Entegris DEF 14A 2007
SCHEDULE 14A INFORMATION
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3500 Lyman Blvd.
Chaska, Minnesota 55318
NOTICE OF 2007 ANNUAL MEETING OF STOCKHOLDERS
To Be Held on May 9, 2007
The 2007 Annual Meeting of Stockholders of Entegris, Inc. will be held at the Companys offices at 129 Concord Road, Billerica, Massachusetts, on Wednesday, May 9, 2007, at 10:00 a.m., local time, to consider and act upon the following matters:
Stockholders of record at the close of business on March 23, 2007 are entitled to notice of and to vote at the Annual Meeting and any adjournments or postponements thereof.
Dated: March 30, 2007
IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED AT THE ANNUAL MEETING. WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE VOTE IN ONE OF THE FOLLOWING THREE WAYS: (1) BY COMPLETING, SIGNING AND DATING THE ENCLOSED PROXY CARD AND RETURNING IT IN THE ENCLOSED STAMPED ENVELOPE BY MAIL, (2) BY COMPLETING A PROXY USING THE TOLL-FREE TELEPHONE NUMBER LISTED ON THE PROXY CARD, OR (3) BY COMPLETING A PROXY ON THE INTERNET AT THE ADDRESS LISTED ON THE PROXY CARD.
TABLE OF CONTENTS
3500 Lyman Boulevard
Chaska, Minnesota 55318
Proxy Statement for the 2007 Annual Meeting of Stockholders
To Be Held on May 9, 2007
This proxy statement is furnished in connection with the solicitation of proxies by the Board of Directors (the Board) of Entegris, Inc., a Delaware corporation, (Entegris or the Company) for use at the 2007 Annual Meeting of Stockholders to be held at the Companys offices at 129 Concord Road, Billerica, Massachusetts on Wednesday, May 9, 2007, at 10:00 a.m., local time, and at any adjournment or adjournments of that meeting. This proxy statement, the foregoing Notice of Annual Meeting of Stockholders, the enclosed form of proxy and the Companys Fiscal Year 2006 Annual Report on Form 10-K are first being mailed or given to stockholders on or about March 30, 2007.
A stockholder giving a proxy may revoke it at any time before it is voted by executing and delivering to Entegris another proxy bearing a later date, by delivering a written notice to the Secretary of the Company stating that the proxy is revoked, or by voting in person at the 2007 Annual Meeting. Any properly completed proxy forms returned in time to be voted at the Annual Meeting will be voted in accordance with the instructions indicated thereon. If no instructions are indicated on the proxy, the proxy will be voted IN FAVOR of the election of the ten named nominees as directors. In addition, the proxy confers discretionary authority to vote on any other matter properly presented at the 2007 Annual Meeting which is not known to the Company as of the date of this proxy statement, unless the proxy directs otherwise.
Shareholders may vote by proxy in one of the following three ways: (1) by completing, signing and dating the enclosed proxy card and returning it in the enclosed postage paid envelope by mail, (2) by completing a proxy using the toll-free telephone number listed on the proxy card in accordance with the specified instructions, or (3) by completing a proxy on the Internet at the address listed on the proxy card in accordance with the specified instructions.
All costs of solicitation of proxies will be borne by Entegris. In addition to solicitations by mail, the Companys directors, officers and regular employees, without additional remuneration, may solicit proxies by telephone, personal interviews and the Internet. Brokers, custodians and fiduciaries will be requested to forward proxy soliciting material to the owners of stock held in their names, and Entegris will reimburse them for their reasonable out-of-pocket expenses incurred in connection with the distribution of proxy materials.
VOTING SECURITIES AND VOTES REQUIRED
The record date for the determination of stockholders entitled to notice of and to vote at the 2007 Annual Meeting was the close of business on March 23, 2007 (the Record Date). On the Record Date, there were 134,456,633 shares of Common Stock, $0.01 par value per share, the Companys only voting securities, outstanding and entitled to vote. Each share of common stock is entitled to one vote. Under the Companys By-Laws, the holders of a majority of the shares of common stock outstanding and entitled to vote at the meeting shall constitute a quorum for the transaction of business at the meeting. Shares of common stock represented in person or by proxy (including shares which abstain or do not vote with respect to one or more of the matters presented for stockholder approval) will be counted for purposes of determining whether a quorum is present. The affirmative vote of the holders of a plurality of votes cast by the stockholders entitled to vote at the meeting is required for the election of directors. Shares which abstain from voting as to a particular matter, and shares
held in street name by brokers or nominees, who indicate on their proxies that they do not have discretionary authority to vote such shares as to a particular matter, will not be counted as votes in favor of such matter, and will also not be counted as votes cast or shares voting on such matter. Accordingly, abstentions and broker non-votes will not be included in vote totals and will not affect the outcome of the voting on the election of the directors.
The Company is the surviving entity from an August 6, 2005 merger pursuant to which Entegris, Inc., a Minnesota corporation, and Mykrolis Corporation, a Delaware corporation, were merged into the Company in a strategic merger of equals transaction. As used in this proxy statement, references to the Merger mean the above described merger of equals transaction and references to Entegris Minnesota and Mykrolis mean Entegris, Inc., a Minnesota corporation, and Mykrolis Corporation, a Delaware corporation, the constituent predecessor corporations to the Merger, respectively. In addition, effective January 1, 2006 the Company changed its fiscal year to the calendar year. As a result of this change, during 2005 the Company had a four month transition period following the end of its prior fiscal year, running from August 28, 2005, through December 31, 2005.
1. ELECTION OF DIRECTORS
At each annual meeting of stockholders, directors are elected for a term of one year to succeed those directors whose terms are expiring. The persons named in the enclosed proxy will vote to elect as directors the nominees designated by the Board, whose names are listed below, unless the proxy is marked otherwise. Each of the nominees has indicated his willingness to serve, if elected. However, if a nominee should be unable to serve, the shares of common stock represented by proxies may be voted for a substitute nominee designated by the Board. There are no family relationships between or among any officers or directors of Entegris.
Nominees for Election
Set forth below are the name and age of each nominee for election as a director, his principal occupation and the year of his first election as a director of Entegris or a predecessor public corporation.
Set forth below are the principal occupation and business experience during the past five years of each director as well as the names of other publicly held companies of which he serves as a director. All of the following directors have served as Entegris directors since the Merger of Entegris Minnesota and Mykrolis into the Company on August 6, 2005.
Gideon Argov serves as our President and Chief Executive Officer. He served as the Chief Executive Officer and a director of Mykrolis from November 2004 until the Merger. Prior to joining Mykrolis, Mr. Argov was a Special Limited Partner at Parthenon Capital, a Boston-based private equity partnership, since 2001. He served as Chairman, Chief Executive Officer and President of Kollmorgen Corporation from 1991 to 2000. From 1988 to 1991 he served as Chief Executive Officer of High Voltage Engineering Corporation. Prior to 1988, he led consulting engagement teams at Bain and Company. He is a director of Interline Brands, Inc., X-Rite Incorporated and Fundtech Corporation.
Michael A. Bradley served as a director of the Mykrolis and as Chairman of the Audit & Finance Committee of the Mykrolis board of directors from 2001 until the Merger. He served as Chairman of the Audit & Finance Committee of the Companys board of directors from the date of the Merger until June 14, 2006. He has been the Chief Executive Officer and a director of Teradyne, Inc. since 2004. Prior to that he served as President of Teradyne, Inc. since May of 2003 and as President, Semiconductor Test Division of Teradyne since April of 2001. Mr. Bradley served as the Chief Financial Officer of Teradyne, Inc. from 1999 until 2001 and as a Vice President of Teradyne since 1992. Prior to that, Mr. Bradley held various finance, marketing, sales and management positions with Teradyne and worked in the audit practice group of the public accounting firm of Coopers and Lybrand. Mr. Bradley was appointed to Teradynes Management Committee in 1994 and its Executive Committee in 1996. Mr. Bradley serves as a director of the Massachusetts High Technology Council. He received his A.B. degree from Amherst College and an M.B.A. from the Harvard Business School.
