<PAGE>   1
 
    AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 20, 2000
 
                                                     REGISTRATION NO. 333-
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
 
                       SECURITIES AND EXCHANGE COMMISSION
 
                              WASHINGTON, DC 20549
                            ------------------------
 
                                    FORM S-1
                             REGISTRATION STATEMENT
                                   UNDER THE
                             SECURITIES ACT OF 1933
                            ------------------------
 
                       CABOT MICROELECTRONICS CORPORATION
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
 

<TABLE>
<S>                                 <C>                                 <C>
             DELAWARE                              3291                             36-4324765
  (STATE OR OTHER JURISDICTION OF      (PRIMARY STANDARD INDUSTRIAL              (I.R.S. EMPLOYER
  INCORPORATION OR ORGANIZATION)        CLASSIFICATION CODE NUMBER)           IDENTIFICATION NUMBER)
</TABLE>

 
                            ------------------------
                            870 NORTH COMMONS DRIVE
 
                             AURORA, ILLINOIS 60504
                                 (630) 375-6631
  (ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
                   REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
 
                                MATTHEW NEVILLE
                       CABOT MICROELECTRONICS CORPORATION
                            CHIEF EXECUTIVE OFFICER
                            870 NORTH COMMONS DRIVE
                             AURORA, ILLINOIS 60504
                                 (630) 375-6631
 (NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
                             OF AGENT FOR SERVICE)
                            ------------------------
                                   COPIES TO:
 

<TABLE>
<S>                                                  <C>
            THOMAS W. CHRISTOPHER, ESQ.                           DUNCAN C. MCCURRACH, ESQ.
      FRIED, FRANK, HARRIS, SHRIVER & JACOBSON                       SULLIVAN & CROMWELL
                 ONE NEW YORK PLAZA                                    125 BROAD STREET
              NEW YORK, NEW YORK 10004                             NEW YORK, NEW YORK 10004
                   (212) 859-8000                                       (212) 558-4000
</TABLE>

 
                            ------------------------
    APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
                            ------------------------
    If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act,
check the following box.  [ ]
 
    If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
---------------
 
    If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
---------------
 
    If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the registration statement for the same
offering. [ ]
---------------
 
    If delivery of the prospectus is expected to be made pursuant to Rule 434,
check the following box. [ ]
                            ------------------------

                        CALCULATION OF REGISTRATION FEE
 

<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------
                                                                 PROPOSED MAXIMUM
                                                                AGGREGATE OFFERING         AMOUNT OF
     TITLE OF EACH CLASS OF SECURITIES TO BE REGISTERED              PRICE(1)           REGISTRATION FEE
-----------------------------------------------------------------------------------------------------------
<S>                                                           <C>                    <C>
Common Stock, par value $.001 per share.....................       $75,000,000              $19,800
-----------------------------------------------------------------------------------------------------------
Preferred Share Purchase Rights(2)..........................            --                     --
-----------------------------------------------------------------------------------------------------------
Total.......................................................       $75,000,000              $19,800
-----------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------
</TABLE>

 
(1) Estimated solely for the purpose of calculating the registration fee
    pursuant to Rule 457(o) under the Securities Act of 1933.
 
(2) The rights will initially trade together with the common stock. The value
    attributable to the rights, if any, is reflected in the market price of the
    common stock.
                            ------------------------
 
    THE REGISTRANT HEREBY AMENDS THE REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------

<PAGE>   2
 
       THE INFORMATION IN THIS PRELIMINARY PROSPECTUS IS NOT COMPLETE AND MAY BE
       CHANGED. THESE SECURITIES MAY NOT BE SOLD UNTIL THE REGISTRATION
       STATEMENT FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE.
       THIS PRELIMINARY PROSPECTUS IS NOT AN OFFER TO SELL NOR DOES IT SEEK AN
       OFFER TO BUY THESE SECURITIES IN ANY JURISDICTION WHERE THE OFFER OR SALE
       IS NOT PERMITTED.
 
                 SUBJECT TO COMPLETION. DATED JANUARY 20, 2000.
 
                                            Shares
                       CABOT MICROELECTRONICS CORPORATION
                                  Common Stock
[CABOT MICROELECTRONICS LOGO]
                            ------------------------
 
     This is an initial public offering of shares of common stock of Cabot
Microelectronics Corporation. All of the          shares of common stock are
being sold by Cabot Microelectronics. All or substantially all of the net
proceeds of this offering will be paid to Cabot Corporation, our parent
corporation, in the form of a dividend.
 
     Prior to this offering, there has been no public market for the common
stock. It is currently estimated that the initial public offering price per
share will be between $          and $          . We will apply to have the
common stock included for quotation on the Nasdaq National Market under the
symbol "CCMP".
 
     Upon completion of this offering, Cabot Corporation will directly own at
least 80% of our outstanding common stock and will continue to control us.
 
     See "Risk Factors" beginning on page 8 to read about factors you should
consider before buying shares of the common stock.
 
                            ------------------------
 
    NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY OTHER REGULATORY BODY
HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
 
                            ------------------------
 

<TABLE>
<CAPTION>
                                                            PER SHARE       TOTAL
                                                            ---------       -----
<S>                                                         <C>           <C>
Initial public offering price.............................  $             $
Underwriting discount.....................................  $             $
Proceeds, before expenses, to Cabot Microelectronics......  $             $
</TABLE>

 
     To the extent that the underwriters sell more than           shares of
common stock, the underwriters have the option to purchase up to an additional
          shares from us at the initial public offering price less the
underwriting discount.
 
                            ------------------------
 
     The underwriters expect to deliver the shares on               , 2000.
 
                            ------------------------
 
GOLDMAN, SACHS & CO.
 
                                   MERRILL LYNCH & CO.
                                                   ROBERTSON STEPHENS
 
                            ------------------------
 
                     Prospectus dated               , 2000.

<PAGE>   3
 
                               INSIDE FRONT COVER
 
[ARTWORK]

<PAGE>   4
 

                               PROSPECTUS SUMMARY
 
     You should read the following summary together with the more detailed
information about our company and common stock and our financial statements and
the notes to those statements appearing elsewhere in this prospectus.
 
     Unless otherwise indicated, all references in this prospectus to us include
Cabot Microelectronics and its subsidiaries, to Cabot Corporation include Cabot
and its subsidiaries other than us, and to years are to our fiscal years ended
September 30 of the year indicated.
 
     Unless otherwise indicated, all information in this prospectus assumes the
underwriters' option to purchase additional shares in this offering will not be
exercised.
 
                                  OUR BUSINESS
 
     We are the leading supplier of slurries used in chemical mechanical
planarization, or CMP, a polishing process used in the manufacturing of
integrated circuit, or IC, devices. CMP is an increasingly important part of the
IC device manufacturing process because it helps manufacturers make smaller,
faster and more complex IC devices and improves their production efficiency. CMP
slurries are liquids containing abrasives and chemicals that facilitate and
enhance the CMP polishing process. We believe that we sell approximately 80% of
all CMP slurries sold to IC device manufacturers worldwide. For the fiscal year
ended September 30, 1999, our sales increased 68% over the prior year to
approximately $98.7 million and our net income increased 190% over the prior
year to approximately $12.3 million. On a pro forma basis, for the fiscal year
ended September 30, 1999, our sales would be approximately $97.7 million and our
net income would be approximately $8.7 million. For a discussion of the pro
forma adjustments, see "Unaudited Pro Forma Combined Statement of Income".
 
     CMP is a polishing process used by IC device manufacturers to planarize
many of the multiple layers that are built upon silicon wafers to produce
advanced IC devices. Planarization means to level and smooth, and to remove
excess material from, the surfaces of these layers. CMP is currently used
primarily to polish the insulating layers of IC devices and the tungsten plugs
that go through the insulating layers and connect the multiple wiring layers of
IC devices. By using CMP, manufacturers are able to produce smaller IC devices
with more electronic components, both of which improve performance. By reducing
the size of IC devices, manufacturers increase their throughput, or the number
of IC devices that they manufacture in a given time period. CMP also helps
reduce the number of defective or substandard IC devices produced, which
increases the device yield. Improvements in throughput and yield reduce an IC
device manufacturer's total production costs.
 
     We began developing CMP slurries 15 years ago for IBM, the company that
pioneered CMP processing of IC devices. The first significant commercial sales
of CMP slurries to the semiconductor industry occurred in the early 1990s. Since
that time, use of CMP in the production of IC devices and CMP slurry sales have
grown rapidly. We estimate that sales of CMP slurries have grown at an average
annual compound rate of 60% since 1997 and increased to a total of approximately
$120 million for 1999. CMP is used in the production of logic devices, such as
microprocessors, and memory devices, such as DRAM chips. The benefits of CMP
become increasingly important to IC device manufacturers as the size of the
devices shrink and their complexity increases. Based on existing technology, we
believe that CMP is required for the efficient manufacturing of today's advanced
IC devices, which typically have feature sizes of less than 0.25 microns (about
one thousandth of the thickness of a human hair). The feature sizes of most
advanced IC devices are projected to decrease to less than 0.15 microns by 2003.
 
     We believe we offer the most technologically advanced and broadest
selection of CMP slurries. We are constantly improving and enhancing our
products to keep pace with technological advances in the IC manu-
 
                                        3

<PAGE>   5
 
facturing process and the evolving needs of our customers. We have developed
several different types and generations of slurries for polishing the insulating
layers of IC devices, historically the most common use of CMP. We developed and
introduced in 1994 a CMP slurry for polishing the tungsten plugs used to connect
the multiple wiring layers of IC devices. The market for this type of slurry has
grown rapidly in recent years and we have a majority market share of these CMP
slurry sales to IC device manufacturers. In 1999, sales of CMP slurries for
polishing insulating layers represented approximately two-thirds of our total
sales and sales of CMP slurries for polishing tungsten plugs represented almost
all of the balance.
 
     In 1996 we started developing CMP slurries for polishing the aluminum and
copper wiring layers of IC devices. While most IC device manufacturers do not
currently use CMP to polish these wiring layers and there have not yet been
commercially significant sales of these slurries, we believe CMP will be used on
these layers in the future.
 
     We are using our experience in CMP polishing and slurry manufacturing to
expand our product range to include a broader range of consumables used in the
CMP process. We have begun selling new slurries for CMP polishing of the
substrates and magnetic heads used in hard disk drives. After evaluating the
market for CMP polishing pads and developing new polishing materials, we
recently began limited production of these pads for customer evaluation and
qualification.
 
     We have advanced research and development capabilities and facilities to
support our product development efforts. We have also assembled a highly skilled
work force that includes a wide range of scientists and applications
specialists, many of whom have significant experience in the semiconductor
industry. We believe our people, technology and experience enable us to refine
our existing products and optimize our new products to better meet our
customers' needs and to provide our customers with strong customer service,
applications support, and a reliable supply chain.
 
     Our headquarters and research and development center are located in Aurora,
Illinois. Our slurries are manufactured at four sites: Aurora, Illinois;
Hammond, Indiana; Barry, Wales; and Geino, Japan.
 
                                INDUSTRY TRENDS
 
     The rapid growth of the CMP slurry market has been driven in large part by
the significant growth and technological advances the semiconductor industry has
experienced over the past decade. IC devices are critical components in an
increasingly wide variety of products and applications, including computers,
data processing, communications, telecommunications, the Internet, automobiles
and consumer and industrial electronics. As the performance of IC devices has
increased and their size and cost have decreased, the use of IC devices in these
applications has grown significantly. According to industry sources, the
worldwide semiconductor market as measured by total sales grew at an average
annual compound rate of 11% in the period from 1988 through 1998. Dataquest and
other industry sources project continued growth at similar rates in the future.
 
     The rapid growth in the semiconductor industry, increasing demand for
smaller, higher performance and more complex IC devices and pressure on IC
device manufacturers to reduce their costs have led to increased use of CMP and
consumption of CMP slurries and polishing pads. We believe that worldwide
revenues from the sale of CMP slurries to IC device manufacturers grew to
approximately $120 million in 1999. Industry surveys project that annual
worldwide revenues in this market will grow to between approximately $350 and
$450 million by 2002. This projected growth assumes increases in the number of
IC devices produced, the percentage of IC devices that are produced using CMP
and the number of polishing steps used to produce each device.
 
     Although some sectors of the semiconductor industry have been highly
cyclical, sales of CMP slurries and polishing pads have not been adversely
affected by these trends. We believe this is because sales of CMP slurries and
polishing pads are driven
 
                                        4

<PAGE>   6
 
primarily by the number of IC devices sold, which has been much less cyclical
than the prices of IC devices. In addition, we believe that IC manufacturers
have continued to increase their use of CMP because the CMP process represents
only a small percentage of the total production cost of an IC device and is very
important to the continued improvement of IC device performance.
 
                                    STRATEGY
 
     Our objective is to maximize our profitability and stockholder value by
maintaining and leveraging our leading position in the CMP slurry market. We
believe our leading market position provides us with significant competitive
advantages. We will pursue the following strategies to achieve our objective:
 
REMAIN THE TECHNOLOGY LEADER IN CMP SLURRIES
 
     We believe technology is key to success in the CMP slurry market and we
plan to continue to devote significant resources to our research and development
and the introduction of new and improved CMP slurry products.
 
BUILD AND MAINTAIN CUSTOMER INTIMACY
 
     We will continue to build and maintain close relationships with our
customers by working closely with them in product development, applications
support, customer service, inventory management and other areas.
 
EXPAND GLOBALLY
 
     We intend to expand our production capacity, technical support and sales in
many of the locations around the world where IC device production is
concentrated, particularly in Asia where IC device manufacturing has increased
recently.
 
ATTRACT AND RETAIN TOP QUALITY PERSONNEL
 
     We intend to continue to attract and retain top quality personnel committed
to providing high performance products and strong customer and applications
support.
 
MAINTAIN TOP QUALITY PRODUCTS AND SUPPLY
 
     Because our customers demand high quality products and reliable supply, we
will continually advance our strict quality controls to improve the uniformity,
consistency and performance of our CMP products. We will also continue to expand
and use our strategically located production facilities and utilize our
manufacturing experience to provide our customers with a proven and reliable
source of CMP slurries.
 
EXPAND INTO NEW APPLICATIONS AND PRODUCTS
 
     We intend to leverage our CMP experience and technology into new
applications and products such as CMP polishing pads and slurries for CMP
polishing of substrates and magnetic heads used in hard disk drives.
 
                      RELATIONSHIP WITH CABOT CORPORATION
 
     We are a wholly owned subsidiary of Cabot Corporation, a global chemical
manufacturing company based in Boston, Massachusetts. Prior to our incorporation
in October 1999, we were a division of Cabot. After this offering, we will
continue to be controlled by Cabot, which will own at least 80% of the
outstanding shares of our common stock. As our controlling stockholder, Cabot
will be able to approve or reject major corporate transactions without the
support of any other stockholder, including a merger, consolidation or sale of
substantially all our assets.
 
     Cabot has indicated that, following this offering, it intends to divest its
remaining equity interest in us by means of a distribution to its stockholders
in a transaction intended to be tax free to those stockholders. This transaction
is sometimes referred to in this prospectus as the spin-off. While Cabot expects
the spin-off to occur six to twelve months after this offering, we cannot give
any assurance that Cabot will complete its divestiture of its remaining equity
interest in us in this time frame or at all.
 
     We have entered into agreements with Cabot governing various interim and
ongoing relationships between us and Cabot. For a further discussion of these
agreements, see "Relationships Between Our Company and Cabot Corporation".
 
                                        5

<PAGE>   7
 
                                  THE OFFERING
 

<TABLE>
<S>                                            <C>
Common stock offered by us...................  shares
Common stock to be outstanding after this
offering.....................................  shares or           shares if the underwriters
                                               exercise their over-allotment option in full. These
                                               shares do not include           options reserved for
                                               issuance or           options granted and not
                                               exercised pursuant to our stock option plans as of
                                                         , 2000.
Use of proceeds..............................  To pay a dividend to Cabot in the amount of $     .
Proposed Nasdaq symbol.......................  CCMP
</TABLE>

 
                             ----------------------
 
     We were incorporated in Delaware in October 1999.  Our principal executive
offices are located at 870 North Commons Drive, Aurora, Illinois, 60504. Our
telephone number at that location is (630) 375-6631.
 
                                        6

<PAGE>   8
 
                      SUMMARY AND PRO FORMA FINANCIAL DATA
 
     The following table presents our summary and pro forma condensed combined
financial data and has been derived from our audited financial statements for
the fiscal years ended September 30, 1997, 1998 and 1999 which are included
elsewhere in this prospectus, and from our unaudited financial statements for
the fiscal years ended September 30, 1995 and 1996. The unaudited pro forma
combined financial data give effect to our new fumed metal oxide supply
agreement and new dispersion services agreement with Cabot, each of which will
become effective upon completion of this offering, as if they had been in effect
since October 1, 1998 and do not purport to represent our results of operations
for any future period. Because we began to operate as a separate division of
Cabot in July 1995, the statement of operations data for 1995 include only three
months of activity. As adjusted balance sheet data give effect to the proceeds
from the sale of           shares of common stock in this offering and the
dividend payment to Cabot. The data below should be read in conjunction with
"Selected Financial Data", "Unaudited Pro Forma Combined Statement of Income",
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and our combined financial statements and the notes to our combined
financial statements, each of which is included elsewhere in this prospectus.
     An income tax benefit was recorded in 1997 as a result of a tax credit for
research and development activities that exceeded our statutory taxes for that
period.
 

<TABLE>
<CAPTION>
                                                                YEAR ENDED SEPTEMBER 30,
                                   THREE MONTHS    ---------------------------------------------------
                                       ENDED                                                   PRO
                                   SEPTEMBER 30,                                              FORMA
                                       1995         1996      1997      1998      1999        1999
                                   -------------    ----      ----      ----      ----        -----
                                                             (IN THOUSANDS)
<S>                                <C>             <C>       <C>       <C>       <C>       <C>
COMBINED STATEMENT OF OPERATIONS
  DATA:
Revenue..........................     $5,003       $24,334   $35,211   $58,831   $98,690     $97,695
Gross profit.....................      1,978        10,987    15,290    29,176    50,799      45,233
Income (loss) before income
  taxes..........................        577        (1,513)      663     6,448    19,076      13,500
Net income (loss)................        355          (866)      708     4,237    12,280       8,691
</TABLE>

 

<TABLE>
<CAPTION>
                                                               AS OF SEPTEMBER 30,
                                                                       1999
                                                              ----------------------
                                                                             AS
                                                              ACTUAL      ADJUSTED
                                                              ------      --------
                                                                     ) (IN THOUSANDS
<S>                                                           <C>        <C>
COMBINED BALANCE SHEET DATA:
Cash........................................................  $    38     $
Working capital.............................................   18,345
Total assets................................................   70,274
Current liabilities.........................................    7,775
Total liabilities...........................................    8,197
Division equity.............................................   62,077
Total liabilities and division equity.......................   70,274
</TABLE>

 
                                        7

<PAGE>   9
 

                                  RISK FACTORS
 
     You should carefully consider the risks described below before you decide
to buy our common stock. If any of the following risks were to occur, our
business, financial condition or results of operations could suffer. In that
event, the trading price of our common stock could decline, and you may lose all
or part of your investment.
 
     This prospectus contains forward-looking statements based on our current
expectations, assumptions, estimates and projections about our company and our
industry. These forward-looking statements involve risks and uncertainties. Our
actual results could differ materially from those anticipated in these
forward-looking statements as a result of various factors, as more fully
described below and elsewhere in this prospectus.
 
                         RISKS RELATING TO OUR BUSINESS
 
WE HAVE NEVER OPERATED AS A STAND-ALONE ENTITY AND OUR BUSINESS COULD SUFFER IF
WE FAIL TO DEVELOP THE SYSTEMS AND INFRASTRUCTURE NECESSARY TO SUPPORT OUR
BUSINESS AS A STAND-ALONE ENTITY
 
     We have been a part of Cabot since we began developing CMP slurries in
1985. We were organized as a separate division of Cabot in July 1995. Cabot has
historically provided us with operational, financial and other support.
Following this offering, we will operate as a stand-alone entity and,
accordingly, must develop and implement the systems and infrastructure necessary
to support our current and future business. Although Cabot has agreed to provide
us with the various interim and ongoing services described in "Relationships
Between Our Company and Cabot Corporation", these arrangements will terminate
upon the spin-off. We cannot give any assurance that, after the expiration of
these various arrangements, we will be able to replace the interim and ongoing
services on terms and conditions, including costs, as favorable as those that we
had as a division of Cabot or pursuant to these arrangements. We also cannot
give any assurance we will be able to develop the necessary systems and
infrastructure to operate as a stand-alone entity. Any failure to do so could
have a material adverse effect on our business, results of operations and
financial condition.
 
OUR HISTORICAL FINANCIAL INFORMATION MAY NOT BE REPRESENTATIVE OF OUR RESULTS AS
A SEPARATE COMPANY
 
     The historical financial information we have included in this prospectus
may not reflect what our results of operations, financial position and cash
flows would have been had we been a separate, stand-alone entity during the
periods presented and may not be indicative of what our results of operations,
financial position and cash flows will be in the future. This is because:
 
- as a division of Cabot, Cabot provided us with various services and allocated
  expenses for these services to us in amounts that may not have been the same
  as the expenses we would have incurred had we performed or acquired these
  services ourselves;
 
- we are changing our fumed metal oxide supply and dispersion services
  arrangements with Cabot and the prices under our new agreements will be
  different from the prices we paid in the past; and
 
- the information does not reflect other events and changes that will occur as a
  result of our separation from Cabot, including the establishment of our
  capital structure, the incurrence of debt and changes in our expenses as a
  result of new employee, tax and other structures and matters.
 
WE HAVE A NARROW PRODUCT RANGE AND OUR PRODUCTS MAY BECOME OBSOLETE, OR
TECHNOLOGICAL CHANGES MAY REDUCE OR LIMIT INCREASES IN CMP CONSUMPTION
 
     Our business is substantially dependent on a single class of products, CMP
slurries, which accounted for almost all of our revenue in 1999. Our success
depends on our ability to keep pace with technological changes and advances in
the semiconductor industry and to adapt and improve our products in response to
evolving customer needs and industry trends. Since its inception the
semiconductor industry has experienced rapid technological changes and advances
in the
 
                                        8

<PAGE>   10
 
design, manufacture, performance and application of IC devices and these changes
and advances are expected to continue in the future. One or more developments in
the semiconductor industry may render our products obsolete or less important to
the IC device manufacturing process, including:
 
- increased competition from new or existing producers of CMP slurries,
  including the introduction of new or substitute products;
 
- a shift toward recycling slurries;
 
- the adoption of a new process to create the wiring in IC devices known as dual
  damascene, which may reduce the number of CMP steps required to produce an IC
  device and which we expect will become predominant in IC device manufacturing
  in the next five to ten years; and
 
- advances in CMP technology that make it possible to perform CMP without a
  slurry.
 
There may also be physical and other limits on the ability of IC device
manufacturers to continue to shrink the size and increase the density of IC
devices, which are trends currently driving the growth in CMP. Any of the
foregoing developments could have a material adverse effect upon the CMP slurry
market in general or our business, financial condition and results of operations
in particular.
 
WE HAVE A LIMITED NUMBER OF LARGE CUSTOMERS
 
     Our customer base is concentrated among a limited number of large
customers. For the year ended September 30, 1999, our five largest customers
accounted for approximately 58% of our revenue, with Intel accounting for
approximately 22% of our revenue, Marketech accounting for approximately 15% of
our revenue, and Takasago accounting for approximately 10% of our revenue.
Marketech and Takasago are distributors. We believe that in the same year sales
of our products to our five largest end user customers accounted for
approximately 45% of our revenue. One or more of these principal customers may
stop buying CMP slurries from us or may substantially reduce the quantity of CMP
slurries purchased from us. Any cancellation, deferral or significant reduction
in CMP slurries sold to these principal customers or a significant number of
smaller customers could have a material adverse effect on our business,
financial condition and results of operations. See "Business -- Customers, Sales
and Marketing" for more information relating to our customers.
 
WE ARE CURRENTLY DEFENDING CLAIMS OF INFRINGEMENT AND MAY BE SUBJECT TO FUTURE
CLAIMS
 
     In June 1998, Rodel, Inc. commenced a lawsuit against Cabot in the United
States District Court for the District of Delaware seeking injunctive relief and
damages relating to allegations that Cabot is infringing a United States patent
owned by an affiliate of Rodel that relates to polishing metal surfaces. The
action is presently in discovery and trial is scheduled to begin in November
2000. In April 1999, Rodel commenced a second lawsuit against Cabot in the same
court seeking injunctive relief and damages relating to allegations that Cabot
is infringing two other United States patents owned by an affiliate of Rodel. In
the first lawsuit, the only product that is specifically alleged to infringe a
Rodel patent is our W2000 slurry, which is used to polish tungsten and which
currently accounts for a significant portion of our total revenue. The second
lawsuit does not allege infringement by any specific products; instead, it cites
one of our patents (which relates to a CMP polishing slurry for metal surfaces
including, among other things, aluminum and copper) as evidence of infringement
by us through the manufacture and sale of unspecified products. At this stage,
we cannot predict whether or to what extent Rodel will make specific
infringement claims with respect to any of our products other than our W2000
slurry in these or any future proceedings. It is possible that Rodel will claim
that many of our products infringe its patents.
 
     Although Cabot is the only named defendant in these lawsuits, we have
agreed to indemnify Cabot for any and all losses and expenses arising out of
this litigation as well as any other litigation arising out of our business.
While we believe we have meritorious defenses to the pending actions and intend
to defend them vigorously, we can give you no assurance that we will be
successful
 
                                        9

<PAGE>   11
 
in our defense. If Rodel wins either of these cases, we may have to pay damages
and, in the future, may be prohibited from producing any products found to
infringe those patents or required to pay Rodel royalty and licensing fees with
respect to sales of those products. In addition, we cannot assure you that we
will not be subject to future infringement claims by Rodel or others with
respect to our products and processes. These claims, even if they are without
merit, could be expensive and time consuming to defend and if we were to lose
any future infringement claims we could be subject to injunctions, damages
and/or royalty or licensing agreements. Royalty or licensing agreements, if
required as a result of any pending or future claims, may not be available to us
on acceptable terms or at all. Successful claims of infringement against us
could adversely affect our business, financial condition and results of
operations.
 
ANY PROBLEM OR INTERRUPTION IN OUR SUPPLY FROM CABOT OF FUMED METAL OXIDES, OUR
MOST IMPORTANT RAW MATERIALS, COULD DELAY OUR SLURRY PRODUCTION AND ADVERSELY
AFFECT OUR SALES
 
     Fumed metal oxides are the primary raw materials we use in many of our CMP
slurries. These slurries represented approximately 98% of our revenue in 1999.
Cabot is currently our exclusive supplier of fumed metal oxides. We have entered
into a fumed metal oxide supply agreement with Cabot, which will be effective
upon completion of this offering and under which Cabot will continue to be our
exclusive supplier of fumed metal oxides for our current slurry products.
Although the agreement does not require us to purchase from Cabot fumed metal
oxides for slurry products that we develop in the future, we expect that Cabot
will be our primary supplier of fumed metal oxides for these products as well.
Over 80% of the fumed metal oxides that we currently purchase from Cabot are
manufactured at its facility in Tuscola, Illinois. Our continued supply of fumed
metal oxides from Cabot is subject to a number of risks, including:
 
- the destruction of one of Cabot's fumed metal oxides manufacturing facilities,
  particularly its Tuscola facility, or its distribution infrastructure;
 
- a work stoppage or strike by Cabot employees who manufacture fumed metal
  oxides;
 
- the failure of Cabot to provide fumed metal oxides of the requisite quality
  for production of our various CMP slurries;
 
- the failure of essential fumed metal oxides manufacturing equipment at a Cabot
  plant;
 
- the failure or shortage of supply of raw materials to Cabot; and
 
- contractual amendments and disputes with Cabot, including those relating to
  the fumed metal oxide supply agreement.
 
     A significant reduction in the amount of fumed metal oxides supplied by
Cabot, a problem with the quality of those fumed metal oxides or a prolonged
interruption in their supply by Cabot could interfere with our ability to
produce our CMP slurries in the quantities and of the quality required by our
customers and in accordance with their delivery schedules. It may also be
difficult to secure alternative sources of fumed metal oxides in the event Cabot
encounters supply problems. Any of these events could have a material adverse
effect on our business, financial condition and results of operations.
 
