG Wafer Partners, which in turn is a member of TPG Wafer
Holdings, and also the managing member of TPG Wafer Management. TPG Wafer
Holdings directly holds the 49,959,970 shares of MEMC common stock and
260,000 shares of Series A Cumulative Convertible Preferred Stock and an
approximately 60% interest in TPG Wafer Management. TPG Wafer Partners
directly holds 9,850,001 warrants to purchase MEMC common stock and TPG
Wafer Management directly holds 250,000 warrants to purchase MEMC common
stock. TPG Advisors III, T(3) Advisors and T(3) Advisors II may be deemed,
pursuant to Rule 13d-3 under the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), to beneficially own all of the securities held by TPG
Wafer Holdings and TPG Wafer Partners. Mr. Bonderman, Mr. Coulter and Mr.
Price, by virtue of their positions with TPG Advisors III, T(3) Advisors,
and T(3) Advisors II, may be deemed to have investment powers and beneficial
ownership with respect to the equity securities held by TPG Wafer Holdings
and TPG Wafer Partners. Each of Mr. Bonderman, Mr. Coulter and Mr. Price
disclaims beneficial ownership of such securities.
(5) LGP Management, Inc. ("LGPM") is the general partner of Leonard Green &
Partners, L.P. ("LGP"), which is an affiliate of GEI Capital III, L.L.C.
("GEI Capital" and, together with LGPM and LGP, the "LGP Controlling
Persons"), which is the general partner of Green Equity Investors III, L.P.
("GEI") and Green Equity Investors Side III, L.P. ("GEI Side"). GEI and GEI
Side, in the aggregate, own 19.7% of the membership interests in TPG Wafer
Holdings. TPG Wafer Holdings directly holds 49,959,970 shares of MEMC common
stock and 260,000 shares of Series A Cumulative Convertible Preferred Stock.
GEI directly holds 3,258,872 warrants to purchase MEMC common stock and GEI
Side directly holds 24,461 warrants to purchase MEMC common stock. LGPM, LGP
and GEI Capital may be deemed, pursuant to Rule 13d-3 under the Exchange Act
to share beneficial ownership of the securities held by TPG Wafer Holdings,
and to beneficially own the warrants to purchase MEMC common stock held by
GEI and GEI Side. Leonard I. Green, Jonathan D. Sokoloff, John G. Danhakl,
Peter J. Nolan, Jonathan A. Seiffer and John M. Baumer, either directly
(whether through ownership interest or position) or through one or more
intermediaries, may be deemed to control the LGP Controlling Persons. By
virtue of their positions with the LGP Controlling Persons, Messrs. Green,
Sokoloff, Danhakl, Nolan, Seiffer and Baumer may be deemed to share
beneficial ownership of the securities held by TPG Wafer Holdings and to
have investment power and beneficial ownership with respect to the warrants
to purchase MEMC common stock held by GEI and GEI Side. However, each such
individual disclaims beneficial ownership of such securities.
(6) TCW/Crescent Mezzanine III, LLC ("MEZZANINE LLC"), a Delaware limited
liability company, is the General Partner of TCW/Crescent Mezzanine Partners
III, L.P. ("TCW Partners") and TCW/
9
Crescent Mezzanine Partners III Netherlands, L.P. ("TCW Netherlands") and
the Managing Owner of TCW/Crescent Mezzanine Trust III ("TCW Trust" and,
collectively, the "TCW Funds"). TCW/ Crescent Mezzanine Management III, LLC
("Mezz Mgmt III") is the Investment Advisor of the TCW Funds, and has
delegated all investment and voting discretion with respect to the
securities owned by the TCW Funds to TCW Asset Management Company, a
California corporation and registered investment advisor ("TAMCO"), as
Sub-Advisor. As a result, Mezz Mgmt III disclaims beneficial ownership of
these securities. TCW (Mezzanine III), L.P. ("Mezz III LP"), a Delaware
limited partnership, is a member of MEZZANINE LLC who may be deemed to
control MEZZANINE LLC. TAMCO is the Sub-Advisor to the TCW Funds and the
General Partner of Mezz III LP. TAMCO is wholly owned by The TCW Group,
Inc., a Nevada corporation ("TCWG"). TCWG, together with its direct and
indirect subsidiaries, collectively constitute The TCW Group, Inc. business
unit (the "TCW Business Unit"). The TCW Business Unit is primarily engaged
in the provision of investment management services. The ultimate parent
company of TCWG is Societe Generale, S.A., a company incorporated under the
laws of France ("SG"). The principal business of SG is acting as a holding
company for a global financial services group, which includes certain
distinct specialized business units that are independently operated,
including the TCW Business Unit. SG, for purposes of the federal securities
laws, may be deemed ultimately to control TCWG and the TCW Business Unit.
SG, its executive officers and directors, and its direct and indirect
subsidiaries (including all of its business units except the TCW Business
Unit), may beneficially own securities and such securities are not reported
in this Table. In accordance with Exchange Act Release No. 34-39538 (January
12, 1998) and due to the separate management and independent operation of
its business units, SG disclaims beneficial ownership of our securities
beneficially owned by the TCW Business Unit. Each member of the TCW Business
Unit disclaims beneficial ownership of our securities beneficially owned by
SG and any of SG's other business units. TCW Partners, TCW Trust and TCW
Netherlands, in the aggregate, own 19.7% of the membership interests in TPG
Wafer Holdings and 3,065,630 warrants to purchase MEMC common stock. TPG
Wafer Holdings directly holds 49,959,970 shares of MEMC common stock and
260,000 shares of Series A Cumulative Convertible Preferred Stock.
(7) Based on information contained in Amendment No. 4 to Schedule 13G filed with
the Securities and Exchange Commission by The State of Wisconsin Investment
Board on February 12, 2002. The State of Wisconsin Investment Board has sole
voting and investment power over all 6,147,000 shares.
BOARD OF DIRECTORS -- COMMITTEES
AUDIT COMMITTEE
The Audit Committee assists the Board in overseeing and monitoring our
financial reporting process. In this regard, the Audit Committee reviews MEMC's
financial reports to shareholders and reviews and assesses our financial
reporting process along with our system of internal controls. The Audit
Committee also recommends the appointment of our independent accountants and
reviews their services. Messrs. Willem D. Maris and Michael B. Smith served on
the Audit Committee until November 2001. Mr. William E. Stevens has served on
the Audit Committee since June 2001. The Audit Committee met six times in 2001,
including two meetings since June 2001 when Mr. Stevens was appointed to the
Committee. Messrs. Boehlke, Marsh and Stevens currently serve on the Audit
Committee.
COMPENSATION AND NOMINATING COMMITTEE
The Compensation and Nominating Committee:
- Selects the executive and salaried employees who participate in our
executive compensation program
- Periodically reviews management development efforts
- Reviews and approves new compensation programs
- Sets base salaries for certain executives
10
- Reviews and approves base salaries of certain newly hired executives
- Approves annual incentive plan participants, targets and award amounts
- Approves participants and awards under long-term equity incentive
programs
- Approves profit sharing programs
- Reviews and approves annual adjustments in compensation necessitated by
competitive, inflationary or governmental pressures
- Reviews and approves compensation for our Board
Since October 2001, the Compensation and Nominating Committee has also been
responsible for nominating persons for election to our Board of Directors. The
Compensation and Nominating Committee accepts nominations of persons for
election to the Board of Directors by any MEMC shareholder who is a shareholder
on the record date for the annual meeting and who submits a notice to us setting
forth the information about both the nominee (including information required by
the federal proxy solicitation rules) and the shareholder making the nomination.
See "SHAREHOLDER PROPOSALS FOR 2003 ANNUAL MEETING," below.
Prof. Dr. Wilhelm Simson, Drs. Hans Michael Gaul and Alfred Oberholz, and
Messrs. Helmut Mamsch, Paul T. O'Brien and Michael B. Smith served on the
Compensation and Nominating Committee until November 2001, during which time the
Compensation and Nominating Committee met three times in 2001. Messrs. Boehlke,
Marren and Marsh have served on this Committee since December 2001. There were
no meetings of the Compensation and Nominating Committee in December 2001.
ENVIRONMENTAL, SAFETY AND HEALTH COMMITTEE
The Environmental, Safety and Health Committee:
- Ensures that MEMC implements and maintains uniform environmental, safety
and health standards and performance expectations at all our locations
which protect the environment and the health and safety of our employees
and surrounding communities
- Ensures that we maintain an effective process for evaluating the
potential environmental, safety and health impacts of our new capital
expenditures
- Evaluates the impact that existing and developing environmental, safety
and health laws, regulations, trends and issues may have on our
operations, personnel and performance
- Ensures that we take appropriate actions to minimize or mitigate the
impact of such laws, regulations, trends and issues on MEMC, our
operations and our personnel
- Monitors our processes, performance and allocated resources in the
environmental, safety and health areas
Mr. von Horde served on the Environmental, Safety and Health Committee for
all of 2001 and Messrs. Paul T. O'Brien and Michael B. Smith served on this
Committee until November 2001, during which time the Committee met three times
in 2001. There were no meetings of the Environmental, Safety and Health
Committee in December 2001. The Environmental, Safety and Health Committee
currently consists of Messrs. Boyce, Marren and Gareeb.
PLANNING AND CAPITAL EXPENDITURES COMMITTEE
The Planning and Capital Expenditures Committee reviews our planned capital
expenditures and makes recommendations to the Board regarding these
expenditures. Mr. von Horde served on the Planning and Capital Expenditures
Committee for all of 2001 and Prof. Dr. Wilhelm Simson, Drs. Hans Michael Gaul
and Alfred Oberholz, and Messrs. Helmut Mamsch and Willem D. Maris served on
this Committee until November 2001, during which time the Committee met three
times in 2001. There were no meetings of the
11
Planning and Capital Expenditures Committee in December 2001. The Planning and
Capital Expenditures Committee was dissolved in January 2002.
DIRECTOR COMPENSATION AND ATTENDANCE
Employee directors receive no additional compensation for serving on the
Board and its Committees.
In 2001, non-employee directors received the following fees for their
service on the Board and its Committees:
- $25,000 annual Board retainer
- $3,000 annual retainer for each Committee ($6,000 for a chairperson)
- $1,000 for each Board meeting attended
- $1,000 for each Committee meeting attended ($2,000 for a chairperson)
In addition, on January 1, 2001 we granted each non-employee director stock
options to purchase 2,100 shares of MEMC common stock. We also granted Mr.
Stevens stock options to purchase 1,200 shares of MEMC common stock upon his
appointment to the Board on June 14, 2001. One-third of these stock options will
vest on the first, second and third anniversaries of the date of grant. Prof.
Dr. Wilhelm Simson, Drs. Hans Michael Gaul and Alfred Oberholz, and Messrs.
Helmut Mamsch, Willem D. Maris, Paul T. O'Brien and Michael B. Smith resigned
from the Board in November 2001. As such, all of their respective unvested stock
options were terminated and cancelled effective November 2001.
The Board of Directors met five times in 2001. During 2001, all directors
attended 75% or more of the Board and Committee meetings on which they served,
except for Drs. Gaul and Oberholz. Dr. Gaul attended 73% of the Board and
Committee meetings on which he served because he was unable to attend the Board
meeting and two Committee meetings held in May 2001, and Dr. Oberholz attended
73% of the Board and Committee meetings on which he served because he was unable
to attend the Board meeting and two Committee meetings held in March 2001.
REPORT OF THE AUDIT COMMITTEE
The Audit Committee of the MEMC Board of Directors is currently composed of
three independent directors and operates under a written charter adopted by the
Board of Directors.