Michael P.C. Carns has served as a director of Mykrolis and as a member of the Management Development & Compensation Committee of the Mykrolis board of directors since 2001 and as Chairman of that committee from 2004 until the Merger; he has also served as the Chairman of the Management Development & Compensation Committee of the Company since June 14, 2006. Mr. Carns retired in the grade of General from the United States Air Force in September 1994 after 35 years of service. General Carns currently is an independent business consultant. From 2001 through 2003, he served as Vice Chairman of PrivaSource, Inc., a software company focusing on health data privacy and security. From 1995 to 2000, General Carns served as President and Executive Director of the Center for International Political Economy. From May 1991 until his retirement, General Carns served as Vice Chief of Staff, United States Air Force. From September 1989 until 1991, he served as Director of the Joint Staff, Joint Chiefs of Staff. General Carns is a director of Engineered Support Systems, Inc. (manufacture and service of integrated military electronics systems) and Rockwell Collins, Inc. (aviation and information technology). He is also a member of the Department of Defense Science Board and numerous professional and civic organizations. General Carns graduated from the United States Air Force Academy in 1959; from the Harvard Business School in 1967; and from the Royal College of Defence Studies, London in 1977.
Daniel W. Christman has served as a director of Mykrolis and as a member of the Audit & Finance Committee of the Mykrolis board of directors from 2001 until the Merger. From February of 2003 through 2004 he was designated as the Presiding Director of the Mykrolis Board of Directors. In 2003 he became a Senior Vice President, International Affairs of the U.S. Chamber of Commerce. From 2001 until 2003 he was the President and Executive Director of the Kimsey Foundation, Washington, D.C., which has been active in education and community development in the Washington, D.C. area as well as in international issues that focus on the alleviation of human suffering. He was named to this position in July 2001, after his retirement as a Lieutenant General from a career in the United States Army that spanned more than 36 years. Immediately prior to his retirement, General Christman served as the Superintendent of the United States Military Academy at West Point since 1996. From 1994 until 1996, General Christman served as Assistant to the Chairman of the Joint Chiefs of Staff of the United States. General Christmans key command positions have also included the U.S. Armys
Engineer School in the early 1990s, and the U.S. Army Corps of Engineer District in Savannah, Georgia. General Christman also served in President Fords administration as a member of the National Security Council staff, where he shared responsibility for strategic arms control. General Christman currently serves as a member of the Board of Directors of Ultralife Batteries, Inc., a manufacturer of high energy lithium batteries for military, industrial and consumer applications and of United Services Automobile Association. General Christman is a graduate of the United States Military Academy at West Point, where he also was an Assistant Professor of Economics. General Christman holds an MPA degree in public affairs and an MSE degree in civil engineering from Princeton University and a Juris Doctor degree from The George Washington University Law School.
James E. Dauwalter has served as our non-executive Chairman of the Board since the Merger. He was appointed Chief Executive Officer of Entegris Minnesota in January 2001, served as President of Entegris Minnesota from June 2000 to January 2005, and served a director of Entegris Minnesota since June 1999. Mr. Dauwalter has also served as Chief Operating Officer of Entegris Minnesota from March 2000 to January 2001, and was its Executive Vice President from March 2000 through June 2000. Prior to that time, Mr. Dauwalter had been a director of Fluoroware, Inc. a predecessor corporation of Entegris Minnesota, since 1982 and also served as Executive Vice President and Chief Operating Officer of Fluoroware, Inc. since September 1996. Mr. Dauwalter serves on the board of directors of U.S. BioEnergy Corporation and of the Community Bank of Chaska.
Gary F. Klingl served as a director of Entegris Minnesota and as Chairman of the Compensation and Stock Option Committee of the Entegris Minnesota board of directors from September 2000 until the Merger; he also served as the Chairman of the Management Development & Compensation Committee of the Companys Board from the merger until June 14, 2006. Since 1994, Mr. Klingl has served as a management consultant. Prior to 1994, Mr. Klingl served as President of Green Giant Worldwide, a division of The Pillsbury Company and held various other management positions at Pillsbury.
Roger D. McDaniel served as a director of Entegris Minnesota and as a member of the Compensation and Stock Option and of the Audit Committees of the Entegris Minnesota board of directors from August 1999 until the Merger; since June 14, 2006 he has also served as the Chairman of the Audit & Finance Committee of the Companys Board. Prior to that time, Mr. McDaniel was a director of Fluoroware, Inc. since August 1997. Mr. McDaniel, currently retired, was President and Chief Executive Officer of IPEC, Inc., a manufacturer of chemical-mechanical planarization (CMP) equipment for the semiconductor industry, from 1997 to 1999. From 1989 to August 1996, Mr. McDaniel was the Chief Executive Officer of MEMC, a silicon wafer producer, and was also a director of MEMC from April 1989 to March 1997. Mr. McDaniel is a director of Veeco Instruments, Inc. He is also a past director and Chairman of the Semiconductor Equipment and Materials International (SEMI) organization.
Paul L.H. Olson served as a director of Entegris Minnesota and as Chairman of the Governance Committee of the Entegris Minnesota board of directors from March 2003 until the Merger and as the Chairman of the Governance and Nominating Committee of the Companys Board since the Merger. Mr. Olson has served as Executive Vice President of Bethel University since 2002. Prior to 2000, Mr. Olson was a founding executive of Sterling Commerce, Inc., an electronic commerce software concern. Prior to his role with Sterling Commerce, he held executive positions with Sterling Software, Inc. and Michigan National Corp. Mr. Olson is a member of the board of directors of several private companies and non-profit organizations, including Prophet 21, Inc., WMC Industries, Inc., NuBridges, LLC, Bethel University and CCCA; Mr. Olson also serves as an advisor to Thoma Cressey Bravo Equity Partners. Mr. Olson holds a doctorate degree from the University of Pennsylvania.
Thomas O. Pyle served as a director of Mykrolis and as a member of the Audit & Finance Committee of the Mykrolis Board of Directors from 2001 until the Merger. From January 1, 2005 until the Merger he served as the non-executive Chairman of the Board of Directors of Mykrolis; since the Merger he has served as a member of the Governance and Nominating Committee of the Companys Board. Since June of 2004 Mr. Pyle has served as a director of PolyMedica Corporation and its non-executive Chairman of the Board since September 2005.
Mr. Pyle retired from his position as Senior Advisor to the Boston Consulting Group in 1997, a position he had held since 1992, other than from January to April of 1993 when he served on the White House Task Force on Healthcare Reform and from October 1993 through September 1994 when he served as Chief Executive Officer of MetLife HealthCare. From April 2001 until April 2002 he was Chairman, Chief Executive Officer and director of PrivaSource Incorporated, a software company focusing on health data privacy and security, and was the Chairman and a director of that organization until July 2003. Mr. Pyle served Harvard Community Health Plan, Inc. as its President, director and Chief Executive Officer from 1978 until 1991. Mr. Pyle received his M.B.A. from the Harvard Business School. He served as a director of Millipore Corporation from 1987 until 2001 and as a director of Controlled Risk Insurance Company, Ltd. from 1976 until August 2003 and as its Chairman from 1976 to 1989 and from 2000 until 2002. Mr. Pyle currently serves as a member of the Board of Directors of the Pioneer Institute, a non-profit public policy research organization.
