e424b5
The
information in this prospectus supplement and the accompanying
prospectus is not complete and may be changed. This prospectus
supplement and the accompanying prospectus are not an offer to
sell these securities, and they are not soliciting an offer to
buy these securities in any state where the offer or sale is not
permitted.
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SUBJECT TO COMPLETION, DATED
JUNE 8, 2010
Filed
Pursuant to Rule 424(b)(5)
Registration
No. 333-165785
Prospectus Supplement
(To Prospectus dated April 12, 2010)
FSI International,
Inc.
Shares of Common
Stock
We are
offering shares
of our common stock, no par value.
Our common stock is listed on the NASDAQ Global Market under the
symbol FSII. On June 7, 2010, the last reported
sale price of our common stock was $3.37 per share.
Investing in our common stock involves risks. See Risk
Factors beginning on
page S-3
of this prospectus supplement before you make an investment in
our common stock.
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Per Share
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Total
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Public offering price
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$
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$
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Underwriting discount
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$
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$
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Proceeds to us (before expenses)
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$
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$
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The underwriters have a
30-day
option to purchase up
to
additional shares from us on the same terms set forth above to
cover over-allotments, if any.
The underwriters expect to deliver the shares to purchasers on
or about June , 2010 through the book-entry
facilities of the Depository Trust Company.
Neither the Securities and Exchange Commission nor any state
securities commission has approved or disapproved these
securities or passed upon the adequacy or accuracy of this
prospectus supplement or the accompanying prospectus. Any
representation to the contrary is a criminal offense.
Sole Book-Running Manager
Craig-Hallum Capital
Group
Co-Manager
Dougherty &
Company
The date of this prospectus supplement is
June , 2010.
Table
of Contents
Prospectus
Supplement
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S-ii
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S-ii
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S-1
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S-3
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S-15
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S-16
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S-17
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S-18
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S-19
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S-21
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S-21
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S-22
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Prospectus
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You should rely only on the information contained or
incorporated by reference in this prospectus supplement, the
accompanying prospectus and any related free writing
prospectuses that we may authorize to be provided to you. We
have not, and the underwriters have not, authorized any other
person to provide you with different information. If anyone
provides you with different or inconsistent information, you
should not rely on it. We are not, and the underwriters are not,
making an offer to sell these securities in any jurisdiction
where the offer or sale is not permitted. The information in
this prospectus supplement, the accompanying prospectus and any
related free writing prospectuses that we may authorize to be
provided to you is current as of the date such information is
presented. Our business, financial condition, results of
operations and prospects may have changed since those dates.
Cautionary
Statement Concerning Forward-looking
Statements
This prospectus supplement, the accompanying prospectus, any
related free writing prospectuses that we may authorize to be
provided to you and the documents that are incorporated by
reference herein and therein may contain forward-looking
statements within the meaning of the federal securities laws and
the Private Securities Litigation Reform Act of 1995. In some
cases, you can identify forward-looking statements by words such
as may, hope, will,
should, expect, plan,
anticipate, intend, believe,
estimate, predict,
potential, continue, could,
future, strive or the negative of those
terms or other words of similar meaning. You should read
statements that contain these words carefully because they
discuss our future expectations or state other
forward-looking information. We believe that it is
important to communicate our future expectations to our
investors. However, there may be events in the future that we
are not able to accurately predict or control and our actual
results may differ materially from the expectations we describe
in our forward-looking statements. Before you invest in our
common stock, you should be aware that the occurrence of the
events described under the caption Risk Factors and
elsewhere in this prospectus supplement, the accompanying
prospectus, any related free writing prospectuses that we may
authorize to be provided to you and in the information
incorporated by reference herein and therein could have an
adverse effect on our business, results of operations and
financial condition. The forward-looking statements contained or
incorporated by reference in this prospectus supplement, the
accompanying prospectus or any related free writing prospectuses
that we may authorize to be provided to you relate only to
circumstances as of the date on which the statements are made.
About
This Prospectus Supplement
This document is in two parts. The first part is this prospectus
supplement, which describes the specific terms of this offering.
The second part, the accompanying prospectus, gives more
information about the securities we may offer from time to time,
some of which may not apply to our offering of common stock
pursuant to this prospectus supplement. Generally, when we refer
only to the prospectus, we are referring to both
parts combined.
As used in this prospectus supplement or the accompanying
prospectus, the terms FSI, we,
us, and our mean FSI International, Inc.
and its subsidiaries, unless the context indicates another
meaning, and the term common stock means our common
stock, no par value. Our fiscal year ends on the last Saturday
of August each year.
This prospectus supplement includes a discussion of risk factors
and other special considerations applicable to this particular
offering of securities. This prospectus supplement, and the
information incorporated herein by reference, may also add,
update or change information in the accompanying prospectus. You
should read both this prospectus supplement and the accompanying
prospectus together with additional information described under
the heading Where You Can Find More Information. If
there is any inconsistency between the information in this
prospectus supplement and the accompanying prospectus, you
should rely on the information in this prospectus supplement. If
there is any inconsistency between the information in this
prospectus supplement and the information set forth in a
document we have incorporated by reference, you should rely on
the information in the more recent document.
Except as otherwise specifically identified herein, all
information regarding market position and industry data
pertaining to our business contained in this prospectus
supplement, the accompanying prospectus or incorporated by
reference herein or therein, are based on managements
estimates. The Gartner Report described in certain documents
incorporated by reference herein (the Gartner
Report) represents data, research opinion or viewpoints
published, as part of a syndicated subscription service, by
Gartner, Inc. (Gartner), and are not representations
of fact. Each Gartner Report speaks as of its original
publication date (and not as of the date of this registration
statement or any filings incorporated by reference) and the
opinions expressed in the Gartner Reports are subject to change
without notice.
S-ii
Summary
This summary highlights information contained elsewhere in
this prospectus supplement, the accompanying prospectus and the
documents incorporated by reference. This summary sets forth the
material terms of this offering, but does not contain all of the
information you should consider before investing in our common
stock. You should read carefully this entire prospectus
supplement and the accompanying prospectus, including the
documents incorporated by reference herein and therein, before
making an investment decision to purchase our common stock,
especially the risks of investing in our common stock discussed
under Risk Factors contained in this prospectus
supplement and under Item 1.A. Risk Factors in
our Annual Report on
Form 10-K
for the fiscal year ended August 29, 2009.
FSI
International, Inc.
FSI International, Inc., a Minnesota corporation organized in
1973, designs, manufactures, markets and supports equipment used
in the fabrication of microelectronics, such as advanced
semiconductor devices. We provide surface conditioning
technology solutions and microlithography systems and support
services to worldwide manufacturers of integrated circuits. We
manufacture, market and support surface conditioning equipment
that uses wet, cryogenic and other chemistry techniques to
clean, strip or etch the surfaces of silicon wafers and supply
refurbished microlithography products that are used to deposit
and develop light sensitive films. Our business is supported by
service groups that provide finance, human resources,
information services, sales and service, marketing and other
administrative functions.
We directly sell and service our products in North America,
Europe, and the Asia Pacific region, except for Japan. In Japan,
our products are sold and serviced through Apprecia Technology,
Inc. (Apprecia), a company in which we maintain a
20 percent equity ownership.
We maintain manufacturing facilities in Chaska, Minnesota and
Allen, Texas. Quality control is maintained through quality
assurance programs with suppliers, incoming inspection of
components, in-process inspection during equipment assembly, and
final inspection and operation of manufactured equipment prior
to shipment. We have a company-wide quality program in place,
utilizing many of the key processes developed when we received
ISO 9001 certification in 1994, ISO 9000:2000 certification in
2003 and ISO 14001:2004 certification in 2003 (which
certifications expired in November 2008, with respect to ISO
9001 and ISO 9000:2000, and April 2009, with respect to ISO
14001:2004, when we decided to stop paying the required
maintenance fee).
Our principal executive offices are located at 3455 Lyman
Boulevard, Chaska, Minnesota 55318 and our telephone number is
(952) 448-5440.
The
Offering
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Common stock offered by us |
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shares |
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Over-allotment option |
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shares |
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Common stock outstanding after this offering |
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shares.
If the underwriters exercise their over-allotment option in
full, we will issue an
additional shares,
which will result in shares outstanding. |
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Use of proceeds |
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We estimate that the net proceeds to us from this offering,
after deducting underwriting discounts and estimated fees and
expenses, will be approximately
$ million. We intend to use
the net proceeds from this offering for general corporate and
working capital purposes. See Use of Proceeds for
additional information. |
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NASDAQ Global Market Symbol |
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FSII |
S-1
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Risk factors |
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Investing in our common stock involves substantial risks. You
should carefully consider all the information in or incorporated
by reference in this prospectus supplement and the accompanying
prospectus prior to investing in our common stock. In
particular, we urge you to carefully consider the factors set
forth under Risk Factors beginning on
page S-3
of this prospectus supplement and under Item 1.A.
Risk Factors in our Annual Report on
Form 10-K
for the fiscal year ended August 29, 2009. |
The number of shares outstanding after the offering is based on
32,243,092 shares outstanding as of June 3, 2010, and
excludes:
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2,966,234 shares of common stock issuable upon the exercise
of stock options outstanding at a weighted average exercise
price of $5.07 per share as of June 3, 2010;
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1,011,543 shares of common stock reserved for future grants
under our 2008 Omnibus Stock Plan as of June 3,
2010; and
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1,107,157 shares of common stock reserved for future
purchases under our Employees Stock Purchase Plan as of
June 3, 2010.
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S-2
Risk
Factors
Investing in our common stock involves substantial risks. You
should carefully consider the risk factors set forth below as
well as the other information contained or incorporated by
reference in this prospectus supplement and the accompanying
prospectus before investing in our common stock, including those
risks described under Item 1.A. Risk Factors in
our Annual Report on
Form 10-K
for the fiscal year ended August 29, 2009. Any such risks
could materially and adversely affect our business, financial
condition or results of operations. In such a case, you may lose
all or part of your investment. The risks described below and in
our Annual Report on
Form 10-K
for the fiscal year ended August 29, 2009 are not the only
risks facing us. Additional risks and uncertainties not
currently known to us or those we currently view to be
immaterial may also materially adversely affect our business,
financial condition or results of operations.
Risks
Related to Our Business
Volatility
in the global economy could adversely affect our business and
operating results.
Financial markets in the United States, Europe and Asia have
been experiencing extreme disruption in recent months,
including, among other things, volatility in securities prices,
severely diminished liquidity and credit availability, rating
downgrades of certain investments and declining valuation of
others, declines in consumer confidence, declines in economic
growth, increases in unemployment rates, and uncertainty about
economic stability. These conditions have had a significant
adverse impact on our industry and financial condition and
results of operations. There may be further changes in the
global economy, which could lead to further challenges in our
business and negatively impact our financial condition and
results of operations. A tightening of credit in financial
markets adversely affects the ability of our customers and
suppliers to obtain financing for significant purchases and
operations and could result in a decrease in orders and spending
for our products and services. We are unable to predict the
likely duration and severity of the current disruption in
financial markets and adverse economic conditions and the
effects they may have on our business and financial condition.
If the current uncertain economic conditions continue or further
deteriorate, our business, financial condition and results of
operations could be further materially and adversely affected.
Because
our business depends on the amount that manufacturers of
microelectronics spend on capital equipment, downturns in the
microelectronics industry may adversely affect our business and
operating results.
The microelectronics industry experiences periodic downturns,
which may have a negative effect on our business and our sales
and other operating results. Our business depends on the amounts
that manufacturers of microelectronics spend on capital
equipment. The amounts they spend on capital equipment depend on
the existing and expected demand for semiconductor devices and
products that use semiconductor devices. When a downturn occurs,
some semiconductor manufacturers experience lower demand and
increased pricing pressure for their products. As a result, they
are likely to purchase less semiconductor processing equipment
and have sometimes delayed making decisions to purchase capital
equipment. In some cases, semiconductor manufacturers have
canceled or delayed orders for our products. Historically, the
semiconductor equipment industry has experienced more pronounced
decreases in net sales than the semiconductor industry as a
whole.
We have in the past experienced downturns in orders for new
equipment as well as delays in or cancellations of existing
orders. We cannot predict the extent and length of any future
softening in the industry.
If
cash requirements exceed expenditures, we may not have
sufficient resources to conduct our business and operations as
currently planned.
We do not have any revolving line of credit or other form of
debt financing. If more cash is needed to fund operations than
expected, we may need to take additional actions. These actions
could include additional cost reduction measures and possible
cash generating activities, including exploring a sale-leaseback
arrangement for our Chaska, Minnesota facility, entering into an
asset-based lending arrangement, borrowing up to
$3.5 million against or liquidating our remaining life
insurance investments of $3.6 million, borrowing up to 50%
against or selling some or all of our currently illiquid auction
rate securities (ARS), possibly at a loss, or
selling additional
S-3
equity. We can provide no assurance that any of these
cash-generating activities will be available to us when needed,
or if available, on such terms that will be acceptable or in
sufficient amounts to cover our operating expenses at such time.
The sale of additional equity would likely result in additional
dilution to our shareholders. In addition, without substantial
available capital, we may be unable to take advantage of
strategic opportunities as they arise, such as investments in or
acquisitions of businesses, products or technologies.
Our
actual results may vary from the guidance we provide investors,
which could cause our stock price to decline and subject us to
lawsuits from investors.
We provide earnings guidance from time to time. For a variety of
reasons, our results of operations are difficult to predict and
may vary significantly from quarter to quarter. Our ability to
achieve forecasted results depends on a number of factors,
including our assumptions regarding future performance, many of
which are entirely outside of our control. Due to the
uncertainties relating to assumptions that management makes in
calculating our expected financial results, actual results may
vary from the guidance we provide investors and may vary
materially. Investors are cautioned not to place undue reliance
on our earnings guidance. In addition, because we provide
earnings guidance from time to time, our common stock may be
subject to increased volatility and we may be subject to
lawsuits by investors. Our stock price may decline following an
announcement of disappointing earnings or earnings guidance or
if we revise our earnings guidance downward as the estimates and
assumptions we make in calculating guidance become more certain.