We have met and held discussions with MEMC management and with MEMC's
independent accountants, KPMG LLP. We have reviewed and discussed the
consolidated financial statements of MEMC for 2001 with MEMC management. We
discussed with KPMG matters required to be discussed by generally accepted
auditing standards, including standards set forth in Statement on Auditing
Standards No. 61.
KPMG also provided to us the written disclosures regarding their
independence required by Independence Standards Board Standard No. 1, and we
discussed with KPMG their independence.
Based on these reviews and discussions, we recommended to the Board of
Directors that the audited consolidated financial statements for 2001 be
included in MEMC's Annual Report on Form 10-K for the year ended December 31,
2001 filed with the Securities and Exchange Commission.
William E. Stevens (Chairman)
Robert J. Boehlke
C. Douglas Marsh
12
PRINCIPAL ACCOUNTING FIRM FEES
The following table presents fees for professional audit services rendered
by KPMG LLP for the audit of the Company's annual financial statements for 2001,
and fees billed for other services rendered by KPMG LLP:
<Table>
Audit Fees, excluding audit related......................... $872,000
========
Financial information systems design and implementation..... $ 0
========
All other fees
Audit related fees(1)..................................... $205,000
Other non-audit services(2)............................... $459,000
--------
Total all other fees...................................... $664,000
========
</Table>
- ---------------
(1) Audit related fees consisted principally of review of SEC registration
statements and other filings and issuance of consents, statutory audits and
audits of financial statements of certain employee benefit plans.
(2) Other non-audit fees consisted of tax compliance, employee benefit advice
and tax business incentives.
The Audit Committee has considered and determined that the provision of
non-audit services by KPMG LLP in 2001 is compatible with maintaining KPMG LLP's
independence.
COMPENSATION AND NOMINATING COMMITTEE REPORT
Our executive compensation program is based on the premise that a balance
is required between our need to operate our business in an effective and
profitable manner and the competitiveness of rewards in competing for management
talent in the marketplace. The Compensation and Nominating Committee reviews
this program at least annually to ensure that this balance is maintained.
POLICIES, GOALS AND RESPONSIBILITIES
The objective of the Compensation and Nominating Committee is to establish
compensation at a level that will allow us to attract, retain and motivate the
caliber of individuals required to manage and expand our business. We establish
compensation levels using guidelines developed by internationally recognized
compensation consultants. These guidelines are based upon survey data of
comparable U.S. companies, or comparable companies in the relevant geographic
area where an executive is located.
Our 2001 guideline for executive compensation was based on the Towers
Perrin Executive Compensation Survey Database, General Industry, with a special
emphasis placed on a subset of the Towers Perrin Executive Compensation Survey
Database that included companies in the electronics and electrical equipment
industries. We consider the companies included in these surveys to be
representative of those with which we compete for executive officers and
employees. To retain and attract key executives, for 2001 the Compensation and
Nominating Committee utilized a compensation guideline that targeted base
salaries and annual incentives for executive officers at the 50th percentile of
the surveys. For long-term equity incentives, The Compensation and Nominating
Committee did not rely on the survey levels but determined award levels for
executive officers based on individual roles, responsibilities and performance.
Our 2001 executive compensation program consisted of three components: (1)
base salary, (2) annual cash incentive awards, and (3) long-term equity
incentive awards.
BASE SALARIES
We review the base salary of each executive officer on an annual basis. In
making base salary decisions, the Compensation and Nominating Committee first
reviews the comparable salary ranges from the compensation surveys. In addition,
we consider certain other factors and use discretion as appropriate when setting
base salary levels. For 2001, we continued to use an overall compensation
guideline that targeted base salaries for
13
executive officers at the 50th percentile of companies included in the
compensation surveys. In setting base salaries for 2001, the Compensation and
Nominating Committee also considered the improved performance of the Company in
2000, the competitive position of each executive officer's base salary in the
market, personal performance and level of contribution.
For 2001, Mr. von Horde, the Company's CEO, received an increase in base
salary of $45,000. Mr. von Horde's 2001 base salary was $565,000. In increasing
Mr. von Horde's base salary, the Compensation and Nominating Committee
considered the compensation ranges from the compensation surveys, the fact that
Mr. von Horde received no increase in base salary in 2000, and the improved
performance of the Company in 2000.
As a result of the difficult financial and market conditions experienced by
the Company in 2001, in December 2001 the Compensation and Nominating Committee
approved a twenty percent (20%) reduction in each executive officer's base
salary effective as of January 1, 2002. This base salary reduction is effective
until such time as the Company attains certain financial objectives as may be
established by the Compensation and Nominating Committee or the Board of
Directors.
ANNUAL CASH INCENTIVE AWARDS
Participation in our Annual Incentive Bonus Plan is discretionary and the
plan is non-contractual. Under current practice, we make annual cash awards to
certain management, professional and technical personnel to recognize and reward
individual and corporate performance.
The Compensation and Nominating Committee establishes a performance/payout
schedule each year to set target bonuses (as a percentage of base salary) for
each designated participant. For 2001, we continued the use of the overall
compensation guideline that targeted annual incentives for executive officers at
the 50th percentile of companies included in the compensation surveys. In
setting target bonuses for 2001, we also considered personal performance and
level of contribution and the need to retain and attract key executive officers
as the Company continued to recover from the difficult market and financial
conditions experienced in the last several years. The Compensation and
Nominating Committee generally did not adjust the target annual bonus levels for
executive officers as compared with 1999, except in cases of substantial changes
in responsibility. The 2001 target bonus levels for participants ranged from 8%
to 140% of each participant's annual base salary.
The 2001 annual incentive award for executive officers was subject to three
factors: (1) the Company's performance against a certain financial target, (2)
the participant's performance against his or her individual goals and (3) a
discretionary award as determined by management. A certain percentage of a
participant's target bonus was dependent on each of these factors, and each
factor was independent of the other factors.
In 2001, if the financial target was met, then each participant who was an
executive officer received fifty percent (50%) of his or her target bonus. Each
such participant could receive up to twenty-five percent (25%) of his or her
target bonus based on his or her performance against individual goals. The
remaining twenty-five percent (25%) of each such participant's target bonus was
discretionary.
The 2001 annual incentive plan also included a provision providing for the
immediate payment of a bonus if events occurred which resulted in a change in
control, as defined in the Company's 1995 Equity Incentive Plan. These events
occurred in November 2001 as a result of the closing of the transaction between
E.ON AG and an investor group led by Texas Pacific Group. However, in advance of
the closing, the Special Committee of the Board of Directors terminated the 2001
annual incentive plan and authorized management to design and implement another
plan which did not contain the change in control provision.
Under the new 2001 annual incentive plan, all participants who were
employed on March 15, 2002, except Mr. von Horde and certain executive officers
and employees who either entered into separation agreements or new employment
agreements with the Company, received an award equal to 100% of the
participant's target bonus. The award was paid in the form of cash and
restricted stock. The restricted stock award will vest 50% on March 15, 2002 and
50% on March 15, 2003.
14
In consideration of the payments to be made to Mr. von Horde under his
retirement agreement, Mr. von Horde did not receive an annual incentive bonus
for 2001.
LONG-TERM INCENTIVE AWARDS
Our long-term incentive bonus plan provides for equity-based compensation
in the form of annual grants of non-qualified stock options with twenty-five
percent (25%) of such options vesting on each anniversary of the date of grant.
The non-qualified stock options have an exercise price equal to 100% of the
market value of the Company's stock on the date of grant.
In 2001, the Compensation and Nominating Committee used discretion in
determining stock option award levels for executive officers taking into
consideration individual roles and responsibilities, along with personal
performance and level of contribution.
Mr. von Horde's employment agreement provides for annual grants of stock
options to purchase a number of shares with a face value of 200% of his base
salary, not to exceed 100,000 shares in any one year. Consistent with this
employment agreement, in 2001 we awarded Mr. von Horde non-qualified stock
options to purchase 100,000 shares of stock.
MEMBERS OF THE COMPENSATION AND NOMINATING COMMITTEE
<Table>
PRIOR TO NOVEMBER 13, 2001: AFTER NOVEMBER 12, 2001:
Prof. Dr. Wilhelm Simson, Chairman John Marren, Chairman
Dr. Hans Michael Gaul Robert J. Boehlke
Mr. Helmut Mamsch C. Douglas Marsh
Dr. Alfred Oberholz
Mr. Paul T. O'Brien
Ambassador Michael B. Smith
</Table>
SUMMARY COMPENSATION TABLE
<Table>
<Caption>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
-------------------------------------- ------------
OTHER ANNUAL SECURITIES ALL OTHER
SALARY BONUS COMPENSATION UNDERLYING COMPENSATION
NAME AND PRINCIPAL POSITION YEAR ($)(1) ($)(2) ($) OPTIONS (#) ($)(3)
- --------------------------- ---- ------- ------- ------------ ------------ ------------
Klaus R. von Horde(4)......... 2001 564,984 -- -- 100,000 7,534
Chief Executive Officer and 2000 519,984 691,600 -- 100,000 7,140
President 1999 505,853 330,000 -- 109,000 1,854
James M. Stolze............... 2001 289,992 -- -- 40,000 6,440
Executive Vice President and 2000 275,496 202,000 -- 40,000 6,322
Chief Financial Officer 1999 260,088 214,000 -- 39,200 6,720
John P. De Luca(5)............ 2001 220,000 154,000 -- 40,000 7,315
Corporate Vice President 2000 198,200 135,000 -- 25,000 6,845
Technology 1999 185,800 175,000 -- 25,200 6,720
Julius R. Glaser (6).......... 2001 220,000 -- -- 30,000 7,315
Corporate Vice President 2000 210,000 120,000 -- 25,000 5,513
Global Sales and Marketing 1999 158,333 54,000 33,399(7) 10,800 --
Jonathon P. Jansky............ 2001 232,000 -- -- 40,000 6,711
Corporate Vice President 2000 220,000 160,000 -- 40,000 6,393
Operations 1999 205,000 156,710 -- 36,000 6,720
</Table>
- ---------------
(1) Amounts shown include cash compensation earned and received as well as cash
compensation earned but deferred at the election of the executive officer.
(2) The amounts shown in this column consist of the following:
15
ANNUAL INCENTIVE BONUSES (UNDER ANNUAL INCENTIVE BONUS PLAN):
- Mr. von Horde, $691,600 in 2000 and $330,000 in 1999
- Mr. Stolze, $202,000 in 2000 and $89,000 in 1999
- Dr. De Luca, $154,000 in 2001, $135,000 in 2000 and $50,000 in 1999
- Mr. Glaser, $120,000 in 2000 and $44,000 in 1999
- Mr. Jansky, $160,000 in 2000 and $73,000 in 1999
SPECIAL INCENTIVE BONUSES (UNDER SPECIAL INCENTIVE BONUS PROGRAM):
- Mr. Stolze, $125,000 in 1999
- Dr. De Luca, $125,000 in 1999
- Mr. Jansky, $83,710 in 1999
SPECIAL SIGN-ON BONUS:
- Mr. Glaser, $10,000 in 1999
(3) For all executive officers other than Dr. De Luca, the amounts shown in this
column represent matching contributions by MEMC to the MEMC Retirement
Savings Plan. For Dr. De Luca, the amounts shown in this column consist of
matching contributions by MEMC to the MEMC Retirement Savings Plan of
$7,315, $6,338 and $6,720 in 2001, 2000 and 1999, respectively, and a patent
award of $507 in 2000.
(4) Mr. von Horde became Chief Executive Officer on February 17, 1999 and
retired effective April 30, 2002.