     Prior to introducing a new CMP slurry into its manufacturing process, an IC
device manufacturer generally requires that the slurry be qualified through a
series of tests and evaluations intended to ensure that the slurry will function
properly in the manufacturing process and to optimize its application. Our
customers would have to requalify our CMP slurries if we changed the supplier or
type of fumed metal oxides we use to make them. A requalification might also be
required if we were to purchase fumed metal oxides from a different Cabot
manufacturing facility. The requalification process would likely take a
significant amount of time to complete, during which our sales of CMP slurries
to these customers could be interrupted or reduced. Any interruption or
reduction of this type could have a material adverse effect on our
 
                                       10

<PAGE>   12
 
business, financial condition and results of operations.
 
     We have also specifically engineered our slurry chemistries with the fumed
metal oxides currently used in the production of our CMP products. A change in
the fumed metal oxides we use to make our slurry products could require us to
modify our chemistries. This modification may involve a significant amount of
time and cost to complete, which may result in a material adverse effect on our
business, financial condition and results of operations.
 
WE MAY EXPERIENCE COMPETITION FROM NEW ENTRANTS INTO THE CMP SLURRY MARKET AND
CUSTOMERS THAT DEVELOP IN-HOUSE SLURRY MANUFACTURING PROCESSES
 
     We are aware of only four other manufacturers of CMP slurries currently
selling significant volumes to IC device manufacturers. Opportunities exist for
companies with sufficient financial or technological resources to emerge as
potential competitors by developing their own CMP slurry products. Some of our
major customers, and some potential customers, currently manufacture slurries
in-house and others have the financial and technological capability to do so.
Increased competition from current CMP slurry manufacturers, new entrants to the
CMP slurry market or a decision by any of our major customers to produce slurry
products in-house could have a material adverse effect on our business,
financial condition and results of operations. The existence or threat of
increased competition and in-house production could also limit or reduce the
prices we are able to charge for our slurry products. In addition, our
competitors may obtain intellectual property rights which may restrict our
ability to market our existing products and/or to innovate and develop new
products.
 
OUR INABILITY TO ATTRACT AND RETAIN KEY MANAGEMENT PERSONNEL OR TECHNICAL
EMPLOYEES COULD CAUSE OUR BUSINESS TO SUFFER
 
     If we fail to recruit and retain the necessary management personnel, our
business and our ability to maintain existing and obtain new customers, develop
new products and provide acceptable levels of customer service could suffer. The
success of our business is also heavily dependent on the leadership of our key
management personnel, all of whom are employees-at-will. We have no key man
insurance on any of our personnel. The loss of any number of our key management
personnel could have a material adverse effect on our business and results of
operations.
 
     Our success also depends on our ability to recruit, retain and motivate
technical personnel for our research and development activities. Competition for
qualified personnel, particularly those with significant experience in the CMP
and IC device industries, is intense, and we may not be able to successfully
recruit, train or retain these employees. The loss of the services of any key
technical employee could have a material adverse effect on our business
generally as well as our ability to research and develop new and existing
products and to provide technical support and service to our customers.
 
EXPANSION OF OUR BUSINESS INTO NEW PRODUCT AREAS AND APPLICATIONS MAY NOT BE
SUCCESSFUL
 
     An element of our strategy is to leverage our current customer
relationships and technological experience and capabilities to expand our
business into new product areas and applications, including manufacturing CMP
polishing pads and slurries for CMP polishing of substrates and magnetic heads
used in hard disk drives. Since we have had limited experience in developing and
marketing these products, we cannot give any assurance that the expansion of our
business into these new product areas or new applications will be successful.
 
OUR INTELLECTUAL PROPERTY MAY BE MISAPPROPRIATED
 
     Our intellectual property is important to our success and ability to
compete. We attempt to protect our intellectual property rights through a
combination of patent, trademark, copyright and trade secret laws, as well as
employee and third-party nondisclosure and assignment agreements. Our failure to
obtain or maintain adequate protection of our
 
                                       11

<PAGE>   13
 
intellectual property rights for any reason could have a material adverse effect
on our business, financial condition or results of operations.
 
     Policing the unauthorized use of our intellectual property is difficult,
and we cannot give any assurance that the steps we have taken will prevent the
misappropriation or unauthorized use of our technologies. In addition, we cannot
give any assurance that we will be able to prevent other parties from designing
and marketing unauthorized technologies or that others will not independently
develop or otherwise acquire the same or substantially equivalent technologies
to ours.
 
WE ARE SUBJECT TO SOME RISKS ASSOCIATED WITH OUR FOREIGN OPERATIONS
 
     We currently have operations and a large customer base outside the United
States. In 1999, approximately 45.9% of our revenue was generated by sales to
customers outside the United States. We encounter potential risks in doing
business in foreign countries, including:
 
- the difficulty of enforcing agreements and collecting receivables through some
  foreign legal systems;
 
- foreign customers may have longer payment cycles than customers in the United
  States;
 
- tax rates in some foreign countries may exceed those of the United States and
  foreign earnings may be subject to withholding requirements or the imposition
  of tariffs, exchange controls or other restrictions;
 
- general economic and political conditions in the countries where we operate
  may have an adverse effect on our operations in those countries;
 
- the difficulties associated with managing a large organization spread
  throughout various countries; and
 
- the potential difficulty in enforcing intellectual property rights in some
  foreign countries.
 
As we continue to expand our business globally, our success will depend, in
part, on our ability to anticipate and effectively manage these and other risks.
We cannot assure you that these and other factors will not have a material
adverse effect on our international operations or on our business, financial
condition or results of operations.
 
EXCHANGE RATE FLUCTUATIONS COULD ADVERSELY AFFECT OUR FINANCIAL RESULTS
 
     As a result of our international operations, we expect to generate an
increasing portion of our revenue and incur a significant portion of our
expenses in currencies other than U.S. dollars. To the extent we are unable to
match revenue received in foreign currencies with costs paid in the same
currency, exchange rate fluctuations in any foreign currency could have a
material adverse effect on our business, financial condition or results of
operations.
 
     The financial condition and results of operations of some of our operating
entities are reported in various foreign currencies and then translated into
U.S. dollars at the applicable exchange rate for inclusion in our consolidated
financial statements. As a result, appreciation of the U.S. dollar against these
foreign currencies will have a negative impact on our reported revenue and
operating profits. Conversely, depreciation of the U.S. dollar against these
foreign currencies will have a positive impact on our reported revenue and
operating profit. For information about the impact of foreign currency
translation on our financial condition, see "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Effect of Currency
Exchange Rate and Exchange Rate Risk Management" and "-- Market Risk and
Sensitivity Analysis".
 
OUR ABILITY TO RAISE CAPITAL IN THE FUTURE MAY BE LIMITED
 
     We believe that cash generated by our operations, the net proceeds of this
offering, borrowings under our credit facility and up to $10 million of
additional financing which we expect to be able to borrow on acceptable terms
will be sufficient to pay the $
 
                                       12

<PAGE>   14
 
dividend to Cabot and to fund our operations and capital expenditures for the
next 24 months. However, we plan to expand our business and continue to improve
our technology and, to do so, we may be required to raise additional funds in
the future through public or private equity or debt financing, strategic
relationships or other arrangements. We cannot be certain any financing will be
available on acceptable terms, or at all, and our failure to raise capital when
needed could have a material adverse effect on our business, financial condition
or results of operations. Additional equity financing may be dilutive to the
holders of our common stock and debt financing, if available, may involve
restrictive covenants.
 
YEAR 2000 ISSUES COULD HARM OUR BUSINESS AS A RESULT OF REDUCED DEMAND FOR OUR
PRODUCTS AND INTERNAL AND EXTERNAL OPERATIONS DIFFICULTIES
 
     The Year 2000 problem is the potential for system and processing failures
of date-related data arising from the use of two digits by computer-controlled
systems, rather than four digits, to define the applicable year. Cabot and our
company rely, directly and indirectly, on the systems of business enterprises
such as customers, suppliers, utilities, creditors and financial institutions,
both domestic and international, which could be subject to operational
difficulties arising out of Year 2000 issues. Any failure on the part of Cabot's
or our principal internal systems or other business' systems as a result of the
Year 2000 problem could harm our business, reputation, financial condition or
results of operations. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Year 2000 Readiness Disclosure".
 
                  RISKS RELATING TO OUR SEPARATION FROM CABOT
 
WE WILL BE CONTROLLED BY CABOT AS LONG AS IT OWNS A MAJORITY OF OUR COMMON STOCK
AND OUR OTHER STOCKHOLDERS WILL BE UNABLE TO AFFECT THE OUTCOME OF STOCKHOLDER
VOTING DURING THAT TIME
 
     After the completion of this offering, Cabot will beneficially own
approximately      % of our outstanding shares of common stock, or      % if the
underwriters exercise their over-allotment option in full. As long as Cabot owns
a majority of our outstanding common stock, Cabot will continue to be able to
elect our entire board of directors and generally to determine the outcome of
all corporate actions requiring stockholder approval. As a result, Cabot will be
in a position to continue to control all matters affecting our company,
including:
 
- a change of control of our company, including a merger;
 
- the acquisition or disposition of assets by our company;
 
- future issuances of common stock or other securities of our company;
 
- the incurrence of debt by our company;
 
- amendments, waivers and modifications to our fumed metal oxide supply
  agreement with Cabot and the other interim and ongoing agreements we have
  entered into with Cabot;
 
- the payment of dividends on our common stock; and
 
- some determinations with respect to treatment of items in our tax returns
  which are consolidated or combined with Cabot's tax returns.
 
     Cabot has indicated that, following this offering, it intends to divest its
remaining equity interest in our company within six to twelve months after this
offering. We cannot give any assurance, however, that Cabot will complete a
divestiture of its equity interest in our company in this time frame or at all.
 
A NUMBER OF OUR DIRECTORS MAY HAVE CONFLICTS OF INTEREST BECAUSE THEY ARE ALSO
DIRECTORS OR EXECUTIVE OFFICERS OF CABOT OR OWN CABOT STOCK
 
     We currently anticipate that three members of our board of directors will
be directors or executive officers of Cabot. Our directors who are also
directors or executive officers of Cabot will have obligations to both companies
and may have conflicts of interest with respect to matters involving or
affecting us,
 
                                       13

<PAGE>   15
 
such as acquisitions and other corporate opportunities that may be suitable for
both us and Cabot. In addition, after this offering and the spin-off, a number
of our directors and executive officers will continue to own Cabot stock and
options on Cabot stock they acquired as directors or employees of Cabot. This
ownership could create, or appear to create, potential conflicts of interest
when these directors and officers are faced with decisions that could have
different implications for our company and Cabot. While there are provisions in
our certificate of incorporation designed to resolve these conflicts between us
and Cabot fairly, we cannot assure you that any conflicts will be so resolved.
See "Description of Capital Stock".
 
WE MAY HAVE POTENTIAL BUSINESS CONFLICTS OF INTEREST WITH CABOT WITH RESPECT TO
OUR PAST AND ONGOING RELATIONSHIPS
 
     Upon the completion of this offering, Cabot will continue to be our
exclusive supplier of fumed metal oxides for our existing slurries under a fumed
metal oxide supply agreement between Cabot and our company. While we are not
required to do so under the terms of that agreement, we expect we also will
purchase from Cabot most of the fumed metal oxides we require for any new
slurries we develop. Furthermore, we currently have and, after this offering and
the spin-off, will continue to have, contractual arrangements with Cabot
requiring Cabot and its affiliates to provide us with various interim, ongoing
and other services. As a result, conflicts of interest may arise between Cabot
and us in a number of areas relating to our past and ongoing relationships,
including:
 
- the terms of our fumed metal oxide supply agreement and other interim and
  ongoing agreements with Cabot;
 
- Cabot's ability to control our management and affairs;
 
- the nature, quality and pricing of transitional services Cabot has agreed to
  provide us;
 
- business opportunities that may be attractive to both Cabot and us;
 
- litigation, labor, tax, employee benefit and other matters arising from our
  separation from Cabot;
 
- the incurrence of debt and major business combinations by us; and
 
- sales or distributions by Cabot of all or any portion of its ownership
  interest in us.
 
     We cannot assure you that we will be able to resolve any conflicts we may
have with Cabot or, if we are able to do so, that the resolution will be as
favorable as if we were dealing with an unaffiliated party. The contractual
agreements we have entered into with Cabot may be amended from time to time upon
agreement between the parties and, as long as Cabot is our controlling
stockholder, it will have the ability to require us to agree to any such
amendments. These agreements were made in the context of an affiliated
relationship and were negotiated in the overall context of our separation from
Cabot. The prices and other terms under these agreements may be less favorable
to us than what we could have obtained in arm's-length negotiations with
unaffiliated third parties for similar services or under similar leases. It is
particularly difficult to assess whether the price for fumed metal oxides
provided for under our fumed metal oxide supply agreement with Cabot is the same
as or different than the price we could have obtained in arm's-length
negotiations with an unaffiliated third party in light of the long-term nature
of the contract, the volumes provided for under the agreement and our particular
quality requirements. For more information about these arrangements, see
"Relationships Between Our Company and Cabot Corporation".
 
WE FACE RISKS ASSOCIATED WITH BEING A MEMBER OF CABOT'S CONSOLIDATED GROUP FOR
FEDERAL INCOME TAX PURPOSES
 
     For so long as Cabot continues to own 80% of the vote and value of our
capital stock, we will be included in Cabot's consolidated group for federal
income tax purposes. Under a tax sharing agreement with Cabot that will become
effective prior to the completion of this offering, we will pay Cabot the amount
of federal, state and local income
 
                                       14

<PAGE>   16
 
taxes that we would be required to pay to the relevant taxing authorities if we
were a separate taxpayer not included in Cabot's consolidated or combined
returns. In addition, by virtue of its controlling ownership and the tax sharing
agreement, Cabot will effectively control substantially all of our tax
decisions. Under the tax sharing agreement, Cabot will have sole authority to
respond to and conduct all tax proceedings including tax audits relating to
Cabot consolidated or combined income tax returns in which we are included.
Moreover, notwithstanding the tax sharing agreement, federal law provides that
each member of a consolidated group is liable for the group's entire tax
obligation. Thus, to the extent Cabot or other members of the group fail to make
any federal income tax payments required of them by law, we could be liable for
the shortfall. Similar principles may apply for state income tax purposes in
many states.
 
IF THE ANTICIPATED SPIN-OFF IS NOT TAX FREE, WE COULD BE LIABLE TO CABOT FOR THE
RESULTING TAXES
 
     As described above under "Prospectus Summary -- Relationship with Cabot
Corporation", we will, after this offering, continue to be controlled by Cabot
and Cabot intends to divest itself of its remaining equity interest in us by
means of a tax free spin-off. We have agreed to indemnify Cabot in the event
that the spin-off is not tax free to Cabot as a result of various actions taken
by or with respect to us or our failure to take various actions, all as set
forth in our tax sharing agreement with Cabot. We may not be able to control
some of the events that could trigger this liability. In particular, any
acquisition of us by a third party within two years of the spin-off could result
in the spin-off becoming a taxable transaction and give rise to our obligation
to indemnify Cabot for any resulting tax liability.
 
                        RISKS RELATING TO THIS OFFERING
 
SINCE OUR COMMON STOCK HAS NOT TRADED PUBLICLY, THE INITIAL PUBLIC OFFERING
PRICE MAY NOT BE INDICATIVE OF THE MARKET PRICE OF OUR COMMON STOCK AFTER THIS
OFFERING, AND THE MARKET PRICE OF OUR COMMON STOCK MAY FLUCTUATE WIDELY AND
RAPIDLY
 
     There is currently no public market for our common stock, and we cannot
assure you that an active trading market will develop or be sustained after this
offering. The initial public offering price has been determined through
negotiation between us and representatives of the underwriters and may not be
indicative of the market price for our common stock after this offering.
 
     The market price of our common stock could fluctuate significantly as a
result of:
 
- economic and stock market conditions generally and specifically as they may
  impact participants in the semiconductor industry;
 
- changes in financial estimates and recommendations by securities analysts
  following our stock;
 
- earnings and other announcements by, and changes in market evaluations of,
  participants in the semiconductor industry;
 
- changes in business or regulatory conditions affecting participants in the
  semiconductor industry;
 
- announcements or implementation by us or our competitors of technological
  innovations or new products; and
 
- trading volume of our common stock.
 
     The securities of many companies have experienced extreme price and volume
fluctuations in recent years, often unrelated to the companies' operating
performance. Specifically, market prices for securities of technology related
companies have frequently reached elevated levels, often following their initial
public offerings. These levels may not be sustainable and may not bear any
relationship to these companies' operating performances. If the market price of
our common stock reaches an elevated level following this offering, it may
materially and rapidly decline. In the past, following periods of volatility in
 
                                       15

<PAGE>   17
 
the market price of a company's securities, stockholders have often instituted
securities class action litigation against the company. If we were involved in a
class action suit, it could divert the attention of senior management, and, if
adversely determined, have material adverse effect on our business, results of
operations and financial condition.
 
SHARES ELIGIBLE FOR FUTURE SALE COULD REDUCE THE MARKET PRICE FOR OUR COMMON
STOCK
 
     The market price of our common stock could drop as a result of sales of a
large number of shares of our common stock in the market after this offering or
the perception that these sales could occur. These factors also could make it
more difficult for us to raise funds through future offerings of our common
stock.
 
     Upon the completion of this offering, there will be
outstanding shares of our common stock. The shares of our common stock sold in
this offering will be freely tradable without restriction, except for any shares
acquired by an affiliate of our company (which can be sold under Rule 144 under
the Securities Act, subject to various volume and other limitations).      % of
the shares of our common stock will be beneficially owned by Cabot. Cabot is not
obligated to retain these shares, except that subject to limited exceptions, it
has agreed not to sell or otherwise dispose of any shares of common stock for
180 days after the completion of this offering without the consent of our
underwriters. After the expiration of this 180 day period, Cabot could dispose
of its shares of our common stock through a public offering, spin-off or other
transaction and has indicated its intention to do so through a spin-off.
 
ANTI-TAKEOVER PROVISIONS OF DELAWARE'S GENERAL CORPORATION LAW AND OUR
CERTIFICATE OF INCORPORATION AND BYLAWS, AS WELL AS OUR STOCKHOLDERS RIGHTS
PLAN, COULD DELAY OR DETER A CHANGE IN CONTROL OF OUR COMPANY
 
     Amendments we intend to make to our certificate of incorporation and our
bylaws, as well as our stockholders' rights plan and various provisions of the
Delaware General Corporation Law, may make it more difficult to effect a change
in control of our company. These amendments, our stockholders' rights plan and
the various provisions of Delaware General Corporate Law may adversely affect
the price of our common stock, discourage third parties from making a bid for
our company or reduce any premiums paid to our stockholders for their common
stock. For example, we intend to amend our certificate of incorporation to
authorize our board of directors to issue up to                million shares of
blank check preferred stock and to attach special rights and preferences to this
preferred stock. The issuance of this preferred stock may make it more difficult
for a third party to acquire control of us. We also intend to amend our
certificate of incorporation to provide for the division of the board of
directors into three classes as nearly equal in size as possible with staggered
three-year terms. This classification of our board of directors could have the
effect of making it more difficult for a third party to acquire our company, or
of discouraging a third party from acquiring control of our company. In
addition, the rights issued to our stockholders under our stockholders' rights
plan may make it more difficult or expensive for another person or entity to
acquire control of us without the consent of our board of directors. See
"Description of Capital Stock -- Preferred Stock", "-- Anti-takeover Effects of
Our Certificate of Incorporation and Bylaws and Provisions of Delaware Law" and
"-- Rights Plan" for a more complete description of our capital stock, our
certificate of incorporation, our stockholders' rights plan and the effects of
the Delaware General Corporation Law that could hinder a third party's attempts
to acquire control of us.
 
INVESTORS IN THIS OFFERING WILL EXPERIENCE IMMEDIATE AND SUBSTANTIAL DILUTION
 
     If you purchase common stock in this offering, you will pay more for your
shares than the amounts paid by Cabot for its shares. As a result, you will
experience immediate and substantial dilution of approximately $          per
share, representing the difference between the initial public offering price of
$          per share and our net tangible book value per share as of
 
                                       16

<PAGE>   18
 
, 1999 after giving effect to this offering. In addition, you may experience
further dilution to the extent that shares of our common stock are issued upon
the exercise of stock options or under our employee stock purchase plan.
Substantially all of the shares issuable upon the exercise of currently
outstanding stock options, or under our employee stock purchase plan, will be
issued at a purchase price less than the public offering price per share in this
offering. See "Dilution" for a more complete description of how the value of
your investment in our common stock will be diluted upon the completion of this
offering.
 

                                USE OF PROCEEDS
 
     We estimate the net proceeds from our sale of                shares of
common stock will be $          , after deducting the underwriting discount and
estimated offering expenses payable by us. If the underwriters' over-allotment
option is exercised in full, we estimate the net proceeds will be $  million.
 
     We presently intend to use all of the net proceeds from this offering to
pay a dividend to Cabot in the amount of $          .
 

                                DIVIDEND POLICY
 
     Except for the dividend that we expect to pay to Cabot immediately
following the completion of this offering, we have never declared or paid any
cash dividends on our capital stock. We presently intend to retain future
earnings, if any, to finance the expansion of our business and do not expect to
pay any cash dividends in the foreseeable future. Payment of future cash
dividends, if any, will be at the discretion of our board of directors after
taking into account various factors, including our financial condition,
operating results, current and anticipated cash needs and plans for expansion.
 
                                       17

<PAGE>   19
 

                                 CAPITALIZATION
 
     The following table sets forth our capitalization (1) on an actual basis as
of September 30, 1999, and (2) as adjusted to give effect to:
 
- the proceeds from the sale of                shares of common stock offered
  hereby at an assumed initial public offering price of $          per share,
  after deducting estimated underwriting discounts and expenses and assuming the
  underwriters do not exercise their option to purchase additional shares; and
 
- the payment of the dividend to Cabot in the amount of $       .
 
     This table should be read in conjunction with "Selected Financial Data",
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and our combined financial statements and the notes to our combined
financial statements, each of which is included in this prospectus.
 

<TABLE>
<CAPTION>
                                                              AS OF SEPTEMBER 30, 1999
                                                              ------------------------
                                                               ACTUAL     AS ADJUSTED
                                                               ------     -----------
                                                                   (IN THOUSANDS)
<S>                                                           <C>         <C>
Long-term debt..............................................  $    --       $    --
Division equity.............................................   62,077
                                                              -------       -------
          Total capitalization..............................  $62,077       $
                                                              =======       =======
</TABLE>

 
                                       18

<PAGE>   20
 
                                    DILUTION
 
     Our net tangible book value as of September 30, 1999 was approximately
$58.0 million, or $     per share. Net tangible book value per share is equal to
our total tangible assets minus our total liabilities divided by the number of
shares of our common stock outstanding. Assuming we had sold the
shares of common stock offered by this prospectus at an initial public offering
price of $          , and after deducting discounts and commissions and
estimated offering expenses payable by us and the dividend payment to Cabot, our
pro forma net tangible book value at September 30, 1999 would have been
approximately $     million, or $     per share. This represents an immediate
increase in net tangible book value of $     per share to Cabot and an immediate
dilution of $     per share to new investors. Dilution is determined by
subtracting net tangible book value per share after the offering from the amount
of cash paid by a new investor for a share of common stock. The following table
illustrates the substantial and immediate per share dilution to new investors:
 

<TABLE>
<CAPTION>
                                                                 PER SHARE
                                                              ----------------
<S>                                                           <C>       <C>
Assumed initial public offering price.......................            $
Net tangible book value as of September 30, 1999............  $
  Dividend payment to Cabot.................................
  Increase in pro forma net tangible book value attributable
     to new investors.......................................
                                                              ------
Pro forma net tangible book value after this offering.......
                                                                        ------
Dilution to new investors...................................            $
                                                                        ======
</TABLE>

 
     The following table summarizes as of September 30, 1999 the number of
shares of common stock purchased from us, the total consideration paid to us and
the average price per share paid by Cabot and by new investors at an assumed
offering price of $     per share and without giving effect to the underwriting
discount and assumed offering expenses:
 

<TABLE>
<CAPTION>
                                       SHARES PURCHASED     TOTAL CONSIDERATION
                                      ------------------    -------------------    AVERAGE PRICE
                                      NUMBER     PERCENT     AMOUNT     PERCENT      PER SHARE
                                      ------     -------     ------     -------    -------------
<S>                                   <C>        <C>        <C>         <C>        <C>
Existing stockholders...............                   %    $                 %       $
New investors.......................
                                      -------     -----     --------     -----
  Total.............................                   %    $                 %
                                      =======     =====     ========     =====
</TABLE>

 
     If the underwriters exercise their over-allotment option in full, the net
tangible book value per share of common stock as of September 30, 1999 would
have been $
per share, which would result in dilution to the new investors of $     per
share, and the number of shares held by the new investor will increase to
          , or      % of the total number of shares to be outstanding after this
offering, and the number of shares held by Cabot will be           shares, or
     % of the total number of shares to be outstanding after this offering.
 
     The foregoing computation of dilution excludes an aggregate of
approximately           shares of stock purchasable at $     per share upon the
exercise of outstanding employee stock options.
 
                                       19

<PAGE>   21
 
                            SELECTED FINANCIAL DATA
 
     The following selected financial data should be read in conjunction with,
and are qualified by reference to, "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and our combined financial
statements and the notes to our combined financial statements, each of which is
included elsewhere in this prospectus. The selected financial data presented is
for the five-year period ended September 30, 1999. The statement of operations
data for the fiscal years ended September 30, 1997, 1998 and 1999 and the
balance sheet data as of September 30, 1998 and 1999 are derived from our
combined financial statements, which have been audited by PricewaterhouseCoopers
LLP, independent public accountants, and are included elsewhere in this
prospectus. The statement of operations data for the fiscal years ended
September 30, 1995 and 1996 and the balance sheet information as of September
30, 1995, 1996 and 1997 are derived from our unaudited combined financial
statements, which are not included in this prospectus. Because we began to
operate as a separate division of Cabot in July 1995, the statement of
operations data for 1995 includes only three months of activity.
     Unaudited pro forma basic and diluted net income per share has been
calculated by dividing net income for the most recent fiscal year by the
          common shares issued to Cabot by us and the shares to be issued in
this offering. See the notes to our combined financial statements.
 
     An income tax benefit was recorded in 1997 as a result of a tax credit for
research and development activities that exceeded our statutory taxes for that
period.
 

<TABLE>
<CAPTION>
                                                        THREE
                                                       MONTHS
                                                        ENDED             YEAR ENDED SEPTEMBER 30,
                                                    SEPTEMBER 30,   -------------------------------------
                                                        1995         1996      1997      1998      1999
                                                    -------------   -------   -------   -------   -------
                                                       (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<S>                                                 <C>             <C>       <C>       <C>       <C>
COMBINED STATEMENT OF OPERATIONS DATA:
Revenue...........................................     $4,242       $23,373   $33,851   $56,862   $95,701
Revenue -- related party..........................        761           961     1,360     1,969     2,989
                                                       ------       -------   -------   -------   -------
                                                        5,003        24,334    35,211    58,831    98,690
                                                       ------       -------   -------   -------   -------
Cost of goods sold................................      2,264        12,386    18,561    27,686    44,902
Cost of goods sold -- related party...............        761           961     1,360     1,969     2,989
                                                       ------       -------   -------   -------   -------
                                                        3,025        13,347    19,921    29,655    47,891
                                                       ------       -------   -------   -------   -------
    Gross profit..................................      1,978        10,987    15,290    29,176    50,799
Operating expenses:
  Research and development........................         27         6,984     8,411    10,139    14,551
  Selling and marketing...........................        591           674     1,028     3,293     4,572
  General and administrative......................        604         4,122     4,468     8,576    11,880
  Amortization of goodwill and other
    intangibles...................................        179           720       720       720       720
                                                       ------       -------   -------   -------   -------
    Total operating expenses......................      1,401        12,500    14,627    22,728    31,723
                                                       ------       -------   -------   -------   -------
Income (loss) before income taxes.................        577        (1,513)      663     6,448    19,076
Provision for (benefit from) income taxes.........        222          (647)      (45)    2,211     6,796
                                                       ------       -------   -------   -------   -------
    Net income (loss).............................     $  355       $  (866)  $   708   $ 4,237   $12,280
                                                       ======       =======   =======   =======   =======
Unaudited pro forma basic and diluted net income
  per share.......................................                                                $
                                                                                                  =======
Unaudited pro forma basic and diluted weighted
  average shares outstanding......................
                                                                                                  =======
</TABLE>

 
                                       20

<PAGE>   22
 

<TABLE>
<CAPTION>
                                                                   AS OF SEPTEMBER 30,
                                                     -----------------------------------------------
                                                      1995      1996      1997      1998      1999
                                                      ----      ----      ----      ----      ----
<S>                                                  <C>       <C>       <C>       <C>       <C>
                                                        (UNAUDITED)
<CAPTION>
                                                                     (IN THOUSANDS)
<S>                                                  <C>       <C>       <C>       <C>       <C>
COMBINED BALANCE SHEET DATA:
Total current assets...............................  $ 3,957   $ 5,817   $ 8,781   $15,581   $26,120
Property, plant and equipment, net.................    4,045    16,797    17,195    24,713    40,031
Other assets.......................................    6,928     6,284     5,547     4,837     4,123
                                                     -------   -------   -------   -------   -------
Total assets.......................................  $14,930   $28,898   $31,523   $45,131   $70,274
                                                     =======   =======   =======   =======   =======
Total current liabilities..........................  $   651   $ 2,649   $ 2,980   $ 4,870   $ 7,775
Other long-term liabilities........................       61        40       119       233       422
                                                     -------   -------   -------   -------   -------
Total liabilities..................................      712     2,689     3,099     5,103     8,197
Division equity....................................   14,218    26,209    28,424    40,028    62,077
                                                     -------   -------   -------   -------   -------
Total liabilities and division equity..............  $14,930   $28,898   $31,523   $45,131   $70,274
                                                     =======   =======   =======   =======   =======
</TABLE>

 
                                       21

<PAGE>   23
 
                UNAUDITED PRO FORMA COMBINED STATEMENT OF INCOME
 
     The following unaudited pro forma combined statement of income has been
prepared to reflect adjustments to our historical results of operations to give
effect to certain transactions, as if such transactions had been consummated at
earlier dates, as described herein.
 