Brian F. Sullivan served as a director of Entegris Minnesota and as a member of its Compensation and Stock Option Committee from December 2003 until the Merger; and has served as a member of the Management Development & Compensation Committee of the Companys Board since the Merger. Mr. Sullivan has served as Chief Executive Officer of SterilMed, Inc. since 2002. From 1999 to 2002, Mr. Sullivan was co-chairman of an on-line grocery delivery company, SimonDelivers.com. Mr. Sullivan co-founded Recovery Engineering, Inc. in 1986, and was Chairman and Chief Executive Officer until it was sold in 1999. Mr. Sullivan is a member of the board of directors of Sontra Medical Corporation, as well as several private companies and non-profit organizations.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE
STOCKHOLDERS VOTE FOR THE ABOVE NOMINEES
Entegriss Board of Directors believes that adherence to good corporate governance principles is essential to running our business efficiently, to maintaining our integrity in the marketplace and to ensure that the Company is managed for the long-term benefit of its stockholders. The Board recognizes that maintaining and ensuring good corporate governance is a continuous process. To this end, our Board of Directors has adopted the Entegris, Inc. Corporate Governance Guidelines, the Entegris Code of Business Ethics (which is applicable to all employees, including executive officers, as well as directors to the extent relevant to their service as directors) and a charter for each Committee of the Board. The Corporate Governance Guidelines, the Code of Business Ethics and the Charters of the Audit & Finance Committee, the Management Development & Compensation Committee and the Governance & Nominating Committee are available on the Companys website at http://www.Entegris.com under Investors Corporate Governance and will be provided in printed form to any stockholder who requests them from us. In addition, the Board has determined that each of Messrs. Bradley, Carns, Christman, Klingl, McDaniel, Olson, Pyle and Sullivan is independent under Rule 4200(15) of the NASDAQ Stock Market, Inc. Marketplace Rules. The Entegris, Inc. Corporate Governance Guidelines provide that there will be an executive session, comprised exclusively of independent directors, at each regularly scheduled Board of Directors meeting. The independent directors have determined that these executive sessions shall be presided over by the Chairman of the Governance & Nominating Committee (currently Mr. Olson).
Board and Committee Meetings
The Board has a standing Audit & Finance Committee, which provides the opportunity for direct contact between the Companys independent registered public accounting firm and the directors. As noted above, the Board has adopted a written charter for the Audit & Finance Committee, a copy of which is posted on the Companys web site http://www.Entegris.com under Investors Corporate Governance. The responsibilities of the Audit & Finance Committee include selection, appointment, compensation and oversight of the Companys independent registered public accounting firm as well as reviewing the scope and results of audits and reviewing the Companys internal accounting control policies and procedures. The Audit & Finance Committee held eleven
meetings during fiscal 2006. The current members of the Audit & Finance Committee are Roger D. McDaniel, Chairman, Michael A. Bradley and Daniel W. Christman, each of whom has been determined by the Board to be independent as defined under Rule 4200(15) of the NASDAQ Stock Market, Inc. Marketplace Rules and to comply with the independence requirements contemplated by Rule 10A-3 under the Securities Exchange Act of 1934. The Board has determined that Roger D. McDaniel, the Chairman of the Audit & Finance Committee, and Michael A. Bradley, a member of the Audit & Finance Committee, each possess the attributes of an audit committee financial expert as that term is defined in the rules of the Securities and Exchange Commission.
The Board also has a standing Management Development & Compensation Committee, which reviews executive compensation and development and provides recommendations to the Board regarding Entegriss compensation programs. The Board has adopted a written charter for the Management Development & Compensation Committee, a copy of which is posted on the Companys web site http://www.Entegris.com under Investors Corporate Governance. The responsibilities of the Management Development & Compensation Committee include determining the compensation of corporate officers, reviewing and recommending changes to equity incentive and other employee benefit plans, reviewing the administration of such plans and reviewing the Companys management development programs and strategies. The Management Development & Compensation Committee held seven meetings during fiscal 2006. The members of the Management Development & Compensation Committee are Michael P.C. Carns, Chairman, Gary F. Klingl and Brian F. Sullivan, each of whom has been determined by the Board to be independent as defined under Rule 4200(15) of the NASDAQ Stock Market, Inc. Marketplace Rules.
The Board has a standing Governance & Nominating Committee, which provides recommendations to the Board regarding Entegriss corporate governance and corporate responsibility programs and recommends nominees to be elected to the board of directors. The Board has adopted a written charter for the Governance & Nominating Committee, a copy of which is posted on the Companys web site http://www.Entegris.com under Investors Corporate Governance. The responsibilities of the Governance & Nominating Committee include the periodic review of corporate governance guidelines and matters related to corporate responsibility, review of matters relating to the size, composition, required skills and structure of the Board and committees thereof, and the review and evaluation of potential candidates for nomination to the Board and recommendation to the Board of a slate of nominees for election as directors each year. The Governance & Nominating Committee held three meetings during fiscal 2006. The members of the Governance & Nominating Committee are Paul L.H. Olson, Chairman, Thomas O. Pyle and Gary F. Klingl, each of whom has been determined by the Board to be independent as defined under Rule 4200(15) of the NASDAQ Stock Market, Inc. Marketplace Rules. The Board has designated the Chairman of the Governance & Nominating Committee to preside at executive sessions of the Board, attended only by the independent directors.
The Board held seven meetings during fiscal 2006. Each of Messrs. Argov, Bradley, Carns, Christman, Dauwalter, Klingl, McDaniel, Olson, Pyle and Sullivan attended at least 75% of the aggregate number of meetings held by the Board of Directors and by any committee on which he served.
Management Development & Compensation Committee Interlocks and Insider Participation
The members of the Entegris Management Development & Compensation Committee are Michael P.C. Carns, Chairman, Gary F. Klingl and Brian F. Sullivan. No member of the Companys Management Development & Compensation Committee was at any time during fiscal year 2006 an officer or employee of either the Company or of any subsidiary, nor has any member of such Committee had any relationship with Entegris requiring disclosure under Item 404 of Regulation S-K under the Securities Act of 1933 as amended.
During fiscal 2006, no executive officer of the Company has served as a director or member of the compensation committee (or other committee serving an equivalent function) of any other entity, one of whose executive officers served as a director of or member of the Management Development & Compensation Committee of the Company.
Director Nomination Process
The Governance & Nominating Committee is responsible for managing the process for nomination of new directors. The Committee may identify potential candidates for first-time nomination as a director using a variety
of sources recommendations from our management, current directors, stockholders or contacts in communities served by Entegris, or by conducting a formal search using an outside search firm selected and engaged by the Governance & Nominating Committee. Following the identification of a potential director-nominee, the Governance & Nominating Committee commences an inquiry to obtain sufficient information on the background of a potential new director-nominee. Included in this inquiry is an initial review of the candidate with respect to the following factors: (1) whether the individual meets the specified minimum qualifications for first-time director nominees; (2) whether the individual would be considered independent under applicable rules of NASDAQ and the Securities and Exchange Commission; and (3) whether the individual would meet any additional requirements imposed by law or regulation on the members of the Audit & Finance Committee and/or the Management Development & Compensation Committee of the Board.