(5) Dr. De Luca retired in January 2002.
(6) Mr. Glaser joined MEMC as Vice President, Sales in March 1999 and resigned
from MEMC effective February 28, 2002.
(7) Amount shown represents relocation allowances.
OPTION GRANTS IN LAST FISCAL YEAR
<Table>
<Caption>
INDIVIDUAL GRANTS
-------------------------------------------------- POTENTIAL REALIZABLE
% OF TOTAL VALUE AT ASSUMED
NUMBER OF OPTIONS ANNUAL RATES OF STOCK
SECURITIES GRANTED TO PRICE APPRECIATION FOR
UNDERLYING EMPLOYEES EXERCISE OPTION TERM(1)
OPTIONS IN FISCAL PRICE EXPIRATION -----------------------
NAME GRANTED(#)(2) YEAR ($/SH) DATE 5%($) 10%($)
- ---- ------------- ---------- -------- ---------- --------- -----------
Klaus R. von Horde........... 100,000(3) 16.9% 9.6875 1/1/11 609,240 1,543,938
James M. Stolze.............. 40,000 6.7% 9.6875 1/1/11 243,696 617,575
John P. De Luca.............. 40,000 6.7% 9.6875 1/31/05 85,471 184,567
Julius R. Glaser............. 30,000 5.1% 9.6875 2/28/05 65,575 141,971
Jonathon P. Jansky........... 40,000 6.7% 9.6875 1/1/11 243,696 617,575
</Table>
- ---------------
(1) The dollar amounts under these columns are the result of calculations at the
5% and 10% rates set by the SEC and are not intended to forecast possible
future appreciation, if any, of MEMC's common stock price. If MEMC's common
stock does not increase in value, then the option grants described in the
table will be valueless.
(2) Upon Dr. De Luca's retirement on January 31, 2002, the options granted to
Dr. De Luca in 2001 vested and became exercisable for a period of three
years. Upon Mr. Glaser's resignation effective as of February 28, 2002, the
options granted to Mr. Glaser in 2001 vested and became exercisable for a
period of three years. For each of the other named executive officers,
options vest and become exercisable at the rate of 25% per year on January
1, 2002, January 1, 2003, January 1, 2004 and January 1, 2005. All options
expire ten years from the date of grant. In the event of a change in control
of MEMC and except as the Compensation and Nominating Committee may
otherwise determine, all restrictions and conditions on the remaining
unvested stock options will lapse as of the date of the change in control.
In
16
addition, upon termination of employment due to death, permanent disability
or retirement, all stock options become immediately exercisable. In
addition, upon termination of employment by MEMC without cause or by the
employee for good reason within two years following a change of control, all
stock options shall vest and become immediately exercisable.
(3) Upon Mr. von Horde's retirement on April 30, 2002, all of his existing
unvested options were cancelled and vested options became exercisable for 60
days. See "Retirement Agreement -- Klaus R. von Horde."
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<Table>
<Caption>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED
OPTIONS AT FY-END(#)
---------------------------
NAME(1) EXERCISABLE UNEXERCISABLE
- ------- ----------- -------------
Klaus R. von Horde(2)....................................... 183,000 264,000
James M. Stolze............................................. 94,504 102,000
John P. De Luca(3).......................................... 67,354 79,350
Julius R. Glaser(4)......................................... 11,650 54,150
Jonathon P. Jansky.......................................... 59,150 95,650
</Table>
- ---------------
(1) The named executive officers did not exercise any options in 2001. None of
the unexercised options were in-the-money based on a per share closing price
of MEMC common stock of $3.55 on December 31, 2001.
(2) Upon Mr. von Horde's retirement on April 30, 2002, all of his existing
unvested options were cancelled and vested options became exercisable for 60
days. See "Retirement Agreement -- Klaus R. von Horde."
(3) Upon Dr. De Luca's retirement on January 31, 2002, all of his options vested
and became exercisable for a period of three years, except for options to
purchase 16,504 shares granted to Dr. De Luca in July 1995 which are
exercisable for a period of only one year from his retirement date.
(4) Upon Mr. Glaser's resignation effective February 28, 2002, all of his
options vested and became exercisable for a period of three years.
PENSION PLAN
MEMC sponsors the MEMC Pension Plan, a defined benefit pension plan which
covered most U.S. employees of MEMC and its subsidiaries during the year. At the
end of 2001, the plan was amended to freeze the accrued benefit for employees
who did not meet certain age and service criteria. In order to receive future
benefit accruals, a participant must have met one of two criteria: 1) as of
December 31, 2001, the participant was at least age 50 with 5 years of service;
or, 2) the participant had at least 25 years of service as of December 31, 2001.
No future employees will be eligible for coverage under this plan.
The basic benefit payable under the MEMC Pension Plan is determined based
on a lump sum equal to 8% of a participant's "average total earnings" (as
defined below) up to one-half of the Social Security wage base plus 12% of the
participant's average total earnings over one-half of the Social Security wage
base, multiplied by the participant's years of benefit service, less 2% of such
amount for every year by which the current age of the participant is less than
age 65 (the "Basic Formula"). In addition to the normal annuity options, a
portion of the benefit is also available in an immediate lump-sum distribution
at termination of employment.
Employees who were participants in our former Pension Plan for Salaried
Employees (the "Salaried Plan"), a prior plan merged into the MEMC Pension Plan
as of December 31, 1996, are entitled to a benefit calculated under the formula
in effect as of such date under the Salaried Plan, if such benefit is greater
than the benefit calculated under the Basic Formula. The basic benefit payable
under the Salaried Plan formula is a
17
single life annuity equal to 1.2% of the participant's average total earnings
multiplied by the participant's years of benefit service. However, if the
participant was hired in the United States by Monsanto Company ("Monsanto"), a
prior owner of a substantial part of our business, before April 1, 1986 and was
employed by us at any time during the period April 1, 1989 through May 31, 1989,
or if the participant was employed by MEMC at any time during the period January
1, 1989 through March 31, 1989, the factor is 1.4% of the participant's "average
total earnings" instead of 1.2%. If a participant with either the 1.2% or 1.4%
formula retires on or after age 55 but prior to age 65, his benefit will be
reduced 1/4% for each month that his retirement date precedes his 65th birthday.
However, if the participant is under age 65 but at least age 55 at the time of
his retirement, and the participant's age and years of vesting service add up to
at least 80, then the benefit is not subject to any reduction.
The basic benefit under either the 1.2% or 1.4% formula is reduced by the
amount the participant is entitled to receive under any other designated
Monsanto defined benefit pension plan.
For purposes of the MEMC Pension Plan, "average total earnings" means
twelve times the greater of (a) the monthly average earnings received in the 36
full calendar months immediately prior to the date of employment termination or
(b) the monthly average of earnings received during the highest three of the ten
calendar years immediately prior to the year in which employment terminates.
"Earnings" means amounts paid to participants that are subject to federal income
tax withholding (including salary and bonus payments), subject to certain
adjustments. Generally, "earnings" utilized for pension formula purposes
includes salary and annual bonus reported in the salary and bonus columns of the
Summary Compensation Table. However, earnings utilized for pension formula
purposes does not include payments in lieu of accrued vacation, sign-on bonuses
and the special incentive bonuses paid in 1999. In addition, since annual
incentive bonuses are paid in the year following the year earned, such bonuses
are included in earnings utilized for pension formula purposes in the year
following the year such bonuses are reported in the bonus column of the Summary
Compensation Table.
Retirement benefits payable under qualified defined benefit plans are
subject to the annual pension limitations imposed under Section 415 of the
Internal Revenue Code, for which limitations vary annually. The Section 415
limitation for 2001 is $140,000. In addition, Section 401(a)(17) of the Internal
Revenue Code specifies a maximum amount of annual compensation, also adjusted
annually, that may be taken into account in computing benefits under a qualified
defined benefit plan. The Section 401(a)(17) limitation for 2001 is $170,000.
However, for 2002 the Section 401(a)(17) limitation was increased to $200,000
which increased amount could be applied retroactively to all prior years.
Effective in January 2002, we amended the MEMC Pension Plan to apply this
$200,000 limitation to all prior years. Our Supplemental Executive Pension Plan
(the "MEMC SEPP"), a non-qualified and unfunded plan, provided benefits over the
applicable Internal Revenue Code limitations. Benefits under the MEMC SEPP are
payable in the form of a lump-sum distribution, in the form of an annuity with
monthly payments for life beginning at the participant's retirement age, or in
annual installments not to exceed fifteen years. The MEMC SEPP was amended at
the end of the year to cease future accruals. In addition, all accrued benefits
under the MEMC SEPP for employees who entered into new employment contracts with
the Company were waived.
The following table shows the estimated annual pension benefits under the
MEMC Pension Plan and the MEMC SEPP in the remuneration and years of service
classifications indicated using the Basic Formula. The table is based on the
2001 Social Security Wage Base, a 6.0% interest rate and the GAM83(50/50)
Mortality Table. In addition, the amounts in the table assume that a participant
met the criteria for continued benefit
18
accrual effective as of December 31, 2001. The amounts shown in the table are
calculated on a single life annuity basis and assume retirement at age 65.
PENSION PLAN TABLE(1)
<Table>
<Caption>
YEARS OF SERVICE
------------------------------------------------------------------
REMUNERATION 5 10 15 20 25 30 35
- ------------ ------ ------- ------- ------- ------- ------- -------
$ 125,000................. 6,329 12,658 18,987 25,316 31,645 37,974 44,303
150,000................. 7,738 15,476 23,214 30,951 38,689 46,427 54,165
175,000................. 9,147 18,294 27,440 36,587 45,734 54,881 64,028
200,000................. 10,556 21,111 31,667 42,223 52,779 63,334 73,890
225,000................. 11,965 23,929 35,894 47,859 59,823 71,788 83,753
250,000................. 13,374 26,747 40,121 53,494 66,868 80,242 93,615
300,000................. 16,191 32,383 48,574 64,766 80,957 97,149 113,340
400,000................. 21,827 43,654 65,482 87,309 109,136 130,963 152,791
500,000................. 27,463 54,926 82,389 109,852 137,315 164,778 192,241
600,000................. 33,099 66,197 99,296 132,395 165,493 198,592 231,691
700,000................. 38,734 77,469 116,203 154,938 193,672 232,407 271,141
800,000................. 44,370 88,740 133,111 177,481 221,851 266,221 310,591
900,000................. 50,006 100,012 150,018 200,024 250,030 300,036 350,041
1,000,000................. 55,642 111,283 166,925 222,567 278,208 333,850 389,492
</Table>
Mr. von Horde and Mr. Glaser are covered by the Basic Formula. As of
December 31, 2001, Mr. von Horde had 3.8 years of benefit service and annualized
average total earnings of $903,174. Under the terms of the MEMC Pension Plan and
MEMC SEPP, because Mr. von Horde did not participate in the MEMC Pension Plan
and MEMC SEPP until April 1, 1998, as of December 31, 2001, Mr. von Horde had no
vested benefit. As of December 31, 2001, Mr. Glaser had 2.8 years of benefit
service and annualized average total earnings of $268,690. Under the terms of
the MEMC Pension Plan and MEMC SEPP, because Mr. Glaser joined MEMC in March
1999, as of December 31, 2001, Mr. Glaser had no vested benefit. Neither Mr. von
Horde nor Mr. Glaser met the criteria for continued benefit accrual effective
December 31, 2001.