Also, some companies that have made downward revisions to their
earnings guidance or did not meet the guidance provided have
been subject to lawsuits by investors. Such lawsuits may have
merit and result in adverse settlements or judgments. Even if
such lawsuits are dismissed or have no merit, they may be costly
and may divert management attention and other resources away
from our business, which could harm our business and the price
of our common stock.
We
have incurred significant net losses in the past, our future
revenues are inherently unpredictable, and we may be unable to
maintain profitability.
We have incurred significant net losses in the past. Our
operating results for future periods are subject to numerous
uncertainties, and we cannot assure that we will be able to
maintain profitability. It is possible that in future quarters
our operating results will decrease from the previous quarter or
fall below the expectations of securities analysts and
investors. In this event, the trading price of our common stock
could significantly decline. Further, exacerbated or continuing
declines in net income or increases in net losses could affect
our operating results, liquidity or financial condition.
The
current economic environment and the fact that we derive a
significant percentage of our quarterly revenues from bookings
received during the quarter and from shipments made in the final
weeks of the quarter make our quarterly revenues difficult to
predict.
Our quarterly revenues and operating results are affected, both
positively and negatively, by fluctuations in general economic
conditions and in the specific economic conditions affecting the
semiconductor industry. Although we believe overall conditions
in the worldwide economy and financial markets in general, and
in the semiconductor industry in particular, have improved
recently, our visibility continues to be limited and forecasting
remains extremely difficult. We derive a significant percentage
of our quarterly revenues from bookings received during the
quarter and from shipments made in the final weeks of the
quarter, making quarterly revenues difficult to predict. We
generate a significant percentage of our quarterly revenues from
orders received during the quarter and turned for
shipment within the quarter. Any shortfall in expected
turns orders will adversely affect quarterly
revenues. There are many factors that can cause a shortfall in
turns orders, including declines in general economic conditions
or the businesses of our customers. In addition, we sometimes
book a disproportionately large percentage of turns orders
during the final weeks of the quarter. Any failure to receive,
or delay in receiving, expected turns orders would adversely
(and perhaps materially) affect quarterly revenues. We sometimes
ship a disproportionately large percentage of our quarterly
revenues during the final weeks of the quarter, and any delays
in making those shipments are more likely to cause them to slip
into the following quarter. Any failure to effect scheduled
shipments by the end of a quarter would adversely affect
quarterly revenues.
S-4
We
derive our revenues primarily from a relatively small number of
high-priced systems, sales of which significantly affect our
quarterly operating results.
System sales constitute a significant portion of our total
revenue. Our systems are priced from approximately $500,000 to
up to $5 million per unit, and our revenues in any given
quarter are dependent upon a rather limited number of such
systems. As a result, the inability to recognize revenue on even
a few systems can cause a significant adverse impact on our
revenues for that quarter.
We
have a limited number of key customers, which may subject us to
unpredictable revenue swings.
Sales to a limited number of large customers constitute a
significant portion of our overall revenue, new orders and
profitability. As a result, the actions of even one customer may
subject us to revenue swings that are difficult to predict.
Similarly, significant portions of our credit risk may, at any
given time, be concentrated among a limited number of customers,
so that the failure of even one of these key customers to pay
its obligations to us could significantly impact our cash flow
and operating results.
Failure
of our products to gain market acceptance would adversely affect
our business, operating results and financial
condition.
We believe that our growth prospects depend upon our ability to
gain customer acceptance of our products and technology,
particularly newly developed products, such as our Orion Single
Water Cleaning System. Market acceptance of products depends
upon numerous factors, including:
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compatibility with existing manufacturing processes and products;
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ability to displace incumbent suppliers or processes or tools of
record;
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perceived advantages over competing products; and
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the level of customer service available to support such products.
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Moreover, manufacturers often rely on a limited number of
equipment vendors to meet their manufacturing equipment needs.
As a result, market acceptance of our products may be affected
adversely to the extent potential customers utilize a
competitors manufacturing equipment. There can be no
assurance that sales of new products will remain constant or
grow or that we will be successful in obtaining broad market
acceptance of our systems and technology.
We expect to spend a significant amount of time and resources to
develop new systems and enhance existing systems. In light of
the long product development cycles inherent in our industry, we
will make these expenditures well in advance of the prospect of
deriving revenue from the sale of any new systems. Our ability
to commercially introduce and successfully market any new
systems is subject to a wide variety of challenges during this
development cycle, including
start-up
bugs, design defects and other matters that could delay
introduction of these systems to the marketplace. In addition,
since our customers are not obligated by long-term contracts to
purchase our systems, our anticipated product orders may not
materialize or orders that do materialize may be canceled. As a
result, if we do not achieve market acceptance of new products,
we may not be able to realize sufficient sales of our systems in
order to recoup research and development expenditures. The
failure of any of our new products, for example the
ORION®,
to achieve market acceptance would harm our business, operating
results and financial condition.
If we
do not continue to develop new products and processes, we will
not be able to compete effectively.
Our business and results of operations could decline if we do
not develop and successfully introduce new or improved products
and processes that the market accepts. The technology used in
microelectronics manufacturing equipment and processes changes
rapidly. For example, the industry has started to shift towards
single wafer processes from batch processes. If this trend
occurs more rapidly than anticipated, it could negatively impact
our operating results. Industry standards change constantly and
equipment manufacturers frequently introduce new
S-5
products and processes. We believe that microelectronics
manufacturers increasingly rely on equipment manufacturers like
us to:
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design and develop more efficient manufacturing equipment;
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design and implement improved processes for microelectronics
manufacturers to use; and
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make their equipment compatible with equipment made by other
equipment manufacturers.
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To compete, we must continue to develop, manufacture, and market
new or improved products and processes that meet changing
industry standards. To do this successfully, we must:
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select appropriate products;
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design and develop our products efficiently and quickly;
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implement our manufacturing and assembly processes efficiently
and on time;
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make products that perform well for our customers;
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market and sell our products effectively; and
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introduce our new products in a way that does not unexpectedly
reduce sales of our existing products.
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Because
we do not have long-term sales commitments with our customers,
our operating results will be adversely affected if customers
decide to reduce, delay or cancel orders or choose to buy from
our competitors.
We depend and expect to continue to depend on a limited number
of customers for a large portion of our business and if our
significant customers reduce, delay, or cancel orders, then our
operating results could suffer. Our largest customers have
changed from year to year, however, sales to our top five
customers accounted for approximately 55% of total revenues in
fiscal 2009, 51% of total revenues in fiscal 2008 and 42% of
total revenues in fiscal 2007. Samsung Electronics accounted for
approximately 34% of our total sales in fiscal 2009, 19% of our
total sales in fiscal 2008 and 13% of our total sales in fiscal
2007. ST Microelectronics accounted for approximately 12% of our
total sales in fiscal 2008. Intel Corporation accounted for
approximately 11% of our total sales in fiscal 2007. We
currently have no long-term sales commitments with any of our
customers. Instead, we generally make sales under purchase
orders. All orders are subject to cancellation or delay by the
customer.
Our
licensing practices related to international spare parts sales
may subject us to fines and could reduce our ability to be
competitive in certain countries.
In addition to offering our customers microelectronics
manufacturing equipment, we provide replacement spare parts,
spare part kits and assemblies. In late calendar 2006, we
determined that certain of our replacement valves, pumps and
heaters could fall within the scope of United States export
licensing regulations to products that could be used in
connection with chemical weapons processes. We determined that
these regulations require us to obtain licenses to ship some of
our replacement spare parts, spare part kits and assemblies to
customers in certain controlled countries as defined in the
export licensing regulations. During the second quarter of
fiscal 2007, we were granted licenses to ship replacement spare
parts, spare parts kits and assemblies to all customers in the
controlled countries where we currently conduct business.
The applicable export licensing regulations frequently change.
Moreover, the types and categories of products that are subject
to export licensing are often described in the regulations in
general terms and could be subject to differing interpretations.
If we do not maintain the appropriate export licenses, our
business and results of operations could be adversely affected
and we could be subjected to significant fines.
In the second quarter of fiscal 2007, we made a voluntary
disclosure to the United States Department of Commerce to
clarify our licensing practices and to review our practices with
respect to prior sales of certain replacement valves, pumps and
heaters to customers in several controlled countries as defined
in the licensing regulations.
S-6
In October 2009, we entered into a settlement agreement with the
Office of Export Enforcement for $450,000. We will pay $5,000
per month for ten months beginning in November 2009. The
remaining $400,000 owed under the settlement will be suspended
for 12 months. If we do not commit any export violations
during the
12-month
period, we will be released from further payment, including the
suspended $400,000.
Product
or process development problems could harm our results of
operations.
Our products are complex, and from time to time have defects or
bugs that are difficult and costly to fix. This can harm our
results of operations in the following ways:
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we may incur substantial costs to ensure the functionality and
reliability of products early in their life cycle;
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repeated defects or bugs can reduce orders, increase
manufacturing costs, adversely impact working capital and
increase service and warranty expenses;
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we may require significant lead times between product
introduction and commercialization;
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harm our credibility with existing customers; and
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lead to commercial
and/or
product liability as a result of lawsuits.
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As a result, we may have to write off inventory and other assets
related to products and could lose customers and revenue. There
is no assurance that we will be successful in preventing product
and process development problems that could potentially harm our
results of operations.
If the
worsening of credit market conditions continues or increases, it
could have a material adverse impact on our investment
portfolio.
The current short-term funding credit issues that began to occur
during the second half of calendar 2007, continue to impact
liquidity in asset-backed commercial paper and to cause failed
auctions in the auction rate securities market. If the global
credit market continues to deteriorate, our investment portfolio
may be impacted and we could determine that some of our
investments are impaired. This could materially adversely impact
our results of operations and financial condition.
Our investment portfolio includes ARS. The ARS we currently hold
have contractual maturities between 26 to 34 years. ARS are
usually found in the form of municipal bonds, preferred stock, a
pool of student loans or collateralized debt obligations. The
interest rates of our ARS are reset every 28 days through
an auction process and at the end of each reset period,
investors can sell or continue to hold the securities at par.
The $4.6 million par value ARS we hold are backed by
student loans and are collateralized, insured and guaranteed by
the United States Federal Department of Education. In addition,
all ARS held by us are rated by the major independent rating
agencies and carry investment grade ratings and have not
experienced any payment defaults.
Beginning in the second quarter of fiscal 2008, all of our ARS
experienced failed auctions due to sell orders exceeding buy
orders. Under the contractual terms, the issuer is obligated to
pay penalty interest rates should an auction fail. We cannot
liquidate our ARS until a successful auction occurs, the issuer
redeems the ARS, a buyer is found outside of the auction process
or the underlying securities have matured.
There is no assurance that future auctions of our ARS will be
successful. As a result, our ability to voluntarily liquidate
and recover the carrying value of some or all of the ARS we hold
may be limited for an indefinite period of time. If an issuer of
our ARS is unable to successfully close future auctions or does
not redeem the ARS, or the United States government fails to
support its guaranty of the obligations, we may be required to
adjust the carrying value of the ARS and record additional
impairment charges in future periods, which could materially
affect our results of operations and financial condition.
S-7
Changes
in demand caused by fluctuations in foreign currency exchange
rates may reduce our international sales.
Almost all of our direct international sales are denominated in
U.S. dollars. Nonetheless, changes in demand caused by
fluctuations in interest and currency exchange rates may affect
our international sales. We have direct sales, service and
applications support and logistics responsibilities for our
products in Europe and the Asia Pacific region, and accordingly,
we incur labor, service and other expenses in foreign
currencies. As of February 27, 2010, we had not entered
into any hedging activities and our foreign currency transaction
gains and losses for fiscal 2009 and through second quarter of
fiscal 2010 were insignificant. We intend to evaluate various
hedging activities and other options to minimize fluctuations in
foreign currency exchange rates. There is no assurance that we
will be successful in minimizing foreign exchange rate risks and
such failure may reduce our international sales or negatively
impact our operating results.
Because
of the need to meet and comply with numerous foreign regulations
and policies, the potential for change in the political and
economic environments in foreign jurisdictions and the
difficulty of managing business overseas, we may not be able to
sustain our historical level of international
sales.
We operate in a global market. In the first six months of fiscal
2010, approximately 51% of our sales revenue derived from sales
outside the United States. In fiscal 2009, approximately 71% of
our sales revenue derived from sales outside of the United
States. In fiscal 2008, approximately 76% of our sales revenue
derived from sales outside the United States. In fiscal 2007,
approximately 69% of our sales revenue derived from sales
outside the United States. We expect that international sales
will continue to represent a significant portion of total sales.
Sales to customers outside the United States involve a number of
risks, including the following:
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imposition of government controls;
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compliance with U.S. export laws, the Foreign Corrupt
Practices Act of 1977, as amended and foreign laws;
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political and economic instability;
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trade restrictions;
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changes in taxes and tariffs;
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longer payment cycles;
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difficulty of administering business overseas;
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outbreak of hostilities, particularly in Korea, Taiwan or China;
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the need for technical support resources in different locations;
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our ability to secure and retain qualified people in all
necessary locations for the successful operation of our
business; and
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general economic conditions.
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In particular, the Japanese and Asia Pacific markets are
extremely competitive. The semiconductor device manufacturers
located in these markets are very aggressive in seeking price
concessions from suppliers, including equipment manufacturers
like us.
We seek to meet technical standards imposed by foreign
regulatory bodies. However, we cannot guarantee that we will be
able to comply with those standards in the future. Any failure
by us to design products to comply with foreign standards could
have a significant negative impact on us.
Because
of the significant financial resources needed to offer a broad
range of products, to maintain customer service and support and
to invest in research and development, we may be unable to
compete with larger, better established
competitors.
The microelectronics equipment industry is highly competitive.