The Governance & Nominating Committee evaluates candidates for director nominees in the context of the current composition of the Board taking into account all factors it considers appropriate, including but not limited to, the characteristics of independence, age, skills, experience, availability of service to Entegris, tenure of incumbent directors on the Board and the anticipated needs of the Board of Directors. The Governance & Nominating Committee believes that, at a minimum, all nominees recommended by the Governance & Nominating Committee, should have (i) a position capable of making, or a record of, valuable contributions to the business community, (ii) personal qualities of leadership, character, judgment and a reputation in the community at large of integrity, trust, respect, competence and adherence to the highest ethical standards, (iii) experience in the semiconductor/microelectronics industry or in other industries in which the Company operates; (iv) relevant knowledge and diversity of background and experience in such things as business, manufacturing, technology, finance and accounting, marketing, international business, government and the like; (v) candor and willingness to operate on a team and to seek consensus; (vi) an absence of conflicts of interest with the Company; and (vii) the time required for preparation, participation and attendance at all meetings. In addition, at least one member of the Board should have accounting or related financial management expertise, as determined in the business judgment of the Board. The Governance & Nominating Committee will consider potential nominees recommended by our stockholders for the Committees consideration taking into account the same considerations as are taken into account for other potential nominees. Stockholders may recommend candidates by writing to the Chairman, Governance & Nominating Committee in care of the Companys Senior Vice President, General Counsel & Secretary at Entegris, Inc., 129 Concord Road, Billerica, MA 01821. Our By-Laws provide for additional procedures and requirements for stockholders wishing to nominate a director for election as part of the official business to be conducted at an annual stockholders meeting, as described further under Stockholder Proposals for 2008 Annual Meeting below.
Communications with the Independent Directors
Stockholders and other interested parties may communicate directly with a member or members of the Board or the non-management directors either individually or as a group by addressing their correspondence to the director or directors, c/o our Senior Vice President, General Counsel & Secretary, at the address listed above, with a request to forward the same to the intended recipient. All such communications will be reviewed by the Companys Senior Vice President, General Counsel & Secretary and if they are relevant to the Companys operations, policies and philosophies, they will be forwarded to the Chairman of the Governance & Nominating Committee (currently Mr. Olson). The Chairman of the Governance & Nominating Committee will provide to the directors copies or summaries of any such stockholder communications as he considers appropriate.
Director Attendance at Annual Meetings
Members of the Board of Directors are encouraged to attend Annual Meetings of Stockholders. All directors attended the 2006 Annual Meeting of Stockholders.
Effective August 10, 2005, the Board adopted the following standard compensation arrangements for non-employee directors: an annual retainer of $40,000 plus an annual fee of $2,000 for service on the
Management Development & Compensation Committee and the Governance and Nominating Committee and of $5,000 for service on the Audit & Finance Committee. Committee chairmen receive an annual fee in lieu of the committee service fee of $5,000 for the Management Development & Compensation Committee and the Governance and Nominating Committee and of $8,000 for the Audit & Finance Committee. Such fees are paid quarterly in advance. Non-employee directors are also entitled to annual equity awards of 10,000 shares of restricted stock on the date of each Annual Meeting with restrictions lapsing one year following the date of award. In addition, non-employee directors are reimbursed for their out-of-pocket expenses incurred in connection with services as a director. The Board has adopted the following standard compensation arrangements for the non-executive Chairman of the Board (Mr. Dauwalter) in addition to his salary as an employee: the above specified annual retainer plus an annual chairmans fee of $40,000. All of the foregoing fees are paid quarterly in advance. Mr. Argov receives no compensation for his service as a director.
Director Summary Compensation Table
The following table summarizes the reportable compensation in accordance with Item 402(k) of Regulation S-K under the Securities Act of 1933, as amended, to directors for the fiscal year ended December 31, 2006.
COMPENSATION OF EXECUTIVE OFFICERS
Set forth below is summary information concerning certain compensation earned, paid or awarded during fiscal year 2006 by the Company to our chief executive officer, our chief financial officer and to the three other most highly compensated executive officers who were serving as executive officers at the end of the fiscal year.
Compensation Discussion and Analysis
Objectives of Executive Compensation Policies
The Entegris executive compensation policies are designed so that: (i) total compensation is tied to individual performance, (ii) total compensation will vary with the Companys performance in achieving financial and non-financial objectives, and (iii) long-term incentive compensation is closely aligned with stockholders interests. Further, the Entegris executive compensation policies provide that the proportion of variable compensation increases as an employees level of responsibility increases so that compensation for senior executives is closely aligned with the Companys performance. For these reasons, the Entegris executive compensation policies prioritize: pay-for-performance, competitive compensation and employee retention and alignment with stockholders interests. The overall objectives of the executive compensation policies are to:
Evaluation of Compensation against External Data
In the design of the 2006 compensation programs the Management Development & Compensation Committee of the Board, which is comprised solely of independent non-employee directors, as described under Corporate Governance above, (the Committee) evaluates each element of compensation as well as total compensation against corresponding compensation data collected by Mercer Human Resource Consulting (Mercer), the compensation consultant retained by the Committee. The Committee compares the Companys compensation practices and levels of pay to a group of companies serving the semiconductor industry or related materials management industries that were recommended by Mercer as being comparable to Entegris. For 2006 this peer group was comprised of the following 21 companies:
Mercer also incorporates data from broader, general industry compensation surveys for similarly-sized companies to develop a composite market perspective on competitive pay levels.
Based upon the Committees review of the compensation arrangements discussed below, the compensation levels of the above peer companies, general market pay practices for executives and its assessments of individual and corporate performance, the Company and the Committee believe that the value and design of the Companys executive compensation policies for 2006 was appropriate. While executive officers, principally the Senior Vice President for Human Resources, work closely with the Committee and with its consultant, Mercer, to design Entegris compensation programs, the Committee ultimately decides which policies to adopt and directs and finally approves the design of all compensation programs.
Elements of Compensation
The 2006 Entegris compensation program for executives, including the named executive officers, consisted of a number of elements which are described in the following table:
The use of these compensation elements enables us to reinforce our pay for performance philosophy and to strengthen our ability to attract and retain high quality executives. The Company and the Committee believe that this combination of compensation elements provides an appropriate mix of fixed and variable pay and achieves an appropriate balance between short term operational performance and long term shareholder value. The Committee determines the amount of compensation under each component of executive compensation granted to the executive officers to emphasize performance based compensation tied to financial metrics approved by the Committee and to achieve the appropriate balance between cash compensation and equity compensation, as well as to reflect the level of responsibility of the executive officer. There is no pre-established policy or target for the allocation between either cash and non-cash or short-term and long-term incentive compensation. In fiscal 2006, the Committee granted a majority of total compensation to the named executive officers in the form of non-cash equity long-term incentive compensation.
In general, base salary for each employee, including the named executive officers, is established based on the individuals job responsibilities, performance and experience; the Companys overall budget for merit increases; and the competitive environment. Each year, we survey the compensation practices of similar size companies serving the semiconductor and other materials integrity industries as well as general market pay practices for executives in the United States as well as in other countries in which we have significant employee populations in order to assess the competitiveness of the compensation we offer. In fiscal 2006, we targeted base salary at the median level of the companies identified by and included in the compensation surveys conducted or relied upon by Mercer as the compensation consultant for the Committee. However, as noted above, the Company and the Committee believe that our success is dependent on our ability to hire and retain high caliber executives in critical functions, and the pursuit of this objective may require us to recruit individual executives who have significant compensation and retention packages in place with other employers. In order to attract such individuals to Entegris, we may be required to negotiate compensation packages that deviate from the general principle of targeting base pay at the median of our peers. Similarly, we may determine to provide compensation outside of the normal cycle to individuals to address retention issues. Therefore, for some executives, compensation was above the median.
