UCTT » Topics » Certain Relationships and Related Transactions

This excerpt taken from the UCTT DEF 14A filed May 4, 2009.
Certain Relationships and Related Transactions
 
Relationship with Former Sieger Stockholders.  As consideration for their stock in Sieger Engineering, Inc., we issued an aggregate of 2,599,393 shares of our common stock to former Sieger stockholders when Sieger was merged into one of our subsidiaries in June 2006. Set forth below is a brief description of the existing agreement between us and former Sieger stockholders.
 
FP-Ultra Clean, L.L.C., Leonid Mezhvinsky, other former Sieger stockholders and we have entered into an amended and restated registration rights agreement. The registration rights agreement provides that, at the request of FP-Ultra Clean, L.L.C. or Leonid Mezhvinsky as the agent for the former Sieger stockholders, we can be required to effect registration statements, or demand registrations, registering the securities held by FP-Ultra Clean, L.L.C. and the former Sieger stockholders. FP-Ultra Clean, L.L.C does not currently own any of our securities and therefore has no demand registration right. Leonid Mezhvinsky can request us to register the securities held by former Sieger stockholders only once through December 29, 2009. We are required to pay the registration expenses in connection with each demand registration. We may decline to honor any of these demand registrations if the aggregate gross proceeds expected to be received does not equal or exceed $5 million or if we have effected a demand registration within the preceding 90 days. If a demand registration is underwritten and the managing underwriter advises us that the number of securities offered to the public needs to be reduced, priority of inclusion in the demand registration shall be such that first priority shall be given to the stockholder requesting registration.
 
In addition to our obligations with respect to demand registrations, if we propose to register any of our securities, other than on Form S-8 or S-4 or successor forms of these forms, whether or not such registration is for our own account, former Sieger stockholders will have the opportunity to participate in such registration. Expenses relating to these “incidental registrations” are required to be paid by us.
 
If an incidental registration is underwritten and the managing underwriter advises us that the number of securities offered to the public needs to be reduced, priority of inclusion shall be such that first priority shall be given to us and second priority shall be given to former Sieger stockholders. We and the stockholders selling securities under a registration statement are required to enter into customary indemnification and contribution arrangements with respect to each registration statement.


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Transactions with Management and Directors.  The wife of Bruce Weir, our Sr. Vice President of Engineering, is the sole owner of Acorn Travel, Inc., our primary travel agency. We incurred fees for travel-related services, including the cost of airplane tickets, provided by Acorn Travel to Ultra Clean for a total of $319,000 in the year ended January 2, 2009.
 
The Company leases a facility from an entity controlled by Leonid Mezhvinsky, one of our directors. In the year ended January 2, 2009, the Company incurred rent and other expense resulting from the lease of this facility of $283,000.
 
Related Person Transaction Policy.  Our Board of Directors adopted a Related Person Transaction Policy in February 2007. The policy requires the Board of Directors or the Nominating and Corporate Governance Committee to review and approve all related person transactions. Our directors and officers are required to promptly notify our Chief Compliance Officer of any transaction which potentially involves a related person. The Board or the Nominating and Corporate Governance Committee then considers all relevant facts and circumstances, including without limitation the commercial reasonableness of the terms of the transaction, the benefit and perceived benefit, or lack thereof, to the Company, opportunity costs of alternate transactions, the materiality and character of the related person’s direct or indirect interest, and the actual or apparent conflict of interest of the related person. The Board or the Nominating and Corporate Governance Committee will not approve or ratify a related person transaction unless it has determined that, upon consideration of all relevant information, the transaction is in, or not inconsistent with, the best interests of the Company and its stockholders.
 
Certain Relationships and Related Transactions
 
Relationship with Former Sieger Stockholders.  As consideration for their stock in Sieger Engineering, Inc., we issued an aggregate of 2,599,393 shares of our common stock to former Sieger stockholders when Sieger was merged into one of our subsidiaries in June 2006. Set forth below is a brief description of the existing agreement between us and former Sieger stockholders.
 
FP-Ultra Clean, L.L.C., Leonid Mezhvinsky, other former Sieger stockholders and we have entered into an amended and restated registration rights agreement. The registration rights agreement provides that, at the request of FP-Ultra Clean, L.L.C. or Leonid Mezhvinsky as the agent for the former Sieger stockholders, we can be required to effect registration statements, or demand registrations, registering the securities held by FP-Ultra Clean, L.L.C. and the former Sieger stockholders. FP-Ultra Clean, L.L.C does not currently own any of our securities and therefore has no demand registration right. Leonid Mezhvinsky can request us to register the securities held by former Sieger stockholders only once through December 29, 2009. We are required to pay the registration expenses in connection with each demand registration. We may decline to honor any of these demand registrations if the aggregate gross proceeds expected to be received does not equal or exceed $5 million or if we have effected a demand registration within the preceding 90 days. If a demand registration is underwritten and the managing underwriter advises us that the number of securities offered to the public needs to be reduced, priority of inclusion in the demand registration shall be such that first priority shall be given to the stockholder requesting registration.
 