In connection with certain reduction in force actions occurring in 2001 and
2002, we amended the MEMC Pension Plan to provide that participants terminated
as part of a reduction in force prior to June 30, 2002 would be fully vested in
their accrued benefit. Because Mr. Glaser terminated his employment as part of a
reduction in force action, upon his termination on February 28, 2002 his $36,544
accrued lump-sum benefit under the MEMC Pension Plan became fully vested.
Under the terms of his retirement agreement, Mr. von Horde will be entitled
to a lump sum payment of $374,901 in full settlement of his accrued benefit
under the MEMC Pension Plan and MEMC SEPP. See "Retirement Agreement -- Klaus R.
von Horde."
The following table shows the estimated annual pension benefits under the
MEMC Pension Plan and the MEMC SEPP in the remuneration and years of service
classifications indicated using the 1.4% Salaried Plan formula described above.
As discussed above, the 1.4% formula is an alternative to the Basic Formula. The
amounts shown in the table assume that a participant met the criteria for
continued benefit accrual effective as
19
of December 31, 2001. In addition, the amounts shown in the table are calculated
on a single life annuity basis and assume retirement at age 65 (without regard
to the offsets described above).
PENSION PLAN TABLE(2)
<Table>
<Caption>
YEARS OF SERVICE
-----------------------------------------
REMUNERATION 20 25 30 35
- ------------ -------- -------- -------- --------
$125,000................................... $ 35,000 $ 43,750 $ 52,500 $ 61,250
150,000................................... 42,000 52,500 63,000 73,500
175,000................................... 49,000 61,250 73,500 85,750
200,000................................... 56,000 70,000 84,000 98,000
225,000................................... 63,000 78,750 94,500 110,250
250,000................................... 70,000 87,500 105,000 122,500
300,000................................... 84,000 105,000 126,000 147,000
400,000................................... 112,000 140,000 168,000 196,000
450,000................................... 126,000 157,500 189,000 220,500
500,000................................... 140,000 175,000 210,000 245,000
</Table>
Dr. DeLuca and Mr. Jansky are covered by the 1.4% formula. As of December
31, 2001, Dr. De Luca had 24.6 years of benefit service and annualized average
total earnings of $287,988, and Mr. Jansky had 28.0 years of benefit service and
annualized average total earnings of $304,925.
Upon his retirement on January 31, 2002, Dr. DeLuca's annual single life
annuity benefit from the MEMC Pension Plan was $56,835 and his lump-sum benefit
under the MEMC SEPP was $393,001.
The following table shows the estimated annual pension benefits under the
MEMC Pension Plan and the MEMC SEPP in the remuneration and years of service
classifications indicated using the 1.2% Salaried Plan formula described above.
As discussed above, the 1.2% formula is an alternative to the Basic Formula. The
table presents the better of the Basic Formula or the grandfathered 1.2% formula
for each level of remuneration and years of service classification as a single
life annuity assuming retirement at age 65. The basic benefit is calculated
using the 2001 Social Security Wage Base, a 6% interest rate and the
GAM83(50/50) Mortality Table to convert the lump sums to annuities. The amounts
shown in the table assume that a participant met the criteria for continued
benefit accrual effective as of December 31, 2001.
PENSION PLAN TABLE(3)
<Table>
<Caption>
YEARS OF SERVICE
---------------------------
REMUNERATION 5 10 15
- ------------ ------- ------- -------
$225,000................................................ $13,500 $27,000 $40,500
250,000................................................ 15,000 30,000 45,000
300,000................................................ 18,000 36,000 54,000
400,000................................................ 24,000 48,000 72,000
500,000................................................ 30,000 60,000 90,000
600,000................................................ 36,000 72,000 108,000
700,000................................................ 42,000 84,000 126,000
</Table>
Mr. Stolze is eligible for the 1.2% formula. As of December 31, 2001, Mr.
Stolze had 6.5 years of benefit service and annualized average total earnings of
$406,934.
20
EMPLOYMENT AGREEMENTS
JAMES M. STOLZE
Mr. Stolze entered into a new employment agreement with MEMC effective as
of January 1, 2002, which replaced his prior employment agreement. The new
employment agreement provides that Mr. Stolze will serve as an executive officer
of MEMC for a three-year term commencing November 13, 2001.
Mr. Stolze's new employment agreement includes the following:
- An initial annual base salary of $290,000 through December 31, 2001,
which will then be reduced by 20% until such time as MEMC attains certain
performance objectives to be determined by the Board
- After Mr. Stolze's base salary is restored, the base salary shall be
reviewed from time to time and may be adjusted by the Board, provided,
however, his base salary cannot be decreased unless such decrease is part
of a base salary reduction applicable to a broad class of management
employees
- An annual bonus opportunity, the terms and conditions of which will be
determined by the Board with a target bonus of 50% of annual base salary
and a maximum bonus of 88% of base salary
- Participation in our employee benefit plans as maintained by MEMC from
time to time and generally available to senior executives
The new employment agreement provides for grants of stock options to
purchase MEMC common stock as follows:
- An initial grant of stock options to purchase 250,000 shares of MEMC
common stock at an exercise price of $1.50 per share, vesting ratably
over four years
- An additional grant of stock options to purchase 250,000 shares at an
exercise price per share equal to the fair market value per share on the
date of grant, which will vest on the seventh anniversary of the date of
grant or earlier if certain financial and operating objectives are
achieved
- On or about June 1, 2002, MEMC intends to allow Mr. Stolze to cancel all
of his options to purchase 196,504 shares of MEMC common stock granted to
him prior to the commencement date of the new employment agreement in
exchange for a subsequent grant as soon as reasonably practicable
following January 1, 2003 of stock options to purchase at least 40,000
shares of MEMC common stock at an exercise price equal to the fair market
value on the date of grant, of which 50% will vest ratably over four
years and 50% will vest on the seventh anniversary of the date of grant
or earlier if certain financial and operating objectives are achieved
Either party may terminate Mr. Stolze's employment agreement. In the event
of Mr. Stolze's involuntary termination without cause (other than by reason of
death or disability) or Mr. Stolze's voluntary termination for good reason
during the employment term, he will be entitled to:
- His base salary through the date of termination
- His annual bonus, if any, earned in the calendar year immediately
preceding the calendar year in which the date of termination occurs, to
the extent not yet paid
- Subject to the execution by Mr. Stolze of a general release and waiver,
the continuation of Mr. Stolze's base salary for the one-year period
beginning on the date of termination
In consideration of the benefits provided in the new employment agreement,
Mr. Stolze waived his rights to all benefits and payments under the MEMC SEPP,
the MEMC Severance Plan for Senior Officers and the MEMC 2001 Annual Incentive
Plan.
JONATHON P. JANSKY
Mr. Jansky entered into an employment agreement with MEMC effective as of
January 1, 2002. The employment agreement provides that Mr. Jansky will serve as
an executive officer of MEMC for a three-year term commencing November 13, 2001.
21
Mr. Jansky's employment agreement includes the following:
- An initial annual base salary of $232,000 through December 31, 2001,
which will then be reduced by 20% until such time as MEMC attains certain
performance objectives to be determined by the Board
- After Mr. Jansky's base salary is restored, the base salary shall be
reviewed from time to time and may be adjusted by the Board, provided,
however, his base salary cannot be decreased unless such decrease is part
of a base salary reduction applicable to a broad class of management
employees
- An annual bonus opportunity, the terms and conditions of which will be
determined by the Board with a target bonus of 50% of annual base salary
and a maximum bonus of 88% of base salary
- Participation in our employee benefit plans as maintained by MEMC from
time to time and generally available to senior executives
The new employment agreement provides for grants of stock options to
purchase MEMC common stock as follows:
- An initial grant of stock options to purchase 250,000 shares of MEMC
common stock at an exercise price of $1.50 per share, vesting ratably
over four years
- An additional grant of stock options to purchase 250,000 shares at an
exercise price per share equal to the fair market value per share on the
date of grant, which will vest on the seventh anniversary of the date of
grant or earlier if certain financial and operating objectives are
achieved
- On or about June 1, 2002, MEMC intends to allow Mr. Jansky to cancel all
of his options to purchase 154,800 shares of MEMC common stock granted to
him prior to the commencement date of the new employment agreement in
exchange for a subsequent grant as soon as reasonably practicable
following January 1, 2003 of stock options to purchase at least 40,000
shares of MEMC common stock at an exercise price equal to the fair market
value on the date of grant, of which 50% will vest ratably over four
years and 50% will vest on the seventh anniversary of the date of grant
or earlier if certain financial and operating objectives are achieved
Either party may terminate Mr. Jansky's employment agreement. In the event
of Mr. Jansky's involuntary termination without cause (other than by reason of
death or disability) or Mr. Jansky's voluntary termination for good reason
during the employment term, he will be entitled to:
- His base salary through the date of termination
- His annual bonus, if any, earned in the calendar year immediately
preceding the calendar year in which the date of termination occurs, to
the extent not yet paid
- Subject to the execution by Mr. Jansky of a general release and waiver,
the continuation of Mr. Jansky's base salary for the one-year period
beginning on the date of termination
In consideration of the benefits provided in the new employment agreement,
Mr. Jansky waived his rights to all benefits and payments under the MEMC SEPP,
the MEMC Severance Plan for Senior Officers and the MEMC 2001 Annual Incentive
Plan.
JULIUS R. GLASER
Effective as of February 28, 2002, Mr. Glaser resigned from MEMC. In
connection with his resignation, Mr. Glaser entered into a separation agreement
with MEMC. The separation agreement provides for:
- A lump-sum cash payment of $442,133
- Vesting of all unvested options under MEMC's 1995 Equity Incentive Plan
which options will be exercisable until February 28, 2005
- Outplacement services not to exceed $18,000
22
The above payments and benefits are in lieu of any amounts payable to Mr.
Glaser under his prior employment agreement effective as of February 10, 1999,
the MEMC Severance Plan for Senior Officers and any other plan in which Mr.
Glaser was a participant other than his accrued benefits under certain
retirement plans. The separation agreement also included a release and waiver of
certain employment related claims.
RETIREMENT AGREEMENT
KLAUS R. VON HORDE
In connection with Mr. von Horde's retirement as our President and Chief
Executive Officer effective April 30, 2002, MEMC entered into a retirement
agreement with Mr. von Horde in April 2002. Pursuant to the retirement
agreement, Mr. von Horde will receive the following in lieu of all amounts to
which Mr. von Horde was entitled under all MEMC plans and his employment
agreements:
- Installment payments totaling $565,000 (subject to tax withholding) over
the next twelve months, provided that any time on or after September 1,
2002, Mr. von Horde may elect to terminate the installment payments and
receive the balance in a lump-sum cash payment
- Lump-sum cash payment of $342,500 (subject to tax withholding) upon
payment in full of the above installment payments
- Lump-sum cash payment of $374,901 upon payment in full of the above
installment payments in full settlement of accrued pension obligations
owed by MEMC
- Fully vested, three-year options to purchase 100,000 shares of MEMC
common stock at an exercise price of $3.55 per share and 20,000 shares of
MEMC common stock at an exercise price of $1.50 per share
- Grant of 198,744 shares of MEMC common stock to be subject to a
restricted stock agreement with certain vesting conditions
- Participation in MEMC's medical and dental plans for the duration of the
above installment payments on the same terms as similarly situated
employees
With respect to stock options awarded to Mr. von Horde prior to retirement,
those that were not vested as of April 30 were cancelled, and those that were
vested as of April 30 became exercisable for 60 days. The retirement agreement
also includes mutual releases of certain claims.
SEVERANCE PLAN FOR SENIOR OFFICERS
On October 15, 1999, we adopted a severance plan for our senior officers.