     We historically sold various dispersion products to Cabot at our cost of
manufacturing. We have entered into a new dispersion services agreement with
Cabot, which will become effective upon the completion of this offering, under
which we will provide dispersion products to Cabot at our cost plus a standard
margin. Under the new agreement, Cabot will supply us with the fumed metal oxide
raw materials for these dispersions at no cost to us, which will reduce both our
cost of goods sold and revenue for these dispersions. The unaudited pro forma
combined statement of income has been adjusted to reflect the reduction in
revenue and related cost of goods sold which would have resulted had the
dispersion services agreement been in effect for the year ended September 30,
1999.
 
     We historically purchased fumed metal oxides, critical raw materials for
our slurries, from Cabot at Cabot's budgeted standard cost. We have entered into
a new fumed metal oxide supply agreement with Cabot which will become effective
upon the completion of this offering under which we will purchase fumed metal
oxides at a contractually agreed upon price. The agreement provides for fixed
price increases each year and other price increases if Cabot's cost of producing
fumed metal oxides increases. The unaudited pro forma combined statement of
income has been adjusted to reflect the additional costs that we would have
incurred based on the initial contractual price if the fumed metal oxide supply
agreement had been in effect for the year ended September 30, 1999.
 
     The effective tax rate derived from our income tax expense for the year
ended September 30, 1999 was applied to the pro forma adjustments to determine
the income tax expense or benefit associated with pro forma adjustments.
 
     Unaudited pro forma basic and diluted earnings per share has been
calculated by dividing net income for the most recent fiscal year by the
common shares issued to Cabot by us and the shares to be issued in this
offering. See the notes to our combined financial statements.
 
     The unaudited pro forma combined statement of income should be read in
connection with, and are qualified by reference to, our combined financial
statements and related notes, as well as "Management's Discussion and Analysis
of Financial Condition and Results of Operations", included elsewhere in this
prospectus. We believe that the assumptions used provide a reasonable basis for
presenting the significant effects directly attributable to the transactions
discussed above. The unaudited pro forma combined statement of income is not
necessarily indicative of the results that would have been reported had such
events actually occurred on the dates specified, nor are they indicative of our
future results.
 
                                       22

<PAGE>   24
 

<TABLE>
<CAPTION>
                                                   FOR THE YEAR ENDED SEPTEMBER 30, 1999
                                                   --------------------------------------
                                                                  PRO FORMA
                                                   HISTORICAL    ADJUSTMENTS    PRO FORMA
                                                   ----------    -----------    ---------
                                                    (IN THOUSANDS, EXCEPT SHARE AND PER
                                                                SHARE DATA)
<S>                                                <C>           <C>            <C>
Revenue..........................................   $95,701        $             $95,701
Revenue -- related party.........................     2,989           (995)        1,994
                                                    -------        -------       -------
                                                     98,690           (995)       97,695
                                                    -------        -------       -------
Cost of goods sold...............................    44,902          5,925        50,827
Cost of goods sold -- related party..............     2,989         (1,344)        1,645
                                                    -------        -------       -------
                                                     47,891          4,581        52,472
                                                    -------        -------       -------
     Gross profit................................    50,799         (5,576)       45,223
Operating expenses:
  Research and development.......................    14,551                       14,551
  Selling and marketing..........................     4,572                        4,572
  General and administrative.....................    11,880                       11,880
  Amortization of goodwill and other
     intangibles.................................       720                          720
                                                    -------                      -------
     Total operating expenses....................    31,723                       31,723
                                                    -------        -------       -------
Income before income taxes.......................    19,076         (5,576)       13,500
Provision for income taxes.......................     6,796         (1,987)        4,809
                                                    -------        -------       -------
     Net income..................................   $12,280        $(3,589)      $ 8,691
                                                    =======        =======       =======
Pro forma basic and diluted earnings per share...                                $
                                                                                 =======
Pro forma weighted average shares outstanding....
                                                                                 =======
</TABLE>

 
                                       23

<PAGE>   25
 

                      MANAGEMENT'S DISCUSSION AND ANALYSIS
                OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 
     The following discussion and analysis should be read in conjunction with
our historical combined financial statements and the notes to those financial
statements and our unaudited pro forma combined statement of income, which are
included in this prospectus. This prospectus contains forward-looking statements
relating to future events and our future financial performance. Actual results
could be significantly different from those discussed in this prospectus.
Factors that could cause or contribute to such differences include those
summarized in the section entitled "Risk Factors", as well as those discussed in
other sections of this prospectus.
 
                                    OVERVIEW
 
     We develop, manufacture and supply CMP slurries to the semiconductor
industry. Our revenue consists of (1) sales of CMP slurry products to IC device,
DRAM and hard disk drive manufacturers and (2) related party revenue from fumed
metal oxide dispersions sold to Cabot. We recognize revenue and accrue for
anticipated warranty costs upon delivery of products.
 
     The primary factors affecting our revenue are sales volumes, average
selling prices and foreign currency effects. In recent years, sales volumes have
been positively impacted by the growth of the semiconductor industry, increased
demand for smaller, faster and more complex IC devices, pressure on IC device
manufacturers to reduce costs, successful new product introductions and the
competitive dynamics within our industry.
 
     For the year ended September 30, 1999, our five largest customers accounted
for approximately 58% of our revenue, with Intel accounting for approximately
22% of our revenue, Marketech accounting for approximately 15% of our revenue,
and Takasago accounting for approximately 10% of our revenue. Marketech and
Takasago are distributors. We believe that in the same year sales of our
products to our five largest end user customers accounted for approximately 45%
of our revenue.
 
     A portion of our revenue is derived from sales in international markets.
Revenue from sales in Europe was 10% of our total revenue in 1999, 8% of our
total revenue in 1998 and 6% of our total revenue in 1997. Revenue from sales in
Asia was 35% of our total revenue in 1999, 23% of our total revenue in 1998 and
17% of our total revenue in 1997. We expect our sales in Asia to continue to
increase significantly in the future and intend to use our Geino, Japan facility
to support these sales.
 
     Our revenue from Cabot was $1.4 million in 1997, $2.0 million in 1998 and
$3.0 million in 1999. In the past we sold fumed metal oxide dispersions to Cabot
on a cost basis which included the cost of the fumed metal oxide raw materials
we purchased from Cabot. We have entered into a new dispersion services
agreement with Cabot which will be effective upon the completion of this
offering. Under the new agreement with Cabot, Cabot will supply the fumed metal
oxide raw materials for these dispersions to us at no cost. Because the cost of
the fumed metal oxide raw materials will not be included in our cost of goods
sold, it will also not be included in the price we charge to Cabot for our
dispersion services. Consequently, we expect our revenue from Cabot and our cost
of goods sold attributable to this revenue to decrease in the future.
 
     Our cost of goods sold consists primarily of the cost of fumed metal
oxides, the primary raw materials used in the manufacture of most of our CMP
slurries. We have entered into a fumed metal oxide supply agreement with Cabot,
effective as of the completion of this offering, pursuant to which Cabot will
continue to be our exclusive supplier of fumed metal oxides for our currently
existing slurry products. Although the agreement does not require us to purchase
from Cabot fumed metal oxides for slurry products that we develop in the future,
we expect that Cabot will be our primary supplier of fumed metal oxides for
these products as well. Under the new agreement, the prices we will pay to Cabot
in the future for fumed metal
 
                                       24

<PAGE>   26
 
oxides will be higher than we have paid in the past and will increase each year.
See "Business -- Cabot as Our Raw Materials Supplier".
 
     We currently pay a royalty to a third party from whom we purchased assets
in July 1995. This royalty is equal to approximately 2.5% of all revenue derived
from the sale of our CMP slurry products, including our slurries for polishing
substrates and magnetic heads in hard disk drives. This obligation will expire
in the third quarter of 2002.
 
     We have entered into a management services agreement with Cabot, effective
as of the completion of this offering, pursuant to which Cabot will provide
administrative and corporate support services to us on an interim or
transitional basis. These services will be similar in scope to what Cabot
provided to us prior to this offering. Cabot will charge us for these services
at a price that reflects its cost to provide these services. We expect that the
cost to us will be similar to what our corporate charges were prior to this
offering.
 
     We are, and, after this offering but prior to the spin-off, will continue
to be, included in Cabot's consolidated federal income tax group, and our
federal income tax liability will be included in the consolidated federal income
tax liability of Cabot. We have entered into a tax sharing agreement with Cabot
under which we will pay Cabot an amount equal to our income tax liability
calculated as if we were an independent company. Under the terms of the tax
sharing agreement, Cabot will not be required to make any payment to us for the
use of our tax attributes that come into existence prior to the spin-off until
the time that we would otherwise be able to utilize those attributes.
 
     We have been a part of Cabot since we began developing CMP slurries in
1985. We were organized as a separate division of Cabot in July 1995. Our
financial statements reflect our historical results of operations, financial
position and cash flows. These financial statements have been carved out from
the financial statements and records of Cabot using the historical results of
operations and cash flows and historical basis of the assets and liabilities of
our business, as adjusted to reflect allocations of certain corporate charges
that our management believes are reasonable. Our historical financial
information may not necessarily reflect the results of our operations, financial
position and cash flows in the future or what the results of operations,
financial position and cash flows would have been had we been a separate,
stand-alone entity during those periods.
 
                             RESULTS OF OPERATIONS
 
     The following table sets forth for the periods indicated the percentage of
revenue of certain line items included in our combined statement of operations
data:
 

<TABLE>
<CAPTION>
                                                       YEAR ENDED
                                                     SEPTEMBER 30,          PRO FORMA
                                                  --------------------    SEPTEMBER 30,
                                                  1997    1998    1999        1999
                                                  ----    ----    ----    -------------
<S>                                               <C>     <C>     <C>     <C>
Revenue.........................................  100%    100%    100%         100%
Cost of goods sold..............................   56      50      49           54
                                                  ---     ---     ---          ---
Gross profit....................................   44      50      51           46
  Research and development......................   24      17      15           15
  Selling and marketing.........................    3       6       4            4
  General and administrative....................   13      15      12           12
  Amortization of goodwill and other
     intangibles................................    2       1       1            1
                                                  ---     ---     ---          ---
Income before income taxes......................    2      11      19           14
Provision for income taxes......................    0       4       7            5
                                                  ---     ---     ---          ---
Net income......................................    2       7      12            9
                                                  ===     ===     ===          ===
</TABLE>

 
                                       25

<PAGE>   27
 
YEAR ENDED SEPTEMBER 30, 1999 VERSUS YEAR ENDED SEPTEMBER 30, 1998
 
REVENUE
 
     Revenue from sales of CMP slurry products was $95.7 million in 1999, which
represented an increase of 68%, or $38.8 million, from 1998. The increase in
revenue was primarily due to a 53% increase in volume and, to a lesser extent, a
10% increase in average selling prices. The volume growth was driven by the
increased use of CMP slurries in the manufacture of IC devices. In particular,
our sales to customers in Asia increased significantly, and we began to
recognize revenue from the sale of slurry products used in the manufacture of
the substrates in hard disk drives. Average selling prices rose from 1998 to
1999 due to the sale of higher performance products which had higher average
selling prices. Related party revenue was $3.0 million in 1999, which
represented an increase of 52%, or $1.0 million, from 1998. This increase was
due to higher volumes sold. On a pro forma basis, for the fiscal year ended
September 30, 1999, related party revenue would have been $2.0 million. This
decrease reflects the fact that under our existing arrangement with Cabot, we
purchase the fumed metal oxide raw materials required to make the dispersions
and the cost of these raw materials is included in the price we charge to Cabot,
while under our new dispersion services agreement Cabot will provide these raw
materials to us at no cost. As a result, our revenue and cost of goods sold will
decrease as a result of the new arrangements.
 
COST OF GOODS SOLD
 
     Cost of goods sold was $47.9 million in 1999, which represented an increase
of 61%, or $18.2 million, from 1998. Of that increase, $14.6 million was due to
higher sales volume and the remainder was primarily due to higher manufacturing
costs associated with improved quality requirements and start up costs of our
Geino, Japan facility. On a pro forma basis, for the year ended September 30,
1999, cost of goods sold would have been $52.5 million, which reflects a $5.9
million increase for the fumed metal oxides we purchase from Cabot to produce
our slurries, partially offset by a $1.3 million decrease in the cost of goods
sold attributable to our new dispersion services agreement with Cabot, in each
case for the reasons described above.
 
GROSS PROFIT
 
     Our gross profit as a percentage of revenue was 51% for 1999 and 50% for
1998. Higher margins from new products in 1999 were offset by increased spending
for expanded capacity and support capabilities. On a pro forma basis, for the
year ended September 30, 1999, gross profit as a percentage of revenue was 46%.
 
RESEARCH AND DEVELOPMENT
 
     Research and development expenses were $14.6 million in 1999, which
represented an increase of 44%, or $4.4 million, from 1998. Of this increase,
$2.3 million was due to higher clean room costs for personnel, laboratory
supplies and depreciation expenses in order to enhance development of new
products. Increased staffing and consumption of supplies in other research and
development areas contributed to the rest of the increase in 1999. Key
activities during 1999 involved the development of advanced particle technology,
new or enhanced slurry products and new CMP polishing pad products.
 
SELLING AND MARKETING
 
     Selling and marketing expenses were $4.6 million in 1999, which represented
an increase of 39%, or $1.3 million, from 1998. The increase was primarily due
to the hiring of additional customer support personnel and business development
activities.
 
GENERAL AND ADMINISTRATIVE
 
     General and administrative expenses were $11.9 million in 1999, which
represented an increase of 39%, or $3.3 million, from 1998. Charges for
corporate services provided by Cabot increased $1.8 million from 1998 to 1999 to
keep pace with the growth of our business. The remaining increase was primarily
due to additional personnel costs and outside legal fees.
 
AMORTIZATION OF GOODWILL AND OTHER INTANGIBLES
 
     Amortization of goodwill and other intangibles was $720,000 in 1999 and
1998 and
 
                                       26

<PAGE>   28
 
related to goodwill and other intangible assets associated with the acquisition
of selected assets from a third party in 1995.
 
PROVISION FOR INCOME TAXES
 
     The effective tax rate on income from operations was 36% in 1999 and 34% in
1998.
 
NET INCOME
 
     Net income was $12.3 million in 1999, which represented an increase of
190%, or $8.0 million, from 1998 as a result of the factors discussed above.
 
YEAR ENDED SEPTEMBER 30, 1998 VERSUS YEAR ENDED SEPTEMBER 30, 1997
 
REVENUE
 
     Revenue from sales of CMP slurry products was $56.9 million in 1998, which
represented an increase of 68%, or $23.0 million, from 1997. The increase in
revenue was primarily due to a 61% increase in volume and, to a lesser extent, a
4% increase in average selling prices. The volume growth was driven by the
increased use of CMP slurries in the manufacture of IC devices. Average selling
prices rose due to the sale of higher performance products which had higher
average selling prices. Related party revenue was $2.0 million in 1998, an
increase of 45% from $1.4 million in 1997, and increased due to higher volumes
sold.
 
COST OF GOODS SOLD
 
     Cost of goods sold was $29.7 million in 1998, which represented an increase
of 49%, or $9.7 million, from 1997. This increase was primarily due to higher
sales volume.
 
GROSS PROFIT
 
     Our gross profit as a percentage of revenue increased to 50% in 1998 from
44% in 1997. The improvement was primarily the result of higher volumes and
improved operating efficiencies, as well as a greater percentage of higher
margin new products.
 
RESEARCH AND DEVELOPMENT
 
     Research and development expenses were $10.1 million in 1998, which
represented an increase of 21%, or $1.7 million, from 1997. The increase was due
to additional personnel and operating supply costs for new product development.
Key activities during 1998 involved the development of new CMP slurry and
polishing pad products.
 
SELLING AND MARKETING
 
     Selling and marketing expenses were $3.3 million in 1998, which represented
an increase of 220%, or $2.3 million, from 1997. The increase resulted primarily
from the establishment of an international customer support organization in Asia
and Europe. The increase was also due to increased spending to perform market
research and conduct promotional activities such as participation in trade shows
and creation and distribution of product literature.
 
GENERAL AND ADMINISTRATIVE
 
     General and administrative expenses were $8.6 million in 1998, which
represented an increase of 92%, or $4.1 million, from 1997. The increase in 1998
was primarily due to $2.0 million of increased legal expenses relating to patent
litigation and $1.2 million of increased charges from Cabot for corporate
services and additional personnel hired to support our growth.
 
AMORTIZATION OF GOODWILL AND OTHER INTANGIBLES
 
     Amortization of goodwill and other intangibles was $720,000 in 1998 and
1997 related to goodwill and other intangible assets associated with the
acquisition of selected assets from a third party in 1995.
 
PROVISION FOR INCOME TAXES
 
     The effective tax rate on income from operations was 34% in 1998 as
compared to a tax benefit of 7% in 1997. An income tax benefit was recorded in
1997 as a result of a tax credit for research and development activities that
exceeded our statutory taxes for that period.
 
NET INCOME
 
     Net income was $4.2 million in 1998, which represented an increase of 498%,
or $3.5 million, from 1997 as a result of the factors discussed above.
 
                                       27

<PAGE>   29
 
                      SELECTED QUARTERLY OPERATING RESULTS
 
     The following table presents our unaudited financial information for the
eight quarters ended September 30, 1999. This unaudited financial information
has been prepared in accordance with generally accepted accounting principles
applied on a basis consistent with the annual audited financial statements and
in the opinion of management, they include all necessary adjustments, which
consist only of normal recurring adjustments necessary to present fairly the
financial results for the periods. The results for any quarter are not
necessarily indicative of results for any future period.
 

<TABLE>
<CAPTION>
                                                                    QUARTER ENDED
                              -----------------------------------------------------------------------------------------
                              DEC. 31,   MARCH 31,   JUNE 30,   SEPT. 30,   DEC. 31,   MARCH 31,   JUNE 30,   SEPT. 30,
                                1997       1998        1998       1998        1998       1999        1999       1999
                              --------   ---------   --------   ---------   --------   ---------   --------   ---------
                                                         (IN THOUSANDS, EXCEPT PERCENTAGES)
<S>                           <C>        <C>         <C>        <C>         <C>        <C>         <C>        <C>
Revenue.....................  $12,090     $14,001    $15,120     $17,620    $20,875     $21,867    $22,864     $33,084
Cost of Goods Sold..........    6,323       7,343      7,554       8,435     10,036      10,177     11,007      16,671
                              -------     -------    -------     -------    -------     -------    -------     -------
Gross Profit................    5,767       6,658      7,566       9,185     10,839      11,690     11,857      16,413
                                 47.7%       47.6%      50.0%       52.1%      51.9%       53.5%      51.9%       49.6%
Operating Expenses
  Research and
    development.............    2,283       2,501      2,455       2,900      3,445       3,067      3,669       4,370
  Selling and Marketing.....      649       1,077      1,013         554        954       1,083      1,108       1,427
  General and
    administrative..........    1,769       1,869      2,106       2,832      2,570       2,989      3,232       3,089
  Amortization of goodwill
    and other intangible
    assets..................      180         180        180         180        180         180        180         180
                              -------     -------    -------     -------    -------     -------    -------     -------
Total operating expenses....    4,881       5,627      5,754       6,466      7,149       7,319      8,189       9,066
                              -------     -------    -------     -------    -------     -------    -------     -------
Income before income taxes..      886       1,031      1,812       2,719      3,690       4,371      3,668       7,347
Provision for income
  taxes.....................      304         353        622         932      1,313       1,559      1,307       2,617
                              -------     -------    -------     -------    -------     -------    -------     -------
Net Income..................  $   582     $   678    $ 1,190     $ 1,787    $ 2,377     $ 2,812    $ 2,361     $ 4,730
                              =======     =======    =======     =======    =======     =======    =======     =======
</TABLE>

 
                        LIQUIDITY AND CAPITAL RESOURCES
 
     We had cash flows from operating activities of $9.0 million in 1999, $2.3
million in 1998 and $361,000 in 1997. Our principal capital requirements have
been to fund working capital needs and to support our expansion.
 
     In 1999, cash flows used in investing activities were $17.1 million,
primarily due to the completion of our Geino, Japan facility and construction of
our Aurora, Illinois headquarters building. In 1998, cash flows used in
investing activities were $9.3 million due to manufacturing capacity increases
and the acquisition of research and development equipment. In 1997, cash flows
used in investing activities were $1.7 million, primarily related to additions
for the purchase of machinery and equipment used in the production and research
and development.
 
     Cash flows from financing activities of $8.1 million in 1999, $6.8 million
in 1998, and $1.2 million in 1997 resulted from capital contributions from
Cabot.
 
     Upon the completion of this offering, we will have a $25 million revolving
credit facility with BankBoston, N.A. Loans under this facility will be used
primarily for general corporate purposes, including working capital and capital
expenditures. There is a sublimit for letters of credit of $5 million. We may
elect to borrow at either:
 
- the higher of BankBoston's base rate as announced from time to time or the
  federal funds rate plus 0.50%; or
 
- the LIBOR rate plus a margin of between 1.5% and 2.0%, determined quarterly.
 
     Interest for base rate loans will be payable at the end of each calendar
quarter, and for LIBOR loans at the earlier of the end of each interest period
or quarterly.
 
                                       28

<PAGE>   30
 
Borrowings under the credit facility may be prepaid at any time, subject to
payment of normal breakage costs, if any, in the case of LIBOR loans.
 
     During the term of the facility, we will be required to maintain the
following financial ratios:
 
- a ratio of (A) cash plus short-term investments plus net accounts receivable
  to (B) total current liabilities equal or above 1.25 to 1;
 
- a leverage ratio of (A) total funded indebtedness to (B) EBITDA below 2.25 to
  1; and
 
- a minimum coverage ratio of (A) EBIT to (B) interest expense greater than 3.0
  to 1.
 
     EBITDA is our net income before taxes plus interest expense, depreciation
and amortization. EBIT would take into account depreciation and amortization.
 
     We would breach the credit facility if we were to incur losses greater than
$7.5 million in a single fiscal quarter or greater than $10 million in two
consecutive quarters. In addition to customary covenants, the credit facility
contains certain restrictions on our ability to incur additional indebtedness,
create liens, make certain investments, pay dividends or make certain
distributions on our stock, merge, consolidate, make certain acquisitions or
dispositions and enter into transactions with affiliates.
 
     We estimate that our total capital expenditures in 2000 will be
approximately $32.5 million, approximately $7.2 million of which we have already
spent. Our major capital expenditures in 2000 are expected to be:
 
- approximately $20.4 million to expand our existing North American
  manufacturing facilities and build and equip a new slurry manufacturing
  facility adjacent to our current facility in Aurora, Illinois;
 
- approximately $8.1 million to expand our existing manufacturing facility in
  Japan and establish new distribution facilities in Asia;
 
- approximately $0.7 million to expand and improve our Barry, Wales facility;
  and
 
- approximately $3.4 million for polishing and other equipment used in our
  research and development activities.
 
     We believe that cash generated by our operations, the net proceeds of this
offering, borrowings under our credit facility and up to $10 million of
additional financing which we expect to be able to borrow on acceptable terms
will be sufficient to pay the $
dividend to Cabot and fund our operations and expected capital expenditures for
the next 24 months. However, we plan to expand our business and continue to
improve our technology and, to do so, we may be required to raise additional
funds in the future through public or private equity or debt financing,
strategic relationships or other arrangements. We cannot be certain any such
financing will be available on acceptable terms, or at all, and our failure to
raise capital when needed could have a material adverse effect on our business,
financial condition or results of operations. Additional equity financing could
be dilutive to the holders of our common stock and debt financing, if available,
may involve restrictive covenants. See "Risk Factors -- Risks Relating to Our
Business -- Our ability to raise capital in the future may be limited".
 
     Cabot is currently a defendant in two lawsuits involving Rodel. We will
indemnify Cabot for any liabilities or damages resulting from these lawsuits.
See "Business -- Legal Proceedings".
 
      EFFECT OF CURRENCY EXCHANGE RATES AND EXCHANGE RATE RISK MANAGEMENT
 
     We conduct business operations outside of the United States through our
foreign subsidiaries. Our foreign subsidiaries maintain their accounting records
in their local currencies. Consequently, period to period comparability of
results of operations is affected by fluctuations in exchange rates. The primary
currencies to which we have exposure are the Japanese Yen and the British Pound.
Our exposure to foreign currency exchange risks has not been significant because
a significant portion of our foreign sales are denominated in U.S. dollars. As
foreign markets become a more significant portion of our business, we
 
                                       29

<PAGE>   31
 
may enter into forward contracts in an effort to manage foreign currency
exchange exposure.
 
                      MARKET RISK AND SENSITIVITY ANALYSIS
 
FOREIGN EXCHANGE RATE RISK
 
     During 1999, less than 10% of our revenue was transacted in currencies
other than the U.S. dollar. We generally do not enter into forward exchange
contracts as a hedge against foreign currency exchange risk on transactions
denominated in foreign currencies or for speculative or trading purposes. We
have performed a sensitivity analysis assuming a hypothetical 10% adverse
movement in foreign exchange rates. As of September 30, 1999, the analysis
demonstrated that such market movements would not have a material adverse effect
on our consolidated financial position, results of operations or cash flows.
Actual gains and losses in the future may differ materially from this analysis
based on changes in the timing and amount of foreign currency rate movements and
our actual exposures. We believe that our exposure to foreign currency exchange
rate risk at September 30, 1999 was not material.
 
                         YEAR 2000 READINESS DISCLOSURE
 
     The Year 2000 problem is the potential for system and processing failures
of date-related data arising from the use of two digits by computer controlled
systems, rather than four digits, to define the applicable year. We completed
our Year 2000 assessment in 1999 and have not experienced any material Year 2000
difficulties to date. Subsequent to 1999, we do not expect to incur any material
costs related to Year 2000. Any failure on the part of Cabot's or our principal
internal systems or other business systems as a result of the Year 2000 problem
could harm our business, reputation, financial condition or results of
operations.
 
                            NEW ACCOUNTING STANDARDS
 
     In April 1998, the American Institute of Certified Public Accountants
issued Statement of Position 98-1, "Accounting for the Costs of Computer
Software Developed or Obtained for Internal Use". Statement of Position 98-1
provides guidance regarding whether computer software is internal-use software,
the capitalization of costs incurred for computer software developed or obtained
for internal use and accounting for the proceeds of computer software originally
developed or obtained for internal use and then subsequently sold to the public.
We do not expect the impact of adopting Statement of Position 98-1, which will
be effective for us in fiscal 2000, to be material to our financial condition or
results of operations.
 
     In April 1998, the American Institute of Certified Public Accountants
issued Statement of Position 98-5, "Reporting on the Costs of Start-Up
Activities". Statement of Position 98-5 requires companies to expense start-up
and organization costs as incurred. Statement of Position 98-5 broadly defines
start-up activities and provides examples to help entities determine costs that
are and are not within the scope of Statement of Position 98-5. Statement of
Position 98-5 will be effective for us in fiscal 2000, and its initial
application is to be reported as the cumulative effect of a change in accounting
principle. We do not expect the impact of adopting Statement of Position 98-5 to
be material to our financial condition or results of operations.
 