Short-Term Incentive Compensation
During 2006 Entegris maintained a short-term variable incentive compensation program, the Entegris Incentive Plan or EIP, providing for a potential cash award based upon the achievement of financial and operating performance objectives. Under this plan, an incentive pool is established based upon the attainment of financial objectives established by the Committee. During 2006 the named executive officers listed in the Summary Compensation Table below as well as three other senior executives were eligible to receive an incentive compensation payment targeting 75% of their base salary. Other employees under the EIP were eligible to receive lesser percentages ranging from 3% to 50% of their base salary, depending on their level of responsibility. The Entegris Incentive Plan is administered by and all awards are made at the discretion of the Committee.
The EIP award formula includes the following elements:
During 2006 three types of Company financial performance criteria were established by the Committee as performance objectives for executives, including the named executive officers, and were weighted as follows: (i) EBITA (as described below) (40%); (ii) revenue (20%) and (iii) cash conversion cycle (as described below, hereinafter CCC) (20%). EBITA is a non-GAAP metric that is derived from GAAP operating income with the following expenses added back: (A) Merger related and other restructuring charges; (B) post-Merger integration expenses; (C) post-Merger integration related stock based compensation expense; and (D) amortization of Merger related and other intangibles. This metric was chosen because the Company and the Committee believe that for 2006 this was the most accurate measure of the performance of the ongoing operations of the Company. CCC is a non-GAAP metric that measures the efficiency with which the Company manages the following working capital accounts: accounts receivable, accounts payable and inventory balances in the context of the Companys production and revenue cycles. The remaining 20% of the EIP award was based on performance in achieving individual goals established for 2006 for each executive, including the named executive officers, as measured against the Companys executive performance metrics which include:
Individual EIP goals for the named executive officers were established based on specific objectives relevant to the Companys ongoing business strategy. As a general matter, achievement of these individual goals by the named executive officers was necessary for the Company to achieve target performance with respect to the three financial metrics described above.
Awards to other employees under the EIP were based on the three financial performance criteria described above as well as, in certain cases, other additional performance criteria directly related to their responsibilities.
The 2006 EIP award provided for semi-annual calculations, based on the Companys performance with respect to the financial performance criteria during the preceding two quarters, with the financial performance criteria targets adjusted at mid-year to reflect the Companys projected performance for the second half of the year. EIP awards are payable in a single payment early in 2007.
The Committee approved these Company financial performance criteria, their respective weightings and the specific targets for each financial performance criteria as a part of its review of the Companys 2006 operating plan. These Company financial performance criteria were selected for 2006 because the Company and the Committee believe that the achievement of these goals will strengthen the Companys financial condition and increase shareholder value. In accordance with the provisions of the 2006 EIP, the specific targets for each financial performance criteria for the second half of the year were adjusted upward at mid year to reflect the relatively strong performance achieved by the Company during the first half of 2006. These adjusted targets were also reviewed and approved by the Committee.
The Companys performance against the goals with respect to these three financial criteria during the first half of 2006 were combined with its performance against the increased goals with respect to the three financial criteria for the second half of 2006 and with the individual performance goal achievement percentage to determine the annual award. This calculation is summarized in the following table:
Further, the 2006 EIP contained an overall restriction that provided that there would be no award unless the Company was profitable on an EBITA basis for the entire year. As illustrated above, our performance in 2006 qualified for an award pay out at 92.5% of target; these awards for the Chief Executive Officer and the named executive officers are included in the column entitled Non-Equity Incentive Plan Compensation in the Summary Compensation Table as well as in the Grants of Plan Based Awards table below.
Long-Term Incentive Compensation
Executives are also eligible to receive equity grants and awards under the various Entegris equity incentive plans, which are also administered by the Committee. As a general matter, restricted stock awards and awards of performance shares to senior executives are the principal vehicle currently used by Entegris for the payment of long-term incentive compensation. The Company and the Committee believe that the award of restricted stock and/or performance shares is an effective mechanism to align the interests of our executive officers and key personnel with those of Entegris shareholders which is expected to lead to an increase in the long-term value of Entegris. Prior to 2005 our predecessor companies granted stock options which we assumed and these options continue to be outstanding. With the adoption of SFAS 123(R), which requires that we take an operating statement charge with respect to the grant of stock options, the Company and the Committee do not believe that stock options represent as efficient a long term compensation vehicle as restricted stock and performance share awards. All stock options granted to executive officers by our predecessor companies were granted with an exercise price equal to fair market value on the date of grant. The Board has adopted a standing agenda that provides that the Committee will consider equity awards for a given year at its first meeting during that year (generally in February).
The 2006 long term incentive awards to the named executive officers are listed in the Grants of Plan Based Awards table below under the columns entitled Estimated Future Payouts Under Equity Incentive Plan Awards and All Other Stock Awards Number of Shares of Stock or Units. One half of the 2006 award to executive officers, including the named executive officers other than the CEO, consisted of restricted stock, with the restrictions lapsing over four years, and one-half consisted of performance shares representing the right to receive an award of shares of the Companys Common Stock in each of the succeeding four (4) years if financial
performance criteria targets established by the Committee are achieved for the year in question. The equal balance between restricted stock and performance shares for the named executive officers other than the CEO for the 2006 award was selected because it achieved the dual purposes of employee retention while providing a significant incentive to achieve corporate performance. The 2006 award to the CEO was entirely of performance shares because it was believed to be appropriate that the CEOs long term incentive compensation should focus on achieving corporate performance. Under the 2006 performance share award, the Committee establishes the performance criteria for each year covered by the award; depending on the Companys level of performance during the year in question, the award recipient may receive from 0 to 200% of the annual potential share award. Non-executive employees receiving equity awards in 2006 received restricted stock, with the restrictions lapsing proportionately over four (4) years.
The calculation of the performance share awards under 2006 long term incentive awards to executive officers is illustrated by the following:
For the 2006 portion of the performance share award, the Committee selected the EIP financial performance criteria and goals as the performance goals for the 2006 Performance Share award, but calculated on an annual rather than a semi-annual basis and excluding the individual performance component. This calculation is summarized in the following table:
Our performance in 2006 qualified for a performance share payment equal to 101% of the 2006 annual potential award; this payment to the named executive officers is set forth in the Summary Compensation Table below and the potential future annual payments under the 2006 performance share award are set forth in the Grants of Plan Based Awards table below.
For each subsequent year the Committee will establish performance criteria for that year. When earned, performance shares under the 2006 long-term incentive award are free of restrictions. As discussed above, the Company and the Committee believe that achieving or exceeding these goals will create value for Entegris shareholders.
Stock Ownership Guidelines
During 2006 the Committee adopted stock ownership guidelines in order to assure the continuation of the close alignment of the interests of those executive officers who are elected by the Board of Directors with those of Entegris stockholders. This alignment is the objective of the long term incentive compensation discussed above. The guidelines provide that the CEO should attain and maintain beneficial ownership of Entegris stock having a value equal to five times his annual base salary; Executive Vice Presidents should attain and maintain beneficial ownership of Entegris stock with a value equal to four times their respective annual base salaries, the
Chief Financial Officer should attain and maintain beneficial ownership of Entegris stock with a value equal to three times his annual base salary and Senior Vice Presidents should attain and maintain beneficial ownership of Entegris stock with a value equal to two times their annual base salary. While the stock ownership guidelines provide that executives should attain this beneficial ownership of Entegris stock within five years of the later of their appointment to these positions or the date the guidelines were adopted, most of our executive officers have already attained or exceeded these ownership levels.