The plan provided severance benefits to certain key executive officers in the
event of their termination of employment both before and after a change of
control of MEMC. Executive Vice Presidents and Corporate Vice Presidents
reporting to MEMC's Chief Executive Officer were eligible to participate in the
plan. However, the Compensation and Nominating Committee must designate all
participants. All of the participants in this plan have either terminated their
employment with MEMC or waived their rights under the plan in connection with
the execution of separation agreements or new employment agreements.
Accordingly, there are currently no participants in the plan.
The plan has the initial term of three years ending October 15, 2002. After
the initial term, the plan automatically renews for successive one-year terms
until terminated on twelve months' prior notice to each participant. However, if
there is a change in control of MEMC, the plan continues for two years following
the change in control at which time the plan will terminate. The transaction
between the investor group led by Texas Pacific Group and E.ON AG and its
affiliates that closed on November 13, 2001 constituted a change of control
under the plan. Accordingly, the plan will terminate on November 13, 2003.
The Compensation and Nominating Committee may remove a participant from the
plan by giving the participant twelve months' notice. However, no participant
may be removed from the plan for two years following a change in control of
MEMC.
23
A participant is entitled to severance benefits under the plan in the event
that he or she is:
- Involuntarily terminated, other than for cause, while a participant in
the plan; or
- Constructively discharged within two years following a change in control
of MEMC.
A participant is not entitled to severance benefits under the plan in the
event of his or her termination of employment on account of death, total and
permanent disability, voluntary termination of employment by the participant or
termination of employment by MEMC for cause.
Participants who are entitled to severance benefits under the plan receive
the following:
CASH COMPENSATION
Salary: The greater of (1) one year's base salary in effect at the time of
termination of employment without any accrued and unused vacation or (2) two
weeks of such salary for each year of service with MEMC plus one additional
week's salary plus accrued and unused vacation.
Bonus: A pro rata bonus for the year of termination based on the number of
days in the year before the termination date. The bonus will be determined based
on the actual level of achievement of the relevant goals. However, if the
termination of employment occurs within two years following a change in control,
then (1) the pro rata bonus will be based on the full targeted level and (2) the
participant will receive an additional payment equal to the bonus the
participant would have received for the year of termination at the full targeted
level.
STOCK OPTIONS
If the termination of employment occurs within two years following a change
in control, then the participant will be deemed to have retired for purposes of
determining the vesting and expiration of all stock options previously granted
to the participant.
RETIREMENT BENEFITS
For purposes of determining benefits payable under the MEMC SEPP, the
period used above to determine the salary severance benefit (e.g., either one
year, or two weeks for each year of service plus one additional week) will be
treated as additional service to MEMC.
MEDICAL AND DENTAL BENEFITS
A participant will receive a payment equal to the cost of 18 months of
COBRA premiums for dental coverage for the same level of coverage the
participant is enrolled immediately prior to his or her termination. In
addition, if a participant is not eligible for retiree medical benefits, the
participant will receive an additional payment equal to the cost of 18 months of
COBRA premiums for medical coverage for the same level of coverage the
participant is enrolled immediately prior to his or her termination. These
payments will be grossed up for taxes.
CHANGE IN CONTROL
The Company's stock option plans and certain award agreements under such
plans provide for acceleration of vesting in the event of a change in control of
MEMC and/or in the event of termination of employment by MEMC without cause or
by the participant for good reason within two years following a change in
control of MEMC, as defined in those plans. Our named executives participate in
these plans.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
From January to November 2001, the Compensation and Nominating Committee
was comprised of Dr. Hans Michael Gaul, Mr. Helmut Mamsch, Dr. Alfred Oberholz,
Mr. Paul T. O'Brien, Prof. Dr. Wilhelm
24
Simson and Ambassador Michael B. Smith. Since December 2001, the Compensation
and Nominating Committee has been comprised of Mr. Robert J. Boehlke, Mr. John
Marren and Mr. C. Douglas Marsh.
Drs. Gaul, Oberholz and Simson and Mr. O'Brien are executive officers
and/or directors of E.ON AG or one or more of its affiliates. Mr. Mamsch is a
former executive officer of VEBA AG, a predecessor company of E.ON AG. E.ON AG,
through certain of its subsidiaries, owned 71.8% of the outstanding shares of
MEMC common stock until November 13, 2001. Mr. Marren is a partner with Texas
Pacific Group. An investor group led by Texas Pacific Group currently owns 71.8%
of the outstanding shares of MEMC common stock, 100% of the outstanding shares
of MEMC Series A Cumulative Convertible Preferred Stock and 100% of the
16,666,667 outstanding warrants to purchase MEMC common stock. For a description
of certain transactions and arrangements between MEMC and E.ON AG and its
affiliates and between MEMC and the investor group led by Texas Pacific Group,
see "CERTAIN TRANSACTIONS," below.
None of the directors comprising the Compensation and Nominating Committee
during 2001 has been an officer or employee of MEMC or any of its subsidiaries.
Because the full Board of Directors approved certain compensation
recommendations of the Compensation and Nominating Committee, Mr. von Horde is
deemed to have participated in deliberations of the Board of Directors regarding
remuneration paid to executive officers.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Based on our review of the Forms 3, 4 and 5 furnished to us, all of the
filings for our executive officers and directors and greater than 10%
shareholders required under Section 16(a) of the Securities Exchange Act of 1934
were made on a timely basis in 2001.
25
STOCK PRICE PERFORMANCE GRAPH
The graph below compares cumulative total shareholder return with the
cumulative total return (assuming reinvestment of dividends) of the S&P 500
Index and the JPMorgan H&Q Semiconductor Index. The information on the graph
covers the period from December 31, 1996 through December 31, 2001. The stock
price performance shown on the graph below is not necessarily indicative of
future stock price performance.
(Performance Graph)
<Table>
<Caption>
- ---------------------------------------------------------------------------------------------------------------------------------
December 31, December 31, December 31, December 31, December 31, December 31,
1996 1997 1998 1999 2000 2001
- ---------------------------------------------------------------------------------------------------------------------------------
MEMC 100 68 38 54 43 16
S&P 500 100 133 171 208 189 166
JPMorgan H&Q Semiconductor 100 105 148 369 308 299
</Table>
CERTAIN TRANSACTIONS
E.ON North America, Inc., a corporation owned by E.ON AG and its
subsidiaries, and VEBA Zweite Verwaltungsgesellschaft mbH, another subsidiary of
E.ON AG, collectively owned approximately 72% of the outstanding shares of MEMC
common stock until November 13, 2001. On September 30, 2001, E.ON AG and its
affiliates (E.ON) entered into a purchase agreement with an investor group led
by Texas Pacific Group, including TPG Wafer Holdings LLC and funds managed by
Leonard Green & Partners, L.P. and TCW/Crescent Mezzanine Management III LLC
(collectively, TPG). Pursuant to the purchase agreement, on November 13, 2001,
TPG Wafer Holdings and its assignees purchased all of E.ON's debt in MEMC of
approximately $910 million and all of E.ON's equity holdings in MEMC,
representing approximately 72% of the outstanding shares of MEMC common stock.
In an effort to minimize conflicts of interest by members of our Board of
Directors affiliated with E.ON, TPG or other related parties, the Audit
Committee, or a special committee consisting entirely of independent directors,
generally approves or ratifies any material transaction with a related party. A
special committee approved the transactions described under "TPG RESTRUCTURING
AGREEMENT," below.
In 2001, we made payments to E.ON AG and certain of its affiliates for
software maintenance, raw materials, equipment and services, credit commitments
and interest. We also participated in E.ON AG's global treasury management
system. MEMC Pasadena, Inc., our granular polysilicon subsidiary, sold granular
26
polysilicon to an affiliate of E.ON AG. Our significant agreements and
arrangements between E.ON AG and its affiliates are more fully described below.
In connection with and as a condition to closing the transactions
contemplated by the purchase agreement between E.ON and TPG, on November 13,
2001, we entered into a restructuring agreement with TPG Wafer Holdings under
which we restructured approximately $860 million of our debt that was acquired
by TPG from E.ON. As part of the transactions contemplated by the purchase
agreement and restructuring agreement, we also entered into certain agreements
with TPG, E.ON and their respective affiliates as more fully described below.
AGREEMENTS AND TRANSACTIONS WITH E.ON
LOAN AGREEMENTS
In 2001, MEMC incurred approximately $69.5 million in interest expense,
commitment fees and other financing fees to E.ON AG and certain of its
affiliates. We had entered into a number of credit and loan arrangements with
E.ON AG and its affiliates. These loan and credit agreements with E.ON AG and
its affiliates provided that the maturities on all outstanding debt maturing
prior to January 1, 2002 would be extended until their respective maturity date
anniversaries in 2002 (but only in the event we had used our best efforts to
obtain replacement financing on equivalent terms and conditions and had been
unsuccessful). On November 13, 2001, we had approximately $910 million of U.S.
dollar, Euro and Japanese yen based loans outstanding with E.ON AG and its
affiliates. These loans had interest rates ranging from 3.5% to 11.8% with
annual commitment fees of 1/4 of one percent on the undrawn portion of these
loans.
On November 13, 2001, our loan and credit agreements with E.ON AG were
assigned by E.ON to TPG pursuant to the terms of the purchase agreement and
restructured as part of a restructuring agreement. See "CHANGE IN CONTROL" and
"TPG RESTRUCTURING AGREEMENT" below.
TREASURY MANAGEMENT
Under an informal arrangement, MEMC participated in E.ON AG's global
treasury management system. As part of this arrangement, we generally offered
E.ON AG or an affiliate a right of first refusal to act as our financial
intermediary in transacting currency hedging activities. As a result of this
arrangement, we entered into a number of foreign exchange hedging contracts
using E.ON AG or an affiliate as our financial intermediary. MEMC believes that
these hedging arrangements with E.ON AG or an affiliate allowed for transactions
on terms that were comparable to terms available from unrelated third party
financial intermediaries.
In anticipation of the closing of the transactions contemplated by the
purchase agreement between E.ON and TPG, on November 9, 2001 we terminated all
of our hedging arrangements with E.ON. In full settlement of these hedging
arrangements, E.ON paid MEMC approximately $4.3 million and approximately 3.8
billion Italian Lira. We believe the exchange rates and interest rates used to
determine the settlement amounts were comparable to rates that would have been
used by unrelated third party financial institutions to settle such hedging
agreements.
PURCHASES OF EQUIPMENT AND RAW MATERIALS
We purchased equipment and related maintenance services from an affiliate
of Steag AG. E.ON AG holds a significant minority ownership interest in Steag
AG. We believe that the price we paid for the equipment and services was not
materially different from the price that we could have obtained from unrelated
third parties for comparable equipment and services. In 2001, we paid Steag AG
and its affiliates approximately $3.9 million for equipment and related
services.
We purchased raw materials from Degussa-Huls, an affiliate of E.ON AG. We
believe the price we paid for the raw materials was not materially different
from the price we could have obtained from third parties for similar products.
In 2001, we paid Degussa-Huls approximately $1.3 million for raw materials.
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SALES OF GRANULAR POLYSILICON
MEMC Pasadena, Inc., our granular polysilicon subsidiary, sold granular
polysilicon to an affiliate of Siemens Solar GmbH. An affiliate of E.ON, AG
holds a significant minority ownership interest in Siemens Solar GmbH. We
believe that the prices received by MEMC Pasadena, Inc. for these sales were
comparable to the prices received by MEMC Pasadena, Inc. from sales to third
parties. In 2001, MEMC Pasadena, Inc. sold approximately $9.6 million of
granular polysilicon to the affiliate of Siemens Solar GmbH.