We face substantial competition throughout the world. We believe
that to remain competitive, we will need significant financial
resources to offer a broad range
S-8
of products, to maintain customer service and support, and to
invest in research and development. We believe that the
microelectronics industry is becoming increasingly dominated by
large manufacturers who have the resources to support customers
on a worldwide basis. In the past several years, we have seen a
trend toward consolidation in the microelectronics equipment
industry. We expect the trend toward consolidation to continue
as companies seek to strengthen or maintain their market
positions in a rapidly changing industry. This could lead to
larger, stronger competitors. Some of our competitors have
substantially greater financial, marketing, and customer-support
capabilities than us. Large equipment manufacturers have or may
enter the market areas in which we compete. In addition,
smaller, emerging microelectronics equipment companies provide
innovative technology. We expect that our competitors will
continue to improve the design and performance of their existing
products and processes. We also expect them to introduce new
products and processes with better performance and pricing. We
cannot guarantee that we will continue to compete effectively in
the United States or elsewhere. We may be unable to continue to
invest in marketing, research and development and engineering at
the levels we believe necessary to maintain our competitive
position. Our failure to make these investments could have a
significant negative impact on our business, operating results
and financial condition.
Manufacturing
interruptions or delays could affect our ability to meet
customer demand, while the failure to estimate customer demand
accurately could result in excess or obsolete
inventory.
Our business depends on our ability to supply equipment,
services and related products that meet the rapidly changing
requirements of our customers, which depends in part on the
timely delivery of parts, components and subassemblies
(collectively, parts) from suppliers. Some key parts may be
subject to long lead-times
and/or
obtainable only from a single supplier or limited group of
suppliers. Significant interruptions of manufacturing operations
or the delivery of services could result in delayed deliveries
to our customers, manufacturing inefficiencies, increased costs
or order cancellations as a result of:
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the failure or inability of suppliers to timely deliver quality
parts;
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the inability to hire and retain technically skilled labor;
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volatility in the availability and cost of materials;
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difficulties or delays in obtaining required export approvals;
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information technology or infrastructure failures;
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difficulties related to planning or effecting business process
changes;
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natural disasters (such as earthquakes, floods or
storms); or
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other causes (such as regional economic downturns, pandemics,
political instability, terrorism or acts of war).
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Moreover, if actual demand for our products is different than
expected, we may purchase more/fewer parts than necessary or
incur costs for canceling, postponing or expediting delivery of
parts. Any or all of these factors could materially and
adversely affect our business, financial condition and results
of operations.
Our
backlog may not result in future net sales.
We schedule the production of our systems based in part upon
order backlog. Due to possible customer changes in delivery
schedules and cancellations of orders, our backlog at any
particular date is not necessarily indicative of actual sales
for any succeeding period. In addition, while we evaluate each
customer order on a case by case basis to determine
qualification for inclusion in backlog, there can be no
assurance that amounts included in backlog ultimately will
result in future sales. A reduction in backlog during any
particular period, or the failure of our backlog to result in
future sales, could harm our business and operating results.
S-9
Because
we depend upon our management and technical personnel for our
success, the loss of key personnel could place us at a
competitive disadvantage.
Our success depends to a significant extent upon our management
and technical personnel. The loss of a number of these key
persons could have a negative effect on our operations.
Competition is high for such personnel in our industry in all of
our locations. We periodically review our compensation and
benefit packages to ensure that they are competitive in the
marketplace and make adjustments or implement new programs for
that purpose, as appropriate. We cannot guarantee that we will
continue to attract and retain the personnel we require.
Our
employment costs in the short-term are to a large extent fixed,
and therefore any unexpected revenue shortfall could adversely
affect our operating results.
Our operating expense levels are based in significant part on
our headcount, which generally is driven by longer-term revenue
goals. For a variety of reasons, particularly the high cost and
disruption of lay-offs and the costs of recruiting and training,
our headcount in the short-term is, to a large extent, fixed.
Accordingly, we may be unable to reduce employment costs in a
timely manner to compensate for any unexpected shortfall in
revenue or gross margin, which could have a material adverse
effect on our operating results.
Because
the development and protection of our intellectual property is
important to our success, the loss or diminution of our
intellectual property rights could adversely affect our
business.
We attempt to protect our intellectual property rights through
patents, copyrights, trade secrets, and other measures. However,
we believe that our financial performance will depend more upon
the innovation, technological expertise, and marketing abilities
of our employees than on such protection. In connection with our
intellectual property rights, we face the following risks:
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our pending patent applications may not be issued or may be
issued with more narrow claims;
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patents issued to us may be challenged, invalidated, or
circumvented;
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rights granted under issued patents may not provide competitive
advantages to us;
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foreign laws may not protect our intellectual property rights;
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others may independently develop similar products, duplicate our
products, or design around our patents; and
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employees and others with whom we have confidentiality
agreements may breach these agreements and we may not have
adequate remedies in connection with any such breach.
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As is typical in the semiconductor industry, we occasionally
receive notices from others alleging infringement claims and we
also consider seeking claims against others. We have been
involved in patent infringement litigation in the past and we
could become involved in similar lawsuits or other patent
infringement claims in the future. We cannot guarantee the
outcome of such lawsuits or claims, which may have a significant
negative effect on our business or operating results.
We are
exposed to various risks related to legal proceedings or
claims.
We have in the past and may in the future be involved in legal
proceedings or claims regarding patent infringement,
intellectual property rights, contracts and other matters. These
legal proceedings and claims, whether with or without merit,
could be time-consuming and expensive to prosecute or defend,
and could divert managements attention and resources.
There can be no assurance regarding the outcome of future legal
proceedings or claims. If we are not able to resolve a claim,
negotiate a settlement of the matter, obtain necessary licenses
on commercially reasonable terms
and/or
successfully prosecute or defend its position, our business,
financial condition and results of operations could be
materially and adversely affected.
There has and continues to be substantial litigation regarding
patent and other intellectual property rights in the
microelectronics industry. Commercialization of new products or
further commercialization of our products could provoke claims
of infringement by third parties. In the future, litigation may
be necessary to enforce patents issued
S-10
to us, to protect trade secrets or know-how owned by us or to
defend us against claimed infringement of the rights of others
and to determine the scope and validity of our proprietary
rights. Any such litigation could result in substantial costs
and diversion of our effort, which alone could have a material
adverse impact on our financial condition and operating results.
Further, adverse determinations in such litigation could result
in our loss of proprietary rights, subject us to significant
liabilities to third parties, require us to seek licenses from
third parties or prevent us from manufacturing or selling one or
more products, any of which could have a material adverse effect
on our financial condition and results of operations.
We generate minor amounts of liquid and solid hazardous waste
and use licensed haulers and disposal facilities to ship and
dispose of such waste. In the past, we have received notice from
state or federal enforcement agencies that we are a potentially
responsible party (PRP) in connection with the
investigation of several hazardous waste disposal sites owned
and operated by third parties. In each matter, we have elected
to participate in settlement offers made to all de minimis
parties with respect to such sites. The risk of being named
a PRP is that if any of the other PRPs are unable to contribute
their proportionate share of the liability, if any, associated
with the site, those PRPs that are financially able could be
held financially responsible for the shortfall.
Certain of our product lines are intended for use with hazardous
chemicals. As a result, we are notified by our customers from
time to time of incidents involving our equipment that have
resulted in a spill or release of a hazardous chemical. We
maintain product liability insurance in an effort to minimize
our risk. However, in some cases it may be alleged that we or
our equipment are at fault. There can be no assurance that any
future litigation resulting from such claims would not have a
material adverse effect on our business or financial results.
Our
sales cycle is long and unpredictable, which could require us to
incur high sales and marketing expenses with no assurance that a
sale will result.
Sales cycles for some of our products can run as long as 12 to
18 months. As a result, we may not recognize revenue from
efforts to sell particular products for extended periods of
time. We believe that the length of the sales cycle may increase
as some current and potential customers centralize purchasing
decisions into one decision-making entity. We expect this may
intensify the evaluation process and require us to make
additional sales and marketing expenditures with no assurance
that a sale will result.
Risks
Related to Our Common Stock
Investors
in this offering will experience immediate and substantial
dilution in net tangible book value per share. Also, if
additional financing is required, you may suffer dilution of
your investment. We may be required to seek to raise additional
capital in the future through the issuance of equity securities,
which may result in dilution to existing
shareholders.
The offering price of the common stock in this offering will be
substantially higher than the net tangible book value per share
of our outstanding common stock. If you purchase shares of our
common stock, you will incur immediate and substantial dilution
in the amount of $ per share. See
the section entitled Dilution beginning on
page S-17
of this prospectus supplement for additional information.
Because
of the volatility of our stock price, the ability to trade
shares of our common stock may be adversely affected and our
ability to raise capital through future equity financing may be
reduced.
Our stock price has been volatile in the past and may continue
to be so in the future. In fiscal 2010 through June 3,
2010, our stock price ranged from $0.83 to $4.56 per share. In
fiscal 2009, our stock price ranged from $0.20 to $1.21 per
share. In fiscal 2008, our stock price ranged from $1.08 to
$2.73 per share and in fiscal 2007, our stock price ranged from
$2.13 to $6.90 per share.
The trading price of our common shares is subject to wide
fluctuations in response to various factors, some of which are
beyond our control, including, but not limited to, factors
discussed elsewhere in this prospectus supplement, and the
following:
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failure to meet the published expectations of securities
analysts for a given period;
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changes in financial estimates by securities analysts;
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S-11
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press releases or announcements by, or changes in market values
of, comparable companies;
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additions or departures of key personnel; and
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involvement in or adverse results from litigation.
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The prices of technology stocks, including ours, have been
particularly affected by extreme fluctuations in price and
volume in the stock market generally. These broad stock market
fluctuations may have a negative effect on our future stock
price.
In the past, securities class action litigation has often been
brought against a company following periods of volatility in the
market price of its securities. In the future we could be the
target of this type of litigation. Securities litigation may
result in substantial costs and divert managements
attention and resources, which could seriously harm our business.
Our
common stock is at risk for delisting from the NASDAQ Global
Market. If it is delisted, our stock price and the liquidity of
our common stock may be impacted.
While our stock price has recently exceeded $3.00 per share, our
stock price traded below $1.00 during fiscal 2009. If, in the
future, the bid price falls below $1.00 for 30 consecutive
business days, we could receive notice from the NASDAQ Global
Market stating that the bid price of our common stock had closed
below the minimum $1.00 per share requirement for continued
inclusion on the NASDAQ Global Market under Marketplace
Rule 4310(c)(4). Under NASDAQ Marketplace
Rule 4310(c)(8)(D), we would then have 180 calendar days to
regain compliance. If at any time after receiving the notice,
the bid price of our common stock closes at $1.00 per share or
more for a minimum of 10 consecutive business days, the NASDAQ
Global Market would notify us that we have achieved compliance
with the minimum bid price rule. However, if we did not regain
compliance with the minimum bid price rule within the 180
calendar days, the NASDAQ Global Market would determine whether
we met the initial listing criteria for the NASDAQ Global Market
other than the bid price requirement. If we met such criteria,
we would be afforded an additional 180 calendar days in order to
regain compliance with the minimum bid price rule.
If we fail to meet NASDAQs maintenance criteria, our
common stock will be delisted from the NASDAQ Global Market.
If we fail to maintain the standards necessary to be quoted on
the NASDAQ Global Market and our common stock is delisted,
trading in our common stock would be conducted on the NASDAQ
Capital Market or other available market, provided we meet the
standards of such market. Our stock price, as well as the
liquidity of our common stock, may be adversely impacted as a
result.
Because
our quarterly operating results are volatile, our stock price
could fluctuate.
In the past, our operating results have fluctuated from quarter
to quarter and are likely to do so in the future. These
fluctuations may have a significant impact on our stock price.
The reasons for the fluctuations in our operating results, such
as sales, gross profits, and net loss, include:
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The Timing of Significant Customer Orders and Customer
Spending Patterns. Our customers may ask us to
delay or even cancel the shipment of equipment orders. Delays
and cancellations may adversely affect our operating results in
any particular quarter if we are unable to recognize revenue for
particular sales in the quarter in which we expected the revenue
on those sales to be recognized.
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The Timing of Customer Acceptances. Based on
our revenue recognition policy, revenue related to certain
shipments to customers is not recognized until customer
acceptance. Delays of customer acceptances may adversely affect
our operating results in any particular quarter if we are unable
to recognize revenue for particular sales in the quarter in
which we expected those sales.
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The Timing of New Product and Service Announcements By Us or
Our Competitors. New product announcements by us
or our competitors could cause our customers to delay a purchase
or to decide to purchase products of one of our competitors
which would adversely affect our revenue and, therefore, our
results of operations. New product announcements by others may
make it necessary for us to reduce prices
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S-12
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on our products or offer more service options, which could
adversely impact operating margins and net income.
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The Mix of Products Sold and the Market Acceptance of Our New
Product Lines. The mix of products we sell varies
from period to period, and because margins vary among or within
different product lines, this can adversely affect our results
of operations. If we fail to sell products that generate higher
margins, our average gross margins may be lower than expected.
If we fail to sell our new product lines, our revenue may be
lower than expected.
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General Global Economic Conditions or Economic Conditions in
a Particular Region. When economic conditions in
a region or worldwide worsen, customers may delay or cancel
their orders. There also may be an increase in the time it takes
to collect payment from our customers or even outright payment
defaults. This can negatively affect our cash flow from
operations and our operating results.
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As a result of these factors, our future operating results are
difficult to predict. Further, we base our current and future
expense plans in significant part on our expectations of our
longer-term future revenue. We expect our expense levels to be
relatively fixed in the short-term. An unanticipated decline in
revenue for a particular quarter may disproportionately affect
our net income in that quarter. If our revenue is below our
projections, then our operating results will also be below
expectations. Any one of the factors we list above, or a
combination of them, could adversely affect our quarterly
results of operations, and consequently may cause a decline in
our stock price.
Our
restated articles of incorporation, as amended, our restated
by-laws and Minnesota law make a takeover of our company more
difficult and expensive, which may prevent certain changes in
control and limit the market price of our common
stock.
Our restated articles of incorporation, as amended, our restated
by-laws and Minnesota law make a takeover of our company more
difficult and expensive, which may prevent certain changes in
control and limit the market price of our common stock. Our
restated articles of incorporation, as amended, our restated
by-laws and Section 302A.673 of the Minnesota Business
Corporation Act contain provisions that might enable our
management to resist a takeover of our company. Provisions in
our amended and restated articles of incorporation, as amended,
and restated by-laws may discourage, delay or prevent a merger
or acquisition involving us that our shareholders may consider
favorable. For example, our authorized but unissued shares of
common stock and preferred stock are available for future
issuances without shareholder approval, subject to any
limitations imposed by the NASDAQ Global Market. Our board of
directors may set the rights, preferences and terms of new
preferred stock, without shareholder approval. With these rights
and preferences, it could be more difficult for a third party to
acquire us. In addition, our restated articles of incorporation,
as amended, provide for a staggered board of directors, with
directors serving for three-year terms, with approximately
one-third of the directors coming up for re-election each year.