In addition to our obligations with respect to demand registrations, if we propose to register any of our securities, other than on Form S-8 or S-4 or successor forms of these forms, whether or not such registration is for our own account, former Sieger stockholders will have the opportunity to participate in such registration. Expenses relating to these “incidental registrations” are required to be paid by us.
 
If an incidental registration is underwritten and the managing underwriter advises us that the number of securities offered to the public needs to be reduced, priority of inclusion shall be such that first priority shall be given


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to us and second priority shall be given to former Sieger stockholders. We and the stockholders selling securities under a registration statement are required to enter into customary indemnification and contribution arrangements with respect to each registration statement.
 
Transactions with Management and Directors.  The wife of Bruce Weir, our Sr. Vice President of Engineering, is the sole owner of Acorn Travel, Inc., our primary travel agency. We incurred fees for travel-related services, including the cost of airplane tickets, provided by Acorn Travel to Ultra Clean for a total of $358,000 in the year ended December 28, 2007.
 
The Company leases a facility from an entity controlled by Leonid Mezhvinsky, one of our directors. In the year ended December 28, 2007, the Company incurred rent and other expense resulting from the lease of this facility of $281,000. In addition, the sister, son and sister-in-law of Mr. Mezhvinsky worked for the Company during the year ended December 28, 2007. These employees were employees of Sieger prior to the date of acquisition. During the year ended December 28, 2007, the Company made payments to these individuals totaling $161,000.
 
Related Person Transaction Policy.  Our Board of Directors adopted a Related Person Transaction Policy in February 2007. The policy requires the Board of Directors or the Nominating and Corporate Governance Committee to review and approve all related person transactions. Our directors and officers are required to promptly notify our Chief Compliance Officer of any transaction which potentially involves a related person. The Board or the Nominating and Corporate Governance Committee then considers all relevant facts and circumstances, including without limitation the commercial reasonableness of the terms of the transaction, the benefit and perceived benefit, or lack thereof, to the Company, opportunity costs of alternate transactions, the materiality and character of the related person’s direct or indirect interest, and the actual or apparent conflict of interest of the related person. The Board or the Nominating and Corporate Governance Committee will not approve or ratify a related person transaction unless it has determined that, upon consideration of all relevant information, the transaction is in, or not inconsistent with, the best interests of the Company and its stockholders.
 
Certain Relationships and Related Transactions
 
Relationship with Former Sieger Stockholders.  As consideration for their stock in Sieger Engineering, Inc., we issued an aggregate of 2,599,393 shares of our common stock to former Sieger stockholders when Sieger was merged into one of our subsidiaries in June 2006. Set forth below is a brief description of the existing agreements between us and former Sieger stockholders.
 
FP-Ultra Clean, L.L.C., Leonid Mezhvinsky, other former Sieger stockholders and we entered into an amended and restated stockholders’ agreement. The stockholders’ agreement covers matters of corporate governance and information rights. Following the sale by FP Ultra Clean, L.L.C. of all of its holdings of our common stock in February 2007, the parties to the stockholders’ agreement determined that it is in their mutual best interest to terminate the agreement. The amended and restated stockholders’ agreement was terminated on April 25, 2007.
 
FP-Ultra Clean, L.L.C., Leonid Mezhvinsky, other former Sieger stockholders and we have also entered into an amended and restated registration rights agreement. The registration rights agreement provides that, at the request of FP-Ultra Clean, L.L.C. or Leonid Mezhvinsky as the agent for the former Sieger stockholders, we can be


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required to effect registration statements, or demand registrations, registering the securities held by FP-Ultra Clean, L.L.C. and the former Sieger stockholders. FP-Ultra Clean, L.L.C. does not currently own any of our securities and therefore has no demand registration right. Leonid Mezhvinsky can request us to register the securities held by former Sieger stockholders only once through December 29, 2009. We are required to pay the registration expenses in connection with each demand registration. We may decline to honor any of these demand registrations if the aggregate gross proceeds expected to be received does not equal or exceed $5 million or if we have effected a demand registration within the preceding 90 days. If a demand registration is underwritten and the managing underwriter advises us that the number of securities offered to the public needs to be reduced, priority of inclusion in the demand registration shall be such that first priority shall be given to the stockholder requesting registration.
 