     In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities". Statement of Financial Accounting Standards No. 133
establishes new standards of accounting and reporting for derivative instruments
and hedging activities. Statement of Financial Accounting Standards No. 133
requires all derivatives be recognized at fair value in the statement of
financial position, and the corresponding gains or losses be reported either in
the statement of operations or as a component of comprehensive income, depending
on the type of hedging relationship that exists. We do not expect the impact of
adopting Statement of Financial Accounting Standards No. 133, which will apply
to us in 2001, to be material to our financial condition or results of
operations.
 
     In December 1999, the SEC released Staff Accounting Bulletin No. 101, which
pro-
 
                                       30

<PAGE>   32
 
vides guidance on the recognition, presentation and disclosure of revenue in
financial statements filed with the SEC. We are required to be in conformity
with the provisions of Staff Accounting Bulletin No. 101 no later than October
1, 2000 and do not expect a material change in our financial condition or
results of operations as a result of SAB 101.
 
                                       31

<PAGE>   33
 

 
                                   BUSINESS
 
                                  OUR COMPANY
 
     We are the leading supplier of slurries used in chemical mechanical
planarization, or CMP. We believe that we have an approximately 80% share of the
slurries sold to IC device manufacturers worldwide. CMP is a polishing process
used by IC device manufacturers to planarize many of the multiple layers of
material that are built upon silicon wafers to produce advanced IC devices.
Planarization is a polishing process that levels and smooths, and removes the
excess material from, the surfaces of these layers. CMP slurries are liquids
containing abrasives and chemicals that facilitate and enhance this polishing
process. CMP assists IC device manufacturers in producing smaller, faster and
more complex IC devices with fewer defects. We believe CMP will become
increasingly important in the future as manufacturers seek to further shrink the
size of these devices and improve their performance. Most of our CMP slurries
are used to polish insulating layers and the tungsten plugs that go through the
insulating layers and connect the multiple wiring layers of IC devices. We are
in the process of introducing CMP slurries for polishing the substrates and
magnetic heads used in hard disk drives. In addition, we have recently begun
producing and selling polishing pads used in the CMP process.
 
                            IC DEVICE MANUFACTURING
 
     Today's advanced IC devices are composed of millions of transistors and
other electronic components connected by miles of wiring. The wiring, composed
primarily of aluminum and tungsten, carries electric signals through the
multiple layers of the IC device. Insulating material is used throughout the IC
device to isolate the electronic components and wiring to prevent short
circuiting and to improve the efficiency of electric signal travel within the
device. To increase performance, IC device manufacturers have progressively
increased the number, or density, of transistors and other electronic components
in each IC device.
 
     The manufacturing process for IC devices typically begins with a circular
wafer of pure silicon. A large number of identical IC devices are manufactured
on each wafer at the same time, and at the end of the process, the wafer is cut
into the individual devices. The first step in the manufacturing process is to
build transistors and other electronic components on the silicon wafer. These
components are then wired together in a particular sequence to produce an IC
device with the desired characteristics. Once the transistors and other
electronic components are in place on the silicon wafer, they are usually
covered with a layer of insulating material, most often silicon dioxide.
 
     CMP is used to planarize the insulating layers of an IC device and prepare
them for a process known as metallization. During metallization, wiring is added
to the surface of the insulating layer through a series of steps involving:
 
- depositing metal, usually aluminum, onto the surface of the layer;
 
- projecting an image of the desired wiring pattern on the layer using a process
  known as photolithography; and
 
- removing the excess deposited metal from the surface of the insulating layer
  using a process known as etching, which leaves behind the desired wiring
  pattern.
 
When the wiring is finished, another layer of insulating material is added and
planarized using CMP. This process of alternating insulating and wiring layers
is repeated until the IC device is completed. The electronic components and
wiring layers are connected by conductive plugs that are formed by making holes
in the insulating layers and filling those holes with metal, usually tungsten.
After these holes have been filled with tungsten, CMP is used to remove all the
excess tungsten above the surface of the insulating layer so that the top of the
plug is level with the surface of the insulating layer before the next wiring
layer is built. Manufacturing IC devices requires precision processing in ultra
clean, controlled environments.
 
                                       32

<PAGE>   34
 
     The semiconductor industry has a generally accepted set of design rules
that describe current and projected feature size and spacing of electronic
components and wiring in IC devices. The feature size and spacing in these
design rules have been progressively decreasing to accommodate the demand for
increased circuit density and miniaturization. As the density of IC devices
increases, the amount of wiring needed to connect the transistors and other
electronic components to each other also increases. As IC devices become
smaller, this increase in wiring requires tighter and more precise spacing of
the wiring and has led to an increase in the layers of IC devices.
 
     According to the Semiconductor Industry Association's National Technology
Roadmap for Semiconductors, the trends toward increased density and
miniaturization of IC devices are expected to continue. While the number of
layers varies by IC device type, an advanced logic device built with today's
common 0.25 micron feature size has approximately seven insulating and six
wiring layers and a typical memory device built with the same feature size has
approximately three insulating and two wiring layers. By 2001, the Semiconductor
Industry Association predicts that advanced IC devices will be manufactured with
a 0.15 micron feature size and that advanced logic devices will have
approximately eight insulating and seven wiring layers and advanced memory
devices will have approximately four insulating and three wiring layers. CMP is
currently used to polish both the insulating layers and the tungsten plugs in IC
devices in separate steps. As a result, even though CMP is not currently used to
polish the wiring layers, the number of CMP steps used to produce an IC device
is typically at least equal to the total number of insulating and wiring layers
in the device. While CMP is currently used more in the manufacture of logic
devices than memory devices, we believe that the use of CMP in the manufacture
of memory devices will increase in the future as the feature size and spacing of
these devices decreases and the number of layers in the device increases.
 
     The increased density and miniaturization of IC devices has also resulted
in an increased emphasis on reduction of defects and residue remaining after the
CMP process. A defect is any imperfection on a layer of an IC device that causes
a short circuit or other problem with the performance of the device. Residue
from the CMP process consists of particle and chemical residue left on the layer
surface as a result of the CMP process. The likelihood that a defect or residue
of a given size will negatively effect the performance of an IC device increases
as the density and miniaturization of the device increase. IC device
manufacturers are requiring that the number of defects per given area decline
and that the residues from the CMP process be reduced.
 
                       CHEMICAL MECHANICAL PLANARIZATION
 
     The CMP process involves both chemical reactions and physical means to
planarize the insulating layers of an IC device that are built upon a silicon
wafer and the conductive tungsten plugs that go through the insulating layers
and connect the multiple wiring layers of IC devices. The wafer is typically
held on a rotating carrier which is spun at high speeds and pressed against a
rotating, polishing table. The portion of the table that comes in contact with
the wafer is covered by a textured, polishing pad. A CMP slurry is continuously
applied to the polishing pad during the CMP process to facilitate and enhance
the polishing process. CMP slurries are liquid compounds composed of high purity
deionized water, chemical additives and abrasive agents that chemically interact
with the surface material of the IC device at an atomic level.
 
                                       33

<PAGE>   35
 
     The following diagram demonstrates the CMP process as applied to the
insulating layers of an IC device:
 
                    [CMP OF OXIDE INSULATING LAYER GRAPHIC]
 
     The following diagram demonstrates the CMP process as applied to the
conductive tungsten plugs of an IC device:
 
                     [CMP OF OXIDE TUNGSTEN PLUGS GRAPHIC]
 
                                BENEFITS OF CMP
 
     CMP provides IC device manufacturers with a number of advantages. CMP
enables IC device manufacturers to produce smaller IC devices with greater
density, both of which improve the performance of the device. As IC devices
shrink and become more dense, they require smaller feature sizes and tighter
spacing between the wiring of the device. If the surface is not level, the
smaller feature size and tighter spacing make it more difficult for the
photolithography equipment to focus accurately and create the desired wiring
pattern. In addition, because today's smaller, denser IC devices have more
layers, any uneveness of a layer at or near the bottom of an IC device will get
magnified in the additional layers that are added to the device. Defects caused
by problems in the photolithography process or uneveness in the layers can lead
to short circuits, reduced performance and, at worst, failure of the IC device.
By using CMP, IC device manufacturers can eliminate or minimize these problems.
 
                                       34

<PAGE>   36
 
     By enabling IC device manufacturers to make smaller IC devices, CMP allows
them to increase their throughput, or the number of IC devices that they can
manufacture in a given time period. CMP also helps reduce the number of
defective or substandard IC devices produced, which increases the device yield.
Improvements in throughput and yield reduce an IC device manufacturer's total
production costs. Manufacturers can achieve further improvements in throughput
and yield through improvements in the CMP process that reduce defectivity rates
and decrease the amount of time required for the polishing process.
 
                                  CMP SLURRIES
 
     The characteristics that make an effective CMP slurry include:
 
- high polishing rates, which increase productivity and throughput;
 
- high selectivity, which means enhancing the polishing of specific materials
  while inhibiting polishing of other materials;
 
- uniform polishing of different surface materials at the same time, which
  avoids problems such as dishing and erosion;
 
- low levels of chemical and physical impurities, which reduce defects and
  residues on the polished surface that can adversely affect IC device
  performance; and
 
- colloidal stability, which means the abrasive particles within the slurry do
  not settle, which is important for uniform polishing with minimum defects.
 
     Most of the foregoing qualities of CMP slurries affect and enhance not only
the performance of the IC devices but can also positively impact the cost of
ownership of the CMP process. Cost of ownership is a calculation by which IC
device manufacturers evaluate the benefits and costs of each production step by
analyzing the impact of that step on throughput and yield and the costs of the
production inputs of that step. This calculation allows IC device manufacturers
to compare competing production processes and inputs. An input that improves
throughput and yield may reduce the cost of ownership even though it costs more.
 
     Prior to introducing a new or different CMP slurry into its manufacturing
process, an IC device manufacturer generally requires that the slurry be
qualified at each of its plants through a series of tests and evaluations
intended to ensure that the slurry will function properly in the manufacturing
process and to optimize the slurry's application. These tests may require
changes to the CMP process, the CMP slurry and/or the CMP polishing pad. While
this qualification process varies depending on numerous factors, it is not
unusual for this process to be very expensive and take six months or more to
complete. IC device manufacturers must take the cost, time delay and impact on
production into account when they consider switching to a new CMP slurry.
 
                                INDUSTRY TRENDS
 
     The rapid growth of the CMP slurry market has been driven in large part by
the significant growth and technological advances the semiconductor industry has
experienced over the past decade. IC devices are critical components in an
increasingly wide variety of products and applications, including computers,
data processing, communications, telecommunications, the Internet, automobiles
and consumer and industrial electronics. As the performance of IC devices has
increased and their size and cost have decreased, the use of IC devices in these
applications has grown significantly. According to industry sources, the
worldwide semiconductor market as measured by total sales grew at an average
annual compound rate of 11% in the period from 1988 through 1998. Dataquest and
other industry sources project continued growth at similar rates in the future.
 
     The rapid growth in the semiconductor industry, increasing demand for
smaller, higher performance and more complex IC devices and pressure on IC
device manufacturers to reduce their costs have led to increased use of CMP and
consumption of CMP slurries and polishing pads. We believe that worldwide
revenues from the sale of CMP slurries to IC device manufacturers grew
 
                                       35

<PAGE>   37
 
to approximately $120 million in 1999. Industry surveys project that annual
worldwide revenues in this market will grow to between approximately $350 and
$450 million by 2002. This projected growth assumes increases in the number of
IC devices produced, the percentage of IC devices that are produced using CMP
and the number of polishing steps used to produce each device.
 
     Although some sectors of the semiconductor industry have been highly
cyclical, sales of CMP slurries and polishing pads have not been adversely
affected by these trends. We believe this is because sales of CMP slurries and
polishing pads are driven primarily by the number of IC devices sold, which has
been much less cyclical than the prices of IC devices. In addition, we believe
that IC manufacturers have continued to increase their use of CMP because the
CMP process represents only a small percentage of the total production cost of
an IC device and is very important to the continued improvement of IC device
performance.
 
                        OTHER APPLICATIONS OF CMP IN THE
                        IC DEVICE MANUFACTURING PROCESS
 
     CMP is primarily used today for polishing the insulating layers and
tungsten plugs in IC devices. However, we believe there are a number of other
applications for CMP in the IC device manufacturing process and have undertaken
research and have developed slurries for these applications. For example, we
have developed CMP slurries for polishing copper because we believe copper will
increasingly be used in the future for both wiring and conductive plugs because
it conducts electricity better than aluminum and tungsten.
 
     CMP is currently being used by some of the leading IC device manufacturers
in connection with a process known as shallow trench isolation. Shallow trench
isolation is a relatively new method of isolating the electronic components
built on silicon wafers of an IC device to prevent short circuits and other
electrical interference. Shallow trench isolation uses CMP before the first
insulating layer is put down on the wafer. Isolation methods used prior to
shallow trench isolation did not use CMP. By using CMP in conjunction with
shallow trench isolation, IC device manufacturers can achieve greater
miniaturization and density of their IC devices.
 
     An additional application of CMP in the IC device manufacturing process
includes planarizing the polysilicon material often used to build the electronic
components of both logic and memory devices. As the number of these electronic
components per IC device increases, we believe that the use of polysilicon CMP
will increase.
 
                                    STRATEGY
 
     Our objective is to maximize our profitability and stockholder value by
maintaining and leveraging our leading position in the CMP slurry market. We
believe our leading market position provides us with significant competitive
advantages. Our proven track record increases the propensity for IC device
manufacturers to work with us in the early stages of product development for
their next generation IC devices. It also gives us a competitive advantage
because of the evaluation and qualification costs incurred by an IC device
manufacturer if it is required to switch to a new CMP slurry.
 
     To maintain and leverage our leading position in the CMP slurry market, we
will pursue the following strategies:
 
REMAIN THE TECHNOLOGY LEADER IN CMP SLURRIES
 
     We believe that technology is key to success in the CMP slurry market and
we plan to continue to devote significant resources to research and development.
We need to keep pace with the rapid technological advances in the semiconductor
industry so we can continue to deliver products that meet our customers'
evolving needs. We intend to use our advanced research and development,
polishing and metrology capabilities to:
 
- advance our understanding of our customers' technology, processes, and
  performance requirements for qualified products;
 
- further improve the chemical and mechanical qualities of our CMP products; and
 
                                       36

<PAGE>   38
 
- demonstrate and deliver advanced CMP solutions to the semiconductor industry.
 
BUILD AND MAINTAIN CUSTOMER INTIMACY
 
     We believe that building close relationships with our customers is another
key to success in the CMP slurry market. We work closely with our customers to
research and develop new and better CMP slurries, to integrate our slurries into
their manufacturing processes and to assist them with supply, warehousing,
packaging and inventory management. We plan to continue to devote significant
resources to enhancing our close customer relationships.
 
EXPAND GLOBALLY
 
     We believe that having production facilities and personnel and other
resources in strategic locations around the world is key to the success of our
business, particularly in light of increased IC device manufacturing in Asia.
Accordingly, we have established a global presence by opening production
facilities in Barry, Wales and Geino, Japan. We also have assembled a team of
account managers and independent distributors strategically located in Europe,
Taiwan, Singapore, Japan and Korea and technical support and sales personnel
throughout the United States and in Europe and Asia. We intend to expand our
production capacity, technical support and sales in many of the locations around
the world where IC device production is concentrated.
 
ATTRACT AND RETAIN TOP QUALITY PERSONNEL
 
     We have assembled a highly skilled and dedicated workforce that includes a
wide range of scientists and applications specialists, many of whom have
significant experience in the semiconductor industry. We plan to continue to
attract and retain experienced personnel committed to providing high performance
products and strong customer and applications support.
 
MAINTAIN TOP QUALITY PRODUCTS AND SUPPLY
 
     Our customers demand consistent high quality products and a reliable source
of supply. We will continually advance our strict quality controls to improve
the uniformity and consistency of performance of our CMP products. The capacity
and location of our production facilities throughout the United States and in
Europe and Asia allow us to provide a reliable supply chain to meet our
customers' CMP slurry requirements in a consistent, timely manner.
 
EXPAND INTO NEW APPLICATIONS AND PRODUCTS
 
     We intend to leverage our CMP experience and technology into new
applications and products. Starting from our core CMP slurries designed for
polishing the insulating layers of IC devices, we have developed and introduced
new slurries for CMP polishing of the tungsten plugs currently used to connect
the wiring between multiple layers of IC devices. We have also developed CMP
slurries for polishing the aluminum and copper wiring layers of IC devices and
for CMP polishing of substrates and magnetic heads used in hard disk drives.
Additionally, we are using our knowledge of CMP materials to expand into the
production of CMP polishing pads so that we can provide our customers with a
broader range of applications and materials used in the CMP process.
 
                                    PRODUCTS
 
CMP SLURRIES FOR IC DEVICES
 
     We produce CMP slurries of various formulations for polishing a wide
variety of materials. We have developed new, improved generations of each of our
slurries as well as new slurries to keep pace with our customers' evolving
needs. We currently produce more than ten slurries for polishing the oxide
insulating layers of IC devices, which is the most common use of CMP in the IC
device manufacturing process. We have introduced new generations of oxide
slurries that reduce both defectivity in IC devices and the required polishing
time. While our oxide CMP slurries are also used to polish poly-silicon
material, we have developed a CMP slurry specifically engineered to polish this
material which offers improved selectivity to poly-silicon and fine poly-silicon
surface finish.
 
                                       37

<PAGE>   39
 
     We also manufacture more than seven slurry products for polishing tungsten.
As with our oxide slurries, we have introduced new generations of slurries for
polishing tungsten that offer improvements in polishing performance. These
improvements include faster polishing rates, greater polishing uniformity and
reduced defectivity.
 
CMP SLURRIES FOR HARD DISK DRIVES
 
     In 1998 we introduced CMP slurries for CMP polishing of substrates and
magnetic heads used in hard disk drives. We believe this CMP application can
significantly improve the surface finish of these substrates, resulting in
greater storage capacity of the substrates. We also believe that this CMP
application will improve the speed and reliability of information exchange
between the hard disk substrate and the magnetic head. In addition, we believe
that, as with IC device manufacturers, CMP can also improve the production
efficiency of manufacturers of hard disk drives by helping them increase their
throughput and yield.
 
     We developed our CMP slurries for hard disk drives by leveraging our core
slurry technology and manufacturing capacity and hiring personnel directly from
the industry who understand the needs of hard disk drive manufacturers. We also
established a dedicated research and development team and an applications
support team who employ a process solution approach similar to what we use for
our other slurry products. We believe that these markets offer significant
potential and that our products in this area offer superior performance over
currently used materials. We began commercial sale of these products in 1999. We
have generated more than $1.5 million of sales from these products during 1999.
 
POLISHING PADS
 
     CMP polishing pads are consumable materials used in the CMP process that
work in conjunction with the CMP slurry to facilitate the polishing process.
There are two principal types of CMP polishing pads used with CMP slurries: (1)
a round pad that is designed to be affixed to a platform which moves in a rotary
or orbital motion and (2) a developing technology in which a belt, roll or web
polishing pad is affixed to a platform that moves in a linear motion. Both types
of polishing pads are consumed during the CMP process as their surface becomes
worn by the polishing action.
 
     The CMP polishing pad market is currently led by one principal supplier
which we believe has an approximately 90% share of the CMP polishing pad market.
Based on discussions with our customers as well as our own examination of the
CMP polishing pad market, we identified demand for higher quality, more reliable
and consistent polishing pads and the opportunity to jointly market our CMP
slurries and polishing pads to our existing customers.
 
     Our first series of polishing pads, which was introduced in July 1999, is
designed for tungsten applications. In early 2000, our tungsten pad was
qualified by a major semiconductor manufacturer's process and we made our first
commercial sales of CMP polishing pads to this customer. We expect to introduce
an extended line of polishing pads in 2000. We believe that our CMP polishing
pads offer advantages over currently available CMP polishing pads, including
higher removal rates, longer life and more uniform polishing, and that our new
pad production technology provides fundamental improvements over existing
manufacturing methods that will result in increased pad consistency and
reliability. We further believe the compatibility of our CMP polishing pads and
slurries will enhance our ability to jointly market these products to our
existing and future customers.
 
                         CUSTOMERS, SALES AND MARKETING
 
     We primarily market our products directly to IC device manufacturers, a
relatively concentrated market. For the year ended September 30, 1999, our five
largest customers accounted for approximately 58% of our revenue, with Intel
accounting for approximately 22% of our revenue, Marketech accounting for
approximately 15% of our revenue, and
 
                                       38

<PAGE>   40
Takasago accounting for approximately 10% of our revenue. Marketech and
Takasago are distributors. We believe that in the same year sales of our
products to our five largest end user customers accounted for approximately 45%
of our revenue. We currently have a supply contract with Intel for the supply of
CMP slurry products over the three year period beginning in January 1999 at
specified prices.
 
     Our marketing begins with development teams who work closely with our
customers, using our research and development facilities, to design CMP slurry
products tailored to our customers needs. We then employ our applications teams
who work with customers to integrate our slurry products into customers'
manufacturing processes. Finally, we utilize our logistics and sales personnel
to ensure reliable supply, warehousing, packaging and inventory management.
Through our interactive approach, we build close relationships with our
customers across a variety of areas.
 
     We also market our products through independent distributors and other
industry suppliers. We currently utilize independent distributors in Europe,
Taiwan and Singapore, who add to our global presence by complementing our
support personnel already located in those regions. By using our relationships
with other suppliers in the CMP industry, such as suppliers of polishing
equipment, we obtain client leads and recommendations of our products.
 
     The IC device manufacturing industry is currently experiencing significant
growth in Asia. As a result, we have increased our focus on markets in Asia over
the last few years by increasing the number of account managers and applications
and customer support personnel present in this region. By building this regional
infrastructure, we have demonstrated a commitment to the Asian marketplace and
global expansion generally. We intend to make additional concentrated
investments in this region over the next few years.
 
                      CABOT AS OUR RAW MATERIALS SUPPLIER
 
     The base ingredients for most of our slurries are fumed metal oxides,
primarily fumed silica, which is an ultra-fine, high purity silica produced by a
flame process, and, to a much lesser extent, fumed metal alumina. Cabot is
currently our exclusive supplier of fumed metal oxides. Under our new fumed
metal oxide supply agreement with Cabot, which will become effective upon
completion of this offering, Cabot will continue to be our exclusive supplier of
fumed metal oxides, including fumed silica, for our existing slurry products.
Although the agreement does not require us to purchase fumed metal oxides from
Cabot for slurry products that we develop in the future, we expect that Cabot
will be our primary supplier of fumed metal oxides for these products as well.
 
     It is difficult to assess whether the prices we will pay to Cabot for fumed
metal oxides under our new agreement with Cabot are the same as or different
than the prices we could have obtained in arm's-length negotiations with an
unaffiliated third party in light of the long-term nature of the contract, the
volumes provided for under the agreement and our particular quality
requirements.
 
     Our agreement with Cabot contains the following terms with respect to fumed
silica:
 
- Provisions for a fixed annual increase in the price of fumed silica of
  approximately 2% of the initial price and additional increases if Cabot's raw
  material costs increase.
 
- Provisions requiring Cabot to supply us with fumed silica in volumes specified
  by us.
 
- Provisions limiting Cabot's obligation to supply us with fumed metal oxides
  from each of its Tuscola, Illinois and Barry, Wales facilities to specified
  volumes from each facility.
 
- Provisions requiring us to supply Cabot with quarterly, six-month, annual and
  18-month forecasts of our expected fumed silica purchases and limiting Cabot's
  obligations to provide us with fumed silica to specified percentages in excess
  of these forecasted volumes.
 
- Provisions that limit the amount we can forecast for any month to an amount no

                                       39

<PAGE>   41
 
  greater than 20% of the forecasted amount for the previous month.
 
- Provisions requiring us to purchase at least 90% of the six-month volume
  forecast and to pay specified damages to Cabot if we purchase less than that
  amount.
 
- Provisions obligating us to pay all reasonable costs incurred by Cabot to
  provide quality control testing at levels greater than Cabot provides to its
  other customers.
 
- Provisions that generally prohibit us from reselling any fumed silica
  purchased from Cabot.
 
Under the new agreement, Cabot will also supply us with fumed alumina on terms
generally similar to those described above, except that the forecast
requirements do not apply to fumed alumina. The new agreement prohibits Cabot
from selling fumed metal oxides to third parties for use in CMP applications.
 
     Under the new agreement, Cabot warrants that its products will meet our
agreed upon product specifications. We have no right to any consequential,
special or incidental damages for breach of that warranty or any other provision
of the agreement. Cabot will be obligated to replace noncompliant products with
products that meet the agreed upon specifications. The new agreement also
provides that any change to product specifications for fumed metal oxides must
be by mutual agreement. Any increased costs due to product specification changes
will be paid by us. If we require product specification changes that Cabot
cannot meet, we will have the right to purchase products meeting those
specifications from other suppliers.
 
     Historically, we did not provide detailed product specifications to Cabot
and Cabot permitted us to return some products even if they met our
specifications. Under our new agreement, we will provide detailed specifications
to Cabot and will have no contractual right to return products that meet these
specifications.
 
     The agreement has an initial term that expires in June 2005. Thereafter,
the agreement may be terminated by either party on June 30 or December 31 in any
year with at least 18 months prior written notice.
 
DISPERSIONS SERVICES AGREEMENT WITH DAVIES
 
     Cabot has assigned to us a dispersions services agreement with Davies
Imperial Coatings, Inc. pursuant to which Davies produces slurries for us. Under
this agreement, we provide raw materials, primarily fumed silica, to Davies and
it performs dispersion services. The price for these services is set at a
negotiated price, subject to increases. We have agreed to purchase minimum
amounts of services for each year of the agreement. If Davies fails to supply us
with required dispersions services, we have the right to provide these services
for ourselves or purchase them from third parties. The agreement provides for
renegotiation of the price paid for dispersions services on each two-year
anniversary of the agreement in order to reflect changes in Davies'
manufacturing costs. We have also agreed to invest during each year $150,000 in
capital improvements, capacity expansions and other expenditures to maintain
capacity at the Davies dispersions facility in Hammond, Indiana. We own most of
the dispersions equipment at the Davies facility.
 
     Under the agreement, we must give Davies the opportunity to bid to provide
dispersion services for some of our products. Davies and its controlling
stockholders agree that, during the term of the agreement and for a period after
the termination of the agreement, they will not provide, nor assist any other
person or entity in providing, metal oxide dispersion services to any of our
competitors. Under some circumstances, we must pay these individuals
noncompetition payments on the date of the termination of the agreement and on
the first anniversary of the termination.
 
     The agreement has an initial term that expires in October, 2004, and is
automatically renewed for one-year periods thereafter, unless either party gives
written notice to the other of its intention to terminate the agreement at least
90 days prior to the expiration of the term.
 
                                       40

<PAGE>   42
 
                  DISPERSIONS SERVICES ARRANGEMENTS WITH CABOT
 
     Dispersions of fumed metal oxides are used in a variety of applications in
addition to CMP. In the past, Cabot has developed and sold fumed metal oxides
dispersions for these non-CMP applications, and intends to continue this
business after this offering and the expected spin-off. We performed dispersion
services for Cabot prior to our incorporation and Cabot intends to continue to
rely on us for these services in the future. Accordingly, we have entered into a
dispersions services agreement with Cabot, which will become effective upon
completion of this offering, under which we will continue to offer fumed metal
oxide dispersions services to Cabot, including the manufacturing, packaging and
testing of dispersions. Less than 10% of our current dispersions capacity will
be devoted to Cabot. The agreement provides that some dispersion services may be
subcontracted by us to Davies but we will remain liable for these services. The
dispersions services that we will provide to Cabot must be performed at our
facilities in Aurora, Illinois and Barry, Wales or at the Davies facility. Under
the agreement, Cabot will supply us with the fumed metal oxide particles
necessary for the manufacture of the dispersions.
 
     Our agreement with Cabot contains the following terms:
 
- Provisions for the pricing of dispersions services to be determined pursuant
  to a cost-plus formula.
 
- Provisions limiting our obligation to provide Cabot with dispersions to stated
  maximum annual volumes for each of the three facilities.
 
- Provisions requiring Cabot to supply us with quarterly, six-month, annual and
  18-month forecasts of their expected dispersions purchases and limiting our
  obligation to provide Cabot with dispersions to specified percentages in
  excess of these forecasted volumes.
 
- Provisions that provide that if we develop any intellectual property in the
  course of performing dispersion services for Cabot, that intellectual property
  will be jointly owned by us and Cabot.
 
- Provisions that provide that if we develop any intellectual property outside
  of performing dispersion services for Cabot and use that intellectual property
  in performing dispersion services for Cabot, then we are obligated to license
  Cabot that intellectual property in exchange for a royalty payment.
 