Having a staggered board will make it more difficult for a third
party to obtain control of our board of directors through a
proxy contest, which may be a necessary step in any acquisition
of us that is not favored by our board of directors. See
Description of Common Stock in the accompanying
prospectus for additional information on these and other
anti-takeover provisions applicable to us.
Our
management will have broad discretion in allocating the net
proceeds of this offering.
Our management has significant flexibility in applying the net
proceeds we expect to receive in this offering. Because the net
proceeds are not required to be allocated to any specific
investment or transaction, you cannot determine at this time the
value or propriety of our application of those proceeds, and you
and other shareholders may not agree with our decisions. In
addition, our use of the proceeds from this offering may not
yield a significant return or any return at all for our
shareholders. The failure by our management to apply these funds
effectively could have a material adverse effect on our
business, results of operations or financial condition. See
Use of Proceeds for a further description of how
management intends to apply the proceeds from this offering.
We do
not intend to pay dividends.
We have never declared or paid any cash dividends on our common
stock. We currently intend to retain any future earnings for
funding growth and, therefore, do not expect to pay any
dividends in the foreseeable future.
S-13
Future
acquisitions may dilute our shareholders ownership
interests and have other adverse consequences.
Because of consolidations in the semiconductor equipment
industry we serve and other competitive factors, we may seek to
acquire additional product lines, technologies, and businesses
if suitable opportunities develop. Acquisitions may result in
the issuance of our stock, which may dilute our
shareholders ownership interests and reduce earnings per
share. Acquisitions also may increase debt levels and the
related goodwill and other intangible assets, which could have a
significant negative effect on our financial condition and
operating results. In addition, acquisitions involve numerous
risks, including:
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difficulties in absorbing the new business, product line, or
technology;
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diversion of managements attention from other business
concerns;
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entering new markets in which we have little or no
experience; and
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possible loss of key employees of the acquired business.
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S-14
Use
of Proceeds
We estimate that the net proceeds to us from our sale
of shares
of common stock will be approximately
$ million after deducting the
underwriting discount and estimated offering expenses payable by
us.
We intend to use the net proceeds from this offering for general
corporate and working capital purposes, including, without
limitation, funding the cost of placing our products for
evaluation at customer locations, the research and development
of our products and for other general and administrative
expenses.
The amounts and timing of our use of proceeds will vary
depending on a number of factors, including, without limitation,
the amount of cash generated or used by our operations, and the
rate of growth, if any, of our business. As a result, we will
retain broad discretion in the allocation of the net proceeds of
this offering.
Until we use all of the net proceeds, we may invest the net
proceeds from this offering in short-term, interest-bearing,
investment-grade securities or money market funds. We cannot
predict whether the proceeds invested will yield a favorable
return.
S-15
Capitalization
The following table sets forth our consolidated capitalization
as of February 27, 2010
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on an actual basis; and
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on an as adjusted basis to give effect to our sale
of shares
of common stock at the public offering price of
$ per share, after deducting the
underwriting discount and estimated offering expenses payable by
us (assuming no exercise of the underwriters option to
purchase an
additional shares
of our common stock).
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The information set forth in the following table should be read
in conjunction with and is qualified in its entirety by
reference to the audited and unaudited financial statements and
notes thereto incorporated by reference in this prospectus
supplement and the accompanying prospectus.
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As of February 27, 2010
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Actual
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As Adjusted
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(In thousands, except share data) (Unaudited)
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Cash and cash equivalents
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$
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9,790
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$
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Long-term debt
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$
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$
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Shareholders equity:
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Preferred stock, no par value; 9,700,000 shares authorized;
none issued and outstanding
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Series A Junior Participating Preferred Stock, no par
value; 300,000 shares authorized; none issued and
outstanding
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Common stock, no par value; 50,000,000 shares authorized;
issued and outstanding, 32,071,000; issued and
outstanding, ,
on an as adjusted basis
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$
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226,756
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$
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Accumulated deficit
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(177,036
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Accumulated other comprehensive loss
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(1,282
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Other stockholders equity
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3,914
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Total stockholders equity
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52,352
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Total capitalization
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$
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62,142
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$
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S-16
DILUTION
The pro forma net tangible book value of our common stock as of
February 27, 2010 was $52,352,000 or $1.63 per share. Pro
forma net tangible book value per share represents the amount of
our total tangible assets less total liabilities, divided by the
number of shares of common stock outstanding. After giving
effect to our issuance and sale
of shares
of common stock in this offering at an offering price of
$ per share and after deducting
estimated underwriting discounts and commissions and offering
expenses, our pro forma net tangible book value as of
February 27, 2010 would have been
$ , or
$ per share. This represents an
immediate increase in pro forma net tangible book value of
$ per share to existing
shareholders and an immediate dilution of
$ per share to new investors
purchasing shares of common stock in the offering. The following
table illustrates this dilution:
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Offering price per share
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$
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Pro forma net tangible book value per share as of
February 27, 2010
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$
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1.63
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Increase per share attributable to new investors
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$
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Pro forma net tangible book value per share after this offering
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$
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Dilution per share to new investors
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$
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The table above assumes no exercise of any stock options
outstanding as of February 27, 2010. As of
February 27, 2010, there were options outstanding to
purchase 3,251,968 shares of our common stock at a weighted
average exercise price of $5.10 per share (including
172,110 shares of common stock that were issued upon the
exercise of options from February 28, 2010 through
June 3, 2010).
S-17
Price
Range of Common Stock and Dividend Policy
Our common stock is traded on the NASDAQ Global Market under the
symbol FSII. The following table sets forth, for the
periods indicated, the range of high and low closing sale prices
for our common stock as reported by NASDAQ.
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High
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Low
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Fiscal 2008:
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First Quarter
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$
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2.73
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$
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1.70
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Second Quarter
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2.02
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1.52
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Third Quarter
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1.82
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1.25
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Fourth Quarter
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1.74
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1.08
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Fiscal 2009:
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First Quarter
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$
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1.21
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$
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0.31
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Second Quarter
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0.54
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0.25
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Third Quarter
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0.55
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0.20
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Fourth Quarter
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0.99
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0.32
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Fiscal 2010:
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First Quarter
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$
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2.40
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$
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0.83
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Second Quarter
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3.47
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1.13
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Third Quarter
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4.56
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2.31
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Fourth Quarter (through June 3, 2010)
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4.43
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3.96
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On June 7, 2010, the last reported sale price on the NASDAQ
Global Market for our common stock was $3.37 per share. As of
February 27, 2010, there were approximately 470 holders of
record of our common stock. We believe the number of beneficial
owners of our common stock on that date was substantially
greater.
We have not paid any cash dividends on our common stock. We
currently intend to retain any earnings to fund our working
capital needs and growth opportunities, and therefore, we do not
anticipate paying any cash dividends in the foreseeable future.
S-18
Underwriting
The underwriters named below have agreed to buy, subject to the
terms of the purchase agreement, the number of shares listed
opposite their respective names below. Craig-Hallum Capital
Group, the sole book-running manager, is acting as
representative of the other underwriter. The underwriters
obligations are several, which means that each underwriter is
required to purchase a specific number of shares. The
underwriters are committed to purchase and pay for all of the
shares if any are purchased, other than those shares covered by
the over-allotment option we describe below. The purchase
agreement also provides that if an underwriter defaults, the
purchase commitment of the
non-defaulting
underwriter may be increased or this offering of our common
stock may be terminated.
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Number
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Underwriters
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of Shares
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Craig-Hallum Capital Group
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Dougherty & Company LLC
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Total
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The underwriters have advised us that they propose to offer the
shares to the public at $ per
share. The underwriters propose to offer the shares to certain
dealers at the same price less a concession of not more than
$ per share. After the offering,
these figures may be changed by the underwriters.
In compliance with the guidelines of the Financial Industry
Regulatory Authority, Inc. or FINRA, the aggregate maximum
discount, commission, agency fees, or other items constituting
underwriting compensation to be received by any FINRA member or
independent broker-dealer will not exceed 8% of the offering
pursuant to this prospectus supplement.
We have granted to the underwriters an option to purchase up to
an
additional shares
of common stock from us at the same price to the public, and
with the same underwriting discount, as set forth in the table
below. The underwriters may exercise this option any time during
the 30-day
period after the date of this prospectus supplement, but only to
cover over-allotments, including as described below. If this
option is exercised, each of the underwriters will purchase
approximately the same percentage of the additional shares of
common stock to be purchased by that underwriter as shown in the
table above, to the total shown.
The following table summarizes the underwriting discounts that
we will pay to the underwriters. These amounts are shown
assuming both no exercise and full exercise of the
over-allotment option. The compensation we will pay to the
underwriters will consist solely of the underwriting discount.
The underwriters have not received and will not receive from us
any other item of compensation or expense in connection with
this offering considered by the FINRA to be underwriting
compensation under its rule of fair price. The underwriting
discount was determined through arms length negotiations
between us and the underwriters.
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Total with no
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Total with
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Over-Allotment
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Over-Allotment
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Underwriting discount to be paid to the underwriters by us
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$
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$
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We estimate that the total expenses of the offering, excluding
underwriting discounts and commissions, will be
$ .
We have agreed to indemnify the underwriters against certain
liabilities, including civil liabilities under the Securities
Act of 1933, or to contribute to payments that the underwriters
may be required to make in respect of those liabilities.
The shares of our common stock are traded on the NASDAQ Global
Market under the symbol FSII.
We and each of our executive officers and directors have agreed
to certain restrictions on our ability to sell additional shares
of our common stock for a period of 60 days after the date
of this prospectus supplement. We have agreed not to directly or
indirectly offer for sale, sell, contract to sell, grant any
option for the sale of, or otherwise issue or dispose of, any
shares of common stock, options or warrants to acquire shares of
common stock, or any related security or instrument, without the
prior written consent of Craig-Hallum Capital Group. The
purchase
S-19
agreement provides exceptions for (i) sales to the
underwriter pursuant to the purchase agreement, (ii) sales
in connection with the exercise of options granted and
(iii) certain other exceptions.
Each of our executive officers and directors have executed
lock-up
agreements pursuant to which they have agreed not to directly or
indirectly offer for sale, sell, grant any option for the sale
of, or otherwise dispose of, any shares of common stock, options
or warrants to acquire shares of common stock, or any related
security or instrument, without the prior consent of
Craig-Hallum Capital Group. The
lock-up
agreements provide exceptions for (i) sales to the
underwriter pursuant to the purchase agreement, (ii) sales
in connection with the exercise of options granted and
(iii) certain other exceptions. The
60-day
lock-up
period in all the
lock-up
agreements is subject to extension, subject to certain
exceptions, if (a) during the last 17 days of the
lock-up
period we issue an earnings release or material news or a
material event relating to us occurs or (b) prior to the
expiration of the
lock-up
period, we announce that we will release earnings results during
the 16-day
period beginning on the last day of the
lock-up
period, in which case the restrictions imposed in these
lock-up
agreements shall continue to apply until the expiration of the
18-day
period beginning on the issuance of the earnings release or the
occurrence of the material news or material event, as
applicable, unless the underwriter waives, in writing, such
extension; provided, that if at the time of any such release or
announcement, we qualify as a company with actively traded
securities as defined in Rule 101(c)(1) of
Regulation M under the Exchange Act, clauses (a) and
(b) shall not apply.
To facilitate the offering, the underwriters may engage in
transactions that stabilize, maintain or otherwise affect the
price of the common stock during and after the offering.
Specifically, the underwriters may over-allot or otherwise
create a short position in the common stock for their accounts
by selling more shares of common stock than have been sold to
them by us. The underwriters may elect to cover any such short
position by purchasing shares of common stock in the open market
or by exercising the over-allotment option granted to the
underwriters. In addition, the underwriters may stabilize or
maintain the price of the common stock by bidding for or
purchasing shares of common stock in the open market and may
impose penalty bids. If penalty bids are imposed, selling
concessions allowed to broker-dealers participating in the
offering are reclaimed if shares of common stock previously
distributed in the offering are repurchased, whether in
connection with stabilization transactions or otherwise. The
effect of these transactions may be to stabilize or maintain the
market price of the common stock at a level above that which
might otherwise prevail in the open market. The imposition of a
penalty bid may also affect the price of the common stock to the
extent that it discourages resales of the common stock. The
magnitude or effect of any stabilization or other transactions
is uncertain. These transactions may be effected on the NASDAQ
Global Market or otherwise and, if commenced, may be
discontinued at any time.
In connection with this offering, the underwriters (and selling
group members) may also engage in passive market making
transactions in the common stock on the NASDAQ Global Market.
Passive market making consists of displaying bids on the NASDAQ
Global Market limited by the prices of independent market makers
and effecting purchases limited by those prices in response to
order flow. Rule 103 of Regulation M promulgated by
the SEC limits the amount of net purchases that each passive
market maker may make and the displayed size of each bid.
Passive market making may stabilize the market price of the
common stock at a level above that which might otherwise prevail
in the open market and, if commenced, may be discontinued at any
time.
The underwriters may facilitate the marketing of this offering
online directly or through one of their respective affiliates.
In those cases, prospective investors may view offering terms
and a prospectus online and place orders online or through their
financial advisors.
The underwriters and their respective affiliates may in the
future perform various financial advisory and investment banking
services for us, for which they will receive customary fees and
expenses.
Selling
Restrictions
No action may be taken in any jurisdiction other than the United
States that would permit a public offering of our shares or the
possession, circulation or distribution of this prospectus
supplement in any jurisdiction where action for that purpose is
required. Accordingly, the shares may not be offered or sold,
directly or indirectly, and neither the prospectus supplement
nor any other offering material or advertisements in connection
with the offering of our shares may be distributed or published,
in or from any country or jurisdiction except under
circumstances that will result in compliance with any applicable
rules and regulations of any such country or jurisdiction.