SAP SOFTWARE
We obtained the use of SAP R/3 software and related maintenance services
through E.ON AG, which has a license and maintenance contract with SAP AG. SAP
R/3 software is a comprehensive enterprise resource planning software package
designed to integrate our various business processes. In 1999, we paid E.ON AG a
one-time fee of approximately $368,000 for the use of the SAP R/3 software. In
2001, we paid expenses to E.ON AG of approximately $285,000 for annual
maintenance charges related to SAP maintenance services. Because of E.ON AG's
volume pricing, we believe that both the one-time fee and the annual maintenance
charges were more favorable than we would have been required to pay if we had
independently contracted with SAP for the license and maintenance services. In
December 2001, we terminated the agreement with E.ON under which we obtained the
use of SAP R/3 software and related maintenance services and replaced this
agreement with a direct license agreement between us and SAP America.
AGREEMENT FOR COMMUNICATION SERVICES
MEMC had an arrangement with E.ON North America, Inc. covering certain of
our communication service needs. This arrangement allowed MEMC to participate
with E.ON North America, Inc. and several of its affiliates in a communication
service agreement between E.ON North America, Inc. and AT&T. The term of the
communication services agreement expired in 2001. In return for volume pricing
discounts, E.ON North America, Inc. provided AT&T with minimum revenue
commitments for each contract year during the term of the communication services
agreement. MEMC entered into a reimbursement agreement with E.ON North America,
Inc. which required us to reimburse E.ON North America, Inc. if our payments to
AT&T under the communication services agreement did not meet certain minimum
levels for each contract year. The Company was not obligated to make any
reimbursement payments to E.ON North America, Inc. under this agreement. The
reimbursement agreement expired simultaneously with the communication services
agreement.
CHANGE IN CONTROL
On September 30, 2001, E.ON and TPG entered into a purchase agreement.
Prior to the closing contemplated by the purchase agreement, TPG Wafer Holdings
formed MEMC Holdings Corporation as a wholly owned subsidiary.
On November 13, 2001, E.ON and TPG completed the transactions contemplated
by the purchase agreement. Pursuant to the purchase agreement, TPG Wafer
Holdings and its assignees, including MEMC Holdings Corporation, purchased all
of E.ON's debt in MEMC of approximately $910 million for an aggregate purchase
price of $4.00 and all of E.ON's equity holdings in MEMC of 49,959,970 shares of
MEMC common stock, representing approximately 72% of the outstanding shares of
MEMC common stock, for an aggregate purchase price of $2.00. MEMC Holdings
Corporation acquired approximately $411 million of the $910 million total debt.
Pursuant to the purchase agreement, the purchase price payable by TPG to E.ON
may be increased by a maximum of $150 million, depending upon our financial
performance in 2002.
Also at the closing, E.ON made capital contributions to MEMC as required
under the purchase agreement in the aggregate amount of $37 million, of which $5
million was contributed to enable us to make a contribution to our defined
benefit plan. In connection with these transactions, we and certain of our
subsidiaries have executed releases of E.ON from certain actions, causes of
action, suits, debts and other damages. In particular, we have released E.ON
from its obligations under the loan agreements, security agreements, guaranties
and associated documents relating to the debt acquired from E.ON by TPG. We have
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also released E.ON and certain of its affiliates from damages arising out of or
in connection with any of them having been a shareholder, noteholder or director
or officer of MEMC or any of its affiliates, and in connection with agreements
in which E.ON has provided services or financing to or at the request of MEMC or
any of its affiliates, except with respect to certain specified agreements.
The obligations of TPG and E.ON to complete the transactions contemplated
by the purchase agreement were subject to, among other things:
- TPG reaching definitive agreement with respect to an exchange by TPG of
the loans being acquired from E.ON for newly issued debt and equity
securities of MEMC, and
- MEMC entering into a new revolving credit facility with TPG (or a
comparable lender) for up to $150 million.
The conditions to closing were satisfied and E.ON and TPG consummated their
sale and purchase on November 13, 2001. As described below, the transactions
contemplated by the debt restructuring agreement between TPG Wafer Holdings and
MEMC were also completed on November 13, 2001, except for the restructuring of
the debt of our Italian subsidiary. See "-- TPG RESTRUCTURING AGREEMENT" below.
We are currently reviewing with TPG alternatives to the originally contemplated
Italian debt restructuring, which will take place, if at all, at such time as
the parties may agree.
As a result of these transactions, TPG now beneficially owns approximately
72% of the outstanding MEMC common stock and has exchanged approximately $860
million of the debt acquired from E.ON for:
- all of the shares of our newly issued Series A Cumulative Convertible
Preferred Stock with an aggregate stated value of $260 million;
- $50 million in principal amount of our newly issued senior subordinated
secured notes; and
- warrants to purchase 16,666,667 shares of our common stock.
TPG has also retained a senior secured term note issued by our Italian
subsidiary in the principal amount of 55 million Euro (approximately $50
million).
Effective November 13, 2001, all of the E.ON affiliated members resigned
from the MEMC Board of Directors. In addition, on that date two of the
independent members of the Board also resigned. The Board established by
resolution that the Board will consist of nine persons and, on November 13,
2001, appointed four nominees to serve on the Board as designated by TPG Wafer
Holdings in the restructuring agreement. The Board has subsequently established
by resolution that the Board will consist of ten persons and has appointed four
additional persons to the Board, two of whom are independent directors who are
now serving on the Audit Committee of the MEMC Board.
TPG RESTRUCTURING AGREEMENT
GENERAL
In connection with and as a condition of closing of the transactions
contemplated by the purchase agreement between E.ON and TPG, on November 13,
2001, we executed a definitive restructuring agreement with TPG Wafer Holdings.
Pursuant to the restructuring agreement, TPG Wafer Holdings exchanged with MEMC
all of the shares of the Class A Common Stock of MEMC Holdings Corporation, the
subsidiary holding company that had acquired approximately $411 million of the
debt purchased from E.ON, for 260,000 shares of our Series A Cumulative
Convertible Preferred Stock, having an aggregate stated value of $260 million.
Each share of the Series A Cumulative Convertible Preferred Stock is convertible
into shares of MEMC common stock at a conversion price of $2.25 per share,
subject to certain limitations and antidilution adjustments.
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The following steps were then taken pursuant to the restructuring
agreement:
- TPG exchanged with MEMC approximately $449 million of our debt acquired
from E.ON for $50 million in principal amount of our senior subordinated
secured notes, with warrants to acquire up to 16,666,667 shares of our
common stock, subject to certain antidilution adjustments.
- TPG retained an existing 55 million Euro (approximately $50 million) note
from our Italian subsidiary.
- TPG established a five-year revolving credit facility to make available
to us up to $150 million in senior secured loans.
- We entered into various agreements contemplated by the restructuring
agreement, including a registration rights agreement and an agreement and
plan of merger relating to the merger agreement between MEMC and TPG
Wafer Holdings.
TPG Wafer Holdings subsequently exchanged with MEMC the one outstanding
share of Class B Common Stock of MEMC Holdings Corporation for a promissory note
having a principal amount of $250. As a result, MEMC Holdings Corporation is now
a wholly owned subsidiary of MEMC.
SHAREHOLDER APPROVAL
Pursuant to the restructuring agreement, we agreed to use our best efforts
to obtain, as promptly as possible, (i) any necessary approval by our
shareholders relating to the Series A Cumulative Convertible Preferred Stock,
the shares issuable upon conversion of the Series A Cumulative Convertible
Preferred Stock, the warrants and the shares issuable upon exercise of the
warrants under the rules and regulations of the New York Stock Exchange, (ii)
the approval by our shareholders of the plan of merger between MEMC and TPG
Wafer Holdings contained in the merger agreement in accordance with the Delaware
General Corporation Law, and (iii) the approval by our shareholders of a
one-for-two reverse split of our common stock. We have filed a preliminary proxy
statement with the Securities and Exchange Commission in connection with a
special shareholders' meeting for the purpose of approving the above items along
with an increase in our authorized capital stock from 200,000,000 shares of
common stock to at least 250,000,000 shares of common stock. The timing of the
special shareholders' meeting is dependent upon the timing of the completion of
the review of the preliminary proxy statement by the Securities and Exchange
Commission.
OWNERSHIP OF MEMC AFTER RESTRUCTURING TRANSACTIONS
If the preferred stock and warrants are approved by our shareholders, TPG
will own or have the right to acquire, through ownership of the common stock
acquired from E.ON, conversion of the preferred stock (excluding accrued but
unpaid dividends) and exercise of the warrants, a minimum of approximately 182
million shares of our common stock, which would represent approximately 90% of
our outstanding common stock. Because the preferred stock earns cumulative
dividends that may be payable in kind upon conversion, if TPG were not to
convert any preferred stock until immediately prior to the earliest redemption
date, TPG would own or have the right to acquire a maximum of approximately 364
million shares of our common stock, which would represent approximately 95% of
our outstanding common stock.
BOARD REPRESENTATION
The restructuring agreement required the MEMC Board of Directors to appoint
a total of four nominees designated by TPG Wafer Holdings prior to the closing,
to be allocated to the different director classes as specified by TPG Wafer
Holdings. In addition, the restructuring agreement provides that commencing with
the next annual meeting of our shareholders, and at each annual meeting
thereafter, TPG Wafer Holdings shall be entitled to present to the Board of
Directors a number of nominees for election to the class of directors up for
election at such annual meeting equal to the number of TPG Wafer Holdings
nominees in such class immediately prior to such election. We have agreed to
cause each such TPG Wafer Holdings designated nominee to be included in the
slate of nominees recommended by the Board to the shareholders for election, and
to use our best efforts to cause those nominees to be elected. TPG Wafer
Holdings will have these
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contractual rights so long as at least $130 million in stated value of the
Series A Cumulative Convertible Preferred Stock remains outstanding and TPG
Wafer Holdings and its affiliates beneficially own greater than 50% of the
preferred stock. As a practical matter, TPG Wafer Holdings currently possesses
the power to elect all of our directors through its beneficial ownership of a
majority of our voting stock.
NOTES AND WARRANTS
The senior subordinated secured notes due 2007 issued by MEMC under the
terms of the restructuring agreement are guaranteed by our domestic subsidiaries
and bear interest at a rate of 8% (payment in kind) in the first two years
following issuance, 14% (payment in kind) in the third and fourth years
following issuance and 14% (payment in kind with optional payment in cash at the
request of the note holders) in the fifth and sixth years following issuance. As
collateral under the notes, we have pledged substantially all of our domestic
assets, including all of the capital stock of most of our domestic subsidiaries
and 65% of the capital stock of certain of our foreign subsidiaries, but
excluding any assets currently pledged to support third party debt. The notes
and the related security interest are subordinate in priority and in right of
payment to the Citibank revolving credit agreement and the reimbursement
agreement, which are described under "-- Credit Agreement" below. In addition,
the notes and related indenture contain substantially the same loan covenants as
the Citibank revolving credit agreement, which are described under "-- Credit
Agreement" below.
The warrants issued by MEMC entitle the holders to purchase an aggregate of
16,666,667 shares of MEMC common stock at an exercise price of $3.00 per share,
subject to certain antidilution adjustments. The warrants may only be exercised
after shareholder approval of the warrants. See "Shareholder Approval" above.
Assuming shareholder approval is obtained, the warrants may be exercised, in
whole or in part, at any time and from time to time until their expiration on
November 13, 2011.