In addition to our obligations with respect to demand registrations, if we propose to register any of our securities, other than on Form S-8 or S-4 or successor forms of these forms, whether or not such registration is for our own account, former Sieger stockholders will have the opportunity to participate in such registration. Expenses relating to these “incidental registrations” are required to be paid by us.
 
If an incidental registration is underwritten and the managing underwriter advises us that the number of securities offered to the public needs to be reduced, priority of inclusion shall be such that first priority shall be given to us and second priority shall be given to former Sieger stockholders. We and the stockholders selling securities under a registration statement are required to enter into customary indemnification and contribution arrangements with respect to each registration statement.
 
Transactions with Management and Directors.  The wife of Bruce Weir, our Vice President of Engineering, is the sole owner of Acorn Travel, Inc., our primary travel agency. We incurred fees for travel-related services, including the cost of airplane tickets, provided by Acorn Travel to Ultra Clean for a total of $292,000 in the year ended December 31, 2006.
 
As part of the acquisition of Sieger, the Company leases a facility from an entity controlled by Leonid Mezhvinsky, our President and Director. From the time of acquisition to December 31, 2006, the Company incurred rent and other expense resulting from the lease of this facility of $133,000.
 
Related Person Transaction Policy.  Our Board of Directors adopted a Related Person Transaction Policy in February 2007. The policy requires the Board of Directors or the Nominating and Corporate Governance Committee to review and approve all related person transactions. Our directors and officers are required to promptly notify our Chief Compliance Officer of any transaction which potentially involves a related person. The Board or the Nominating and Corporate Governance Committee then considers all relevant facts and circumstances, including without limitation the commercial reasonableness of the terms of the transaction, the benefit and perceived benefit, or lack thereof, to the Company, opportunity costs of alternate transactions, the materiality and character of the related person’s direct or indirect interest, and the actual or apparent conflict of interest of the related person. The Board or the Nominating and Corporate Governance Committee will not approve or ratify a related person transaction unless it has determined that, upon consideration of all relevant information, the transaction is in, or not inconsistent with, the best interests of the Company and its stockholders.
 
Certain Relationships and Related Transactions
 
Relationship with Francisco Partners.  FP-Ultra Clean, L.L.C. currently holds approximately 22.8% of our outstanding common stock. Two of our directors, Messrs. Deb and ibnAle, are employees of Francisco Partners, L.P., which controls FP-Ultra Clean, L.L.C. Set forth below is a brief description of the existing relationships and agreements between us and Francisco Partners.


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FP-Ultra Clean, L.L.C. and we have entered into a stockholders’ agreement. The stockholders’ agreement covers matters of corporate governance and information rights. For a description of the provisions relating to the nomination of directors, see “Structure of Board of Directors and Corporate Governance Information”. In addition, so long as FP-Ultra Clean, L.L.C. holds any of our securities, it has the right to receive from us financial information, monthly management reports, reports from our independent public accountants and such additional information regarding our financial position or business as it reasonably requests. Following the sale by FP Ultra Clean, L.L.C. of a portion of its holdings of our common stock, we are no longer subject to certain restrictions regarding actions that could be taken by us only with the approval of FP Ultra Clean, L.L.C.
 
FP-Ultra Clean, L.L.C. and we have also entered into a registration rights agreement. The registration rights agreement provides that, at the request of FP-Ultra Clean, L.L.C. or its permitted transferees, we can be required to effect registration statements, or demand registrations, registering the securities held by FP-Ultra Clean, L.L.C. We are required to pay the registration expenses in connection with each demand registration. We may decline to honor any of these demand registrations if the aggregate gross proceeds expected to be received does not equal or exceed $5 million or if we have effected a demand registration within the preceding 90 days. If a demand registration is underwritten and the managing underwriter advises us that the number of securities offered to the public needs to be reduced, priority of inclusion in the demand registration shall be such that first priority shall be given to FP-Ultra Clean, L.L.C. and its permitted transferees.
 
In addition to our obligations with respect to demand registrations, if we propose to register any of our securities, other than on Form S-8 or S-4 or successor forms of these forms, whether or not such registration is for our own account, FP-Ultra Clean, L.L.C. will have the opportunity to participate in such registration. Expenses relating to these “incidental registrations” are required to be paid by us.
 