Chief Executive Officer Compensation
The Committee determines the compensation package of the Chief Executive Officer of Entegris in accordance with the objectives and methodology described above. For 2006 Mr. Argovs salary was established pursuant to a revised employment agreement entered into in connection with the Merger with Mykrolis at a base salary of $600,000 per year which was approved by the Board on August 10, 2005. In evaluating Mr. Argovs base salary, the Committee also considers compensation levels of chief executive officers in the market pay survey conducted by Mercer, individual performance and Entegris recent financial performance. Mr. Argov has proposed that for 2007 his salary remain at the 2006 level; the Committee has accepted this proposal.
During 2006 Mr. Argov participated in the EIP described above on the same basis as other senior executives, being eligible to receive incentive compensation payment targeting 75 percent of his base salary to the extent that the financial performance goals were achieved. Accordingly, the Committee awarded Mr. Argov an award of $416,250 under the EIP for 2006. This award is reflected in the Summary Compensation Table and the Grants of Plan Based Awards table below.
During 2006 Mr. Argov was granted a long term equity incentive award of 150,000 shares, however, unlike the other named executive officers, Mr. Argovs award consisted entirely of performance shares, with no restricted stock element to the award. As described above, that award is divided into four equal portions available for award with respect to each of fiscal years 2006 through 2009. For 2006 our performance resulted in a payment to Mr. Argov of 37,875 shares in accordance with the provisions of that plan; this payment is reflected in the Summary Compensation Table above and the potential payments for future years under the 2006 performance share award are included in the Grants of Plan -Based Awards table below.
We provide benefit programs to executive officers and to other employees. The following table generally identifies such benefit plans and identifies those U.S. employees who may be eligible to participate:
The Company and the Committee believe that personal benefits or perquisites for executive officers should be limited in scope and value. As a result, we offer executives a minimal level of perquisites. We provide our officers with a limited financial planning allowance via taxable reimbursements for financial planning services like financial advice, estate planning, and tax preparation, which are focused on assisting officers in achieving the highest value from their compensation. In addition, we provide limited reimbursement for life insurance and health club and airline club memberships in order to encourage a healthy life style and provide more productive business travel arrangements. The aggregate value of all perquisites provided to the named executive officers other than the CEO and the CFO during 2006 was less than $10,000 each. The perquisites provided to the CEO during 2006 were consistent with the terms of his May 4, 2005 amended and restated employment agreement described above, and include tax and financial planning services and other benefits available to executives. The perquisites provided to the CFO during 2006 principally related to separation payments in connection with Mr. Villas decision to terminate his employment with the Company. The perquisites to the CEO and the CFO are included in the Summary Compensation Table below under the column entitled All Other Compensation.
Entegris offers retirement benefits to its U.S. employees through the tax-qualified Entegris, Inc. 401(k) Savings and Profit Sharing Plan (2005 Restatement), hereafter referred to as the 401(k) Plan, which provides both an employer match for employee contributions and a discretionary profit sharing contribution. Executive officers participate in the 401(k) Plan on the same terms as those available for other eligible employees in the U.S. The 401(k) Plan provides a long-term savings vehicle that allows for pretax contributions by employees and tax-deferred earnings. The Company makes matching contributions to the 401(k) Plan equal to 100% of such employee contributions on the first 3% of eligible compensation and 50% of the next 2% of eligible compensation, not to exceed the annual IRS limit. Employees direct their own investments in the 401(k) Plan. The 401(k) Plan also includes a defined contribution element that features a discretionary performance based cash profit sharing contribution determined annually based on the Companys performance against the financial criteria used to determine EIP awards pursuant to a formula approved by the Committee. These profit sharing contributions vest beginning after two years of service in 25% annual increments until the employee is 100% vested after five years of service.
In connection with the 401(k) Plan we also maintain a Supplemental Executive Retirement Plan (SERP) that was assumed in the merger with Mykrolis Corporation. Under this non-qualified plan, certain senior executives, including the named executive officers, are allowed certain salary deferral benefits that would otherwise be lost by reason of restrictions imposed by the Internal Revenue Code limiting the amount of compensation which may be deferred under tax-qualified plans. Compensation that may be deferred into the SERP include employee and matching employer contributions as well as employer discretionary profit sharing contributions to the 401(k) Plan that are in excess of the maximum deferral amount allowed under the terms of the 401(k) Plan. SERP participant accounts are credited with an investment return equivalent to that provided by the investment vehicles elected by the SERP participant with respect to his or her 401(k) Plan account, which may be allocated among 10 mutual funds.
The individual participant balances in the 401(k) Plan and SERP reflect a combination of: (1) the annual amount contributed by the Company or by the employee to the SERP and the amount of his or her cash compensation that the employee elects to defer; (2) the annual contributions and/or deferred amounts being invested at the direction the employee (the same investment choices are available to all participants); and (3) the continuing reinvestment of the investment returns until the accounts are paid out. This means that similarly situated employees, including executive officers, may have materially different account balances because of a combination of these factors.
See the Non Qualified Deferred Compensation Table below for more information on SERP balances and earnings.
MANAGEMENT DEVELOPMENT & COMPENSATION COMMITTEE REPORT
The Management Development & Compensation Committee of the Company has reviewed and discussed the Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K under the Securities Act of 1933, as amended, with management and, based on such review and discussions, the Committee recommended to the Companys Board that the Compensation Discussion and Analysis be included in this Proxy Statement.
Michael P.C. Carns, Chairman
Gary F. Klingl
Brian F. Sullivan
Summary Compensation Table
The following table summarizes the reportable compensation in accordance with Item 402(c) of Regulation S-K under the Securities Act of 1933, as amended, to the named executive officers for the fiscal year ended December 31, 2006:
Grants of Plan Based Awards
During the fiscal year ended December 31, 2006 the following plan based awards were granted to the named executive officers; no stock options were granted during the fiscal year:
Outstanding Equity Awards at Fiscal Year End
The following table lists the number of securities underlying stock options and awards outstanding as of December 31, 2006; there were no awards designated in units or other rights outstanding as of the end of the fiscal year:
Option Exercises and Stock Vested
The following table lists the stock option exercises by, and the number of shares of restricted stock vested with respect to, the named executive officers during the fiscal year ended December 31, 2006:
Nonqualified Deferred Compensation
Pursuant to the Companys SERP, certain executives, including named executive officers, may defer eligible compensation in excess of the maximum deferral amount allowed under the terms of the Companys 401(k) Plan. Deferral elections are made by eligible executives in December of each year for amounts to be contributed in the following year. Compensation that may be deferred into the SERP include employee and matching employer contributions as well as employer discretionary profit sharing contributions to the 401(k) Plan that are in excess of the maximum deferral amount allowed under the terms of the 401(k) Plan. Payment of distributions to the participant under the SERP may be made only upon the retirement, death, disability or other termination of employment with the Company and shall be paid in a lump sum six months following the date of such termination. No SERP distributions may be made to a participant while still employed by Entegris. SERP participants are 100% vested with respect to participant and employer matching contributions; employer profit sharing contributions vest beginning after 2 years of service in 25% annual increments until the participant is 100% vested after 5 years of service. SERP participant accounts are credited with an investment return equivalent to that provided by the investment elections made by the SERP participant with respect to his or her 401(k) Plan account which may be allocated among 10 mutual funds.