Pursuant to the restructuring agreement, we have agreed to restructure the
55 million Euro (approximately $50 million) debt issued by our Italian
subsidiary, on terms set forth in the restructuring agreement. It was originally
contemplated that our Italian subsidiary would secure and deliver to TPG a
senior secured note due 2031 in the principal amount of 55 million Euro,
guaranteed by MEMC, bearing interest at a rate of 6% per annum (payment in kind)
and secured by assets of the Italian subsidiary. The parties have been unable to
restructure the Italian debt on the original terms contemplated in the
restructuring agreement. We are currently reviewing with TPG alternatives to the
originally contemplated restructuring of this debt, which will take place, if at
all, at such time as the parties may agree.
REGISTRATION RIGHTS AGREEMENT
We have entered into a registration rights agreement with TPG providing for
registration rights with respect to the preferred stock, the shares of common
stock issuable upon conversion of the preferred stock, the warrants, the shares
of common stock issuable upon exercise of the warrants, the notes and the
accompanying guarantees and any shares of common stock owned or acquired by TPG
(including the shares acquired by TPG from E.ON pursuant to their purchase
agreement). We have agreed that, on or before August 10, 2002, we will file with
the Securities and Exchange Commission a shelf registration statement on Form
S-3 covering resales of these registrable securities by the holders of the
registrable securities.
CREDIT AGREEMENT
In connection with the restructuring, TPG originally established a
five-year revolving credit facility pursuant to which the TPG lender parties
committed to make available to us a line of credit in an aggregate amount of
$150 million. Pursuant to this credit agreement, loans would be made subject to
the following aggregate lending limitations:
- $50 million at any time prior to January 1, 2002,
- $75 million at any time prior to April 1, 2002,
- $100 million at any time prior to July 1, 2002,
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- $125 million at any time prior to October 1, 2002, and
- $150 million at any time on and after October 1, 2002.
The TPG credit facility provided that loans would bear interest at a rate
of LIBOR plus 3.5% per annum or an alternate base rate (based upon the greater
of the Federal funds rate plus 0.5% and Citibank N.A.'s prime rate) plus 2.5%
per annum. As collateral under this credit agreement, we pledged substantially
all of our domestic assets, including all of the capital stock of most of our
domestic subsidiaries and 65% of the capital stock of certain of our foreign
subsidiaries, but excluding any assets then currently pledged to support third
party debt. Our domestic subsidiaries also guaranteed our payment obligations
under the credit agreement.
Subsequent to the original closing of the debt restructuring transactions,
we made arrangements to replace the TPG revolving credit facility with a
substantially similar five-year revolving credit facility with an affiliate of
Citibank, N.A. On December 21, 2001, we entered into the new Citibank credit
facility which replaced the TPG credit facility. In April 2002, Citibank
assigned 50% of its interest in this credit facility to UBS AG. The interest
rate under the Citibank facility is LIBOR plus 1.5% or an alternative base rate
(based upon the greater of the Federal funds rate plus 0.5% and Citibank's prime
rate) plus 0.5% per annum. TPG has guaranteed our obligations under the new
Citibank facility, and in return, we have entered into a reimbursement agreement
with the guarantors under which we have agreed to reimburse them for any
payments made under the guaranty. Both the Citibank credit facility and the
reimbursement agreement are secured by substantially the same collateral that
secured the original TPG credit facility. As with the TPG facility, our domestic
subsidiaries have guaranteed MEMC's obligations under the Citibank facility and
the reimbursement agreement. The subsidiary guaranties are supported by security
interests in substantially all of the assets of the domestic subsidiaries. The
Citibank credit facility contains certain loan covenants, including covenants to
maintain minimum quarterly consolidated earnings before interest, taxes,
depreciation and amortization; minimum monthly consolidated backlog; minimum
monthly consolidated revenues; maximum annual capital expenditures; and other
covenants customary for revolving loans of this type and size. MEMC must
maintain compliance with these covenants in order to draw on the facility. In
addition, outstanding loans under the credit facility will become due and
payable if we are in breach of the loan covenants and such breach causes an
event of default under the credit facility.
MERGER AGREEMENT
Pursuant to an agreement and plan of merger, we have agreed to permit the
merger of TPG Wafer Holdings with and into us at such time as TPG Wafer Holdings
shall determine. We will continue in existence as the surviving corporation. In
connection with the merger, the members of TPG Wafer Holdings will convert their
limited liability company interests in TPG Wafer Holdings into equivalent equity
securities of us held by TPG Wafer Holdings, plus common stock having a market
value equal to the principal amount of the debt securities of MEMC held by TPG
Wafer Holdings and the accrued but unpaid interest on such debt securities. TPG
Wafer Holdings currently does not directly hold any debt of MEMC and has
indicated it has no current intention to acquire debt of MEMC. The merger is
subject to the approval of our shareholders and the members of TPG Wafer
Holdings. The agreement and plan of merger is being submitted to our
shareholders for approval at the special shareholders meeting described above.
See "-- Shareholder Approval" above.
MANAGEMENT ADVISORY AGREEMENT
In connection with the restructuring, we have entered into a management
advisory agreement with TPG GenPar III, L.P., an affiliate of Texas Pacific
Group. Pursuant to the agreement, TPG GenPar III will provide management and
financial advisory services to us as requested by our Board of Directors in
exchange for a management advisory fee of $2 million per annum plus additional
compensation if TPG GenPar III acts as a financial advisor to us for future
transactions such as a merger or debt or equity financing.
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TAX CONSISTENCY AGREEMENT
In 2001, following the closing of the transactions contemplated by the
purchase agreement and restructuring agreement, we entered into a tax
consistency agreement with MEMC Holdings Corporation, TPG Wafer Partners LLC and
TPG Wafer Holdings. This agreement sets forth the income tax elections to be
made and the anticipated U.S. federal income tax treatment of the transactions
contemplated by the purchase agreement and the restructuring agreement.
FEES AND EXPENSES
We are responsible for the payment of all our expenses incurred in
connection with the restructuring agreement and the subsequent negotiation and
documentation of the Citibank replacement credit facility, including all fees
and expenses of our legal counsel and all third-party consultants engaged by us
to assist in such transactions. We have paid TPG a $10 million transaction fee
in connection with the restructuring agreement. In addition, we expect to pay
TPG, Citibank and UBS a total of $3 million in fees (of which TPG will receive
up to approximately $1.1 million) in connection with the TPG credit facility,
the Citibank credit facility and the related guaranties. We have reimbursed TPG
for all its fees and disbursements of legal counsel, financial advisors and
other third party consultants (of approximately $14 million) and have paid other
out-of-pocket expenses incurred by us in connection with the restructuring (of
approximately $3 million).
OWNERSHIP INTEREST IN TPG WAFER MANAGEMENT
Certain of our executive officers have received limited liability company
membership interests in TPG Wafer Management, an investment limited liability
company that owns a 1.5% membership interest in TPG Wafer Holdings. These
membership interests are economic interests, with no voting rights and represent
a total of approximately 57% of the interests in TPG Wafer Management and,
therefore, indirectly, approximately 0.86% of the membership interests in TPG
Wafer Holdings.
Additional membership interests in TPG Wafer Management may be issued to
directors, executive officers and other services providers of MEMC. In addition
to its membership interest in TPG Wafer Holdings, TPG Wafer Management owns
approximately $750,000 in principal amount of our senior secured notes and a
1.5% interest in the 55 million Euro note issued by MEMC's Italian subsidiary as
well as 250,000 of our warrants. Upon consummation of the merger described
above, TPG Wafer Management will receive a proportionate amount of the shares of
common stock, preferred stock and/or warrants of MEMC in exchange for its 1.5%
membership interest in TPG Wafer Holdings. Assuming consummation of the merger
on November 13, 2001, TPG Wafer Management would have received 749,399 shares of
MEMC common stock and 3,900 shares of Series A Preferred Stock.
ITEM NO. 2 -- APPROVAL OF 2001 EQUITY INCENTIVE PLAN
MEMC's Board of Directors adopted MEMC's 2001 Equity Incentive Plan on
December 10, 2001, amended and restated the plan effective in March, 2002, and
directed that the plan be presented for approval by stockholders at MEMC's 2002
Annual Shareholders' Meeting.
GENERAL
The purpose of the plan is to promote the interests of MEMC and its
stockholders by providing prospective employees, employees and consultants of
MEMC and its subsidiaries with an appropriate incentive to enter and continue in
the employ of MEMC and to improve the growth and profitability of MEMC.
The Compensation and Nominating Committee administers the plan. The plan
provides for the grant of nonqualified stock options and restricted stock.
Individuals who are prospective employees of, employees of or
33
consultants to MEMC or a subsidiary of MEMC are eligible to receive awards under
the plan. The Compensation and Nominating Committee has discretion to, among
other things:
- Determine whether to grant nonqualified stock options, restricted stock
or a combination of both
- Select the prospective employees, employees and consultants to whom
awards are made
- Establish the timing, pricing, amount, vesting and other terms and
conditions of each award
- Adopt, amend and rescind rules and regulations relating to the plan
- Construe and interpret the plan and award agreements
- Make all other determinations necessary or advisable for the
administration of the plan
The Compensation and Nominating Committee's decisions pertaining to the
interpretation, construction or application of the plan are final and binding.
Subject to certain adjustments, a maximum of 7,000,000 shares of common
stock are available for grant under the plan, of which 5,146,410 shares had been
granted as of March 31, 2002. These shares may be authorized but unissued
shares, treasury shares or any combination thereof. If any award granted under
the plan terminates or expires prior to its exercise, the shares covered by the
award will again be available for grant under the plan. No more than 2,000,000
shares of common stock may be subject to stock options awarded in any calendar
year to an individual subject to Section 162(m) of the Internal Revenue Code of
1986, as amended.
The closing price of MEMC common stock on March 28, 2002 as reported on the
New York Stock Exchange was $5.90 per share. As of March 31, 2002, there were
approximately 4,600 employees and 70 consultants who were potentially eligible
to participate in the plan.
TYPES OF AWARDS
Set forth below is a description of the types of awards that may be granted
under the plan.
NONQUALIFIED STOCK OPTIONS
Under the plan, the Compensation and Nominating Committee may grant
nonqualified stock options pursuant to an award agreement. Each option
represents the right to purchase one share MEMC common stock at a price per
share established by the Compensation and Nominating Committee on the date of
grant.
Options must be exercised before expiration or termination, which is
generally ten years after the date of grant or earlier as a result of death,
disability or other termination of employment or consulting service with MEMC.
RESTRICTED STOCK
The Compensation and Nominating Committee may award restricted stock under
the plan pursuant to an award agreement. Restricted stock is an award of MEMC
common stock that is subject to restrictions determined by the Compensation and
Nominating Committee, including forfeiture conditions and restrictions against
transfer for a specified period. The restrictions on restricted stock may lapse
in installments based on factors determined by the Compensation and Nominating
Committee. In addition, the Compensation and Nominating Committee has discretion
to waive or accelerate the lapsing of restrictions in whole or in part.
Prior to the expiration of the restricted period, a grantee of restricted
stock has the right to vote the restricted stock and, unless otherwise provided
in the award agreement, the right to receive cash dividends on the restricted
stock. Any stock dividends on shares of restricted stock will be treated as
additional shares under the restricted stock award and will be subject to the
same restrictions and other terms and conditions as the restricted stock on
which the stock dividend was paid.
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Restricted stock that is not vested at the time a grantee's employment or
consulting service is terminated for any reason will be forfeited, unless
otherwise specified in the award agreement.