If an incidental registration is underwritten and the managing underwriter advises us that the number of securities offered to the public needs to be reduced, priority of inclusion shall be such that first priority shall be given to us and second priority shall be given to FP-Ultra Clean, L.L.C. and its permitted transferees. We and the stockholders selling securities under a registration statement are required to enter into customary indemnification and contribution arrangements with respect to each registration statement.
 
Transactions with Management and Directors.  The wife of Bruce Weir, our Vice President of Engineering, is the sole owner of Acorn Travel, Inc., our primary travel agency. We incurred fees for travel-related services, including the cost of airplane tickets, provided by Acorn Travel to Ultra Clean for a total of $185,610 in the year ended December 31, 2005.
 

Certain Relationships and Related Transactions

                Relationship with Francisco Partners

                FP-Ultra Clean, LLC currently holds approximately 55% of our outstanding common stock. Two of our directors, Messrs. Deb and ibnAle, are employees of Francisco Partners, L.P., which controls FP-Ultra Clean, LLC. Set forth below is a brief description of the existing relationships and agreements between us and Francisco Partners.

                5% Series A Senior Notes due 2009.  In connection with the acquisition of our business from Mitsubishi Corporation, we issued and sold to FP-Ultra Clean, LLC, in a series of transactions from November 15, 2002 through December 2, 2002, an aggregate of $29,250,000 of our Series A Senior Notes. In 2004, we redeemed all Series A Senior Notes plus accrued interest held by FP-Ultra Clean, LLC.

                Advisory Fee. In 2004, we paid Francisco Partners Management, LLC a one-time fee of $2.0 million for advisory services performed during the period leading up to our initial public offering. We are not required to pay any additional fees to Francisco Partners or any of its affiliates.

                Stockholder’s Agreement. We and FP-Ultra Clean, LLC have entered into a stockholder’s agreement. The stockholder’s agreement covers matters of corporate governance, restrictions on transfer of our securities and information rights. For a description of the provisions relating to the nomination of directors, see “Board of Directors Structure and Corporate Governance Information”.

                The stockholder’s agreement provides that our Board of Directors may not take certain significant actions without the approval of FP-Ultra Clean, LLC as long as it owns at least 25% of our outstanding common stock. These actions include:

 
mergers, acquisitions or certain sales of assets;

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any liquidation, dissolution or bankruptcy;
  
issuances of securities;
  
determination of compensation and benefits for our Chief Executive Officer and Chief Financial Officer;
  
appointment or dismissal of any of the chairman of our Board of Directors, Chief Executive Officer, Chief Financial Officer or any other executive officer in any similar capacity;
  
amendments to the Stockholder’s Agreement or exercise or waiver of rights under the Stockholder’s Agreement;
  
amendments to our charter or bylaws;
  
any increase or decrease in the number of directors that comprise our Board of Directors;
  
the declaration of dividends or other distributions;
  
any incurrence or refinancing of indebtedness in excess of $10 million;
  
approval of our business plan, budget and strategy; and
  
modification of our long-term business strategy.
 

                So long as FP-Ultra Clean, LLC holds any of our securities, it has the right to receive from us financial information, monthly management reports, reports from our independent public accountants and such additional information regarding our financial position or business as it reasonably requests.

                Registration Rights Agreement.  The registration rights agreement provides that, at the request of FP-Ultra Clean, LLC or its permitted transferees, we can be required to effect registration statements, or demand registrations, registering the securities held by FP-Ultra Clean, LLC. We are required to pay the registration expenses in connection with each demand registration. We may decline to honor any of these demand registrations if the aggregate gross proceeds expected to be received does not equal or exceed $5 million or if we have effected a demand registration within the preceding 90 days. If a demand registration is underwritten and the managing underwriter advises us that the number of securities offered to the public needs to be reduced, priority of inclusion in the demand registration shall be such that first priority shall be given to FP-Ultra Clean, LLC and its permitted transferees.

                In addition to our obligations with respect to demand registrations, if we propose to register any of our securities, other than a registration on form S-8 or S-4 or successor forms of these forms, whether or not such registration is for our own account, FP-Ultra Clean, LLC will have the opportunity to participate in such registration. Expenses relating to these “incidental registrations” are required to be paid by us.

                If an incidental registration is underwritten and the managing underwriter advises us that the number of securities offered to the public needs to be reduced, priority of inclusion shall be such that first priority shall be given to us and second priority shall be given to FP-Ultra Clean, LLC and its permitted transferees. We and the stockholders selling securities under a registration statement are required to enter into customary indemnification and contribution arrangements with respect to each registration statement.

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