Nonqualified Deferred Compensation Table
Potential Payments Upon Termination as a Result of Change-In-Control
On May 4, 2005, Mykrolis entered into an employment agreement with Mr. Argov that provided that Mykrolis would employ Mr. Argov as chief executive officer for a term of three years, subject to automatic extension from year to year unless either party gives notice that the employment term shall not be extended. This agreement was assumed by Entegris pursuant to the Merger and was expressly approved by the Entegris Board on August 10, 2005. The employment contract continued Mr. Argovs salary of $450,000 through 2005 and provided for a salary of $600,000 commencing January 1, 2006. In addition, Mr. Argov is eligible to participate in Entegriss variable incentive compensation plan at a target pay out level of 75% of base salary, in other employee benefits offered by Entegris, including equity incentive plans, and in any supplemental retirement plan offered by Entegris. He is also entitled to receive a financial planning allowance. In the event of the termination of Mr. Argovs employment under certain circumstances, he will be entitled to severance benefits that vary depending on the circumstances of the termination, including the severance benefits to which he is entitled in the event of a termination following a change of control (as defined in the agreement) which are substantially identical to the change of control agreements described below. If Mr. Argov is terminated by Entegris or a successor other than for cause, if he terminates his own employment for good reason or if Entegris or its successor elects not to extend the agreement for any of the otherwise automatic one-year extension periods, he will receive, in addition to all forms of compensation that he has accrued prior to termination, (i) payment of base
salary commencing with the first regular payday in the seventh month following the date of termination for two years following the date of termination (or through the day immediately preceding the third anniversary of the effective date of the agreement if termination occurs prior to the first anniversary of the effective date of the agreement); (ii) the greater of the target bonus or the highest bonus paid to Mr. Argov during the three years prior to termination; (iii) continuation of health, dental and group life insurance coverage through the date Mr. Argov continues to receive his base salary following termination or the date he becomes eligible for such coverage with a different employer; (iv) immediate vesting of all outstanding unvested equity awards; and (v) reimbursement of up to $15,000 in outplacement services. Mr. Argov agreed to non-competition and non-solicitation covenants with Entegris for a period of two years following the termination of his employment.
There are currently effective agreements with Messrs. Pandraud, Loy, Walcott and Villas as well as three other executive officers and one other executive, to provide them with certain severance benefits in the event of a Change of Control of Entegris. In substance, a Change of Control shall be deemed to have occurred when any person becomes the beneficial owner, directly or indirectly, of 30% or more of the Companys then outstanding Common Stock, if those members who constituted a majority of the Board cease to be so, if an agreement for the merger or other acquisition of the Company is consummated (including the consummation of the Merger). If during the two-year period following a Change of Control the executives employment is terminated or if the executive terminates employment for good cause (as defined in the agreement generally certain adverse changes to the terms or conditions of the executives employment), then the executive will become immediately entitled to: (i) payment of all unpaid compensation, vacation and expenses earned or incurred prior to the date of termination; (ii) a lump sum severance payment equal to two times the sum of the executives base salary plus the highest annual bonus during the three years prior to termination; (iii) medical, dental and life insurance benefits for executive and executives family members for a period of two years following the date of termination; (iv) immediate vesting of all unvested stock options, the ability to exercise stock options for a period of up to one year following such termination (or, if earlier, until the expiration date of the options), and the immediate lapse of all restrictions on executives restricted stock; and (v) up to $15,000 of outplacement services. If such provisions had been triggered on the last business day of 2006, the cash amounts payable to Messrs. Argov, Villas, Pandraud, Loy, Walcott and would have been approximately $2,110,000, $877,212, $1,235,952, $1,095,368, and $924,926, respectively, and equity awards (stock options, restricted stock and performance shares) would vest with the following aggregate values: Mr. Argov $3,380,005; Mr. Villas $1,460,192; Mr. Pandraud $2,211,810; Mr. Loy $1,688,684; and Mr. Walcott $1,568,776.
The agreements also provide for an additional tax gross-up payment to the executive of an amount sufficient to satisfy, on an after-tax basis, any excise tax payable by such executive under Section 4999 of the Internal Revenue Code of 1986 as a result of any payments or benefits received by him (whether or not received pursuant to the amended and restated executive employment agreement).
The agreements include a confidentiality covenant and two year post-termination non-competition and non-solicitation covenants by each executive.
Management Holdings of Entegris Common Stock
The following table sets forth information concerning the number of shares of Entegris Common Stock, $0.01 par value, beneficially owned, directly or indirectly, by each director or nominee; each of the five most highly compensated named executive officers and all directors and executive officers as a group as of January 31, 2007. This information is based on information provided by each director, nominee and executive officer and the listing of such securities is not necessarily an acknowledgment of beneficial ownership. Unless otherwise indicated by footnote, the director, nominee or officer held sole voting and investment power over such shares.
Other Principal Holders of Entegris Common Stock
Based on Schedule 13G Reports filed during February 2007 with the Securities and Exchange Commission, the following persons are believed by the Company to be the beneficial owners of more than 5% of Entegris common stock, the Companys only class of voting securities, as of December 31, 2006:
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Companys directors and officers and persons who own more than 10 percent of Entegris Common Stock to file with the Securities and Exchange Commission initial reports of ownership and reports of changes in ownership of Entegris common stock. Entegris is required to disclose any failure to file these reports by the required due dates. With the exception of one Form 4 reporting an option exercise and resale with respect to 2,000 shares filed by John B. Goodman 28 days late, all of these filing requirements were satisfied in a timely manner during 2006.
REPORT OF THE AUDIT & FINANCE COMMITTEE
The Audit & Finance Committee is composed of three members and acts under a written charter adopted by the Board of Directors. The members of the Audit & Finance Committee are independent directors, as defined in the Audit & Finance Committee Charter and in Rule 4200(15) of the NASDAQ Stock Market, Inc. Marketplace Rules.
The Audit & Finance Committee reviewed the Companys audited financial statements for the fiscal year ended December 31, 2006 and discussed these financial statements with the Companys management. Management is responsible for the Companys internal controls and the financial reporting process. Management represented to the Audit & Finance Committee that the Companys financial statements had been prepared in accordance with accounting principles generally accepted in the United States. The Audit & Finance Committee selected KPMG LLP to serve as the Companys independent registered public accounting firm for 2006. The Companys independent registered public accounting firm is responsible for performing an audit of the Companys financial statements in accordance with auditing standards generally accepted in the United States and to issue a report on those financial statements. More specifically, the Audit & Finance Committee reviews, evaluates, and discusses with the Companys management and with the independent registered public accounting firm, the following matters:
The Audit & Finance Committee also reviewed and discussed the audited financial statements and the matters required by Statement on Auditing Standards 61 (Communication with Audit Committees) with KPMG LLP, the Companys independent registered public accounting firm. Statement on Auditing Standards 61 requires the Companys independent registered public accounting firm to discuss with the Companys Audit & Finance Committee, among other things, the following:
KPMG LLP also provided the Audit & Finance Committee with the written disclosures and the letter required by Independence Standards Board Standard No. 1 (Independence Discussions with Audit Committees). Independence Standards Board Standard No. 1 requires auditors annually to disclose in writing all relationships that in the auditors professional opinion may reasonably be thought to bear on independence, confirm their perceived independence and engage in a discussion of independence. The Audit & Finance Committee discussed with the independent registered public accounting firm the matters disclosed in this letter and their independence from Entegris. The Audit & Finance Committee also considered whether the provision of the other, non-audit related services to Entegris by the independent registered public accounting firm, which are referred to under the heading Accountants below, is compatible with maintaining such auditors independence.
Based on its discussions with management and the independent registered public accounting firm, and its review of the representations and information provided by management and the independent registered public accounting firm, the Audit & Finance Committee recommended to the Companys Board of Directors that the audited financial statements be included in the Companys Annual Report on Form 10-K for the fiscal year ended December 31, 2006.