- Provisions that generally prohibit Cabot from engaging a third party to
  provide dispersion services unless we are unable to supply the requested or
  agreed upon services, although Cabot retains the right to manufacture fumed
  metal oxide dispersions itself or have Davies provide these services.
 
- Provisions that generally prohibit us from performing dispersion services for
  third parties whose products compete with any Cabot product or from selling
  dispersion products in applications, other than CMP, that compete with any
  Cabot product.
 
     The agreement has an initial term that expires in June 2005. Thereafter,
the agreement may be terminated by either party on June 30 or December 31 in any
year with at least 18 months prior written notice. If Cabot terminates the
agreement, Cabot cannot purchase fumed metal oxides dispersion services from one
of our competitors. If we terminate the agreement, Cabot may purchase fumed
metal oxide dispersions services from any party without restriction.
 
                            RESEARCH AND DEVELOPMENT
 
     We believe our future competitive position depends in part on our ability
to develop CMP applications tailored to our customers' needs. To this end, we
have established a technology center at our Aurora facility to provide
applications and product support to customers and to develop new products to
meet the needs of the semiconductor industry. The technology center is staffed
by a team that includes experts from the semiconductor industry and scientists
from key disciplines required for the development of high-performance CMP
products. The technology center is equipped with an advanced polishing and
metrology lab in a Class 10 clean room, a
 
                                       41

<PAGE>   43
 
polishing lab in a Class 1000 clean room, laboratories for product development
and dispersion technology, and a dispersions pilot plant. In our product
development and dispersion technology laboratory, our skilled technical
personnel conduct kinetic studies of the chemical reactions on the surface of
the wafer. These kinetic data allow us to adjust the composition of our slurries
to avoid, among other things, non-uniform polishing patterns. Understanding the
chemical processes on the surface of the polished wafer allows us to compose
slurries specifically tailored to interact with one element and to slow or
essentially stop planarization as soon as this particular element has been
polished. We have also assembled dedicated development teams that work closely
with customers to identify their specific technology and manufacturing
challenges and to translate these challenges into viable CMP process solutions.
 
     We have historically purchased most of the equipment we use for research
and development. In September 1998, we entered into an agreement with a customer
under which we lease some CMP equipment in exchange for CMP slurries. This
equipment includes five IC polishing machines, one hard disk drive polishing
machine and various metrology equipment. The cost of this equipment can be
significant and we need to upgrade our equipment periodically to keep pace with
equipment developments in the semiconductor industry.
 
     We expensed approximately $14.6 million for research and development in
1999. Investments in research and development equipment are capitalized over
their useful life and depreciated.
 
                             INTELLECTUAL PROPERTY
 
     Our intellectual property is important to our success and ability to
compete. We currently have eight U.S. patents and 28 pending U.S. patent
applications covering CMP products and processes. In most cases we file
counterpart foreign patent applications. Many of these patents are important to
our continued development of new and innovative CMP products. We attempt to
protect our intellectual property rights through a combination of patent,
trademark, copyright and trade secret laws, as well as employee and third-party
nondisclosure and assignment agreements. Our failure to obtain or maintain
adequate protection of our intellectual property rights for any reason could
have a material adverse effect on our business, results of operations and
financial condition.
 
     Significant litigation regarding intellectual property rights exists in our
industry. Cabot is currently involved in two separate legal actions brought
against it by Rodel alleging that Cabot is infringing some of Rodel's patents.
Although Cabot is the only named defendant in these lawsuits, we have agreed to
indemnify Cabot for any and all losses and expenses arising out of this
litigation. For a further discussion of this litigation, see "--Legal
Proceedings". We cannot be certain that other third parties will not make a
claim of infringement against us. Any claims, even those without merit, could be
time consuming to defend, result in costly litigation and/or require us to enter
into royalty or licensing agreements. These royalty or licensing agreements, if
required, may not be available to us on acceptable terms or at all. A successful
claim of infringement against us could adversely affect our business, results of
operations and financial conditions. See "-- Legal Proceedings".
 
     In addition, we have obtained a patent license from a third party covering
a polishing process used in the manufacturing of non-IC devices. Although we
expect to independently develop a new technology which will eliminate our need
for this licensed technology, there is no assurance that we will be successful
in doing so or that we will be able to continue to license this technology
beyond the eight years currently provided for in our license agreement.
 
                                  COMPETITION
 
     We are aware of only four other manufacturers with significant commercial
sales of CMP slurries for IC devices. We expect the competition to continue to
intensify. These manufacturers include Rodel, Fujimi, ChemFirst and Clariant. We
are aware of only
 
                                       42

<PAGE>   44
 
three manufacturers with significant commercial sales of CMP slurries for
polishing of substrates and magnetic heads in hard disk drives. These
manufacturers include Rodel, Fujimi and Praxair. We may also face competition
from:
 
- other companies that develop CMP products;
 
- customers that currently have, or that may develop, in-house capacity to
  produce their own CMP products; and
 
- the development of polishing pads containing abrasives or other significant
  changes in technology.
 
     We compete primarily on the basis of our product design, level of service
and, to a lesser extent, price. We believe that we presently compete favorably
with respect to each of these factors. CMP products are evolving, however, and
we cannot give you any assurance that we will compete successfully in the
future.
 

                                   PROPERTIES
 
     Our principal U.S. facilities consist of:
 
- our global headquarters in Aurora, Illinois, comprising approximately 65,000
  square feet;
 
- a commercial dispersions plant in Aurora, Illinois, comprising approximately
  20,000 square feet; and
 
- a technical center in Aurora, Illinois, comprising approximately 20,000 square
  feet.
 
     We are in the process of constructing an additional manufacturing and
distribution center in Aurora, Illinois. The initial phase of this construction
is planned to provide a facility of approximately 170,000 square feet that is
scheduled to be in operation by our third fiscal quarter of 2000.
 
     We also have a commercial dispersions plant in Geino, Japan, comprising
approximately 40,000 square feet. In addition, we own dispersion equipment
located at Cabot's dispersion facility in Barry, Wales and sublease from Cabot
the land and building space where the equipment is located. We are in the
process of constructing a distribution center in Ansung, South Korea. This
approximately 16,000 square foot facility is scheduled for completion by our
third fiscal quarter 2000. Substantially all of our foreign properties and
assets are held through our wholly owned subsidiary, Cabot Microelectronics
International Corporation.
 
     We believe that our current facilities are suitable and adequate for their
intended purposes and, together with our facilities under construction, provide
us with sufficient capacity to meet our current and expected demand in the
foreseeable future. However, if we were to encounter delays in the construction
of our new facilities, we may face capacity constraints.
 
                             ENVIRONMENTAL MATTERS
 
     Our facilities are subject to various environmental laws and regulations,
including those relating to air emissions, wastewater discharges, the handling
and disposal of solid and hazardous wastes, and occupational safety and health.
We believe that our facilities are in substantial compliance with applicable
environmental laws and regulations. Our facilities have incurred, and will
continue to incur, capital and operating expenditures and other costs in
complying with these laws and regulations in both the United States and abroad.
However, we do not anticipate that the future costs of environmental compliance
will have a material adverse effect on our business, financial condition or
results of operations.
 
                                   EMPLOYEES
 
     As of December 31, 1999, we employed a total of 242 individuals, including
24 in sales and marketing, 80 in research and development, 27 in administration
and 111 in operations. None of our employees are covered by collective
bargaining agreements. We have not experienced any work stoppages and consider
our relations with our employees to be satisfactory.
 
                               LEGAL PROCEEDINGS
 
     In June 1998, one of our major competitors, Rodel Inc., filed a lawsuit
against Cabot in the United States District Court for the
 
                                       43

<PAGE>   45
 
District of Delaware entitled Rodel, Inc. v. Cabot Corporation (Civil Action No.
98-352). In this lawsuit, Rodel has requested a jury trial and is seeking a
permanent injunction and an award of compensatory, punitive, and other damages
relating to allegations that Cabot is infringing United States Patent No.
4,959,113 (entitled "Method and Composition for Polishing Metal Surfaces"),
which is owned by an affiliate of Rodel. We refer to this patent as the Roberts
patent and this lawsuit as the Roberts lawsuit. Cabot filed an answer and
counterclaim seeking dismissal of the Roberts lawsuit with prejudice, a judgment
that Cabot is not infringing the Roberts patent and/or that the Roberts patent
is invalid, and other relief. Cabot subsequently filed a motion for a summary
judgment that the Rodel patent is invalid because all of the claims contained in
the patent are anticipated or made obvious by prior art, including United States
Patents Nos. 4,705,566, 4,956,015 and 4,929,257, each of which is owned by a
third party not affiliated with Rodel or us. This motion was denied on September
30, 1999 based on the court's finding that there were genuine issues of material
fact to be determined at trial. The Roberts lawsuit is presently in the
discovery stage and trial is scheduled to begin in November 2000, and the trial
date has not yet been scheduled. After the ruling on the summary judgment
motion, Rodel filed a request for reexamination of the Roberts patent with the
United States Patent and Trademark Office, which was granted on November 12,
1999.
 
     In April 1999, Rodel commenced a second lawsuit against Cabot in the United
States District Court for the District of Delaware entitled Rodel, Inc. v. Cabot
Corporation (Civil Action No. 99-256). In this lawsuit, Rodel has requested a
jury trial and is seeking a permanent injunction and an award of compensatory,
punitive, and other damages relating to allegations that Cabot is infringing two
other patents owned by an affiliate of Rodel. These two patents are United
States Patent No. 5,391,258 (entitled "Compositions and Methods for Polishing")
and United States Patent No. 5,476,606 (entitled "Compositions and Methods for
Polishing"). We refer to these patents as the Brancaleoni patents and this
lawsuit as the Brancaleoni lawsuit. Cabot has filed an answer and counterclaim
to the complaint seeking dismissal of the complaint with prejudice, a judgment
that Cabot is not infringing the Brancaleoni patents and/or that the Brancaleoni
patents are invalid, and other relief. The Brancaleoni lawsuit is presently in
the discovery stage which is currently scheduled to be completed by February 25,
2000. Trial is presently scheduled to commence on December 4, 2000.
 
     In the Roberts lawsuit, the only product that Rodel to date has alleged
infringes the Roberts patent is our W2000 slurry, which is used to polish
tungsten and which currently accounts for a significant portion of our total
revenue. In the Brancaleoni lawsuit, Rodel has not alleged that any specific
product infringes the Brancaleoni patents; instead, Rodel alleges that our
United States Patent No. 5,858,813 (entitled "Chemical Mechanical Polishing
Slurry for Metal Layers and Films" and which relates to a CMP polishing slurry
for metal surfaces including, among other things, aluminum and copper) is
evidence that Cabot is infringing the Brancaleoni patents through the
manufacture and sales of unspecified products. At this stage, we cannot predict
whether or to what extent Rodel will make specific infringement claims with
respect to any of our products other than W2000 in these or any future
proceedings. It is possible that Rodel will claim that many of our products
infringe its patents.
 
     Although Cabot is the only named defendant in these lawsuits, we have
agreed to indemnify Cabot for any and all losses and expenses arising out of
this litigation as well as any other litigation arising out of our business.
While we believe we have meritorious defenses to the pending actions and intend
to defend them vigorously, we can give you no assurances that we will be
successful in our defense. If Rodel wins either of these cases, we may have to
pay damages and, in the future, may be prohibited from producing any products
found to infringe or required to pay Rodel royalty and licensing fees with
respect to sales of those products. In addition, we cannot assure you that we
will not be subject to future infringement claims by Rodel
 
                                       44

<PAGE>   46
 
or others with respect to our products and processes. Such claims, even if they
are without merit, could be expensive and time consuming to defend and if we
were to lose any future infringement claims we could be subject to injunctions,
damages and/or royalty or licensing agreements. Royalty or licensing agreements,
if required as a result of any pending or future claims, may not be available to
use on acceptable terms or at all. Successful claims of infringement against us
could adversely affect our business, financial condition and results of
operations.
 
                                       45

<PAGE>   47
 

                                   MANAGEMENT
                        DIRECTORS AND EXECUTIVE OFFICERS
 
     The following table contains information regarding our executive officers
and directors.
 

<TABLE>
<CAPTION>
                NAME              AGE                            POSITIONS
    ----------------------------  ---      ------------------------------------------------------
    <S>                           <C>      <C>
    Kennett F. Burnes             56       Chairman of the Board
    Samuel W. Bodman              61       Director
    William P. Noglows            41       Director
    Matthew Neville               45       President and Chief Executive Officer, Director
    William C. McCarthy           56       Vice President and Chief Financial Officer
    Daniel J. Pike                36       Vice President of Operations
    J. Michael Jenkins            46       Vice President of Human Resources
    Chris C. Yu                   41       Vice President of Research and Technology
    Bruce M. Zwicker              47       Vice President of Sales and Marketing
</TABLE>

 
                            ------------------------
 
     KENNETT F. BURNES was elected Chairman of the Board of our company in
December 1999. He has served as Cabot's Chief Operating Officer since 1996 and
Cabot's President since 1995. He was elected a director of Cabot in 1992. Before
joining Cabot in 1987, Mr. Burnes was a partner at Choate, Hall & Stewart, a
Boston-based law firm, where he practiced corporate and business law for nearly
20 years. He received both his bachelor's and law degrees from Harvard
University.
 
     SAMUEL W. BODMAN was elected a director of our company in December 1999. He
has served as Cabot's Chairman and Chief Executive Officer since 1988. Before
joining Cabot, Mr. Bodman was President, Chief Operating Officer and a director
of FMR Corp., the holding company overseeing all activities of Fidelity
Investments. Mr. Bodman received his Ph.D. in chemical engineering from
Massachusetts Institute of Technology. In addition to serving on Cabot's board,
Mr. Bodman serves on the boards of John Hancock Mutual Life Insurance Company,
Security Capital Group Incorporated, Thermo Electron Corporation and Westvaco
Corporation.
 
     WILLIAM P. NOGLOWS was elected a director of our company in January 2000.
He has served as Cabot's Executive Vice President and Director of Global
Manufacturing since 1998. From 1984 to 1998, he held various positions at Cabot,
including General Manager of Cabot's Cab-O-Sil Division and Managing Director of
Cabot Australasia. Mr. Noglows received his BS from Georgia Institute of
Technology.
 
     MATTHEW NEVILLE has served as our President and Chief Executive Officer
since December 1999. He was elected a director of our company in December 1999.
Mr. Neville has served as a Vice President of Cabot since 1997 and as General
Manager of our company since 1996. From 1983 to 1996, Mr. Neville held various
positions at Cabot, including Director of Research and Development for the
Cabot's Cab-O-Sil Division. Mr. Neville received his Ph.D. in chemical
engineering from Massachusetts Institute of Technology.
 
     WILLIAM C. MCCARTHY has served as our Vice President and Chief Financial
Officer since December 1999. Mr. McCarthy has served as Chief Financial Officer
since February 1999. From 1976 to 1998, Mr. McCarthy held various positions at
Texas Instruments, including controller of Texas Instruments' Corporate Services
division. Mr. McCarthy received his BS in business and his MBA from Texas A&M
University.
 
     DANIEL J. PIKE has served as our Vice President of Operations since
December 1999. Mr. Pike served as our Director of Global Operations from 1996 to
1999. Prior to joining us, Mr. Pike worked for FMC Corporation as a marketing
manager for the Pharmaceutical Division. Mr. Pike received his BS in chemical
engineering from the University of
 
                                       46

<PAGE>   48
 
Buffalo and his MBA from Wharton School of Business of University of
Pennsylvania.
 
     J. MICHAEL JENKINS has served as our Vice President of Human Resources
since December 1999. Mr. Jenkins has served as our Director of Human Resources
since May 1999. Prior to joining us, Mr. Jenkins was employed for 15 years by
Gas Chromatography Division of Hewlett-Packard holding various positions,
including Human Resources and Quality Manager. Mr. Jenkins received his MA in
human resources from Lincoln University.
 
     CHRIS C. YU has served as our Vice President of Research and Technology
since December 1999. From 1996 to 1999, Mr. Yu served as our Director of
Interconnect Technology. From 1994 to 1996, Mr. Yu was employed by Rockwell
International as Advanced Process Methods principal engineer leading the
development of planarization technologies. Mr. Yu has also held various
positions with Motorola and Micron Technology. Mr. Yu received his Ph.D. in
physics from Pennsylvania State University.
 
     BRUCE M. ZWICKER has served as our Vice President of Sales and Marketing
since December 1999. Mr. Zwicker has served as our Director, Global Business and
Sales from 1997 to 1999. Since 1988, Mr. Zwicker has held various positions with
Cabot, including Dispersion Products Line Manager. Prior to Joining Cabot, Mr.
Zwicker worked for Unocal Corporation. Mr. Zwicker received his BS in
microbiology from Purdue University.
 
                               BOARD OF DIRECTORS
 
     Our board of directors is currently composed of four directors. Prior to
the completion of this offering, we will increase our board of directors to
include three independent directors.
 
     We intend to amend our certificate of incorporation to divide the board of
directors into three classes: Class I, whose terms will expire at the annual
meeting of stockholders to be held in 2001, Class II, whose terms will expire at
the annual meeting of stockholders to be held in 2002, and Class III, whose
terms will expire at the annual meeting of stockholders to be held in 2003. At
each annual meeting of stockholders beginning in 2000, the successors to
directors whose terms will then expire will be elected to serve from the time of
election and qualification until the third annual meeting following election.
 
     In addition, our certificate of incorporation will provide that the
authorized number of directors may be changed only by resolution of the board of
directors. Any additional directorships resulting from an increase in the number
of directors will be distributed among the three classes so that, as nearly as
possible, each class will consist of one-third of the total number of directors.
 
                      COMMITTEES OF THE BOARD OF DIRECTORS
 
     Our committees consist of an audit committee and a compensation committee.
The audit committee recommends the annual appointment of our auditors with whom
the audit committee reviews the scope of audit and non-audit assignments and
related fees, accounting principles we use in financial reporting, internal
auditing procedures and the adequacy of our internal control procedures. The
compensation committee reviews and approves the compensation and benefits for
our employees, directors and consultants, administers our employee benefit
plans, authorizes and ratifies stock option grants and other incentive
arrangements and authorizes employment and related agreements.
 
                           COMPENSATION OF DIRECTORS
 
     Directors who are also our employees receive no additional compensation for
their services as directors. Directors who are not our employees will receive a
fee for attendance in person at meetings of our board of directors or committees
of our board of directors, and they will be reimbursed for travel expenses and
other out-of-pocket costs incurred in connection with the attendance of
meetings.
 
                                       47

<PAGE>   49
 
                               EXECUTIVE OFFICERS
 
     Our board of directors appoints our executive officers. Our executive
officers serve at the discretion of our board of directors.
 
                       COMPENSATION COMMITTEE INTERLOCKS
                           AND INSIDER PARTICIPATION
 
     In our fiscal year ended September 30, 1999, we did not have a compensation
committee or any other committee serving a similar function. Decisions as to the
compensation of executive officers were made by Cabot.
 

                             EXECUTIVE COMPENSATION
 
     The following table sets forth certain compensation information for the
Chief Executive Officer and our four other executive officers who, based on
employment with Cabot, were the most highly compensated for the fiscal year
ended September 30, 1999. All of the information in this table reflects
compensation earned by the listed individuals for services rendered to Cabot. In
connection with this offering, we have established employee benefit plans and
arrangements so that, following this offering, the compensation and employee
benefits of our executive officers and all of our other employees will be
provided primarily by us. See "--Compensation and Employee Benefit Plans" and
"Relationships Between Our Company and Cabot Corporation -- Employee Matters
Agreement".
 
    SUMMARY COMPENSATION TABLE FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 1999
 

<TABLE>
<CAPTION>
                                                                                LONG TERM
                                                                               COMPENSATION
                                               ANNUAL COMPENSATION             ------------
                                      --------------------------------------    RESTRICTED
                                                                OTHER ANNUAL      STOCK        ALL OTHER
NAME AND                                                        COMPENSATION     AWARD(S)     COMPENSATION
PRINCIPAL POSITIONS            YEAR   SALARY($)    BONUS($)         ($)           ($)(1)         ($)(2)
-------------------            ----   ----------   ---------    ------------   ------------   ------------
<S>                            <C>    <C>          <C>          <C>            <C>            <C>
Matthew Neville..............  1999    190,000      100,000                      378,000          28,929
President and Chief Executive
Officer
William C. McCarthy..........  1999    106,250       53,000(3)      82,711(4)    190,350(5)       10,102
  Vice President and Chief
  Financial Officer
Daniel J. Pike...............  1999    146,250       60,000                      170,100          18,453
  Vice President of
  Operations
Chris C. Yu..................  1999    162,637       65,000         45,000(6)    344,475(5)       21,078
  Vice President of Research
  and Technology
Bruce M. Zwicker.............  1999    132,728       48,000                       94,500          15,642
  Vice President of Sales and
  Marketing
</TABLE>

 
---------------
(1) The value of the shares of Cabot restricted stock set forth in the table was
    determined by subtracting the amount paid by the named executive officer to
    Cabot for the shares from the fair market value of the shares on the date of
    grant. The following named executive officers were granted the following
    shares of Cabot restricted stock in the fiscal year ended September 30, 1999
    under an equity incentive plan of Cabot: Mr. Neville, 20,000 shares; Mr.
    McCarthy, 7,500 shares; Mr. Pike, 9,000 shares; Mr. Yu, 15,000 shares; and
    Mr. Zwicker, 5,000 shares.
 
    The number of shares and value (calculated at fair market value as of
    September 30, 1999 ($23.75 per share), less the amount paid by the named
    executive officer for the shares) of all shares of Cabot restricted stock
    held by the named executive officers on September 30, 1999 (including the
    shares referred to in the column of the Table headed "Restricted Stock
    Award(s)"), were as follows: Mr. Neville, 44,000 shares ($589,750); Mr.
    McCarthy, 5,500 shares ($118,475); Mr. Pike, 15,500 shares ($210,275); Mr.
    Yu, 14,500 shares ($247,600); and Mr. Zwicker, 11,500 shares ($154,538).
 
                                       48

<PAGE>   50
 
    Except for a portion of the shares of Cabot restricted stock granted to Mr.
    McCarthy and Mr. Yu (see note 5 below), the restricted stock set forth in
    the table vests, in whole, three years from the date of grant. In accordance
    with Cabot's long-term incentive compensation program under its equity
    incentive plans, each of the named individuals paid to Cabot 30-40% of the
    fair market value of the shares of stock listed in this footnote on the date
    of grant. Some of the funds for the payment for this restricted stock were
    borrowed from Merrill Lynch Bank & Trust Co. by all of the named executive
    officers under a loan facility available to all recipients of restricted
    stock grants under this program. The recipients (including the named
    executive officers) borrowing funds from Merrill Lynch Bank & Trust are
    obligated to pay interest on the loans at the prime rate and to repay the
    funds borrowed. Shares purchased with borrowed funds must be pledged to
    Merrill Lynch Bank & Trust as collateral for the loans when the restrictions
    lapse. Cabot also guarantees payment of the loans in the event the
    recipients fail to honor their obligations. The loans are full recourse.
    Dividends are paid on the shares of restricted stock. In 1999, Cabot ceased
    using the loan facility, purchased the outstanding loan balance from Merrill
    Lynch Bank & Trust, and commenced to make loans under the program on terms
    substantially identical to the bank loans.
 
(2) The information in the column headed "All Other Compensation" includes (a)
    matching contributions to Cabot's tax-qualified savings plan and accruals
    under a non-qualified supplemental savings plan, or CRISP, for the fiscal
    year ended September 30, 1999 and (b) contributions to Cabot's tax-qualified
    employee stock ownership plan and accruals under a supplemental employee
    stock ownership plan, or ESOP, for the fiscal year ended September 30, 1999
    on behalf of the named executive officers in the following amounts:
 

<TABLE>
<CAPTION>
             NAME                 CRISP      ESOP
             ----                 -----      ----
<S>                              <C>        <C>
Mr. Neville....................  $ 15,763   $13,166
Mr. McCarthy...................  $  5,180   $ 4,337
Mr. Pike.......................  $ 11,039   $ 6,723
Mr. Yu.........................  $ 11,961   $ 8,288
Mr. Zwicker....................  $  9,435   $ 5,572
</TABLE>

 
     Cabot provides Mr. Neville (but none of our other named executive officers)
     with death benefit protection in the amount of three times his salary,
     including $50,000 of group life insurance coverage. No amount has been
     included in the column headed "All Other Compensation" for this benefit
     because Cabot accrued no amount for the benefit and the benefit, other than
     the group life insurance (which is available to all Cabot employees in
     amounts determined by the level of their salaries), is not funded by
     insurance on Mr. Neville's life. Cabot funds the cost of the program
     generally by insurance on the lives of various other present and former
     Cabot employees. The value of this benefit, based upon the taxable income
     it would constitute if it were insurance, does not exceed approximately
     $1,500 per year for Mr. Neville. Cabot also provides our other named
     executive officers with death benefit protection in the amount of one times
     their salary. The value of this benefit to each of our named executive
     officers other than Mr. Neville (Mr. McCarthy, $585; Mr. Pike, $691; Mr.
     Yu, $829; and Mr. Zwicker, $636) is reflected in the column headed "All
     Other Compensation".
 
(3) This figure reflects a $10,000 sign-on bonus paid to Mr. McCarthy. Mr.
    McCarthy's hire date was February 2, 1999.
 
(4) This figure reflects reimbursement of relocation expenses.
 
(5) 6,000 of the 7,500 shares of Cabot restricted stock Mr. McCarthy received,
    and 6,000 of the 15,000 shares of Cabot restricted stock Mr. Yu received,
    were granted for no cash purchase price; Mr. McCarthy's 6,000 shares vest in
    equal increments in June, 1999, February, 2000 and February, 2001; Mr. Yu's
    6,000 shares vest annually as follows: one-half in November, 1998,
    one-quarter on November 15, 1999 and one-quarter on November 15, 2000.
 
(6) This figure reflects a reimbursement to Mr. Yu for income tax obligations on
    shares of restricted stock awarded to him.
 
                                       49

<PAGE>   51
 
  AGGREGATE OPTION EXERCISES FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 1999 AND
                         FISCAL YEAR-END OPTION VALUES
 
     The following table sets forth information with respect to the exercise of
Cabot stock options by our named executive officers during 1999, the number of
unexercised Cabot stock options held by named executive officers on September
30, 1999, and the value of the unexercised in-the-money Cabot stock options on
that date.
 

<TABLE>
<CAPTION>
                                                           SECURITIES UNDERLYING         VALUE OF UNEXERCISED
                                                            UNEXERCISED OPTIONS         IN-THE-MONEY OPTIONS AT
                                                           AT FISCAL YEAR-END(#)         FISCAL YEAR-END($)(1)
                        SHARES ACQUIRED      VALUE      ---------------------------   ---------------------------
NAME                    ON EXERCISE(#)    REALIZED($)   EXERCISABLE   UNEXERCISABLE   EXERCISABLE   UNEXERCISABLE
----                    ---------------   -----------   -----------   -------------   -----------   -------------
<S>                     <C>               <C>           <C>           <C>             <C>           <C>
Matthew Neville.......       2,400          37,275         5,000             --          80,031             --
Chris C. Yu...........          --              --            --          7,150              --             --
</TABLE>

 
---------------
(1) We determined the value of unexercised in-the-money options as of September
    30, 1999 by taking the difference between the fair market value of a share
    of Cabot common stock on September 30, 1999 ($23.75 per share) and the
    option exercise price, multiplied by the number of shares underlying the
    options as of that date. Options held by Mr. Yu were out of the money on
    that date, and we have therefore recorded no value for them.
 
                             PENSION PLAN BENEFITS
 
     Prior to this offering, our employees, including our named executive
officers, participated in Cabot's tax-qualified cash balance plan. This plan
provides retirement benefits to plan participants based on their compensation
and years of service, expressed as an account balance. In addition, prior to
this offering, some of our named executive officers participated in Cabot's
non-qualified supplemental cash balance plan, which provides supplemental
retirement benefits not available under the cash balance plan by reason of
limitations set by the Internal Revenue Code and the Employee Retirement Income
Security Act. We do not intend to sponsor a tax-qualified or a supplemental cash
balance plan, and, accordingly, all of our employees will stop accruing benefits
under these plans in connection with this offering. At fiscal year ended
September 30, 1999, we estimate that our named executives had accrued the
following annual pension benefits under these plans: Mr. Neville, $107,400; Mr.
McCarthy, $13,400; Mr. Pike, $91,500; Mr. Yu, $74,200; and Mr. Zwicker, $50,800.
 