S-20
Legal
Matters
The validity of the issuance of the shares of common stock
offered by this prospectus supplement will be passed upon for us
by Faegre & Benson LLP, Minneapolis, Minnesota.
Certain legal matters relating to this offering will be passed
upon for the underwriters by Oppenheimer Wolff &
Donnelly LLP, Minneapolis, Minnesota.
Experts
The consolidated financial statements of FSI International, Inc.
and subsidiaries as of August 29, 2009 and August 30,
2008, and for each of the years in the three-year period ended
August 29, 2009, have been incorporated by reference herein
and in the registration statement in reliance upon the report of
KPMG LLP, independent registered public accounting firm,
incorporated by reference herein, and upon the authority of said
firm as experts in accounting and auditing.
S-21
Where
You Can Find More Information
We file annual, quarterly and special reports, proxy statements
and other information with the SEC. Our SEC filings are
available to the public over the Internet at the SECs web
site at
http://www.sec.gov.
You may also read and copy any document we file with the SEC at
its Public Reference Room at 100 F Street, N.E.,
Washington, D.C. 20549. You can also obtain copies of the
documents at prescribed rates by writing to the Office of
Investor Education and Advocacy of the SEC at
100 F Street, N.E., Washington, D.C. 20549.
Please call the SEC at
1-800-SEC-0330
for further information on the operation of the Public Reference
Room. Our common stock is listed on the NASDAQ Global Market and
similar information can be inspected and copied at the offices
of the Financial Industry Regulatory Authority,
1735 K Street, N.W., Washington, D.C. 20006.
We incorporate by reference into this prospectus
supplement and the accompanying prospectus the information we
file with the SEC, which means that we can disclose important
information to you by referring you to those documents. The
information incorporated by reference is an important part of
this prospectus. Some information contained in this prospectus
supplement and accompanying prospectus updates the information
incorporated by reference, and information that we file
subsequently with the SEC will automatically update this
prospectus supplement and the accompanying prospectus. In other
words, in the case of a conflict or inconsistency between
information set forth in this prospectus supplement
and/or
information incorporated by reference into this prospectus
supplement, you should rely on the information contained in the
document that was filed later.
We incorporate by reference the documents listed below and any
future filings we make with the SEC under Sections 13(a),
13(c), 14, or 15(d) of the Securities Exchange Act of 1934, as
amended, or the Exchange Act, until the termination
of this offering. The documents we have incorporated by
reference are: after the date of this prospectus supplement
(including all filings we make under the Exchange Act following
the date of our initial registration statement but prior to the
effectiveness of such registration statement) and prior to the
time that we sell all the securities offered by this prospectus
supplement (other than any portions of any such documents that
are not deemed filed under the Exchange Act in
accordance with the Exchange Act and applicable SEC rules):
(a) Our Annual Report on
Form 10-K
for the fiscal year ended August 29, 2009, including
information specifically incorporated by reference into our
Form 10-K
from our Definitive Proxy Statement for our 2010 Annual Meeting
of Shareholders;
(b) Our Quarterly Reports on
Form 10-Q
for the quarters ended November 28, 2009 and
February 27, 2010;
(c) Our Current Reports on
Form 8-K
filed on October 27, 2009, December 22, 2009 and
May 26, 2010; and
(d) The description of our common stock contained in the
Registration Statement on Form
8-A filed
with the Commission on November 1, 1988, including any
amendment or report filed to update such description.
You may request a copy of these documents, which will be
provided to you at no cost, by writing or telephoning us using
the following contact information:
FSI International, Inc.
Attention: Benno G. Sand, Executive Vice President, Business
Development,
Investor Relations and Secretary
3455 Lyman Boulevard
Chaska, Minnesota
55318-3052
(952) 448-8936
You should read the information in this prospectus supplement
and the accompanying prospectus together with the information in
the documents incorporated by reference herein.
S-22
FSI INTERNATIONAL,
INC.
3455 Lyman Boulevard
Chaska, Minnesota
55318-3052
(952) 448-5440
$50,000,000
Common Stock
Preferred Stock
Warrants
Units
We may offer and sell, from time to time, shares of our common
stock, preferred stock, warrants
and/or units
consisting of two or more of any such securities on terms to be
determined at the time of sale. The preferred stock may be
convertible into shares of our common stock and the warrants may
be exercisable for shares of our common stock or shares of our
preferred stock. We may offer these securities separately or
together in one or more offerings with a maximum aggregate
offering price of $50,000,000.
Specific terms of the securities being sold as well specific
terms of these offerings will be provided in supplements to this
prospectus. You should read this prospectus and any prospectus
supplement, including any information incorporated herein or
therein, carefully before you invest.
The securities being sold may be sold on a delayed basis or
continuous basis directly by us, through dealers, agents or
underwriters designated from time to time, or through any
combination of these methods. If any dealers, agents or
underwriters are involved in the sale of the securities in
respect of which this prospectus is being delivered, we will
disclose their names and the nature of our arrangements with
them in any prospectus supplement. The net proceeds we expect to
receive from any such sale will also be included in the
applicable prospectus supplement.
Our common stock is listed on the NASDAQ Global Market under the
symbol FSII. The last sale price of our common stock
on March 29, 2010, as reported by NASDAQ, was $3.72 per
share. None of the other securities offered under this
prospectus are publicly traded.
Investing in our securities involves risks. See Risk
Factors beginning on page 2 to read about the factors
you should consider before investing.
This prospectus may not be used to offer and sell securities
unless accompanied by a prospectus supplement for the securities
being sold.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE
SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THESE
SECURITIES OR DETERMINED IF THIS PROSPECTUS IS TRUTHFUL OR
COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
This
prospectus is dated April 12, 2010
TABLE OF
CONTENTS
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Page
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ii
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2
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5
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6
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7
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8
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12
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14
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14
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14
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ABOUT
THIS PROSPECTUS
This prospectus is a part of a registration statement that we
filed with the Securities and Exchange Commission, or SEC,
utilizing a shelf registration process. Under this
shelf registration process, we may sell one or more series or
classes, either separately or together, our common stock,
preferred stock
and/or
warrants in one or more offerings up to an aggregate maximum
offering price of $50,000,000. This prospectus provides you with
a general description of the securities we may offer. Each time
we sell securities under this registration statement, we will
provide a prospectus supplement that will contain specific
information about the terms of that offering. The prospectus
supplement that we may authorize to be provided to you may also
add, update or change information contained in this prospectus
or in any documents that we have incorporated by reference into
this prospectus. We may also prepare free writing prospectuses
that describe particular securities. Any free writing prospectus
should also be read in connection with this prospectus and with
any prospectus supplement referred to therein. For purposes of
this prospectus, any reference to an applicable prospectus
supplement may also refer to a free writing prospectus, unless
the context otherwise requires. You should read this prospectus
and any applicable prospectus supplement, together with the
information incorporated herein by reference as described under
the heading Where You Can Find More Information.
The registration statement that contains this prospectus,
including the exhibits to the registration statement, contains
additional information about us and the securities offered under
this prospectus. That registration statement can be read at the
SEC website or at the SEC offices mentioned under the heading
Where You Can Find More Information.
The distribution of this prospectus and the applicable
prospectus supplement and the offering of the securities in
certain jurisdictions may be restricted by law. Persons into
whose possession this prospectus and the applicable prospectus
supplement come should inform themselves about and observe any
such restrictions. This prospectus and the applicable prospectus
supplement do not constitute, and may not be used in connection
with, an offer or solicitation by anyone in any jurisdiction in
which such offer or solicitation is not authorized or in which
the person making such offer or solicitation is not qualified to
do so or to any person to whom it is unlawful to make such offer
or solicitation.
You should rely only on the information contained or
incorporated by reference in this prospectus and in any
prospectus supplement. We have not authorized anyone to provide
you with different information. We will not make an offer to
sell these securities in any jurisdiction where the offer or
sale is not permitted. The information contained in this
prospectus and any prospectus supplement is accurate only as of
the date of this prospectus or such prospectus supplement, and
the information contained in any document incorporated herein or
therein by reference is accurate only as the date of such
document incorporated by reference, regardless of the time of
delivery or any sale of our securities.
ii
SUMMARY
Prospectus
Summary
This summary highlights selected information from this
prospectus and does not contain all of the information that you
need to consider in making your investment decision. You should
carefully read the entire prospectus, including the risks of
investing discussed under Risk Factors beginning on
page 3, any applicable prospectus supplement, the
information incorporated by reference herein and therein,
including our financial statements, and the exhibits to the
registration statement of which this prospectus is a part.
Throughout this prospectus, references to FSI, the
Company, we, us, and
our refer to FSI International, Inc.
The
Company
FSI International, Inc., a Minnesota corporation organized in
1973, designs, manufactures, markets and supports equipment used
in the fabrication of microelectronics, such as advanced
semiconductor devices. We provide surface conditioning
technology solutions and microlithography systems and support
services to worldwide manufacturers of integrated circuits. We
manufacture, market and support surface conditioning equipment
that uses wet, cryogenic and other chemistry techniques to
clean, strip or etch the surfaces of silicon wafers and supply
refurbished microlithography products that are used to deposit
and develop light sensitive films. Our business is supported by
service groups that provide finance, human resources,
information services, sales and service, marketing and other
administrative functions.
We directly sell and service our products in North America,
Europe, and the Asia Pacific region, except for Japan. In Japan,
our products are sold and serviced through Apprecia Technology,
Inc. (Apprecia), a company in which we maintain a
20 percent equity ownership.
Our principal offices are located at 3455 Lyman Boulevard,
Chaska, Minnesota
55318-3052
and our telephone number is
(952) 448-5440.
The
Securities We May Offer
The descriptions of the securities contained in this prospectus,
together with any applicable prospectus supplement, summarize
all the material terms and provisions of the various types of
securities that we may offer. We will describe in the applicable
prospectus supplement relating to any securities the particular
terms of the securities offered by that prospectus supplement.
We may sell from time to time, in one or more offerings:
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common stock;
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preferred stock which may be convertible into shares of our
common stock;
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warrants to purchase any of the securities listed above; or
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units consisting of two or more of any such securities on terms
to be determined at the time of sale.
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In this prospectus, we refer to the common stock, preferred
stock, warrants and units collectively as
securities. The total dollar amount of all
securities that we may sell will not exceed $50,000,000.
This prospectus may not be used to consummate a sale of
securities unless it is accompanied by a prospectus supplement.
1
RISK
FACTORS
An investment in our securities is risky. Prior to making a
decision about investing in our securities, you should carefully
consider the specific risks discussed in our other filings with
the SEC, including, but not limited to, our Annual Report on
Form 10-K
for the fiscal year ended August 29, 2009 and our Quarterly
Report on
Form 10-Q
for the fiscal quarter ended November 28, 2009, which are
incorporated by reference in this prospectus, together with all
of the other information contained in this prospectus, any
applicable prospectus supplement, or otherwise incorporated by
reference in this prospectus. The risks and uncertainties
described in our SEC filings are not the only ones facing us.
Additional risks and uncertainties not presently known to us, or
that we currently see as immaterial, may also harm our business.
If any of the risks or uncertainties described in the applicable
prospectus supplement or our SEC filings or any such additional
risks and uncertainties actually occur, our business, results of
operations, cash flows and financial condition could be
materially and adversely affected.
The Gartner Report described in certain documents
incorporated by reference herein (the Gartner
Report) represents data, research opinion or viewpoints
published, as part of a syndicated subscription service, by
Gartner, Inc. (Gartner), and are not representations
of fact. Each Gartner Report speaks as of its original
publication date (and not as of the date of this registration
statement or any filings incorporated by reference) and the
opinions expressed in the Gartner Reports are subject to change
without notice.
USE OF
PROCEEDS
Except as described in any prospectus supplement, we currently
intend to use the net proceeds from the sale of the offered
securities for general corporate purposes, including
acquisitions, technology licenses, funding the cost of placing
our products for evaluation at customer locations, the research
and development of products, and for other general and
administrative expenses.
We will retain broad discretion in the use of any net proceeds
from the sale of offered securities. Until we use any net
proceeds, we may invest the funds in short-term, investment
grade, interest-bearing securities. We cannot predict whether
the proceeds invested will yield a favorable return.
DILUTION
We will set forth in a prospectus supplement the following
information regarding any material dilution of the equity
interests of investors purchasing securities in an offering
under this prospectus:
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the net tangible book value per share of our equity securities
before and after the offering;
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the amount of the increase in such net tangible book value per
share attributable to the cash payments made by purchasers in
the offering; and
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the amount of the immediate dilution from the public offering
price which will be absorbed by such purchasers.
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DESCRIPTION
OF OUR COMMON STOCK
This section describes our common stock. The specific terms and
provisions of our common stock that may be offered by this
prospectus will be described in the applicable prospectus
supplement. We have filed our restated articles of
incorporation, as amended, including the certificate of
designation, preferences and rights for our Series A Junior
Participating Preferred Shares, and our restated by-laws as
exhibits to the registration statement of which this prospectus
is a part. Our Series A Junior Participating Preferred
Shares were designated in connection with the execution of our
Share Rights Agreement, which agreement has subsequently expired
in accordance with the terms stated therein. You should read our
restated articles of incorporation, as amended, our certificate
of designation, and our restated by-laws for additional
information before you buy any common stock hereunder.
2
Shares Outstanding
Our authorized capital stock consists of:
(i) 50,000,000 shares of common stock, no par value,
of which 32,070,982 shares were outstanding as of
February 27, 2010, and (ii) 10,000,000 shares of
preferred stock, no par value, of which no shares were
outstanding as of February 27, 2010.
Voting
and Other Rights
Holders of common stock are entitled to one vote for each share
owned of record on all matters on which shareholders may vote.
Holders of common stock do not have cumulative voting rights in
the election of directors. This means that a holder of a single
share of common stock cannot cast more than one vote for each
position to be filled on our Board of Directors (the
Board). The holders of common stock are
entitled, upon liquidation or dissolution of the company, to
receive pro rata all remaining assets available for distribution
to shareholders after payment to any preferred shareholders who
may have preferential rights. The common stock has no preemptive
or other subscription rights, and there are no conversion rights
or redemption provisions. Since the holders of our common stock
have no preemptive rights, this means that, as holders of common
stock, they have no right to buy any portion of securities we
may issue in the future.