In performing all of these functions, the Audit & Finance Committee acts only in an oversight capacity. The members of the Audit & Finance Committee have necessarily relied on the information, opinions, reports and statements presented to them by Entegris management, which has the primary responsibility for financial statements and reports. The members of the Audit & Finance Committee have also relied on the work and assurances of the Companys independent registered public accounting firm, who in their report express an opinion on the Companys annual financial statements. Accordingly, while the Audit & Finance Committee recommended to the Companys Board that the audited financial statements be included in the Companys Annual Report on Form 10-K as described above, the foregoing oversight procedures do not assure that management has maintained adequate financial reporting processes and controls, that the financial statements are accurate, or that the audit would detect all inaccuracies or flaws in the Companys financial statements. The information set forth in this report of the Audit & Finance Committee is not soliciting material, deemed to be filed with the Securities and Exchange Commission and is not incorporated by reference into any filings of the Company under the Securities Exchange Act of 1934, as amended, irrespective of any general incorporation language contained in any such filing.
AUDIT & FINANCE COMMITTEE
Roger D. McDaniel, Chairman
Michael A. Bradley
Daniel W. Christman
KPMG LLP, (KPMG) independent registered public accounting firm, has reported on the Companys consolidated financial statements for the year ended December 31, 2006, four months ended December 31, 2005 and year ended August 27, 2005. The Audit & Finance Committee selected KPMG as the Companys independent registered public accounting firm for 2006 and has also reviewed and approved the scope and nature of the services to be performed for Entegris by that firm. Representatives of KPMG are expected to be present at the Annual Meeting to make a statement if they wish to do so, and to respond to appropriate stockholder questions.
In connection with their examination of and report on the Companys financial statements, on managements assessment of the effectiveness of the Companys internal controls over financial reporting and on the effectiveness of the internal controls over financial reporting for 2006, KPMG also reviewed the Companys Annual Report on Form 10-K and performed a review of its quarterly financial statements included in the quarterly reports on Form 10-Q filed with the Securities and Exchange Commission.
Aggregate fees for professional services rendered for the Company by KPMG for the year ended December 31, 2006, four months ended December 31, 2005 and year ended August 27, 2005 were:
The Audit services for the year ended December 31, 2006, four months ended December 31, 2005, and year ended August 27, 2005 consisted of professional services rendered for the integrated audit of the Companys consolidated financial statements and its internal control over financial reporting, as required by the Sarbanes-Oxley Act of 2002 for the years ended December 31, 2006 and August 27, 2005; the audit of the Companys consolidated financial statements for the four months ended December 31, 2005; the statutory audits of certain of its foreign subsidiaries, and the review of documents filed with the SEC.
The fees for Audit Related services for the year ended December 31, 2006 were for services related to the assessment of the Companys accounting for its accelerated stock buyback program. The fees for Audit Related services for four months ended December 31, 2005 were for services related to the assessment of the Companys adoption of Statement of Financial Accounting Standards No. 123 (revised 2004), Share-Based Payment. The fees for Audit Related services for the year ended August 27, 2005 were for services related to due diligence services provided in connection with the Merger of Entegris Minnesota and Mykrolis into the Company and for auditing procedures performed in connection with that Merger.
The fees for Tax services for the year ended December 31, 2006, four months ended December 31, 2005 and year ended August 27, 2005 were for services related to tax compliance, tax planning and tax advice for the Company, principally in foreign locations.
There were no fees for All Other services for the year ended December 31, 2006, four months ended December 31, 2005 and year ended August 27, 2005.
Effective August 10, 2005, the Companys Board adopted the charter of the Audit & Finance Committee which requires the pre-approval of all non-audit services before any such non-audit services are performed for the Company. The charter of the Audit & Finance Committee is posted on the Companys web site http://www.Entegris.com under Investors Corporate Governance. The Audit & Finance Committee adopted pre-approval policies and procedures with respect to audit and permissible non audit services (Services) effective August 10, 2005. Under this policy Services must receive either a general pre-approval or a specific pre-approval by the Audit & Finance Committee. The grant of a general pre-approval of Services is limited to identified Services that have been determined not to impair the independence of the independent registered public accounting firm and must include a maximum fee level for the Services approved. A request for specific pre-approval must include detailed information concerning the scope of the Services and the fees to be charged. The policy also provides for a special delegation of pre-approval authority to the Chairman of the Audit & Finance Committee where the commencement of Services is required prior to the next scheduled meeting of the Audit & Finance Committee and it is impractical to schedule a special meeting; any such pre-approval by the Chairman is subject to review by the full Committee. All of the fees listed as paid for 2006 in the table above received pre-approval by the Companys Audit & Finance Committee.
STOCKHOLDER PROPOSALS FOR 2008 ANNUAL MEETING
Stockholder proposals submitted for inclusion in next years proxy materials must be received by the Company no later than December 1, 2007 and must comply with the requirements of Rule 14a-8 under the Securities Exchange Act of 1934, as amended. Proposals should be addressed to Peter W. Walcott, Secretary, Entegris, Inc., 129 Concord Road, Billerica, MA 01821.
Under the Companys By-Laws any stockholder of record of Entegris may nominate candidates for election to the Board or present other business at an annual meeting if a written notice is delivered to the Secretary of Entegris at the Companys principal executive offices not less than 60 days nor more than 90 days prior to the first anniversary of the preceding years annual meeting. Such written notice must set forth: (a) as to each person whom the stockholder proposes to nominate for election as a director, all information relating to such person that is required to be disclosed in solicitations of proxies for election of directors pursuant to the Securities Exchange Act of 1934, as amended, (including such persons written consent to being named in the proxy statement as a nominee and to serving as a director if elected); (b) as to any other business to be brought before the meeting, (i) a brief description of the business, (ii) the reasons for conducting such business and (iii) any material interest in such business of such stockholder and the beneficial owner, if any, on whose behalf the proposal is made; and (c) as to the stockholder and the beneficial owner, if any, on whose behalf the nomination or proposal is made, (A) the name and address of such stockholder and such beneficial owner and (B) the number of shares of common stock that are held of record by such stockholder and owned beneficially by such beneficial owner.
The deadline for receipt of timely notice of stockholder proposals for submission to the Entegris 2008 Annual Meeting of Stockholders without inclusion in the Companys 2008 proxy statement is February 13, 2008. Unless such notice is received by Entegris at its offices at 129 Concord Road, Billerica, MA 01821, Attention Peter W. Walcott, Secretary, on or before the foregoing date, proxies with respect to such meeting will confer discretionary voting authority with respect to any such matter.
FORM 10-K ANNUAL REPORT
A copy of the Companys Annual Report on Form 10-K for the fiscal year ended December 31, 2006 accompanies this proxy statement. Stockholders may obtain without charge an additional copy of the Companys Annual Report on Form 10-K for the fiscal year ended December 31, 2006, by writing to Gregory B. Graves, Senior Vice President & Chief Financial Officer, Entegris, Inc. at the Companys headquarters. In addition, the Companys Annual Report on Form 10-K for the fiscal year ended December 31, 2006 is available through the web site of the Securities & Exchange Commission (www.sec.gov) on the EDGAR database as well as on the Companys web page www.Entegris.com in the Investors section under the heading SEC Filings.
The Board of Directors is not aware of any other business to come before the Annual Meeting of Stockholders. However, if other matters properly come before the meeting, it is the intention of the persons named in the enclosed form of proxy to vote such proxy in accordance with their judgment as to such matters.
By Order of the Board of Directors,
Peter W. Walcott
Senior Vice President, General Counsel & Secretary
March 30, 2007
©2007 Entegris, Inc. Printed in USA 9000-2071RRD-1204
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.