                    COMPENSATION AND EMPLOYEE BENEFIT PLANS
 
     We have adopted and will adopt various employee benefit plans and
arrangements for the purpose of providing compensation and employee benefits to
our employees after this offering, including our executive officers. Some of
these plans are described below. These plans and arrangements include an equity
incentive plan, an employee stock purchase plan, a tax-qualified savings plan
and a non-qualified supplemental savings plan. To the extent necessary or
advisable under applicable law, Cabot, as our sole stockholder, will approve
these plans prior to this offering.
 
LONG-TERM INCENTIVES
 
     Prior to the completion of this offering, we will adopt the Cabot
Microelectronics Corporation 2000 Equity Incentive Plan, and Cabot, as our sole
stockholder, will approve the plan. The following description of certain
features of the plan is qualified in its entirety by reference to the full text
of the plan.
 
     Some of our employees (including our executive officers) hold options to
acquire Cabot common stock and shares of Cabot restricted stock granted under
Cabot's equity incentive plans. In connection with the distribution, we and
Cabot are considering giving these employees the choice of retaining these
awards or receiving, in consideration for the cancellation of these awards,
replacement awards under our 2000 Equity Incentive Plan. These replacement
awards will be subject to the same terms and conditions as in effect prior to
the cancellation of the prior Cabot awards, except that (1) our common stock
will be substituted for Cabot common stock,
 
                                       50

<PAGE>   52
 
and (2) the replacement awards will be adjusted to preserve the intrinsic value
to the holders immediately prior to cancellation of the prior Cabot awards.
 
     General; Shares Available for Issuance under the Plan.  The 2000 Equity
Incentive Plan will enable us to make awards of shares, options and restricted
stock (including purchase restricted stock) to eligible employees, including our
executive officers. We believe that the plan will also provide us with
flexibility in designing and providing incentive compensation in order to
attract and retain employees who are in a position to make significant
contributions to our success, to reward employees for past contributions and to
encourage employees to take into account our long-term interests through
ownership of our common stock. Subject to adjustment for stock splits and
similar events, the maximum number of shares of common stock that may be issued
under the plan is the sum of (1)           and (2) the number of shares of our
common stock subject to awards granted to replace awards granted under Cabot's
equity incentive plans as described above. This number does not include shares
which will become available under the plan because of events such as forfeitures
and methods of cashless exercise.
 
     Administration; Eligible Employees.  The 2000 Equity Incentive Plan will be
administered by our compensation committee, consisting of at least three members
of our board of directors, none of whom may be one of our employees. Officers
and other key employees (including employees of our subsidiaries) who are
responsible for or contribute to the management, growth or profitability of our
business and the business of our subsidiaries are eligible to receive awards
under the plan, but no employee may receive awards under the plan covering more
than           shares of common stock.
 
     Stock Options.  The compensation committee may grant stock options under
the 2000 Equity Incentive Plan. Stock options enable the holder of the option to
purchase shares of our common stock at a price specified by the compensation
committee at the time the award is made. The plan permits the granting of stock
options that qualify as incentive stock options under Section 422 of the
Internal Revenue Code and stock options that do not qualify for incentive stock
option treatment. The compensation committee determines the per share exercise
price of all stock options and, as a general rule, this price may not be less
than the fair market value of a share of common stock at the time of grant. The
compensation committee will determine when an option may be exercised and its
term, but the term may not exceed ten years.
 
     Restricted Stock.  The compensation committee may grant restricted stock
under the 2000 Equity Incentive Plan. In general, an award of restricted stock
entitles the recipient to shares of common stock, subject to restrictions
determined by the compensation committee. The compensation committee may require
the recipient to provide consideration for the restricted stock as a condition
to the grant of the restricted stock. Restrictions on restricted stock lapse as
specified by the compensation committee at the time of grant. Until the
restrictions lapse, shares of restricted stock are non-transferable. Recipients
of restricted stock have all rights of a stockholder with respect to the shares,
including voting and dividend rights, subject only to the conditions and
restrictions generally applicable to restricted stock or to other restrictions
and conditions specifically set forth in the award agreement.
 
     Effect of Termination of Employment.  As a general rule, the effect that a
termination of employment will have on a holder's awards will be set forth in
his or her award agreement. We expect that some terminations, such as
terminations upon death or for permanent disability, will result in the
accelerated vesting of options and the lapsing of restrictions on restricted
stock. We also expect that other terminations will result in the forfeiture of
unvested options and restricted stock.
 
     Adjustments for Changes in Capitalization; Change in Control.  The
compensation committee will make appropriate adjustments to the maximum number
of shares of common stock that may be delivered under the plan and to
outstanding awards to reflect stock
 
                                       51

<PAGE>   53
 
dividends, stock splits, and similar changes in capitalization. The compensation
committee may also make appropriate adjustments to take into account material
changes in law or accounting matters or other corporate changes or events. The
plan provides for the accelerated vesting of options, and for the immediate
lapsing of restrictions on restricted stock in the event of a "Change in
Control" (as defined in the plan).
 
     Amendment and Termination.  The compensation committee may at any time
discontinue granting awards under the plan. Our board of directors may at any
time amend the plan or any outstanding award for any purpose permitted by law,
or terminate the plan as to any further grants of awards. However, none of these
actions may, without the approval of our stockholders, increase the maximum
number of shares of common stock available under the plan, extend the time
within which awards may be granted, or amend the provisions of the plan relating
to amendments. Nor may any of these actions adversely affect the rights of a
holder of any previously granted award.
 
                  GRANTS UNDER THE 2000 EQUITY INCENTIVE PLAN
 
     In connection with this offering, we have made initial grants of stock
options to all of our employees, including our executive officers, under the
2000 Equity Incentive Plan. An aggregate of           shares of common stock are
issuable upon the exercise of these options, and these options were granted at
an exercise price of $     per share. The following table sets forth the number
of shares of our common stock underlying these options:
 

<TABLE>
<CAPTION>
                                                               NUMBER OF SHARES
NAME AND POSITIONS                                            UNDERLYING OPTIONS
------------------                                            ------------------
<S>                                                           <C>
Matthew Neville.............................................
  President and Chief Executive Officer, Director
William C. McCarthy.........................................
  Vice President and Chief Financial Officer
Daniel J. Pike..............................................
  Vice President of Operations
Chris C. Yu.................................................
  Vice President of Research and Technology
Bruce M. Zwicker............................................
  Vice President of Sales and Marketing
Executive officers as a group (  persons)...................
Non-employee directors as a group (  persons)...............
All employees as a group (  persons)........................
</TABLE>

 
     In addition, we intend to grant      options under the 2000 Equity
Incentive Plan to Cabot employees who are not directors of our company.
 
ANNUAL INCENTIVES
 
     We intend to make annual cash bonuses to our employees, including our
executive officers, to provide them with an incentive to carry out our business
plan and to reward them for having done so. We intend to set performance goals
in each fiscal year at the beginning of the fiscal year, and we intend to base
the bonuses on an evaluation of our performance in the light of those goals.
 
EMPLOYEE STOCK PURCHASE PLAN
 
     Prior to the completion of this offering, we will adopt a 2000 Employee
Stock Purchase Plan, under which we have initially reserved for issuance 20,000
shares of our common stock, and Cabot, as our sole stockholder, will approve the
plan. We intend that the plan will become effective as soon as practicable after
the completion of this offering. We also intend that the plan will qualify as an
"employee stock purchase plan" under Section 423 of the Internal Revenue Code.
 
                                       52

<PAGE>   54
 
     Administration; Eligible Employees.  The compensation committee will
administer the plan. The compensation committee, as plan administrator, will
have full authority to adopt administrative rules and procedures and to
interpret the provisions of the plan. Each of our full-time employees, and each
full-time employee of present or future subsidiaries that we designate as
eligible to participate in the plan, will be eligible to participate in the
plan. In addition, the Internal Revenue Code requires us to exclude some
employees from participating in the plan and sets limits on how much common
stock a participant may purchase under the plan, and we will comply with these
exclusions and limitations.
 
     Securities Subject to the Plan.  The plan limits the number of shares of
common stock initially reserved for issuance under the plan to 20,000 shares.
The shares issuable under the plan will be made available from authorized but
unissued shares of our common stock. We expect to increase the number of shares
of common stock reserved for issuance under the plan by        shares shortly
after the distribution.
 
     Adjustments; Change in Control.  In the event that any change to the
outstanding common stock occurs (whether by reason of any recapitalization,
stock dividend, stock split, exchange or combination of shares or other change
in corporate structure), we will make appropriate adjustments to (1) the maximum
number and class of securities issuable under the plan, (2) the maximum number
and class of securities purchasable per participant during any plan offering,
and (3) the number and class of securities and the price per share in effect
under each outstanding purchase right. It is intended that any adjustments will
prevent any dilution or enlargement of rights under the plan. In the event of
various corporate events such as our dissolution or liquidation, or a merger, or
a sale of all or substantially all of our assets, the plan offering which would
otherwise be in effect on the date of the event will accelerate and will end on
the last payday before the date of the event. On that date, all outstanding
purchase rights will automatically be exercised.
 
     Plan Offering Periods and Purchase Rights.  The plan will offer shares of
common stock from time to time through a series of plan offerings, each with a
duration of six months. (However, the first plan offering may be slightly longer
or shorter than six months, depending on when the offering occurs.) The plan
offerings will commence as designated from time to time by the compensation
committee. Each plan offering will in any event begin and end on a business day.
On the day a plan offering begins, each participant with respect to that plan
offering will receive a right to purchase shares of our common stock through
payroll deductions made during that plan offering. In general, each participant
may authorize periodic payroll deductions in an amount of between one percent
and ten percent of his or her gross cash compensation for each pay period during
the plan offering. A participant may elect to reduce or increase future payroll
deductions. The purchase date of shares under the plan will occur on the day
that the plan offering ends, and shares will be purchased using the aggregate
payroll deductions withheld from the participant for the plan offering. We will
not issue fractional shares under the plan, and we will retain any cash in lieu
of fractional shares (without interest) and use that cash to purchase shares of
common stock in the next following plan offering. In general, a participant may
withdraw from the plan at any time by giving written notice.
 
     Plan Offering Price.  The price per share of common stock in any plan
offering will in general be 85% of the lower of (1) the fair market value per
share of common stock on the day the plan offering begins and (2) the fair
market value per share of common stock on the day the plan offering ends. The
fair market value will be determined by reference to the closing price of our
common stock on the Nasdaq on the relevant date.
 
     Amendment and Termination.  We may, in our sole discretion, terminate or
amend the plan, but the amendment and termination of the plan may not adversely
affect outstanding purchase rights without the consent of the holders of those
rights. If we terminate the plan, we may end a plan offering and accelerate the
exercise date of all outstanding
 
                                       53

<PAGE>   55
 
purchase rights. We will refund (without interest) any remaining payroll
deductions after we terminate the plan.
 
     New Plan Benefits.  Because the benefits under the plan will depend on
elections to participate and the fair market value of our common stock on
various future dates, we cannot determine the benefits that our executive
officers and other employees may receive under the plan.
 
RETIREMENT BENEFITS
 
     We have adopted a tax-qualified savings plan for the benefit of our
employees, including our executive officers. Our employees will begin to
participate in this plan as of the first day of the month immediately following
the month in which the offering occurs. The savings plan will provide that we
will make discretionary contributions to participants' accounts, as well as cash
matching contributions in amounts based on participants' deferral elections. In
addition, we have adopted a non-qualified savings plan to provide supplemental
benefits to those employees who are affected by limits on compensation contained
in the Internal Revenue Code.
 
     We do not currently sponsor a tax-qualified or supplemental defined benefit
pension plan, and we do not currently have any intention to adopt such a plan.
 
EMPLOYMENT CONTRACTS, TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL
ARRANGEMENTS
 
     In connection with this offering and the spin-off, we expect to adopt
change-in-control arrangements covering our executive officers and other key
employees. These arrangements will likely provide for a cash severance payment,
continued medical benefits and other ancillary payments and benefits upon some
terminations of a covered employee's employment following a change in control.
Terminations of employment entitling a covered employee to these payments and
benefits will likely include (1) termination of the employee by us (or a
successor) other than for cause and (2) termination by the covered employee upon
reduction in compensation, duties or responsibilities, or relocation, or other
circumstances constituting constructive termination.
 
                                       54

<PAGE>   56
 
            RELATIONSHIPS BETWEEN OUR COMPANY AND CABOT CORPORATION
 
                      CABOT AS OUR CONTROLLING STOCKHOLDER
 
     Immediately prior to this offering, Cabot will be our sole stockholder.
Upon completion of this offering, Cabot will beneficially own   % of the
outstanding shares of our common stock, or   % if the underwriters'
over-allotment option is exercised in full. For as long as Cabot continues to
beneficially own more than 50% of the outstanding shares of common stock, Cabot
will be able to direct the election of all of the members of our board of
directors and exercise a controlling influence over our business and affairs,
including any determinations with respect to mergers or other business
combinations involving our company, the acquisition or disposition of assets by
our company, the incurrence of indebtedness by our company, the issuance of any
additional common stock or other equity securities, and the payment of dividends
with respect to the common stock. Similarly, Cabot will have the power to
determine matters submitted to a vote of our stockholders without the consent of
our other stockholders, will have the power to prevent a change in control of
our company and could take other actions that might be favorable to Cabot.
 
     Cabot has announced that after the offering it intends to distribute pro
rata to its common stockholders all of the shares of common stock it owns by
means of a tax-free distribution. Cabot's final determination to proceed will
require a declaration of the spin-off by Cabot's board of directors. Such a
declaration is not expected to be made until certain conditions, many of which
are beyond the control of Cabot, are satisfied, including: (1) receipt by Cabot
of a ruling from the Internal Revenue Service as to the tax-free nature of the
spin-off and (2) the absence of any future change in future market or economic
conditions (including developments in the capital markets) of Cabot's or our
company's business and financial condition that causes Cabot's board of
directors to conclude that the spin-off is not in the best interest of Cabot's
stockholders. We have been advised by Cabot that it expects the spin-off to
occur six to twelve months after the completion of this offering. If Cabot
completes the spin-off, the increased number of shares available in the market
may have an adverse effect on the market price of the common stock. See "Risk
Factors -- Risks Relating to Our Separation from Cabot".
 
     For a description of certain provisions of our certificate of incorporation
concerning the allocation of business opportunities that may be suitable for
both us and Cabot, see "Description of Capital Stock -- Corporate
Opportunities".
 
     For the purposes of governing some of the relationships between us and
Cabot following the spin-off and this offering, we and Cabot have entered or
will enter into commercial arrangements, principally the fumed metal oxide
supply agreement, the dispersions services agreement and the facilities lease
arrangements. In addition, we have entered into a master separation agreement
and an intellectual property agreement providing for the transfer of the assets
and liabilities of our business, as operated by Cabot, to us. We have also
entered into a trademark license agreement which provides for the license to us
by Cabot of some of its trademarks. Furthermore, we have also entered into
various agreements with Cabot regarding certain arrangements between the parties
during the interim period between the effective date of the transfer of assets
and liabilities to our company under the master separation agreement and the
completion of the spin off. These agreements are the management services
agreement, the initial public offering and distribution agreement, the employee
matters agreement and the registration rights agreement. In addition, we and
Cabot have entered into a tax sharing agreement to address the allocation of
certain tax liabilities between the parties.
 
     All of the foregoing agreements will be effective on or prior to the
completion of this offering. Because these agreements have been entered into at
a time when we were still a wholly owned subsidiary of Cabot, they were not the
result of arm's-length negotiations between the parties. Some of the agreements

                                       55

<PAGE>   57
 
summarized below have been filed as exhibits to the registration statement of
which this prospectus forms a part and the summaries of these agreements are
qualified in their entirety by reference to the full text of these agreements.
See "Where You Can Find More Information".
 
                       COMMERCIAL ARRANGEMENTS WITH CABOT
 
FUMED METAL OXIDE SUPPLY AGREEMENT
 
     We have entered into a fumed metal oxide supply agreement with Cabot, which
will be effective upon the completion of this offering, under which Cabot will
continue to be our exclusive supplier of fumed silica and fumed alumina for
existing products and our primary supplier for future products. For a more
complete description of this agreement, see "Business -- Cabot as Our Raw
Materials Supplier".
 
DISPERSIONS SERVICES AGREEMENT WITH CABOT
 
     We have entered into a dispersions services agreement with Cabot, which
will be effective upon the completion of this offering, under which we will
continue to offer fumed metal oxide dispersions services to Cabot. For a more
complete description of this agreement, see "Business -- Dispersions Services
Arrangements with Cabot".
 
FACILITIES LEASE ARRANGEMENTS
 
     We have entered into an agreement with Cabot to sublease the land and
building space at its dispersions facility in Barry, Wales that houses
dispersions equipment that we are acquiring from Cabot. This building space
comprises approximately 62,300 square feet, at the Barry, Wales facility.
Payments by us to Cabot under this lease are approximately $10,000 per month,
including taxes. This lease will expire after ten years, subject to earlier
termination in some circumstances.
 
                          MASTER SEPARATION AGREEMENT
 
     To effect our separation from Cabot, Cabot and its subsidiaries have
transferred to us substantially all of the assets and liabilities of Cabot that
are used in, relate to or arise out of the business previously conducted by us
when we were a division of Cabot, including the assets and liabilities that are
used in, relate to or arise out of
 
- all business operations whose financial performance is reflected in our
  financial statements for the period ended September 30, 1999 as set forth
  elsewhere in this prospectus, except for some dispersions assets at our
  Tuscola, Illinois facility and the building space at our Barry, Wales facility
  that we will sublease from Cabot; and
 
- all business operations initiated or acquired by us after the date of those
  financial statements.
 
     We have assumed and have agreed to perform all liabilities and obligations
of Cabot other than various excluded liabilities relating to or arising out of
these business operations any time on or before the date of the transfer of
these business operations to us, which we refer to as the contribution date.
These assumed liabilities also include, without limitation, all liabilities
relating to or arising out of these business operations as conducted through the
contribution date that are unknown to Cabot and/or unrealized as of the
contribution date and that become known to Cabot or are realized or otherwise
arise after the contribution date.
 
     Except as expressly set forth in the master separation agreement or any
other agreement entered into between Cabot and us in connection with our
separation from Cabot, neither Cabot nor our company is making any
representation or warranty as to the business, assets or liabilities transferred
or assumed as part of the separation. Except as otherwise expressly set forth in
the separation agreement or in an ancillary agreement, all assets are being
transferred on an as is, where is, basis.
 
INDEMNIFICATION
 
     Pursuant to the master separation agreement, we have agreed to indemnify,
defend and hold harmless Cabot and each of its subsidiaries and their respective
successors-in-interest against any losses, claims, dam-
 
                                       56

<PAGE>   58
 
ages, liabilities or actions arising out of or in connection with
 
- the liabilities assumed by us as part of the separation, including any
  liabilities arising out of the current litigation with Rodel; and/or
 
- our conduct of our business and affairs after the contribution date.
 
     Cabot has agreed to indemnify, defend and hold harmless us and each of our
subsidiaries and their respective successors-in-interest against any losses,
claims, damages, liabilities or actions, resulting from, relating to or arising
out of or in connection with
 
- the excluded assets, meaning assets used or owned in connection with any
  businesses and operations of Cabot and its affiliates other than our business;
  and/or
 
- the excluded liabilities, including liabilities that are not incidental to or
  do not arise out of our business and various liabilities in respect of
  indebtedness, income taxes, employee or retirement benefit plans and other
  liabilities.
 
DISPUTE RESOLUTION
 
     The master separation agreement contains provisions that govern the
resolution of disputes, controversies or claims that may arise between us and
Cabot except to the extent otherwise provided for in any other agreement entered
into between Cabot and us in connection with our separation from Cabot. The
master separation agreement provides that the parties will use all commercially
reasonable efforts to settle all disputes arising in connection with the
agreement without resorting to mediation, arbitration or otherwise. If these
efforts are not successful, either party may submit the dispute for non-binding
mediation by delivering notice to the other party of the dispute and expressly
requesting mediation of the dispute.
 
FURTHER ASSURANCES
 
     In addition to the actions specifically provided for elsewhere in the
master separation agreement, each of our company and Cabot have agreed to use
its reasonable best efforts on and after the closing date, to take all actions,
reasonably necessary or appropriate, to complete the transactions contemplated
by the master separation agreement and the ancillary agreements.
 
                        INTELLECTUAL PROPERTY AGREEMENT
 
     We and our wholly owned subsidiary, Cabot Microelectronics International
Corporation, have entered into an intellectual property agreement with Cabot,
effective as of the contribution date, under which Cabot will transfer to us its
intellectual property rights related solely to the business previously conducted
by us when we were a division of Cabot. This transferred intellectual property
includes:
 
- patents;
 
- copyrights;
 
- trademarks;
 
- the right to sue for infringements of these patents, copyrights and
  trademarks;
 
- technology and know-how; and
 
- licenses and other rights concerning third party technology and intellectual
  property.
 
The agreement provides that Cabot will retain its fumed metal oxide particle
technology and process technology for manufacturing and/or treating fumed metal
oxide particles, and the patents related to such technology. Cabot agrees to
assign to us various contracts with third parties relating to our business,
including confidentiality, co-operation, research, technical service, technology
and license agreements.
 
     Under the agreement, we and Cabot agree to keep confidential any
unpublished or other confidential information concerning the business of the
other party, including unpublished technology and intellectual property.
Additionally, Cabot is assigning to us an undivided one-half interest in and to
various patents that relate to dispersion technology, which are owned by Cabot
and used in Cabot's dispersion business and our business.
 
                                       57

<PAGE>   59
 
     Any costs, taxes or other fees related to the assignments and transfers of
intellectual property to us are to be paid by us.
 
                          TRADEMARK LICENSE AGREEMENT
 
     We and our wholly owned subsidiary, Cabot Microelectronics International
Corporation, have entered into a trademark license agreement with Cabot that
governs our use of various trademarks used in our business. Under the agreement,
Cabot grants to CMIC an exclusive, worldwide royalty-free license to use the
trademarks solely in connection with the manufacture, sale or distribution of
products related to our business. The license includes the right to use the term
"Cabot" as a trade name, either individually or in combination with other terms.
This license includes the right to grant sublicenses to subsidiaries and
affiliates of CMIC, for so long as they remain a subsidiary or affiliate. CMIC
has granted our company a sublicense to use all of the trademarks covered by the
license. CMIC may not transfer or assign the license without Cabot's prior
written consent.
 
     Under the agreement, CMIC agrees to refrain from various actions that could
interfere with Cabot's ownership of the trademarks. The agreement contains
provisions regarding:
 
- the creation of quality standards for CMIC's products;
 
- the ability of Cabot to inspect CMIC's products and facilities; and
 
- CMIC's obligation to cease production of and correct or properly destroy, any
  products marketed under the licensed trademarks that fail to meet the quality
  standards.
 
     The agreement provides that our license to use the trademarks may be
terminated for various reasons, including our discontinued use of the
trademarks, our breach of the agreement or a change in control of us.
 
     CMIC will indemnify Cabot and its directors, officers and employees from
claims for damage or injury to persons or property or for loss of life or limb
if Cabot is found liable to any third party under any tort or products liability
or similar action in connection with the use by CMIC of the licensed trademarks.
 
                         MANAGEMENT SERVICES AGREEMENT
 
     We and Cabot have entered into a management services agreement, to be
effective as of the date of this offering, pursuant to which Cabot will provide
administrative and corporate support services to us on an interim or
transitional basis, including human resource, accounting, treasury, tax,
facilities, legal and information services. Specified charges for such services
are generally intended to allow Cabot to recover the fully allocated costs of
providing the services, plus all out-of-pocket, third-party costs and expenses,
but without any profit to Cabot. If Cabot incurs third-party expenses on behalf
of us as well as a Cabot entity, Cabot is required to allocate these expenses in
good faith between us and the Cabot entity, as Cabot shall determine in the
exercise of its reasonable judgment. The agreement provides that Cabot and we
may from time to time, upon mutual agreement, adjust the service charges to the
extent the charges are insufficient to cover or exceed the actual costs incurred
by Cabot. The agreement provides for monthly invoicing of service charges. If we
do not pay the invoiced amount within 90 days following receipt of the invoice,
we are required to pay interest at a specified rate, unless the invoiced amount
is in dispute. Cabot and we are required to use reasonable efforts to resolve
any disputes promptly.
 
     The management services agreement provides that the services provided by
Cabot will be substantially similar in scope, quality and nature to those
services provided to us prior to the contribution date. Cabot will also be
required to provide the services to us through the same or similarly qualified
personnel and the same or similar facilities as it has in the past, but the
selection of personnel to perform the various services will be within the sole
control of Cabot. In addition, Cabot is not required to increase the volume,
scope or quality of the services provided beyond the level at which they were
performed for us in the past. The agreement provides that Cabot
 
                                       58

<PAGE>   60
 
may cause any third party to provide any
service to us that Cabot is required to provide, but that Cabot will remain
responsible for any services it causes to be provided in this manner. Cabot is
not required to provide any service to the extent the performance of the service
becomes impracticable due to a cause outside the control of Cabot, such as
natural disasters, governmental actions or similar events of force majeure.
Similarly, Cabot is not required to provide any service if doing so would
require Cabot to violate any laws, rules or regulations. The agreement also
provides that Cabot and we may agree to additional services to be provided by
Cabot. The terms and costs of these additional services will be mutually agreed
upon by Cabot and us. These additional services may include services that were
not provided to the Microelectronics Division of Cabot prior to the contribution
date.
 
     Pursuant to the management services agreement, we have agreed to indemnify
and hold harmless Cabot, each of its subsidiaries and their directors, officers,
agents and employees from any claims, damages and expenses arising out of the
services rendered to us unless resulting from their breach of contract, gross
negligence or willful misconduct on their part. In addition, we have agreed that
these same persons shall be liable to us only for any claims, damages or
expenses resulting from breach of contract, gross negligence or willful
misconduct on their part.
 
     The management services agreement will commence on the date of this
offering and will continue until the earlier of the date of the spin-off or two
years from the completion of this offering. Cabot and CMC may, by mutual
agreement, provide for the continuation of some services after the spin-off. In
addition, either Cabot or our company may on each anniversary of the agreement
reduce the number, type, scope or amount of services or terminate the management
services agreement with respect to one or more of the services provided
thereunder upon giving   days prior written notice.
 
                          INITIAL PUBLIC OFFERING AND
                             DISTRIBUTION AGREEMENT
 
GENERAL
 
     We have entered into an initial public offering and distribution agreement
with Cabot, which will be effective as of the closing of this offering,
governing our respective rights and duties with respect to this offering and the
spin-off. Although Cabot has announced that it plans to complete the spin-off
within six to twelve months of the completion of this offering, Cabot is not
obligated to do so. We have agreed to cooperate with Cabot in all respects to
complete the spin-off. See "Risk Factors -- Risks Relating to Our Separation
from Cabot".
 
COVENANTS
 
     After this offering, Cabot will continue to own a significant portion of
our common stock. As a result, Cabot will continue to include us as a subsidiary
for various financial reporting, accounting and other purposes. Accordingly, we
have agreed to certain covenants in the initial public offering and distribution
agreement, which will be binding on us as long as Cabot owns at least 50% of our
outstanding common stock. Some of these covenants are described below:
 
- Covenants Regarding the Incurrence of Debt. We will not, and will not permit
  any of our subsidiaries to:
 
     - create, incur or assume any indebtedness in excess of an aggregate of $
       million outstanding at any time, except for indebtedness resulting from
       an acquisition and meeting various financial tests; and
 
     - complete, or agree to complete, any acquisition of any acquisition target
       that does not meet various financial tests.
 
- Other Covenants.  We have also agreed that:
 
     - we will not take any action which would have the effect of limiting
       Cabot's ability to freely sell, pledge or otherwise dispose of shares of
       our common
 
                                       59

<PAGE>   61
 
       stock or limiting the legal rights of or denying any benefit to Cabot as
       our stockholder in a manner not applicable to our stockholders generally;
 
     - we will not amend our stockholder rights plan, or any successor plan, in
       a manner that would result in Cabot's ownership of our common stock
       causing the rights to detach or become exercisable as described under
       "Description of Capital Stock -- Rights Plan"; and
 
     - we will not issue any shares of common stock or any rights, warrants or
       options to acquire our common stock, if after giving effect to such
       issuance Cabot would own less than 80% of the then outstanding shares of
       our common stock.
 
     In addition, we have agreed that, for so long as Cabot is required to
consolidate our results of operations and financial position or account for its
investment in our company, we will provide Cabot financial information regarding
our company and our subsidiaries, consult with Cabot regarding the timing and
content of our earnings releases and cooperate fully with Cabot in connection
with its public filings.
 