Dividend
Policy
Holders of our common stock are entitled to receive such
dividends as the Board may from time to time declare. The Board
may declare dividends only when dividends are legally available.
We have never paid any dividends on our common stock and do not
anticipate paying dividends in the foreseeable future.
Fully
Paid
The outstanding shares of common stock are fully paid and
nonassessable. This means that the full purchase price for the
outstanding shares of common stock has been paid and the holders
of such shares will not be assessed any additional amounts for
such shares. Any additional common stock that we may issue in
the future pursuant to this prospectus will also be fully paid
and nonassessable.
Transfer
Agent
Computershare Investor Services LLC, P. O. Box 43078,
Providence, RI 02940, is the transfer agent and registrar for
our common stock.
Listing
Our common stock is listed on the NASDAQ Global Market under the
symbol FSII.
Anti-Takeover
Provisions Contained in our Articles of Incorporation and
By-Laws and the Minnesota Business Corporation Act
Our restated articles of incorporation, as amended, and our
restated by-laws contain certain provisions which may be deemed
to be anti-takeover in that they may deter,
discourage or make more difficult the assumption of control of
FSI by another corporation or person through a tender offer,
merger, proxy contest or similar transaction or series of
transactions. These provisions are intended to provide
management flexibility to enhance the likelihood of continuity
and stability in the composition of our Board and in the
policies formulated by our Board to discourage an unsolicited
takeover of our company, if our Board determines that such a
takeover is not in the best interests of our company and our
shareholders. However, these provisions could deprive our
shareholders of opportunities to sell their shares of common
stock at prices higher than prevailing market prices. The
overall effect of these provisions may be to deter a future
tender offer or other takeover attempt that some shareholders
might view to be in their best interests at that time. In
addition, these provisions may have the effect of assisting our
current management in retaining its position and place it in a
better position to resist changes which some shareholders may
want to make if dissatisfied with the conduct of our business.
3
Authorized but Unissued Shares and Preferred
Stock: The authorized but unissued shares of our
common stock and preferred stock are available for future
issuance without shareholder approval, subject to any
limitations imposed by the NASDAQ Global Market. The Board may
set the rights, preferences and terms of new preferred stock,
without shareholder approval. Shares of preferred stock could be
issued quickly without shareholder approval, with terms
calculated to delay or prevent a change in control of FSI. Terms
selected could decrease the amount of earnings and assets
available for distribution to holders of common stock or
adversely affect the rights and powers, including voting rights,
of the holders of the common stock without any further action by
the shareholders. The rights of holders of common stock will be
subject to, and may be adversely affected by, the rights of the
holders of any preferred stock we may issue in the future. Our
shareholders do not have preemptive rights with respect to the
purchase of these shares. Such an issuance could result in a
dilution of voting rights and book value per share of the common
stock. No shares of preferred stock are currently outstanding,
and we have no present plan to issue any preferred stock.
Advance Notice Requirements for Shareholder Proposals and
Director Nominations: Our restated by-laws
provide that a shareholder seeking to bring business before an
annual meeting of shareholders must provide timely notice of
such shareholders intention in writing. To be timely, a
shareholders notice must be received not less than
90 days before the first anniversary of the date of the
preceding years annual meeting of shareholders. However,
if the date of the annual meeting of the shareholders is more
than 30 days before or after such anniversary date, a
shareholders notice is considered timely if received not
less than 90 days before such annual meeting or, if later,
within 10 days after the first public announcement of the
date of such annual meeting. A shareholder notice of business to
be conducted at a regular meeting, other than an annual meeting,
is considered timely if received 90 days before such
regular meeting or, if later, within 10 days after the
first public announcement of the date of such meeting. Our
restated articles of incorporation, as amended, provide that a
shareholder may nominate candidates for election as directors at
an annual or special meeting of shareholders upon written notice
at least 60 days prior to the date fixed for such meeting,
including the written consent of such candidate to serve as a
director. Shareholders seeking to have a shareholder proposal
considered for inclusion in our annual proxy statement must
comply with the requirements of
Rule 14a-8
of the federal proxy rules.
Special Meetings of Shareholders: Our restated
by-laws provide that special meetings of shareholders may be
called only by the Board, the Chief Executive Officer, the Chief
Financial Officer or one or more shareholders holding 10% or
more of the voting power of all shares entitled to vote. Special
meetings of shareholders called by shareholders for the purpose
of considering any action to facilitate a business combination
or affect the composition of the Board must be called by
shareholders holding 25% or more of the voting power of all
shares entitled to vote. Further, business transacted at any
special meeting of shareholders is limited to matters relating
to the purpose or purposes stated in the notice of meeting.
Classified Board; Removal of Directors; Number of
Directors: Under our restated articles of
incorporation, as amended, our Board is classified into three
classes of directors. This means that only approximately
one-third of our directors are elected at each annual meeting of
shareholders and that it would take two years to replace a
majority of the directors unless they are removed. Directors may
be removed by shareholders only by a vote of holders of at least
75% of the voting power of the outstanding shares, voting
together as a single class. Our restated articles of
incorporation, as amended, also require a vote of holders of at
least 75% of the voting power of the outstanding shares, voting
together as a single class, in order for the shareholders to
change the number of directors, unless such change shall have
been approved by a majority of our Board.
Business Combinations: Under our restated
articles of incorporation, as amended, certain business
combinations require the vote of 75% of the voting power of the
outstanding shares, voting together as a single class, with
certain exceptions. A business combination includes
(i) certain mergers, consolidations or share exchanges with
any interested stockholder or any other corporation which is, or
after such merger would be, an affiliate of the interested
stockholder, (ii) a sale, lease, pledge, transfer or other
disposition to or with an interested stockholder of assets
valued at or greater than 10% of the book value of our
consolidated assets, (iii) a sale, lease, pledge, transfer
or other disposition to or with us of any assets of an
interested stockholder valued at or greater than 10% of the book
value of our consolidated assets, (iv) the issuance or
transfer by us of any of our securities to an interested
stockholder, with certain exceptions, (v) the adoption of
any plan or proposal for the liquidation or dissolution of us by
an interested stockholder, or (vi) any transaction that has
the effect, directly or indirectly, of increasing the
proportionate share of our equity securities owned by an
interested stockholder. Interested stockholders
generally
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include any person who is currently, or was in the two year
period prior to such business combination, a beneficial owner of
10% or more of our outstanding voting stock, or any affiliate,
associate or assignee thereof.
Statutory Provisions: Section 302A.673 of
the Minnesota Business Corporation Act generally prohibits any
business combination by us, or any subsidiary of ours, with any
shareholder that beneficially owns 10% or more of the voting
power of our outstanding shares (an interested
shareholder) within four years following the time the
interested shareholder crosses the 10% stock ownership
threshold, unless the business combination is approved by a
committee of disinterested members of our Board before the time
the interested shareholder crosses the 10% stock ownership
threshold.
Section 302A.675 of the Minnesota Business Corporation Act
generally prohibits an offeror from acquiring our shares within
two years following the offerors last purchase of our
shares pursuant to a takeover offer with respect to that class,
unless our shareholders are able to sell their shares to the
offeror upon substantially equivalent terms as those provided in
the earlier takeover offer. This statute will not apply if the
acquisition of shares is approved by a committee of
disinterested members of our Board before the purchase of any
shares by the offeror pursuant to the earlier takeover offer.
DESCRIPTION
OF OUR PREFERRED STOCK
The terms and provisions of our preferred stock that may be
offered by this prospectus will be described in the applicable
prospectus supplement. We have filed our restated articles of
incorporation, as amended, and the certificate of designation,
preferences and rights for our Series A Junior
Participating Preferred Shares as exhibits to the registration
statement of which this prospectus is a part. Our Series A
Junior Participating Preferred Shares were designated in
connection with the execution of our Share Rights Agreement,
which agreement has subsequently expired in accordance with the
terms stated therein. You should read our restated articles of
incorporation, as amended, and the certificate of designation
relating to the applicable series of preferred stock for
additional information before you purchase any preferred stock.
General
Our Board has the authority to issue up to
10,000,000 shares of preferred stock in one or more series
and fix the number of shares constituting any such series, the
voting powers, designations, preferences and relative,
participating, optional or other special rights and
qualifications, limitations or restrictions thereof, including
the dividend rights, dividend rate, terms of redemption
(including sinking fund provisions), redemption price or prices,
conversion rights and liquidation preferences of the shares
constituting any series, without any further vote or action by
the shareholders. For example, the Board is authorized to issue
a series of preferred stock that would have the right to vote,
separately or with any other series of preferred stock, on any
proposed amendment to our Restated Articles of Incorporation or
on any other proposed corporate action, including business
combinations and other transactions.
The terms of any particular series of preferred stock will be
described in the applicable prospectus supplement relating to
such offering of preferred stock and may include, among other
things:
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the title and stated value of the preferred stock;
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the number of shares authorized;
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the liquidation preference per share;
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the purchase price;
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the dividend rate, period and payment date, and method of
calculation (including whether cumulative or non-cumulative);
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terms and amount of any sinking fund;
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provisions for redemption or repurchase, if applicable, and any
restrictions on the ability of the company to exercise such
redemption and repurchase rights;
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conversion rights and rates, if applicable, including the
conversion price and how and when it will be calculated and
adjusted;
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voting rights, if any;
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preemptive rights, if any;
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restrictions on sale, transfer and assignment, if any;
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the relative ranking and preferences of the preferred
stock; and
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any other specific terms, rights or limitations of, or
restrictions on, such preferred stock.
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DESCRIPTION
OF OUR WARRANTS
This description summarizes only the terms of any warrants that
we may offer under this prospectus and related warrant
agreements and is not complete. You should refer to the warrant
agreement, including the form of the warrant, relating to the
specific warrants being offered for complete terms, which will
be described and included in an accompanying prospectus
supplement. Such warrant agreement, together with the form of
the warrant, will be filed with the SEC in connection with the
offering of the specific warrants.
We may issue warrants for the purchase of common or preferred
stock. Warrants may be issued independently or together with
common or preferred stock, and may be attached to or separate
from any offered securities.
We will issue each series of warrants under a separate warrant
agreement. We may enter into the warrant agreement with a
warrant agent and, if so, we will indicate the name and address
of the warrant agent in the applicable prospectus supplement
relating to the particular series of warrants.
The particular terms of any issue of warrants will be described
in the applicable prospectus supplement. Those terms may include:
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the title of such warrants;
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the aggregate number of such warrants;
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the price or prices at which such warrants will be issued;
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the currency or currencies (including composite currencies) in
which the price of such warrants may be payable;
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the terms of the securities issuable upon exercise of such
warrants and the procedures and conditions relating to the
exercise of such warrants;
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the price at which the securities issuable upon exercise of such
warrants may be acquired;
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the dates on which the right to exercise such warrants will
commence and expire;
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any provisions for adjustment of the number or amount of
securities receivable upon exercise of the warrants or the
exercise price of the warrants;
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if applicable, the minimum or maximum amount of such warrants
that may be exercised at any one time;
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if applicable, the designation and terms of the securities with
which such warrants are issued and the number of such warrants
issued with each such security or principal amount of such
security;
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if applicable, the date on and after which such warrants and the
related securities will be separately transferable;
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if applicable, the redemption or call provisions of such
warrants;
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United States federal income tax considerations;
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information with respect to book-entry procedures, if
any; and
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any other terms of such warrants, including terms, procedures
and limitations relating to the exchange or exercise of such
warrants.
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Exercise
of Warrants
Each warrant will entitle its holder to purchase the number of
shares of common or preferred stock at the exercise price set
forth in, or calculable as set forth in, the applicable
prospectus supplement. Unless we otherwise specify in the
applicable prospectus supplement, holders of the warrants may
exercise the warrants at any time up to the expiration date set
forth in the applicable prospectus supplement. After the close
of business on the expiration date, unexercised warrants will
become void. We will specify the place or places where, and the
manner in which, warrants may be exercised in the applicable
prospectus supplement. We will set forth on the reverse side of
the applicable warrant certificate (or in the form of exercise
notice attached to each warrant) and in the applicable
prospectus supplement the information that the holder of the
warrant will be required to deliver upon exercise.
Upon receipt of payment and the warrant properly completed and
duly executed, we will, as soon as practicable, forward the
purchased securities. If less than all of the warrants
represented by the warrant are exercised, a new warrant will be
issued for the remaining warrants.
Enforceability
of Rights by Holders of Warrants
Each warrant agent will act solely as our agent under the
applicable warrant agreement and will not assume any obligation
or relationship of agency or trust with any holder of any
warrant. A single bank or trust company may act as warrant agent
for more than one issue of warrants. A warrant agent will have
no duty or responsibility in case of any default by us under the
applicable warrant agreement or warrant, including any duty or
responsibility to initiate any proceedings at law or otherwise,
or to make any demand upon us. Any holder of a warrant may,
without the consent of the related warrant agent or the holder
of any other warrant, enforce by appropriate legal action its
right to exercise, and receive the securities purchasable upon
exercise of, such holders warrants.
Prior to the exercise of any warrants to purchase preferred
stock or common stock, holders of the warrants will not have any
of the rights of holders of the preferred stock or common stock
purchasable upon exercise, including the right to vote or to
receive any payments of dividends.
DESCRIPTION
OF OUR UNITS
We may issue units comprised of two or more of the other
securities described in this prospectus in any combination. Each
unit will be issued so that the holder of the unit is also the
holder of each security included in the unit. Thus, the holder
of a unit will have the rights and obligations of a holder of
each included security. The units will be issued under units
agreements, and we may enter into such unit agreements with a
bank or trust company, as unit agent, as detailed in the
applicable prospectus supplement relating to units being offered.
The applicable prospectus supplement will describe:
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the designation and terms of the units and of the securities
comprising the units, including whether and under what
circumstances the securities comprising the units may be held or
transferred separately;
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a description of the terms of any unit agreement governing the
units;
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a description of the provisions for the payment, settlement,
transfer or exchange of the units;
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a discussion of material U.S. federal income tax
considerations, if applicable; and
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whether the units will be issued in fully registered or global
form.