ADDITIONAL INFORMATION
CHANGE IN CAPITALIZATION
Under the plan, if there is a change in the number of outstanding shares of
MEMC common stock by reason of any stock dividend, recapitalization, merger,
consolidation, stock split, combination or exchange of shares or other form of
reorganization, or any other change involving MEMC common stock, proportionate
adjustments will be made under the plan to reflect the change. Adjustments with
respect to the following will be made as considered appropriate by the
Compensation and Nominating Committee to prevent dilution or enlargement of
rights:
- The aggregate number of shares of MEMC common stock for which awards may
be granted under the plan
- The number of shares of MEMC common stock covered by each outstanding
award under the plan and the price per share for each such award
In the event any of the following events occur, the Compensation and
Nominating Committee may in its discretion exchange or cancel any outstanding
award in return for a new award, cash and/or the property received by holders of
MEMC common stock:
- Dissolution or liquidation of MEMC
- Sale of all or substantially all of MEMC's assets
- Merger or consolidation involving MEMC where MEMC is not the surviving
corporation
- Merger or consolidation involving MEMC where MEMC is the surviving
corporation but the holders of shares of MEMC common stock receive
securities of another corporation and/or other property, including cash
CHANGE IN CONTROL
In the event an individual's employment or consulting service is terminated
by MEMC without cause or by such individual for good reason within two years
following a change in control of MEMC, then, unless the award agreement
otherwise provides or the Compensation and Nominating Committee otherwise
determines:
- All outstanding options held by such individual will become fully vested
and exercisable
- All restrictions and conditions of all restricted stock awards then
outstanding will lapse
OTHER TERMS
Generally, an individual's rights under the plan may not be assigned or
transferred except in the event of death.
The plan will remain in effect until terminated by the Compensation and
Nominating Committee. The plan will continue thereafter, however, until all
awards previously granted under the plan are satisfied or otherwise terminated.
Unless the plan is amended or terminated by the Compensation and Nominating
Committee, no awards may be granted under the plan after December 7, 2011.
The Compensation and Nominating Committee may in its discretion terminate
any option or restricted share then outstanding without amendment to the plan or
the award agreement and pay to the holder thereof:
- With respect to options, an amount equal to the excess of the then fair
market value of MEMC common stock over the exercise price of the options
35
- With respect to restricted stock, an amount equal to the then fair market
value of MEMC common stock
The Compensation and Nominating Committee may at any time amend, suspend or
terminate the plan. No amendment, suspension or termination, however, may
adversely affect a grantee's rights under any previously granted award without
the consent of the grantee.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of certain of the federal income tax
consequences to holders of nonqualified stock options granted under the plan.
NONQUALIFIED STOCK OPTIONS
Although an optionee will not recognize income upon the original grant of a
nonqualified stock option, if an optionee chooses to exercise his or her option,
the optionee will recognize ordinary income in an amount equal to the difference
between the fair market value of the shares of MEMC common stock on the date of
exercise and the aggregate exercise price for such shares. To the extent, and in
the year, that an optionee recognizes income, MEMC may take a deduction. An
optionee's tax basis in the shares received will equal the fair market value of
such shares on the date of exercise.
If an optionee disposes of shares purchased pursuant to a nonqualified
stock option, any gain or loss will be short-term or long-term capital gain or
loss, depending upon the period during which the optionee held such shares. See
"Capital Gains and Losses" below. No gain or loss will be recognized on the
surrender of the previously acquired shares. If an optionee surrenders
previously acquired shares to pay for a nonqualified stock option, the excess,
if any, of the fair market value of the newly acquired shares over the fair
market value of the surrendered shares will be includable in the optionee's
income.
CAPITAL GAINS AND LOSSES
If an optionee holds shares for more than twelve months, upon a subsequent
disposition, the optionee will realize long-term capital gain or loss equal to
the difference between the amount the optionee receives upon such disposition
and the optionee's basis in the shares.
If an optionee disposes of shares twelve months or less after the optionee
acquires them, the optionee will realize short-term capital gain or loss equal
to the difference between the amount the optionee receives upon such disposition
and the optionee's basis in the shares.
To the extent that an optionee recognizes ordinary income, MEMC may take a
deduction.
THE MEMC BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE APPROVAL OF
MEMC'S 2001 EQUITY INCENTIVE PLAN.
36
SHAREHOLDER PROPOSALS FOR 2003 ANNUAL MEETING
Shareholder proposals intended to be presented at our 2003 Annual
Shareholders' Meeting must be received by us by January 20, 2003 for inclusion
in our proxy statement and form of proxy card for that meeting.
In order for a shareholder to nominate a candidate for director for
election at an annual shareholders' meeting, under our Restated Certificate of
Incorporation, we must receive timely notice of the nomination in advance of the
meeting. Such notice must be given not less than 90 nor more than 120 days prior
to the anniversary date of the immediately preceding annual shareholders'
meeting. The shareholder filing a notice of nomination must include information
about the nominee, such as name, address, occupation and shares held.
In order for a shareholder to bring other business before an annual
shareholders' meeting, we must receive timely notice in advance of the meeting.
Such notice must be given not less than 90 nor more than 120 days prior to the
anniversary date of the immediately preceding annual shareholders' meeting. The
notice must include a description of the proposed business, the reasons
therefor, and other specified matters. These requirements are separate from and
in addition to the requirements a shareholder must meet to have a proposal
included in our proxy statement. Upon receipt of any such proposal, we will
determine whether or not to include such proposal in the proxy statement, form
of proxy card and/or annual shareholders' meeting agenda under regulations
governing the solicitation of proxies. The above time limits also apply in
determining whether notice is timely for purposes of rules adopted by the
Securities and Exchange Commission relating to the exercise of discretionary
voting authority.
In each case, the notice must be given to David Fleisher, MEMC's Secretary,
whose address is 501 Pearl Drive (City of O'Fallon), P. O. Box 8, St. Peters,
Missouri 63376.
Any shareholder desiring a copy of our Restated Certificate of
Incorporation or Restated By-Laws will be furnished a copy without charge upon
written request to our Secretary.
OTHER MATTERS
The Board of Directors knows of no other matters to be presented for
consideration at the 2002 Annual Shareholders' Meeting by the Board of Directors
or by shareholders who have requested inclusion of proposals in this proxy
statement. If any other matter shall properly come before the meeting, the
persons named in the accompanying proxy card intend to vote on such matters in
accordance with their judgment.
May 20, 2002
37
MEMC ELECTRONIC MATERIALS, INC.
The undersigned hereby directs Putnam Fiduciary Trust Company as
trustee (the "Trustee") of the MEMC Retirement Savings Plan (the "Plan") to
vote, as designated on the reverse side, all of the shares of Common Stock of
MEMC Electronic Materials, Inc. (the "Company") which the undersigned is
entitled to direct the Trustee to vote pursuant to the terms of the Plan, on the
matters set forth on the reverse side and, in the discretion of the Trustee and
its proxies, upon any other business which may properly come before the Annual
Meeting of Stockholders of the Company, to be held at 345 California Street,
Suite 3300, San Francisco, California 94104 on June 5, 2002 at 10:00 a.m., local
time, and all adjournments thereof.
This voting direction card, when properly executed, will be voted in
the manner directed herein by the undersigned participant. If no direction is
made by a participant, voting will be controlled by the terms of the Plan.
PLEASE DATE AND SIGN ON THE REVERSE SIDE AND
MAIL PROMPTLY IN THE ENCLOSED ENVELOPE.
(Continued and to be signed on reverse side.)
/\ FOLD AND DETACH HERE /\
MEMC ELECTRONIC MATERIALS, INC.
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY. [X]
1. Election of directors: Richard W. Boyce, John G. Danhakl and Nabeel
Gareeb
FOR { } WITHHOLD ALL { } FOR ALL EXCEPT { }
-----------------------------------------------------------------------
(Instruction: To withhold authority to vote for any individual nominee,
write that nominee's name(s) on the space provided above.)
2. To approve MEMC's 2001 Equity Incentive Plan.
FOR { } AGAINST { } ABSTAIN { }
3. In its discretion, the Trustee and its proxies are authorized to vote
upon any other business which may properly come before the meeting and
all adjournments thereof.
The undersigned hereby revokes all prior directions heretofore given by the
undersigned to the Trustee with respect to the subject matter hereof for said
meeting. The direction may be revoked prior to its exercise.
____________________________________________ ______________, 2002
Signature of Plan Participant Date
Note: Please sign exactly as your name or names appear hereon.
PLEASE MARK, SIGN AND PROMPTLY RETURN THIS VOTING DIRECTION CARD IN THE ENCLOSED
ENVELOPE. NO POSTAGE IS REQUIRED IF MAILED IN THE UNITED STATES.
/\ FOLD AND DETACH HERE /\
MEMC ELECTRONIC MATERIALS, INC.
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF STOCKHOLDERS ON JUNE 5, 2002
The undersigned hereby appoints James M. Stolze and David L. Fleisher,
and each of them, with power of substitution, as proxies of the undersigned, to
attend the Annual Meeting of Stockholders of MEMC Electronic Materials, Inc.
(the "Company"), to be held at 345 California Street, Suite 3300, San Francisco,
California 94104 on June 5, 2002 at 10:00 a.m., local time, and all adjournments
thereof, and to vote, as indicated on the reverse side, the shares of Common
Stock of the Company which the undersigned is entitled to vote with all the
powers the undersigned would possess if present at the meeting.
THE SHARES REPRESENTED HEREBY WILL BE VOTED IN ACCORDANCE WITH THE
STOCKHOLDER'S DIRECTION HEREIN, BUT WHERE NO DIRECTIONS ARE INDICATED, SAID
SHARES WILL BE VOTED FOR THE ELECTION AS DIRECTORS OF THE NOMINEES LISTED ON THE
REVERSE SIDE, FOR THE APPROVAL OF MEMC'S 2001 EQUITY INCENTIVE PLAN, AND IN THE
DISCRETION OF THE PROXIES, ON SUCH OTHER MATTERS AS MAY PROPERLY COME BEFORE THE
MEETING, ALL IN ACCORDANCE WITH THE COMPANY'S PROXY STATEMENT, RECEIPT OF WHICH
IS HEREBY ACKNOWLEDGED.
PLEASE DATE AND SIGN ON THE REVERSE SIDE AND
MAIL PROMPTLY IN THE ENCLOSED ENVELOPE.
(Continued and to be signed on reverse side.)
/\ FOLD AND DETACH HERE /\
MEMC ELECTRONIC MATERIALS, INC.
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY. {X}
1. Election of directors: Richard W. Boyce, John G. Danhakl and Nabeel
Gareeb
FOR { } WITHHOLD ALL { } FOR ALL EXCEPT { }
-----------------------------------------------------------------------
(Instruction: To withhold authority to vote for any individual nominee,
write that nominee's name(s) on the space provided above.)
2. To approve MEMC's 2001 Equity Incentive Plan.
FOR { } AGAINST { } ABSTAIN { }
3. In their discretion, the proxies are authorized to vote upon any other
business which may properly come before the meeting and all
adjournments thereof.
THE PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
The undersigned hereby revokes all proxies heretofore given by the undersigned
for said meeting. The proxy may be revoked prior to its exercise.
________________________________________ ____________________, 2002
Signature Date
________________________________________ ____________________, 2002
Signature if held jointly Date
Note: Please sign exactly as your name or names appear hereon. When shares are
held by joint tenants, both should sign. When signing as attorney, executor,
administrator, trustee or guardian, please give full title as such. If a
corporation, please sign in full corporate name by President or other authorized
officer. If a partnership, please sign in partnership name by authorized person.
/\ FOLD AND DETACH HERE /\