INDEMNIFICATION
 
     We have generally agreed to indemnify Cabot and its affiliates against all
liabilities arising out of any material untrue statements or omissions in this
prospectus and the registration statement of which it is a part and in any and
all registration statements, information statements and/or other documents filed
with the SEC in connection with the spin-off. Cabot, however, has agreed to
indemnify us for liabilities we may incur as a result of material untrue
statements or omissions regarding Cabot that are contained in such documents.
 
EXPENSES
 
     We will pay the costs and expenses incurred in connection with our
separation from Cabot and this offering including the costs and expenses of
financial, legal, accounting and other advisers, if any. Cabot will pay the
costs and expenses incurred in connection with the spin-off, including the costs
and expenses of financial, legal, accounting and other advisors, if any.
 
                             TAX SHARING AGREEMENT
 
     We are, and after this offering but prior to the spin-off will continue to
be, included in Cabot's consolidated federal income tax group, and our federal
income tax liability will be included in the consolidated federal income tax
liability of Cabot. We and Cabot have entered into a tax sharing agreement
pursuant to which the amount of taxes to be paid or received by us with respect
to consolidated or combined returns of Cabot in which we are included generally
are determined as though we file separate federal, state, local and foreign
income tax returns. Under the terms of the tax sharing agreement, Cabot is not
required to make any payment to us for the use of our tax attributes that come
into existence prior to the spin-off until such time as we would otherwise be
able to utilize such attributes.
 
     Until the spin-off, Cabot will:
 
- continue to have all the rights of a parent of a consolidated group;
 
- have sole and exclusive responsibility for the preparation and filing of
  consolidated federal and consolidated or combined state, local and foreign
  income tax returns (or amended returns); and
 
- have the power, in its sole discretion, to contest or compromise any asserted
  tax adjustment or deficiency and to file, litigate or compromise any claim for
  refund relating to these returns.
 
     In general, we will be included in Cabot's consolidated group for federal
income tax purposes for so long as Cabot beneficially owns at least 80% of the
total voting power and value of the outstanding common stock, which we expect
will be the case until the time of the spin-off. Each member of a consolidated
group is jointly and severally liable for the federal income tax liability of
each other member of the consolidated
 
                                       60

<PAGE>   62
 
group. Accordingly, although the tax sharing agreement allocates tax liabilities
between us and Cabot during the period in which we are included in Cabot's
consolidated group, we could be liable in the event that any federal tax
liability is incurred, but not discharged, by any other member of Cabot's
consolidated group. See "Risk Factors -- Risks Relating to Our Separation from
Cabot -- We face risks associated with being a member of Cabot's consolidated
group for federal income tax purposes".
 
     Under the terms of the tax sharing agreement, we agree to indemnify Cabot
in the event that the spin-off is not tax free to Cabot as a result of various
actions taken by or with respect to us or our failure to take various actions.
 
                         REGISTRATION RIGHTS AGREEMENT
 
     Although Cabot has announced its plans to complete the spin-off within six
to twelve months of the completion of this offering, we cannot assure you that
the spin-off will occur within this time frame or at all. See "Risk
Factors -- Risk Factors Relating to Our Separation from Cabot". In the event
that Cabot does not complete the spin-off, Cabot could not freely sell all of
our shares that it owns without registration under the Securities Act.
 
     Accordingly, we have entered into a registration rights agreement with
Cabot to provide it with registration rights relating to the shares of our
common stock which it holds. These registration rights generally become
effective at such time as Cabot informs us that it no longer intends to proceed
with or complete the spin-off. Cabot can require us to register under the
Securities Act all or any portion of our shares covered by the registration
rights agreement. In addition, the registration rights agreement also provides
for various piggyback registration rights for Cabot. Whenever we propose to
register any of our securities under the Securities Act for ourselves or others,
subject to certain customary exceptions, we must provide prompt notice to Cabot
and include in that registration all shares of our stock which Cabot requests to
be included.
 
     The registration rights agreement sets forth customary registration
procedures, including a covenant by us to make available our employees and
personnel for road show presentations. All registration expenses incurred in
connection with the registration rights agreement will be paid by us. In
addition, we must reimburse Cabot for the fees and disbursements of its outside
counsel retained in connection with any such registration. The registration
rights agreement also imposes customary indemnification and contribution
obligations on us for the benefit of Cabot and any underwriters with respect to
liabilities resulting from untrue statements or omissions in any registration
statement used in any such registration, although Cabot must indemnify us for
those liabilities resulting from information provided by Cabot.
 
     The registration rights under the registration rights agreement will remain
in effect with respect to the shares covered by the agreement until those shares
have been sold pursuant to an effective registration statement under the
Securities Act or such shares have been sold other than in a privately
negotiated sale pursuant to Rule 144 under the Securities Act.
 
                           EMPLOYEE MATTERS AGREEMENT
 
     We and Cabot have entered into an employee matters agreement that sets
forth our mutual understanding with respect to the responsibilities, obligations
and liabilities relating to the compensation and benefits of our employees in
connection with the offering and spin-off. Under this agreement, with certain
exceptions, we will be solely responsible for the compensation and benefits of
our employees on and following the offering. The principal exception to this
rule is retirement benefits for our employees; Cabot's tax-qualified retirement
plans will retain all assets and liabilities relating to our employees on and
after the offering (subject to any distributions from the plans that are
required or permitted by the plans and applicable law). The employee matters
agreement also describes our agreement with Cabot as to the conversion of Cabot
stock options and Cabot
 
                                       61

<PAGE>   63
 
purchase restricted stock into similar awards relating to our common stock.
 
                        OPTION GRANTS TO CABOT EMPLOYEES
 
     We intend to grant options under the 2000 Equity Incentive Plan to Cabot
employees. See "Management -- Grants Under the 2000 Equity Incentive Plan".
 
                                       62

<PAGE>   64
 
           SECURITY OWNERSHIP OF PRINCIPAL STOCKHOLDER AND MANAGEMENT
 
                             PRINCIPAL STOCKHOLDER
 
     The following table sets forth information with respect to beneficial
ownership of common stock by Cabot as of December 31, 1999, and as adjusted to
reflect the sale of the shares of common stock offered by us in this offering.
Cabot is the only person or entity that owns beneficially more than 5% of the
outstanding shares of common stock.
 

<TABLE>
<CAPTION>
                                                                                   PERCENTAGE OF
                                                                                    OUTSTANDING
                                                                                      SHARES
                                                                                BENEFICIALLY OWNED
                                                               SHARES OF        -------------------
NAME AND ADDRESS                                              COMMON STOCK       BEFORE     AFTER
OF BENEFICIAL OWNER                                        BENEFICIALLY OWNED   OFFERING   OFFERING
-------------------                                        ------------------   --------   --------
<S>                                                        <C>                  <C>        <C>
Cabot Corporation.......................................                          100%
75 State Street
  Boston, Massachusetts
</TABLE>

 

                                   MANAGEMENT
 
     The following table sets forth information with respect to beneficial
ownership of the outstanding common stock of Cabot, as of November 30, 1999, for
(1) each of our directors; (2) each of our executive officers named in the
Summary Compensation Table; and (3) all of our directors and executive officers
as a group.
 
     Beneficial ownership is determined in accordance with the rules of the SEC
and includes voting or investment power with respect to the securities. Except
as indicated by footnote, and subject to applicable community property laws, the
persons named in the table have sole voting and investment power with respect to
all shares of common stock shown as beneficially owned by them. The number of
shares of common stock outstanding used in calculating the percentage for each
listed person includes the shares of common stock underlying options held by
such person that are exercisable within 60 days of November 30, 1999, but
excludes shares of common stock underlying options held by any other person.
 

<TABLE>
<CAPTION>
                                                        PERCENTAGE
                                                        OWNERSHIP                         PERCENTAGE
                                      SHARES OF           OF OUR       SHARES OF CABOT     OWNERSHIP
NAME                               OUR COMMON STOCK      COMPANY        COMMON STOCK      OF CABOT(1)
----                               ----------------     ----------     ---------------    -----------
<S>                                <C>                <C>              <C>                <C>
Samuel W. Bodman.................         --
Kennett F. Burnes................         --
William C. McCarthy..............         --
Matthew Neville..................         --
William P. Noglows...............         --
Daniel J. Pike...................         --
Chris C. Yu......................         --
Bruce M. Zwicker.................         --
All directors and executive
  officers as a group............
</TABLE>

 
---------------
 
* Denotes less than 1% beneficial ownership.
(1) Other than Mr. Bodman, no named executive officer or director beneficially
    owns 1% or more of Cabot's common stock, nor do executive officers and
    directors as a group.
 
                                       63

<PAGE>   65
 

                          DESCRIPTION OF CAPITAL STOCK
 
     We intend to amend our certificate of incorporation and bylaws upon the
completion of this offering. The forms of our amended certificate of
incorporation and bylaws will be filed as exhibits to the registration statement
of which this prospectus is a part. The following summarizes the terms and
provisions of our capital stock upon the closing of this offering. The summary
is not complete, and you should read the forms of our certificate of
incorporation and bylaws.
 
     Upon the completion of this offering, our authorized capital stock will
consist of                shares, $0.001 par value per share, of common stock
and                shares, par value $0.001 per share, of preferred stock.
 
                                  COMMON STOCK
 
     Each share of our common stock will be identical in all respects and will
entitle its holder to the same rights and privileges enjoyed by all other
holders of common stock and will subject them to the same qualifications,
limitations and restrictions to which all other holders of common stock will be
subject. Holders of our common stock will be entitled to one vote per share on
all matters to be voted on by our stockholders. Holders of common stock will not
have cumulative rights, so that holders of a majority of the shares of common
stock present at a meeting at which a quorum is present will be able to elect
all of our directors eligible for election in a given year. The holders of a
majority of the voting power of the issued and outstanding common stock will
constitute a quorum. Holders of our common stock will be entitled to receive
ratably the dividends, if any, that are declared by our board of directors out
of funds legally available for the declaration of dividends, subject to the
preferential rights of any holder of preferred stock that may from time to time
be outstanding. Upon our liquidation, dissolution or winding up, the holders of
our common stock will be entitled to share pro rata in the distribution of all
of our assets available for distribution after satisfaction of all of our
liabilities and the payment of the liquidation preference of any preferred stock
that may be outstanding. The holders of our common stock will have no preemptive
or other subscription rights to purchase common stock, and there will be no
redemptive rights or sinking fund provisions.
 
                                PREFERRED STOCK
 
     Our board of directors will be authorized to cause shares of preferred
stock to be issued in one or more series, to determine the numbers of shares of
each series, to fix the rights, powers, preferences and privileges of each
series and any qualifications, limitations or restrictions thereon and to
increase or decrease the number of shares of each such series. Among the
specific matters that may be determined by the board of directors are: the
annual rate of dividends, the redemption price, if any; the terms of a sinking
or purchase fund, if any; the amount payable in the event of any voluntary
liquidation, dissolution or winding up of the affairs of our company; conversion
rights, if any; and voting powers, if any. Depending upon the terms of the
preferred stock established by our board of directors, any or all series of
preferred stock could have preferences over the common stock with respect to
dividends and other distributions and upon liquidation or could have voting or
conversion rights that could adversely affect the holders of the outstanding
common stock.
 
     In addition, the preferred stock could delay, defer or prevent a change of
control of our company. We have no present plans to issue shares of preferred
stock. Prior to the spin-off, however, it is anticipated that our board of
directors will adopt a preferred share purchase rights plan. See "-- Rights
Plan".
 
                      LIMITATION ON DIRECTORS' LIABILITIES
 
     Our certificate of incorporation will limit the liability of our directors
to us and our stockholders to the fullest extent permitted by Delaware law.
Specifically, our directors will not be personally liable for money damages
 
                                       64

<PAGE>   66
 
for breach of fiduciary duty as a director, except for liability
 
- for any breach of the director's duty of loyalty to us or our stockholders;
 
- for acts or omissions not in good faith or which involve intentional
  misconduct or a knowing violation of law;
 
- under Section 174 of the Delaware General Corporation Law, which concerns
  unlawful payments of dividends, stock purchases or redemptions; and
 
- for any transaction from which the director derived an improper personal
  benefit.
 
    ANTI-TAKEOVER EFFECTS OF OUR CERTIFICATE OF INCORPORATION AND BYLAWS AND
                           PROVISIONS OF DELAWARE LAW
 
     Our certificate of incorporation, our bylaws and Section 203 of the
Delaware General Corporation Law will contain provisions summarized below that
may delay, discourage or prevent the acquisition or control of our company by
means of a tender offer, open market purchase, proxy fight or otherwise,
including acquisitions that might result in a premium being paid over the market
price of the common stock.
 
STOCKHOLDER ACTION BY WRITTEN CONSENT UNTIL THE SPIN-OFF; SPECIAL MEETINGS
 
     Our certificate of incorporation and bylaws will permit stockholder action
by written consent until the time that Cabot and its affiliates cease to
beneficially own an aggregate of at least a majority of our then outstanding
shares of common stock. Thereafter, any action required or permitted to be taken
by our stockholders may be effected only at a duly called annual or special
meeting of stockholders and may not be effected by a written consent in lieu of
a meeting of stockholders. Prior to Cabot and its affiliates ceasing to
beneficially own an aggregate of at least a majority of our then outstanding
shares of common stock, we will call a special meeting of stockholders promptly
upon the request of Cabot. After Cabot and its affiliates cease to beneficially
own an aggregate of at least a majority of our then outstanding shares of common
stock, except as otherwise required by law and subject to the rights of the
holders of any preferred stock, special meetings of stockholders for any purpose
may be called only by our board of directors, its chairman or, at the written
request of a majority of our board of directors, our president, and the power of
stockholders to call a special meeting will be specifically denied.
 
ADVANCE NOTICE PROCEDURES
 
     Our bylaws will require advance notice of the nomination, other than by or
at the direction of our board of directors, of candidates for election as
directors, as well as for other stockholder proposals, to be considered at
annual meetings of stockholders. Subject to some exceptions, notice of intent to
nominate a director or raise matters at these meetings will have to be received
in writing by us not less than 90 nor more than 120 days prior to the
anniversary of the previous year's annual meeting of stockholders, and must
contain specific information concerning the person to be nominated or the
matters to be brought before the meeting and concerning the stockholder
submitting the proposal. If the chairman of a meeting determines that an
individual was not nominated, or other business was not brought before the
meeting, in accordance with the advance notice procedures, that individual will
not be eligible for election as a director, or that business will not be
conducted at such meeting, as the case may be.
 
BOARD OF DIRECTORS
 
     Our certificate of incorporation and bylaws will provide that the number of
directors shall be determined from time to time by a resolution adopted by the
majority of our directors. Our certificate of incorporation and bylaws will also
provide that the board of directors shall be divided into three classes, as
nearly equal in number as possible. Each director will hold office until that
person's successor is duly elected and qualified. Vacancies on the board of
directors shall be filled by a majority of the remaining directors, or by a sole
remaining director, or by our stockholders if the vacancy was caused by the
action of our stockholders.
                                       65

<PAGE>   67
 
     Subject to the rights of the holders of any series of preferred stock or
any other series or class of stock to elect additional directors under specified
circumstances, prior to the date when Cabot and its affiliates cease to
beneficially own an aggregate of at least a majority of our then outstanding
shares of common stock, any director may be removed from office, with or without
cause, by the affirmative vote of the holders of at least a majority of the
outstanding common stock, voting together as a single class and, on and after
the date when Cabot and its affiliates cease to beneficially own an aggregate of
at least a majority of our then outstanding shares of common stock, any director
may be removed from office only for cause upon the affirmative vote of holders
of at least 80% of our outstanding common stock, voting as a single class. A
director may not be removed by the stockholders at a meeting unless the notice
of the meeting states that the purpose, or one of the purposes, of the meeting
is removal of the director.
 
     The provisions of our certificate of incorporation and bylaws described
above would preclude a third party from removing incumbent directors and
simultaneously gaining control of our board of directors by filling the
vacancies created by removal with its own nominees. Under the classified board
provisions described above, it would take at least two elections of directors
for any individual or group to gain control of our board of directors.
 
ADOPTION, AMENDMENT OR REPEAL OF CERTIFICATE OR BYLAWS
 
     Our certificate of incorporation will provide that the affirmative vote of
holders of at least 80% of our outstanding common stock is required to amend,
repeal or adopt any provision of our certificate of incorporation inconsistent
with the provisions of that certificate regarding amendments to our bylaws,
stockholder action by written consent, special meetings of stockholders, our
board of directors and the election and removal of directors. Our certificate of
incorporation will further provide that our bylaws may be altered, amended or
repealed only by our board of directors or upon the affirmative vote of holders
of at least 80% of our outstanding common stock, voting together as a single
class.
 
SECTION 203 OF THE DELAWARE GENERAL CORPORATION LAW
 
     We must comply with the provisions of Section 203 of the Delaware General
Corporation Law. In general, Section 203 prohibits a publicly held Delaware
corporation from engaging in a "business combination" with an "interested
stockholder" for a period of three years after the date of the transaction in
which the person became an interested stockholder, unless the business
combination is approved in a prescribed manner.
 
     A "business combination" includes a merger, asset sale or other transaction
resulting in a financial benefit to the interested stockholder. An "interested
stockholder" is a person who, together with affiliates and associates, owns, or,
in some cases, within three years prior, did own, 15% or more of the
corporation's voting stock. Under Section 203, a business combination between
our company and an interested stockholder is prohibited unless it satisfies one
of the following three conditions:
 
- our board of directors must have previously approved either the business
  combination or the transaction that resulted in the stockholder becoming an
  interested stockholder;
 
- upon completion of the transaction that resulted in the stockholder becoming
  an interested stockholder, the interested stockholder owned at least 85% of
  our voting stock outstanding at the time the transaction commenced, excluding,
  for purposes of determining the number of shares outstanding, shares owned by
  (1) persons who are directors and also officers and (2) employee stock plans,
  in some instances; and
 
- the business combination is approved by our board of directors and authorized
  at an annual or special meeting of the stockholders by the affirmative vote of
  the holders of at least 66 2/3% of the outstanding voting stock that is not
  owned by the interested stockholder.
 
                                       66

<PAGE>   68
 
                            CORPORATE OPPORTUNITIES
 
     Our certificate of incorporation will provide that we and Cabot and our and
their respective subsidiaries may engage in the same or similar business
activities and lines of business and have an interest in the same areas of
corporate opportunities and that we and Cabot will continue to have contractual
and business relations with each other (including service of directors and
officers of Cabot as our directors and officers).
 
     Our certificate of incorporation will provide that, except as Cabot may
otherwise agree in writing, Cabot will have the right to:
 
- engage in the same or similar business activities or lines of business as us;
 
- do business with any of our potential or actual customers or suppliers; and
 
- employ or otherwise engage, or solicit for such purpose, any of our officers,
  directors or employees.
 
Neither Cabot nor any officer, employee or director of Cabot will be liable to
us or our stockholders for breach of any fiduciary or other duty by reason of
these activities.
 
     If Cabot acquires knowledge of a potential transaction or matter that may
be a corporate opportunity for both Cabot and us, Cabot will have no duty to
communicate that opportunity to us and will not be liable to us or our
stockholders because Cabot pursues or acquires that corporate opportunity for
itself, directs that corporate opportunity to another person or entity or does
not present that corporate opportunity to us.
 
     If one of our directors, officers or employees who is also a director,
officer or employee of a Cabot acquires knowledge of a potential transaction or
matter that may be a corporate opportunity for both us and Cabot, our
certificate will require that our director, officer or employee act in good
faith in accordance with the following policy:
 
- a corporate opportunity offered to any person who is one of our directors but
  not one of our officers or employees and who is also an officer or employee
  (whether or not a director) of Cabot will belong to Cabot, unless the
  opportunity is expressly offered to that person solely in his or her capacity
  as our director, in which case the opportunity will belong to us;
 
- a corporate opportunity offered to any person who is one of our officers or
  employees whether or not a director and who is also a director but not an
  officer or employee of Cabot will belong to us, unless the opportunity is
  expressly offered to that person solely in his or her capacity as a director
  of Cabot, in which case the opportunity will belong to Cabot; and
 
- a corporate opportunity offered to any other person who is (1) either one of
  our officers or employees and either an officer or employee of Cabot or (2) a
  director of both us and Cabot will belong to Cabot, unless such opportunity is
  expressly offered to the person solely in his or her capacity as one of our
  officers, directors or employees, in which case the opportunity will belong to
  us.
 
     For purposes of these corporate opportunity provisions, any of our
directors who is chairman or vice chairman of our board of directors or a
committee thereof will not be deemed to be one of our officers by reason of
holding the position, unless the person is one of our full-time employees. If a
corporate opportunity is offered to us or Cabot other than through a person who
is an officer, director or employee of both us and Cabot, either we or Cabot can
pursue that opportunity.
 
     Under our certificate of incorporation, any corporate opportunity that
belongs to Cabot or to us pursuant to the policy described above will not be
pursued by the other or directed by the other to another person or entity unless
and until Cabot or we, as the case may be, determine not to pursue the
opportunity. If the party to whom the corporate opportunity belongs does not,
however, within a reasonable period of time, begin to pursue, or thereafter
continue to pursue, such opportunity diligently and in good faith, the other
party may pursue such opportunity or direct it to another person or entity.
 
                                       67

<PAGE>   69
 
     Our directors, officers or employees acting in accordance with the policy
described above:
 
- will be deemed fully to have satisfied their fiduciary or other duties to us
  and our stockholders with respect to that corporate opportunity;
 
- will not be liable to us or our stockholders for any breach of fiduciary duty
  by reason of the fact that Cabot pursues or acquires that opportunity for
  itself or directs that corporate opportunity to another person or do not
  communicate information regarding such opportunity to us;
 
- will be deemed to have acted in good faith and in a manner they reasonably
  believe to be in our best interests; and
 
- will be deemed not to have breached any duty of loyalty or other duty those
  persons may have to us or our stockholders and not to have derived an improper
  benefit from these actions.
 
     The corporate opportunity provisions in our certificate of incorporation
will expire on the date that Cabot ceases to beneficially own common stock
representing at least 20% of the combined voting power of outstanding shares of
our common stock and no person who is one of our directors or officers is also a
director or officer of Cabot.
 
     Our certificate of incorporation will provide that any person purchasing or
otherwise acquiring any interest in any shares of our capital stock shall be
deemed to have notice of and to have consented to these provisions.
 
                          TRANSFER AGENT AND REGISTRAR
 
     The transfer agent and registrar for our common stock is Boston EquiServe,
L.P.
 
                                  RIGHTS PLAN
 
     Prior to the completion of this offering, our board of directors intends to
adopt a stockholders' rights plan. Under the rights plan:
 
- our board of directors will declare a dividend of one preferred share purchase
  right, or a right, for each outstanding share of our common stock; and
 
- each right will entitle the registered holder to purchase from us one
  one-hundredth of a share of a new Series A Junior Participating Preferred
  Stock, par value $1.00 per share, at a price of $     per one one-hundredth of
  a share, with adjustment.
 
     The description and terms of the rights are described in a rights agreement
between us and the designated rights agent. The description presented below is
intended as a summary only and is qualified in its entirety by reference to the
rights agreement, a form of which has been filed as an exhibit to the
registration statement of which this prospectus forms a part. See "Where You Can
Find More Information".
 
     The rights are attached to all certificates representing outstanding shares
of our common stock, and no separate right certificates were distributed. The
rights will separate from the shares of our common stock on the close of
business on the tenth day after the earlier to occur of:
 
- a public announcement that, without the prior consent of our board of
  directors, a person or group, known as an acquiring person, including any
  affiliates or associates of that person or group, acquired beneficial
  ownership of securities having 15% or more of the voting power of all our
  outstanding common stock. Cabot, its subsidiaries, employee benefit plans
  established by or for the benefit of employees of Cabot or its subsidiaries,
  and members of the Godfrey L. Cabot family and various trusts, estates,
  corporations and other entities established for the benefit of or directly or
  indirectly owned by the members of the Godfrey L. Cabot family, are not
  included in the definition of acquiring person except in cases where Cabot
  family members or these trusts, estates, corporations and other entities are
  acting with certain third parties; and
 
- the date of the commencement of, or announcement of an intention to commence,
  a tender offer or exchange offer
 
                                       68

<PAGE>   70
 
  that would result in any person or group becoming an acquiring person.
 
     We refer to the date on which the rights separate from our common stock as
the distribution date. The first date of public announcement that a person or
group has become an acquiring person is the stock acquisition date.
 
     Until the distribution date, rights will be transferred only with the
shares of our common stock. In addition, until the distribution date, or earlier
redemption or expiration, of the rights:
 
- new common stock certificates issued upon transfer or new issuance of shares
  of common stock will contain a notation incorporating the rights agreement by
  reference; and
 
- the surrender for transfer of any certificates for shares of common stock
  outstanding, even without a notation, will also constitute the transfer of the
  rights associated with the shares of common stock represented by the
  certificate.
 
     As soon as practicable following the distribution date, separate
certificates evidencing the rights will be mailed to holders of record of the
shares of common stock as of the close of business on the distribution date, and
to each initial record holder of various shares of common stock issued after the
distribution date. The separate right certificates alone will evidence the
rights.
 
     The rights are not exercisable until the distribution date and will expire
at 5:00 P.M., New York time, on the tenth anniversary of the date of issuance,
unless earlier redeemed by us as described below.
 
     If any person becomes an acquiring person, except by a permitted offer as
defined below, or in the event that more than 50% of our assets or earning power
is sold or transferred in either case with or to an acquiring person, each
holder of a right will have, under the terms of the rights agreement, the right,
known as a flip-in right, to receive upon exercise the number of shares of
common stock, or, in the discretion of our board of directors, the number of
one-hundredths of a share of preferred stock, or, in some circumstances, our
other securities, having a value immediately before the triggering event equal
to two times the exercise price. Notwithstanding the description above,
following the occurrence of the event described above, all rights that are, or
generally were, beneficially owned by any acquiring person or any affiliate or
associate of an acquiring person will be null and void.
 
     A permitted offer is a tender or exchange offer for all outstanding shares
of our common stock that is at a price and on terms determined, before the
purchase of shares under the tender or exchange offer, by our board of
directors, to be adequate, taking into account all factors that our board of
directors deems relevant, and otherwise in our best interests and our
stockholders' best interest, other than the person or any affiliate or associate
on whose behalf the offer is being made.
 
     If, at any time following the stock acquisition date,
 
- we are acquired in a merger or other business combination transaction in which
  the holders of all of the outstanding shares of common stock immediately
  before the completion of the transaction are not the holders of all of the
  surviving corporation's voting power; or
 
- more than 50% of our assets or earning power is sold or transferred with or to
  an acquiring person; or
 
- if in the transaction all holders of shares of common stock are not offered
  the same consideration;
 
then each holder of a right, except rights which previously have been voided as
described above, shall afterwards have the right, known as a flip-over right, to
receive, upon exercise, shares of common stock of the acquiring company having a
value equal to two times the exercise price. The holder of a right will continue
to have the flip-over right whether or not the holder exercises or surrenders
the flip-in right.
 
     The purchase price payable, and the number of one-hundredths of a share of
 
                                       69

<PAGE>   71
 
preferred stock or other securities issuable, upon exercise of the rights may be
adjusted from time to time to prevent dilution in the event of any one of the
following:
 
- a stock dividend on, or a subdivision, combination or reclassification of, the
  preferred stock;
 
- the grant to holders of the shares of preferred stock of various rights or
  warrants to subscribe for or purchase shares of preferred stock at a price, or
  securities convertible into shares of preferred stock with a conversion price,
  less than the then current market price of the shares of preferred stock; or
 
- the distribution to holders of the shares of preferred stock of evidences of
  indebtedness or assets, excluding regular quarterly cash dividends, or of
  subscription rights or warrants, other than those referred to above.
 
     The purchase price may also be adjusted in the event of a stock split of
the shares of common stock, or a stock dividend on the shares of common stock
payable in shares of common stock, or subdivisions, consolidations or
combinations of the shares of common stock occurring, in any case, before the
distribution date.
 
     With some exceptions, no adjustment in the purchase price will be required
until cumulative adjustments require an adjustment of at least 1% in the
purchase price. No fractional one-hundredth of a share of preferred stock will
be issued and, instead, an adjustment in cash will be made based on the market
price of the shares of preferred stock on the last trading day before the date
of exercise.
 
     At any time before the earlier to occur of (1) a person becoming an
acquiring person or (2) the expiration of the rights and various other
circumstances, we may redeem the rights in whole, but not in part, at a price of
$0.01 per right, or the redemption price, which redemption shall be effective
upon the action of our board of directors. Additionally, we may redeem the then
outstanding rights in whole, but not in part, at the redemption price in
connection with a merger or other business combination transaction or series of
transaction is which all holders of common stock are treated alike but not
involving an interested stockholder, as defined below.
 