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The descriptions of the units in this prospectus and in any
prospectus supplement are summaries of the material provisions
of the applicable agreements. These descriptions do not restate
those agreements in their entirety and may not contain all the
information that you may find useful. We urge you to read the
applicable agreements because they, and not the summaries,
define your rights as holders of the units. For more
information, please review the form of the relevant agreements,
which will be filed with the SEC promptly after the offering of
units and will be available as described under the heading
Where You Can Find More Information.
7
CERTAIN
U.S. FEDERAL INCOME TAX CONSIDERATIONS
The following discussion is a summary of the material
U.S. federal income tax consequences relevant to the
purchase, beneficial ownership and disposition of the common
stock and preferred stock offered by this prospectus. This
summary is based on the U.S. Internal Revenue Code of 1986,
as amended, Treasury regulations promulgated thereunder
(Treasury Regulations), administrative
pronouncements of the U.S. Internal Revenue Service
(IRS) and judicial decisions, all as
currently in effect and all of which are subject to change and
to different interpretations. Changes to any of the foregoing
authorities could apply on a retroactive basis, and could affect
the U.S. federal income tax consequences described below.
We will not seek a ruling from the IRS with respect to the
matters discussed in this section and we cannot assure you that
the IRS will not challenge one or more of the tax consequences
described below.
This summary does not address all of the U.S. federal
income tax considerations that may be relevant to a particular
investors circumstances, and does not discuss any aspect
of U.S. federal tax law other than income taxation or any
state, local or
non-U.S. tax
consequences of the purchase, ownership and disposition of the
common stock and preferred stock. This summary addresses only
shares of common or preferred stock held as capital assets
within the meaning of the Code (generally, property held for
investment) and does not address U.S. federal income tax
considerations applicable to investors that may be subject to
special tax rules, such as:
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securities dealers or brokers, or traders in securities electing
mark-to-market
treatment;
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banks, thrifts, or other financial institutions;
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insurance companies;
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regulated investment companies or real estate investment trusts;
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tax-exempt organizations;
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retirement plans;
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persons holding our debt securities or shares, as applicable, as
part of a straddle, hedge,
synthetic security or conversion
transaction for U.S. federal income tax purposes, or
as part of some other integrated investment;
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partnerships or other pass-through entities;
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persons subject to the alternative minimum tax;
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certain former citizens or residents of the United States;
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foreign corporations that are classified as passive
foreign investment companies or controlled foreign
corporations for U.S. federal income tax
purposes; or
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U.S. Holders (as defined below) whose
functional currency is not the U.S. dollar.
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In addition, with respect to a particular offering of shares of
common or preferred stock, the discussion below must be read
with the discussion of material U.S. federal income tax
consequences that may appear in the applicable prospectus
supplement for that offering. When we use the term
holder in this section, we are referring to a
beneficial holder of the common stock or preferred stock.
As used herein, a U.S. Holder is a
beneficial owner of shares of common or preferred stock, as the
case may be, that is, for U.S. federal income tax purposes,
(i) an individual citizen or resident of the United States,
(ii) a corporation (or any other entity treated as a
corporation for U.S. federal income tax purposes) created
or organized in or under the laws of the United States, any
state thereof or the District of Columbia, (iii) an estate
whose income is subject to U.S. federal income tax
regardless of its source, or (iv) a trust if (A) a
United States court has the authority to exercise primary
supervision over the administration of the trust and one or more
U.S. persons (as defined under the Code) are authorized to
control all substantial decisions of the trust or (B) it
has a valid election in place to be treated as a
U.S. person. An individual may, subject to certain
exceptions, be deemed to be a resident of the United States by
reason of being present in the United States for at least
31 days in the calendar year and for an aggregate of at
least 183 days during a three-year period ending in the
current calendar year (counting for such purposes all of the
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days present in the current year, one-third of the days present
in the immediately preceding year and one-sixth of the days
present in the second preceding year).
A
Non-U.S. Holder
is any beneficial owner of shares of common or preferred stock,
as the case may be, that, for U.S. federal income tax
purposes, is not a U.S. Holder and that is not a
partnership (or other entity treated as a partnership for
U.S. federal income tax purposes).
If a partnership (or other entity treated as a partnership for
U.S. federal income tax purposes) holds shares of common or
preferred stock, the U.S. federal income tax treatment of a
partner will generally depend on the status of the partner and
the activities of the partnership. A partnership holding shares
of common or preferred stock, and partners in such a
partnership, should consult their own tax advisors with regard
to the U.S. federal income tax consequences of the
purchase, ownership and disposition of the shares of common or
preferred stock by the partnership.
THE DISCUSSION OF THE MATERIAL U.S. FEDERAL INCOME TAX
CONSEQUENCES OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF THE
COMMON STOCK AND PREFERRED STOCK IS NOT INTENDED TO BE, NOR
SHOULD IT BE CONSTRUED TO BE, LEGAL OR TAX ADVICE TO ANY
PARTICULAR PERSON. ACCORDINGLY, ALL PROSPECTIVE INVESTORS ARE
URGED TO CONSULT THEIR TAX ADVISORS WITH RESPECT TO THE
U.S. FEDERAL, STATE AND LOCAL AND
NON-U.S. TAX
CONSEQUENCES RELATING TO THE PURCHASE, OWNERSHIP AND DISPOSITION
OF THE COMMON STOCK OR PREFERRED STOCK BASED ON THEIR PARTICULAR
CIRCUMSTANCES.
U.S.
Federal Income Taxation of U.S. Holders
Distributions. A distribution paid by us in
respect of common or preferred stock will constitute a dividend
for U.S. federal income tax purposes to the extent the
distribution is paid out of our current or accumulated earnings
and profits, as determined under U.S. federal income tax
principles. The gross amount of any such dividend to a
U.S. Holder will be included in the gross income of the
U.S. Holder, as ordinary dividend income from
U.S. sources. In general, distributions in excess of our
current or accumulated earnings and profits will not be taxable
to a U.S. Holder to the extent that such distributions to
the U.S. Holder do not exceed the U.S. Holders
adjusted tax basis in the shares of common or preferred stock
with respect to which the distribution is paid, but rather will
reduce the U.S. Holders adjusted tax basis in such
common or preferred stock (but not below zero). To the extent
that distributions exceed our current and accumulated earnings
and profits as well as the U.S. Holders adjusted tax
basis in the common or preferred stock, such distributions
generally will be taxable as capital gain realized in respect of
the common or preferred stock.
Under current U.S. federal income tax law (presently
effective for taxable years beginning before January 1,
2011), dividends paid to certain non-corporate
U.S. Holders, including individuals, generally will
constitute qualified dividend income eligible for preferential
rates of U.S. federal income tax, with a maximum rate of
15%, provided certain conditions and requirements are satisfied,
such as minimum holding period requirements. U.S. Holders
that are corporations may be eligible for a partial
dividends-received deduction with respect to dividend
distributions that are paid in respect of common or preferred
stock, subject to certain conditions and requirements, such as
minimum holding period requirements. There can be no assurance
that we will have sufficient current or accumulated earnings and
profits for distributions in respect of common or preferred
stock to qualify as dividends for U.S. federal income tax
purposes.
U.S. Holders should be aware that dividends exceeding
certain thresholds in relation to such U.S. Holders
tax basis in the common or preferred stock could be
characterized as extraordinary dividends (as defined
in Section 1059 of the Code). Generally, a corporate
U.S. Holder that receives an extraordinary dividend is
required to reduce its tax basis in the common or preferred
stock by the portion of such dividend that is not taxed because
of the dividends received deduction, and is required to
recognize taxable gain to the extent such portion of the
dividend exceeds the U.S. Holders tax basis in the
common or preferred stock. U.S. Holders who are individuals
and who receive an extraordinary dividend would be
required to treat any losses on the sale of the common or
preferred stock as long-term capital losses to the extent that
the dividends received by them qualified for the reduced 15% tax
rate on qualified dividend income, as described above.
Prospective investors in common or preferred stock should
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consult their own tax advisors with respect to the potential
application of the extraordinary dividend rules to
an investment in the common or preferred stock.
Sale or Other Taxable Dispositions of Common or Preferred
Stock. In general, a U.S. Holder will
recognize capital gain or loss upon the sale or other taxable
disposition of common or preferred stock in an amount equal to
the difference between the sum of the fair market value of any
property and the amount of cash received in such disposition and
such U.S. Holders adjusted tax basis in the common or
preferred stock at the time of the disposition. Any such capital
gain will be long-term capital gain if the common or preferred
stock has been held by the U.S. Holder for more than one
year. Under current U.S. federal income tax law (presently
effective for taxable years beginning before January 1,
2011), certain non-corporate U.S. Holders (including
individuals) are eligible for preferential rates of
U.S. federal income tax on long-term capital gains. The
ability to utilize capital losses is subject to limitations
under the Code.
Redemptions of Common Stock or Preferred
Stock. A redemption of shares of common or
preferred stock generally will be treated under Section 302
of the Code as a distribution unless the redemption satisfies
one of the tests set forth in Section 302(b) of the Code
and is therefore treated as a sale or exchange of the common or
preferred stock that is redeemed. If a redemption of shares of
common or preferred stock is treated as a sale or exchange, the
redemption will be taxable as described under
Sale or Other Taxable Dispositions of Common or Preferred
Stock above, except that an amount received in respect of
declared but unpaid dividends generally will be taxable as a
dividend if we have sufficient current or accumulated earnings
and profits, as described above under
Distributions.
A redemption will be treated as a sale or exchange if it
(i) results in a complete termination of a
U.S. Holders interest in us, (ii) is
substantially disproportionate with respect to a
U.S. Holder, or (iii) is not essentially
equivalent to a dividend with respect to a
U.S. Holder, all within the meaning of Section 302(b)
of the Code. In determining whether any of these tests has been
met, shares of common or preferred stock deemed owned by a
U.S. Holder by reason of certain constructive ownership
rules, as well as shares actually owned by such
U.S. Holder, must be taken into account. A redemption of
shares of common and preferred stock held by a U.S. Holder
generally will qualify for sale or exchange treatment if the
U.S. Holder does not own (actually or constructively) any
shares of any classes of our common or preferred stock following
the redemption, or if the U.S. Holder owns (actually or
constructively) only an insubstantial percentage of our common
or preferred stock, the redemption has the effect of decreasing
such ownership percentage and the U.S. Holder does not
participate in our control or management. However, the
determination as to whether any of the tests of
Section 302(b) of the Code will be satisfied with respect
to any particular U.S. Holder depends upon the facts and
circumstances at the time of the redemption.
If a redemption of shares of common or preferred stock is
treated as a distribution, the entire amount received will be
taxable as described under the caption
Distributions above. In such case, a
U.S. Holders adjusted tax basis in the redeemed
shares of common or preferred stock generally will be
transferred to any remaining shares of common or preferred stock
held by such U.S. Holder immediately after the redemption.
If a U.S. Holder does not own any of other shares of common
or preferred stock immediately after the redemption, such tax
basis may, under certain circumstances, be transferred to shares
of common or preferred stock held by a person related to such
U.S. Holder, or the tax basis may be entirely lost.
Prospective investors should consult their own tax advisors for
purposes of determining the tax consequences resulting from
redemption of shares of common or preferred stock in their
particular circumstances.
Terms of Preferred Stock. The
U.S. federal income tax consequences of the purchase,
ownership or disposition of preferred stock will depend on a
number of factors, including the specific terms of the preferred
stock (such as any put or call option or redemption provisions,
any conversion or exchange features and the price at which the
preferred stock is sold). Prospective investors should carefully
examine the applicable prospectus supplement and should consult
their own tax advisors, regarding the material U.S. federal
income tax consequences, if any, of the ownership and
disposition of preferred stock based upon their particular
circumstances and the terms of the preferred stock.
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U.S.
Federal Income Taxation of
Non-U.S.
Holders
Distributions. Except as described below,
dividends paid to a
Non-U.S. Holder
in respect of common or preferred stock generally will be
subject to U.S. federal withholding tax at a 30% rate, or
such lower rate as may be specified by an applicable tax treaty.
In order to claim the benefits of an applicable tax treaty, a
Non-U.S. Holder
will be required to satisfy applicable certification (for
example, IRS
Form W-8BEN
or other applicable form) and other requirements prior to the
distribution date.
Non-U.S. Holders
should consult their own tax advisors regarding their
entitlement to benefits under an applicable income tax treaty
and the requirements for claiming any such benefits.
Dividends paid to a
Non-U.S. Holder
that are effectively connected with its conduct of a trade or
business within the United States (and, if required by an
applicable income tax treaty, are attributable to a permanent
establishment maintained by the
Non-U.S. Holder
in the United States) generally are exempt from the 30%
U.S. federal withholding tax. Instead, any such dividends
generally will be subject to U.S. federal income tax in the
same manner as if the
Non-U.S. Holder
were a U.S. Holder, as described above. See
U.S. Federal Income Taxation of
U.S. Holders above.
Non-U.S. Holders
will be required to comply with certification (for example, IRS
Form W-8ECI
or applicable successor form) and other requirements in order
for effectively connected income to be exempt from the 30%
U.S. federal withholding tax. A corporate
Non-U.S. Holder
also may be subject to an additional branch profits
tax at a 30% rate (or such lower rate as may be specified
by an applicable tax treaty) with respect to any effectively
connected dividends, subject to certain adjustments.
Sale or Other Taxable Disposition of Common or Preferred
Stock. A
Non-U.S. Holder
generally will not be subject to U.S. federal income tax on
gain recognized on a sale or other taxable disposition of common
or preferred stock unless (i) the gain is effectively
connected with such
Non-U.S. Holders
conduct of a trade or business within the United States (and, if
required by an applicable tax treaty, is attributable to a
permanent establishment maintained by the
Non-U.S. Holder
in the United States); (ii) the
Non-U.S. Holder
is an individual who is present in the United States for 183 or
more days in the taxable year of the disposition and certain
other conditions are satisfied; or (iii) we are or have
been a United States real property holding corporation for
U.S. federal income tax purposes at any time during the
five year period (or shorter period in some situations) ending
on the date of the disposition. We have not been, are not and do
not anticipate becoming a United States real property holding
corporation for U.S. federal income tax purposes.
Gain from the disposition of shares by a
Non-U.S. Holder
that is effectively connected with its conduct of a trade or
business within the United States (and, if required by an
applicable tax treaty, is attributable to a permanent
establishment maintained by the
Non-U.S. Holder
in the United States) generally will be subject to
U.S. federal income tax in the same manner as if the
Non-U.S. Holder
were a U.S. Holder, as described above. See
U.S. Federal Income Taxation of
U.S. Holders above. A corporate
Non-U.S. Holder
also may be subject to an additional branch profits
tax at a 30% rate (or such lower rate as may be specified
by an applicable tax treaty) with respect to any effectively
connected gain from the disposition of shares, subject to
certain adjustments. As discussed above under
U.S. Federal Income Taxation of
U.S. Holders Common Stock and Preferred
Stock Redemptions of Common Stock or Preferred
Stock, the proceeds received from a redemption of shares
of common or preferred stock may be treated as a distribution in
certain circumstances, in which case, the discussion above under
Distributions would be applicable.
Terms of Preferred Stock. The
U.S. federal income tax consequences of the purchase,
ownership or disposition of preferred stock will depend on a
number of factors, including the specific terms of the preferred
stock (such as any put or call option or redemption provisions,
any conversion or exchange features and the price at which the
preferred stock is sold). Prospective investors should carefully
examine the applicable prospectus supplement and should consult
their own tax advisors, regarding the material U.S. federal
income tax consequences, if any, of the ownership and
disposition of preferred stock based upon their particular
circumstances and the terms of the preferred stock.
Backup
Withholding and Information Reporting
U.S. Holders. In general, a
U.S. Holder (other than corporations and other exempt
holders) will be subject to information reporting requirements
with respect to dividends and other taxable distributions paid
in respect of, and
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the proceeds from a sale, redemption or other disposition of,
the common or preferred stock. In addition, such a
U.S. Holder may be subject to backup withholding (currently
at a 28% rate) on such payments if the U.S. Holder
(i) fails to provide an accurate taxpayer identification
number to the payor; (ii) has been notified by the IRS of a
failure to report all dividends required to be shown on its
U.S. federal income tax returns; or (iii) in certain
circumstances, fails to comply with applicable certification
requirements.
Any amounts withheld under the backup withholding rules will be
allowed as a refund or a credit against a
U.S. Holders U.S. federal income tax liability
provided the required information is furnished to the IRS on a
timely basis. U.S. Holders should consult their tax
advisors regarding the application of information reporting and
backup withholding rules in their particular situations, the
availability of an exemption therefrom, and the procedure for
obtaining such an exemption, if applicable.
Non-U.S. Holders. In
general, we or our paying agent must report to the IRS and to a
Non-U.S. Holder
the amount of dividends on the common or preferred stock paid to
the
Non-U.S. Holder
and the amount of U.S. federal withholding tax, if any,
deducted from those payments. Copies of the information returns
reporting such dividend payments and any associated
U.S. federal withholding tax also may be made available to
the tax authorities in the country in which the
Non-U.S. Holder
resides under the provisions of an applicable tax treaty. A
Non-U.S. Holder
generally will not be subject to backup withholding with respect
to payments that we make on shares of common or preferred stock
provided that we or our paying agent does not have actual
knowledge or reason to know that the
Non-U.S. Holder
is a U.S. person (as defined under the Code), and we or our
paying agent has received from the
Non-U.S. Holder
an appropriate certification of
non-U.S. status
(i.e., IRS
Form W-8BEN
or other applicable IRS
Form W-8).
Information reporting and, depending on the circumstances,
backup withholding will apply to the payment of the proceeds of
a sale of shares of common or preferred stock, as the case may
be, that is effected within the United States or effected
outside the United States through certain
U.S.-related
financial intermediaries, unless the
Non-U.S. Holder
certifies under penalty of perjury as to its
non-U.S. status,
and the payor does not have actual knowledge or reason to know
that the beneficial owner is a U.S. person, or the
Non-U.S. Holder
otherwise establishes an exemption.
Any amounts withheld under the backup withholding rules will be
allowed as a refund or a credit against a
Non-U.S. Holders
U.S. federal income tax liability provided the required
information is furnished to the IRS on a timely basis.
PLAN OF
DISTRIBUTION
We may sell any of the securities being offered pursuant to this
prospectus from time to time in one or more of the following
ways:
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directly to one or more purchasers;
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to or through underwriters;
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through dealers or agents;
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in privately negotiated transactions; or
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through a combination of methods.
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We may distribute the securities from time to time in one or
more transactions at a fixed price or prices, which may be
changed, at market prices prevailing at the time of sale, at
prices related to the prevailing market prices or at negotiated
prices. We may also determine the price or other terms of the
securities offered under this prospectus by use of an electronic
auction.
The prospectus supplement with respect to the securities being
offered will set forth the terms of the offering, including:
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the names of the underwriters, dealers or agents, if any,
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the terms of the securities being offered, including the
purchase price of the securities and the net proceeds to us,
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any underwriting discounts and other items constituting
underwriters compensation,
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any over-allotment options under which underwriters may purchase
additional securities from us, and
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any discounts or concessions allowed or reallowed or paid to
dealers and any securities exchanges on which the securities may
be listed.
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Also, if applicable, we will describe in the prospectus
supplement how any auction will be conducted to determine the
price or any other terms of the offered securities, how
potential investors may participate in the auction and the
nature of the underwriters obligations with respect to the
auction.
If required under applicable state securities laws, we will sell
the securities only through registered or licensed brokers or
dealers. In addition, in some states, we may not sell securities
unless they have been registered or qualified for sale in the
applicable state or unless we have complied with an exemption
from any registration or qualification requirements.
If underwriters are used in an offering, we will sign an
underwriting agreement with the underwriters and will specify
the name of each underwriter and the terms of the transaction
(including any underwriting discounts and other terms
constituting compensation of the underwriters and any dealers)
in a prospectus supplement. If an underwriting syndicate is
used, the managing underwriter(s) will be specified on the cover
of the prospectus supplement. If underwriters are used in the
sale, the offered securities will be acquired by the
underwriters for their own accounts and may be resold from time
to time in one or more transactions, including negotiated
transactions, at a fixed public offering price or at varying
prices determined at the time of sale. Any public offering price
and any discounts or concessions allowed or reallowed or paid to
dealers may be changed from time to time. Unless otherwise set
forth in the prospectus supplement, the obligations of the
underwriters to purchase the offered securities will be subject
to conditions precedent, and the underwriters will be obligated
to purchase all of the offered securities if any are purchased.
If dealers are used in an offering, we will sell the securities
to the dealers as principals. The dealers then may resell the
securities to the public at varying prices which they determine
at the time of resale. The names of the dealers and the terms of
the transaction will be specified in a prospectus supplement.
The securities may be sold directly by us or through agents we
designate. If agents are used in an offering, the names of the
agents and the terms of the agency will be specified in a
prospectus supplement. Unless otherwise indicated in a
prospectus supplement, the agents will act on a best-efforts
basis for the period of their appointment.
Dealers and agents named in a prospectus supplement may be
deemed to be underwriters (within the meaning of the Securities
Act of 1933, as amended, or the Securities Act) of the
securities described therein.
We may sell securities directly to one or more purchasers, in
which case underwriters or agents would not be involved in the
transaction. In addition, we may sell the securities directly to
institutional investors or others who may be deemed to be
underwriters within the meaning of the Securities Act with
respect to any resales thereof.
Further, we may authorize agents, underwriters or dealers to
solicit offers by certain types of institutional investors to
purchase securities from us at the public offering price set
forth in the prospectus supplement pursuant to delayed delivery
contracts providing for payment and delivery on a specified date
in the future. We must approve all institutions, but they may
include, among others, commercial and savings banks, insurance
companies, pension funds, investment companies and educational
and charitable institutions. We will describe the conditions to
these contracts and the commissions we must pay for solicitation
of these contracts in an applicable prospectus supplement.
Underwriters, dealers and agents may be entitled to
indemnification by us against specific civil liabilities,
including liabilities under the Securities Act or to
contribution with respect to payments which the underwriters,
dealers or agents may be required to make in respect thereof,
under underwriting or other agreements. Certain underwriters,
dealers or agents and their associates may engage in
transactions with, and perform services for us in the ordinary
course of business.
In connection with any offering of the securities offered under
this prospectus, underwriters may engage in transactions that
stabilize, maintain or otherwise affect the price of such
securities or any other securities the prices
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of which may be used to determine payments on such securities.
These transactions may include short sales, stabilizing
transactions and purchases to cover positions created by short
sales. Short sales involve the sale by underwriters of a greater
number of securities than the underwriters are required to
purchase in the offering. Stabilizing transactions consist of
certain bids or purchases made for the purpose of preventing or
retarding a decline in the market price of the securities while
the offering is in progress.
Underwriters may also impose a penalty bid in any offering of
securities offered under this prospectus through a syndicate of
underwriters. This occurs when a particular underwriter repays
to the underwriters a portion of the underwriting discount
received by it because the other underwriters have repurchased
securities sold by or for the account of such underwriter in
stabilizing or short covering transactions.
These activities by underwriters may stabilize, maintain or
otherwise affect the market price of the securities offered
under this prospectus. As a result, the price of such securities
may be higher than the price that otherwise might exist in the
open market. If these activities are commenced, they may be
discontinued by underwriters at any time. These transactions may
be effected in the
over-the-counter
market or otherwise.
Any common stock sold pursuant to a prospectus supplement will
be eligible for listing and trading on the NASDAQ Global Market,
subject to official notice of issuance. Any underwriters to whom
securities are sold by us for public offering and sale may make
a market in the securities, but the underwriters will not be
obligated to do so and may discontinue any market making at any
time without notice.
As of the date of this prospectus, we have not entered into any
agreements, understandings or arrangements with any
underwriters, broker-dealers or other parties regarding the sale
of securities. As of the date of this prospectus, no period of
time has been fixed within which the securities will be offered
or sold.
LEGAL
MATTERS
Unless the applicable prospectus supplement indicates otherwise,
the validity of the issuance of the securities offered in this
prospectus will be passed upon for us by Faegre &
Benson LLP, 2200 Wells Fargo Center, 90 South Seventh
Street, Minneapolis, MN 55402.
Any underwriters will also be advised about legal matters by
their own counsel, which will be named in the applicable
prospectus supplement.
EXPERTS
The consolidated financial statements of FSI International, Inc.
as of August 29, 2009 and August 30, 2008, and for
each of the years in the three-year period ended August 29,
2009, have been incorporated by reference herein and in the
registration statement in reliance upon the report of KPMG LLP,
independent registered public accounting firm, incorporated by
reference herein, and upon the authority of said firm as experts
in accounting and auditing.
WHERE YOU
CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements
and other information with the SEC. Our SEC filings are
available to the public over the Internet at the SECs web
site at
http://www.sec.gov.
You may also read and copy any document we file with the SEC at
its Public Reference Room at 100 F Street, N.E.,
Washington, D.C. 20549. You can also obtain copies of the
documents at prescribed rates by writing to the Office of
Investor Education and Advocacy of the SEC at
100 F Street, N.E., Washington, D.C. 20549.
Please call the SEC at
1-800-SEC-0330
for further information on the operation of the Public Reference
Room. Our common stock is listed on the NASDAQ Global Market and
similar information can be inspected and copied at the offices
of the Financial Industry Regulatory Authority,
1735 K Street, N.W., Washington, D.C. 20006.
We incorporate by reference into this prospectus the
information we file with the SEC, which means that we can
disclose important information to you by referring you to those
documents. The information incorporated by reference is an
important part of this prospectus. Some information contained in
this prospectus updates the
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information incorporated by reference, and information that we
file subsequently with the SEC will automatically update this
prospectus. In other words, in the case of a conflict or
inconsistency between information set forth in this prospectus
and/or
information incorporated by reference into this prospectus, you
should rely on the information contained in the document that
was filed later.
We incorporate by reference the documents listed below and any
filings we make with the SEC under Sections 13(a), 13(c),
14, or 15(d) of the Securities Exchange Act of 1934, as amended,
or the Exchange Act, after the date of this
prospectus (including all filings we make under the Exchange Act
following the date of our initial registration statement but
prior to the effectiveness of such registration statement) and
prior to the time that we sell all the securities offered by
this prospectus (other than any portions of any such documents
that are not deemed filed under the Exchange Act in
accordance with the Exchange Act and applicable SEC rules):
(a) Our Annual Report on
Form 10-K
for the year ended August 29, 2009, including information
specifically incorporated by reference into our
Form 10-K
from our Definitive Proxy Statement for our 2010 Annual Meeting
of Shareholders;
(b) Our Quarterly Report on
Form 10-Q
for the quarter ended November 28, 2009;
(c) Our Current Reports on
Form 8-K
filed with the SEC on October 27, 2009 and
December 22, 2009; and
(d) The description of our common stock contained in the
Registration Statement on
Form 8-A
filed with the Commission on November 1, 1988, including
any amendment or report filed to update such description.
You may request a copy of these documents, which will be
provided to you at no cost, by writing or telephoning us using
the following contact information:
FSI
International, Inc.
Attention: Benno G. Sand, Executive Vice President, Business
Development, Investor Relations and Secretary
3455 Lyman Boulevard
Chaska, Minnesota
55318-3052
(952) 448-8936
You should rely only on the information contained or
incorporated by reference in this prospectus and in any
accompanying prospectus supplement. We have not authorized
anyone to provide you with information different from that
contained in this prospectus. We may only use this prospectus to
sell securities if it is accompanied by a prospectus supplement.
The securities offered under this prospectus are offered only in
jurisdictions where offers and sales are permitted. You should
not assume that the information in this prospectus or any
applicable prospectus supplement is accurate as of any date
other than the dates on the front of those documents.
15
Shares
FSI International,
Inc.
Common Stock
PROSPECTUS SUPPLEMENT
Craig-Hallum Capital
Group
Dougherty &
Company
June , 2010