     The shares of preferred stock purchasable upon exercise of the rights will
be non-redeemable. Each share of preferred stock will have a minimum
preferential quarterly dividend equal to the greater of $
per share and an amount equal to 100 times the aggregate amount of all cash
dividends per share and non-cash dividends and distributions per share other
than dividends payable in the form of common stock. In the event of liquidation,
the holders of preferred stock will receive a minimum preferential liquidation
payment of $  per share; thereafter, and after the holders of the common stock
receive liquidation payment of $     per share, the holders of the preferred and
common stock will share the remaining assets in the ratio of one hundred to one
(as adjusted) for each preferred and common share so held. Each share of junior
preferred stock will have 1,000 votes, voting together with the shares of common
stock. In the event of any merger, consolidation or other transaction in which
shares of common stock are exchanged, each share of preferred stock will be
entitled to receive 100 times the amount and type of consideration received per
share of common stock. The rights of the preferred stock as to dividends,
liquidation and voting, and in the event of mergers and consolidations, are
protected by customary anti-dilution provisions. In the event that the amount of
accrued and unpaid dividends on the preferred shares is equivalent to at least
six full quarterly dividends, the holders of the preferred shares shall have the
right, voting as a class, to elect two directors in addition to the directors
elected by the holders of the common shares until all cumulative dividends on
the preferred shares have been paid through the last quarterly dividend payment
date or until non-cumulative dividends have been paid regularly for at least one
year.
 
     Until a right is exercised, the holder will have no rights as a stockholder
with respect to the shares covered by that right, including, without limitation,
the right to vote or to receive dividends. While the distribution of the
                                       70

<PAGE>   72
 
rights was not taxable to our stockholders, stockholders may, depending upon the
circumstances, recognize taxable income should the rights become exercisable or
upon the occurrence of some subsequent events.
 
     Interested stockholder means any acquiring person or any of their
affiliates or associates, or any other person in which an acquiring person or
their affiliates or associates have in excess of 5% of the total combined
economic or voting power, or any person acting in concert or on behalf of any
acquiring person or their affiliates or associates.
 
                                       71

<PAGE>   73
 
                        SHARES ELIGIBLE FOR FUTURE SALE
 
     Upon the completion of this offering,
shares of common stock will be outstanding, or      shares if the underwriters
exercise their over-allotment option in full. Of these shares, the      shares
of common stock, assuming the underwriters exercise their over-allotment option
in full, sold in this offering will be freely tradable without restriction or
further registration under the Securities Act, unless held by an "affiliate" of
our company as that term is defined in Rule 144 under the Securities Act. All of
the shares of common stock outstanding prior to this offering are "restricted
securities", as defined under Rule 144. These shares are restricted securities
because they were issued in private transactions not involving a public offering
and may not be sold in the absence of registration other than in accordance with
Rule 144 or Rule 701 promulgated under the Securities Act or another exemption
from registration. This prospectus may not be used in connection with any resale
of shares of common stock acquired in this offering by our affiliates.
 
     The shares of our common stock that will continue to be held by Cabot after
the offering constitute "restricted securities" within the meaning of Rule 144,
and will be eligible for sale by Cabot in the open market after the offering,
subject to contractual lockup provisions and the applicable requirements of Rule
144. In connection with this offering, we and Cabot have agreed that, subject to
specified exceptions, for a period of 180 days after the date of this
prospectus, we and they will not, without the prior written consent of Goldman,
Sachs & Co., dispose of or hedge any shares of our common stock or any
securities convertible into or exchangeable for our common stock.
 
     In general, under Rule 144 as currently in effect, if a minimum of one year
has elapsed since the later of the date of acquisition of the restricted
securities from the issuer or from an affiliate of the issuer, a person or
persons whose shares of common stock are aggregated, including persons who may
be deemed our affiliates, would be entitled to sell within any three-month
period a number of shares of common stock that does not exceed the greater of
 
- one percent of the then-outstanding shares of common stock, which equals
  approximately      shares immediately after this offering, and
 
- the average weekly trading volume during the four calendar weeks preceding the
  date on which notice of the sale is filed with the SEC.
 
     Sales under Rule 144 are also subject to certain restrictions as to the
manner of sale, notice requirements and the availability of current public
information about us. In addition, under Rule 144(k), if a period of at least
two years has elapsed since the later of the date restricted securities were
acquired from us or the date they were acquired from one of our affiliates, a
stockholder who is not our affiliate at the time of sale and who has not been
our affiliate for at least three months prior to the sale would be entitled to
sell shares of common stock in the public market immediately without compliance
with the foregoing requirements under Rule 144. Rule 144 does not require the
same person to have held the securities for the applicable periods. The
foregoing summary of Rule 144 is not intended to be a complete description.
 
     In addition, any employee, director or officer of, or consultant to our
company who acquired shares pursuant to a written compensatory plan or contract
may be entitled to rely on the resale provisions of Rule 701 of the Securities
Act, which permits non-affiliates to sell their Rule 701 shares without having
to comply with the public information, holding period, volume limitation or
notice provisions of Rule 144, and permits our affiliates to sell their Rule 701
shares without having to comply with the holding period restrictions of Rule
144, in each case, commencing 90 days after the date of this prospectus.
 
     Cabot has announced that it currently plans to complete its divestiture of
us by distributing all of the shares of our common stock which it owns to the
holders of its common stock. See "Relationships Between Our Company and Cabot
Corporation" and
 
                                       72

<PAGE>   74
 
"Risk Factors -- Risks Relating to Our Separation from Cabot". Any shares
distributed by Cabot will be eligible for immediate resale in the public market
without restrictions by persons other than our affiliates. Our affiliates would
be subject to the restrictions of Rule 144 described above other than the one-
year holding period requirement.
 
     Immediately following this offering, none of the           "restricted
securities" will be available for immediate sale in the public market pursuant
to Rule 144(k). Beginning 90 days after the date of this prospectus, and without
consideration of the contractual restrictions described above,           shares
issued under or acquired upon exercise of options issued under the 2000 Equity
Incentive Plan will be outstanding and eligible for sale in reliance upon Rule
701. Additional shares may be available if options are exercised in the 180-day
period following the date of this prospectus. Shares of common stock issued
pursuant to the 2000 Equity Incentive Plan generally will be available for sale
in the open market by holders who are not our affiliates and, subject to the
volume and other applicable limitations of Rule 144, by holders who are our
affiliates, unless those shares are subject to vesting restrictions or the
contractual restrictions described above.
 
     Prior to this offering, there has been no public market for the common
stock. No information is currently available and we cannot predict the timing or
amount of future sales of shares, or the effect, if any, that future sales of
shares, or the availability of shares for future sale, will have on the market
price of the common stock prevailing from time to time. Sales of substantial
amounts of the common stock (including shares issuable upon the exercise of
stock options) in the public market after the lapse of the restrictions
described above, or the perception that such sales may occur, could materially
adversely affect the prevailing market prices for the common stock and our
ability to raise equity capital in the future. See "Risk Factors -- Risks
Relating to this Offering -- Shares eligible for future sale could reduce the
market price of our common stock".
 
                              REGISTRATION RIGHTS
 
     Some holders of our common stock are entitled to registration rights, which
are described under "Relationships Between Our Company and Cabot
Corporation -- Registration Rights Agreement".
 
                                       73

<PAGE>   75
 

                                 LEGAL MATTERS
 
     Fried, Frank, Harris, Shriver & Jacobson (a partnership including
professional corporations), New York, New York will pass upon the validity of
the issuance of the shares of common stock offered hereby. The validity of the
shares being issued in this offering will be passed upon for the underwriters by
Sullivan & Cromwell, New York, New York.
 

                                    EXPERTS
 
     The financial statements as of September 30, 1998 and 1999 and for each of
the three years in the period ended September 30, 1999 included in this
prospectus have been so included in reliance on the report of
PricewaterhouseCoopers LLP, independent accountants, given on the authority of
said firm as experts in auditing and accounting.
 
                      WHERE YOU CAN FIND MORE INFORMATION
 
     We have filed with the SEC a registration statement on Form S-1 with
respect to the common stock being offered by this prospectus. This prospectus
does not contain all of the information set forth in the registration statement
and the exhibits and schedules to the registration statement. For further
information with respect to Cabot Microelectronics and the shares of common
stock offered by this prospectus, reference is made to the registration
statement, including its exhibits and schedules. Statements made in this
prospectus to any contract or other document are not necessarily complete and
you should refer to the exhibits attached to the registration statement for
copies of the actual contract or document. You may review a copy of the
registration statement, including its exhibits and schedules, at the SEC's
public reference room, located at 450 Fifth Street, N.W., Washington, D.C.
20549, or at the SEC's regional offices located at 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661, and Seven World Trade Center, 13th Floor,
New York, New York 10048 or on the Internet at http://www.sec.gov. You may
obtain a copy of this registration statement from the SEC's public reference
room upon payment of prescribed fees. Please call the SEC at (800) SEC-0330 for
further information on the operation of the public reference room.
 
     As a result of this offering, we will become subject to the information and
reporting requirements of the Exchange Act and, in accordance with the Exchange
Act, we will file periodic reports, proxy statements and other information with
the SEC.
 
                                       74

<PAGE>   76
 
                   CABOT MICROELECTRONICS MATERIALS DIVISION
 
                     INDEX TO COMBINED FINANCIAL STATEMENTS
 

<TABLE>
<CAPTION>
                                                              PAGE(S)
                                                              -------
<S>                                                           <C>
Report of Independent Accountants...........................    F-2
Combined Balance Sheets at September 30, 1998 and 1999......    F-3
Combined Statements of Income for the years ended September
  30, 1997, 1998 and 1999...................................    F-4
Combined Statements of Division Equity for the years ended
  September 30, 1997, 1998 and 1999.........................    F-5
Combined Statements of Cash Flows for the years ended
  September 30, 1997, 1998 and 1999.........................    F-6
Notes to Combined Financial Statements......................    F-7
</TABLE>

 
                                       F-1

<PAGE>   77
 

                       REPORT OF INDEPENDENT ACCOUNTANTS
 
To the Board of Directors of Cabot Corporation:
 
In our opinion, the accompanying combined balance sheets and the related
combined statements of income, of changes in division equity and of cash flows
present fairly, in all material respects, the financial position of Cabot
Microelectronics Materials Division (the "Division"), a division of Cabot
Corporation, at September 30, 1998 and 1999, and the results of its operations
and its cash flows for each of the three years in the period ended September 30,
1999 in conformity with accounting principles generally accepted in the United
States. These financial statements are the responsibility of the Division's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these statements in
accordance with auditing standards generally accepted in the United States,
which require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for the opinion expressed above.
 
/s/ PricewaterhouseCoopers LLP
 
Boston, Massachusetts
November 5, 1999

 
                                       F-2

<PAGE>   78
 
                   CABOT MICROELECTRONICS MATERIALS DIVISION
 
                            COMBINED BALANCE SHEETS
 

<TABLE>
<CAPTION>
                                                                  SEPTEMBER 30,
                                                              ----------------------
                                                                1998         1999
                                                                ----         ----
                                                              (amounts in thousands)
<S>                                                           <C>          <C>
ASSETS
Current assets:
  Cash......................................................   $    38      $    38
  Accounts receivable, less allowance for doubtful accounts
     of $50 at September 30, 1998 and 1999..................     9,057       19,888
  Inventories...............................................     5,913        5,269
  Prepaid expenses and other current assets.................       142          285
  Deferred income taxes.....................................       431          640
                                                               -------      -------
          Total current assets..............................    15,581       26,120
Property, plant and equipment, net..........................    24,713       40,031
Goodwill, net...............................................     1,890        1,610
Other intangible assets, net................................     2,878        2,438
Deferred income taxes.......................................        69           75
                                                               -------      -------
          Total assets......................................   $45,131      $70,274
                                                               =======      =======
LIABILITIES AND DIVISION EQUITY
Current liabilities:
  Accounts payable..........................................   $   914      $   995
  Accrued expenses and other current liabilities............     3,956        6,780
                                                               -------      -------
          Total current liabilities.........................     4,870        7,775
Deferred compensation.......................................       233          422
                                                               -------      -------
          Total liabilities.................................     5,103        8,197
Commitments and contingencies (Note 14)
Division equity.............................................    40,028       62,077
                                                               -------      -------
          Total liabilities and division equity.............   $45,131      $70,274
                                                               =======      =======
</TABLE>

 
    The accompanying notes are an integral part of these combined financial
                                  statements.
                                       F-3

<PAGE>   79
 
                   CABOT MICROELECTRONICS MATERIALS DIVISION
 
                         COMBINED STATEMENTS OF INCOME
 

<TABLE>
<CAPTION>
                                                                YEARS ENDED SEPTEMBER 30,
                                                              -----------------------------
                                                               1997       1998       1999
                                                               ----       ----       ----
                                                                 (amounts in thousands)
<S>                                                           <C>        <C>        <C>
Revenue.....................................................  $33,851    $56,862    $95,701
Revenue -- related party....................................    1,360      1,969      2,989
                                                              -------    -------    -------
                                                               35,211     58,831     98,690
                                                              -------    -------    -------
Cost of goods sold..........................................   18,561     27,686     44,902
Cost of goods sold -- related party.........................    1,360      1,969      2,989
                                                              -------    -------    -------
                                                               19,921     29,655     47,891
                                                              -------    -------    -------
          Gross profit......................................   15,290     29,176     50,799
Operating expenses:
  Research and development..................................    8,411     10,139     14,551
  Selling and marketing.....................................    1,028      3,293      4,572
  General and administrative................................    4,468      8,576     11,880
  Amortization of goodwill and other intangibles............      720        720        720
                                                              -------    -------    -------
          Total operating expenses..........................   14,627     22,728     31,723
                                                              -------    -------    -------
Income before income taxes..................................      663      6,448     19,076
Provision for (benefit from) income taxes...................      (45)     2,211      6,796
                                                              -------    -------    -------
          Net income........................................  $   708    $ 4,237    $12,280
                                                              =======    =======    =======
</TABLE>

 
    The accompanying notes are an integral part of these combined financial
                                  statements.
                                       F-4

<PAGE>   80
 
                   CABOT MICROELECTRONICS MATERIALS DIVISION
 
               COMBINED STATEMENTS OF CHANGES IN DIVISION EQUITY
 

<TABLE>
<CAPTION>
                                                                                                          NOTES
                                                          ACCUMULATED                                   RECEIVABLE
                                                             OTHER                                         FOR        TOTAL
                                   PARENT     RETAINED   COMPREHENSIVE   COMPREHENSIVE     DEFERRED     RESTRICTED   DIVISION
                                 INVESTMENT   EARNINGS   INCOME (LOSS)      INCOME       COMPENSATION     STOCK       EQUITY
                                 ----------   --------   -------------   -------------   ------------   ----------   --------
                                                              (amounts in thousands)
<S>                              <C>          <C>        <C>             <C>             <C>            <C>          <C>
Balance at September 30, 1996..   $27,147     $  (511)       $ 25                          $  (452)                  $26,209
Capital contribution from Cabot
Corporation....................     1,214                                                                              1,214
Issuance of Cabot restricted
  stock under employee
  compensation plans...........       451                                                     (451)                       --
Amortization of deferred
  compensation.................                                                                242                       242
Net income.....................                   708                       $   708
Foreign currency translation
  adjustment...................                                51                51
                                                                            -------
Total comprehensive income.....                                             $   759                                      759
                                  -------     -------        ----           =======        -------       -------     -------
Balance at September 30, 1997..    28,812         197          76                             (661)                   28,424
 
Capital contribution from Cabot
  Corporation..................     6,822                                                                              6,822
Issuance of Cabot restricted
  stock under employee
  compensation plans...........       878                                                     (878)                       --
Amortization of deferred
  compensation.................                                                                449                       449
Net income.....................                 4,237                       $ 4,237
Foreign currency translation
  adjustment...................                                96                96
                                                                            -------
Total comprehensive income.....                                             $ 4,333                                    4,333
                                  -------     -------        ----           =======        -------       -------     -------
Balance at September 30, 1998..    36,512       4,434         172                           (1,090)                   40,028
 
Capital contribution from Cabot
  Corporation..................     9,450                                                                              9,450
Issuance of Cabot restricted
  stock under employee
  compensation plans...........     1,385                                                   (1,385)                       --
Amortization of deferred
  compensation.................                                                                900                       900
Notes receivable for restricted

  stock........................                                                                          $(1,383)     (1,383)
Net income.....................                12,280                       $12,280
Foreign currency translation
  adjustment...................                               802               802
                                                                            -------
Total comprehensive income.....                                             $13,082                                   13,082
                                  -------     -------        ----           =======        -------       -------     -------
Balance at September 30, 1999..   $47,347     $16,714        $974                          $(1,575)      $(1,383)    $62,077
                                  =======     =======        ====                          =======       =======     =======
</TABLE>

 
    The accompanying notes are an integral part of these combined financial
                                  statements.
                                       F-5

<PAGE>   81
 
                   CABOT MICROELECTRONICS MATERIALS DIVISION
 
                       COMBINED STATEMENTS OF CASH FLOWS
 

<TABLE>
<CAPTION>
                                                               YEARS ENDED SEPTEMBER 30,
                                                             ------------------------------
                                                              1997       1998        1999
                                                              ----       ----        ----
                                                                 (amounts in thousands)
<S>                                                          <C>        <C>        <C>
Cash flows from operating activities:
Net income.................................................  $   708    $ 4,237    $ 12,280
  Adjustments to reconcile net income to net cash provided
     by operating activities:
     Depreciation and amortization.........................    1,911      2,208       2,777
     Noncash compensation expense..........................      242        449         900
     Provision for inventory writedown.....................       30        140         130
     Deferred income tax expense...........................       91       (143)       (215)
     Loss on disposal of property, plant and equipment.....       --         30         141
     Changes in operating assets and liabilities:
       Accounts receivable.................................   (1,829)    (3,213)    (10,616)
       Inventories.........................................   (1,201)    (3,246)        646
       Prepaid expenses and other current assets...........       (1)      (139)       (143)
       Accounts payable....................................      165        290          74
       Accrued expenses and other current liabilities......      166      1,600       2,787
       Deferred compensation...............................       79        114         189
                                                             -------    -------    --------
Net cash provided by operating activities..................      361      2,327       8,950
                                                             -------    -------    --------
Cash flows from investing activities:
  Additions to property, plant and equipment...............   (1,692)    (9,313)    (17,194)
  Proceeds from sale of property, plant and equipment......       --          3          65
                                                             -------    -------    --------
Net cash used by investing activities......................   (1,692)    (9,310)    (17,129)
                                                             -------    -------    --------
Net cash flows from financing activities:
  Net capital contributed by Cabot Corporation.............    1,214      6,822       9,450
  Purchase of notes receivable for restricted stock........       --         --      (1,383)
                                                             -------    -------    --------
                                                               1,214      6,822       8,067
                                                             -------    -------    --------
Effect of exchange rate changes on cash....................      107        194         112
                                                             -------    -------    --------
Increase (decrease) in cash................................      (10)        33          --
Cash at beginning of year..................................       15          5          38
                                                             -------    -------    --------
Cash at end of year........................................  $     5    $    38    $     38
                                                             =======    =======    ========
</TABLE>

 
    The accompanying notes are an integral part of these combined financial
                                  statements.
                                       F-6

<PAGE>   82
 
                   CABOT MICROELECTRONICS MATERIALS DIVISION
 
                     NOTES TO COMBINED FINANCIAL STATEMENTS
            (AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
 
1.  DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION:
 
     Cabot Microelectronics Materials Division (the "Division") is a division of
Cabot Corporation ("Cabot"). The Division is a leading supplier of Chemical
Mechanical Planarization ("CMP") slurries to the semiconductor industry
worldwide. The accompanying financial statements are derived from the historical
books and records of Cabot and present the assets and liabilities, results of
operations and cash flows applicable to the Division. The financial statements
of the Division have been prepared for inclusion in a registration statement
relating to the public offering of a portion of the common stock of Cabot
Microelectronics Corporation ("CMC"), a wholly-owned subsidiary of Cabot which
was incorporated in October 1999. Prior to the planned initial public offering,
the assets and liabilities of the Division will be transferred to CMC.
 
     The combined financial statements include the accounts of each subsidiary
or part of each subsidiary which forms Cabot's Microelectronics Materials
Division. Intercompany transactions between entities within the Division have
been eliminated.
 
     The combined balance sheets have been prepared using the historical basis
of accounting and include all of the assets and liabilities specifically
identifiable to the Division. The combined statements of income include all
revenue and costs attributable to the Division, including a corporate allocation
of employee benefits and costs of shared services (including legal, finance,
human resources, information systems, corporate office, and safety, health and
environmental expenses). These costs are allocated to the Division based on
criteria that management believes to be equitable, such as the Division's
revenue in proportion to Cabot's revenue, headcount, or actual utilization.
Management believes this provides a reasonable estimate of the costs
attributable to the Division. For the years ended September 30, 1997, 1998 and
1999, such allocated costs amounted to $2,358, $3,917, and $5,716, respectively,
and are included in operating expenses. Allocated costs may not necessarily be
indicative of the costs that would have been incurred by the Division on a
standalone basis.
 
2.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
 
  CASH
 
     Cash management for the Division was provided by Cabot and net cash
provided by Cabot was recorded as contributions of capital to the Division.
 
  INVENTORIES
 
     Inventories are stated at the lower of cost, determined on the first-in,
first-out (FIFO) basis, or market.
 
  PROPERTY, PLANT AND EQUIPMENT
 
     Property, plant and equipment are recorded at cost. Depreciation is based
on the following estimated useful lives of the assets using the straight-line
method:
 

<TABLE>
<S>                                                           <C>
Buildings...................................................  20-25 years
Machinery and equipment.....................................   5-10 years
Furniture and fixtures......................................   5-10 years
Information systems.........................................    3-5 years
</TABLE>

 
                                       F-7

<PAGE>   83
                   CABOT MICROELECTRONICS MATERIALS DIVISION
 
             NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
            (AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
 
     Expenditures for repairs and maintenance are charged to expense as
incurred. Expenditures for major renewals and betterments are capitalized and
depreciated over the remaining useful lives. As assets are retired or sold, the
related cost and accumulated depreciation are removed from the accounts and any
resulting gain or loss is included in the results of operations.
 
  GOODWILL AND OTHER INTANGIBLE ASSETS
 
     Goodwill and other intangible assets were acquired in connection with a
July 1995 purchase of selected assets (see Note 4). Other intangible assets
consist of trade secrets and know-how, distribution rights, customer lists and
workforce in place. Goodwill and other intangible assets are amortized on the
straight-line basis over their estimated useful lives.
 
  IMPAIRMENT OF LONG-LIVED ASSETS
 
     The Division reviews long-lived assets, including goodwill, for impairment
whenever events or changes in business circumstances indicate that the carrying
amount of the assets may not be fully recoverable or that the useful lives of
these assets are no longer appropriate. Each impairment test is based on a
comparison of the undiscounted cash flows to the recorded value of the asset. If
an impairment is indicated, the asset is written down to its estimated fair
value on a discounted cash flow basis.
 
  FOREIGN CURRENCY TRANSLATION
 
     The Division's operations in Europe and Asia operate primarily using the
local currency. Accordingly, all assets and liabilities of these subsidiaries
are translated using exchange rates in effect at the end of the period, and
revenue and costs are translated using weighted average exchange rates for the
period. The related translation adjustments are reported in Comprehensive Income
in division equity. Gains and losses resulting from foreign currency
transactions are immaterial for all periods presented.
 
  FOREIGN EXCHANGE MANAGEMENT
 
     The Division has used forward exchange contracts solely to hedge firm
commitments denominated in Japanese Yen associated with the construction of its
Japan plant. The terms of the currency instrument used to hedge this exposure
were consistent with the timing of the committed hedged transaction. The gains
and losses on the forward exchange contracts that were designated as hedges of
the firm commitment associated with the construction of its Japan plant were
deferred and capitalized as part of the cost of the plant. During fiscal 1998,
the Division had a $699 loss on these forward exchange contracts. Cash flows
from these forward exchange contracts have been included in additions to
property, plant and equipment in the combined statement of cash flows. The
purpose of the Division's foreign currency management activity is to protect the
Division from the risk that eventual cash flow requirements from significant
foreign currency commitments may be adversely affected by changes in exchange
rates. The Division has not entered into any other derivative transactions. The
Division had no forward exchange contracts during 1997 or 1999. The Division
does not use derivative financial instruments for trading or speculative
purposes.
 
  FAIR VALUES OF FINANCIAL INSTRUMENTS
 
     The recorded amounts of cash, accounts receivable, accounts payable, and
notes receivable for restricted stock approximate their fair values.
                                       F-8

<PAGE>   84
                   CABOT MICROELECTRONICS MATERIALS DIVISION
 
             NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
            (AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
 
  CONCENTRATION OF CREDIT RISK
 
     Financial instruments that subject the Division to concentrations of credit
risk consist principally of accounts receivable. The Division performs ongoing
credit evaluations of its customers' financial condition and generally does not
require collateral to secure accounts receivable. The Division's exposure to
credit risk associated with nonpayment is affected principally by conditions or
occurrences within the semiconductor industry. The Division historically has not
experienced losses relating to accounts receivables from individual customers or
groups of customers. The Division maintains an allowance for doubtful accounts
based on an assessment of the collectibility of such accounts.
 
     At September 30, 1998, one customer accounted for 40.2% of net accounts
receivable. At September 30, 1999, three customers accounted for 41.0% of net
accounts receivable.
 
     Revenue from customers who represented more than 10% of revenue were as
follows:
 

<TABLE>
<CAPTION>
                                                       FOR THE YEAR ENDED
                                                         SEPTEMBER 30,
                                                    ------------------------
                                                    1997      1998      1999
                                                    ----      ----      ----
<S>                                                 <C>       <C>       <C>
Customer A........................................  42%       38%       22%
Customer B........................................  11%       12%       10%
Customer C........................................   --        --       15%
</TABLE>

 
     Customers B and C in the above table are distributors.
 
  REVENUE RECOGNITION
 
     Revenue is recognized upon completion of delivery obligations, provided
acceptance and collectibility are reasonably assured. A provision for the
estimated warranty cost is recorded at the time revenue is recognized based on
the Division's historical experience.
 
     The Division manufactures certain dispersions which are sold to Cabot at
cost. These sales are disclosed as revenue from related party in the combined
statements of income. Cabot and the Division have entered into a dispersions
services agreement, effective upon the closing date of the planned initial
public offering, which provides for dispersions to be sold to Cabot at cost plus
a margin. Under the new agreement, Cabot will supply the Division with fumed
metal oxide raw materials for these dispersions at no cost. Accordingly, the
cost of these fumed metal oxides will not be included in revenue or cost of
goods sold (see Note 3). Had the dispersions services agreement been effective
for the year ended September 30, 1999, pro forma unaudited revenue from related
party would have been $1,994.
 
  COST OF GOODS SOLD
 
     The Division has historically purchased all of its fumed metal oxides,
critical raw materials used in the manufacturing process, from Cabot at a
budgeted standard cost. Purchases of fumed metal oxides from Cabot by the
Division totaled $8,812, $16,273, and $20,310 during fiscal 1997, 1998, and
1999, respectively.
 
     The Division has entered into a new fumed metal oxide supply agreement with
Cabot, effective immediately prior to the closing date of the planned initial
public offering, under which it will purchase fumed metal oxides at a
contractually agreed upon price (see Note 3). Had the
 
                                       F-9

<PAGE>   85
                   CABOT MICROELECTRONICS MATERIALS DIVISION
 
             NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
            (AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
 
purchases of fumed metal oxides that were recorded in cost of goods sold for the
year ended September 30, 1999 been at the price specified in the new supply
agreement rather than at Cabot's budgeted standard cost of manufacturing, pro
forma unaudited cost of goods sold would have been $50,827.
 
     Cost of sales made to Cabot is disclosed as cost of goods sold from related
party in the combined statements of income. Had the dispersions services
agreement discussed above been effective for the year ended September 30, 1999,
pro forma unaudited cost of goods sold from related party would have been
$1,645.
 
  RESEARCH AND DEVELOPMENT
 
     Research and development costs are expensed as incurred.
 
  INCOME TAXES
 
     The Division was not a separate taxable entity for federal, state or local
income tax purposes. The Division's operations are included in the consolidated
Cabot tax returns. An income tax provision has been calculated on a separate
return basis. Prior to the consummation of the offering, the Division intends to
enter into a tax-sharing agreement with Cabot as described in Note 3.
 
     Deferred income taxes are determined based on the estimated future tax
effects or differences between financial statement carrying amounts and the tax
bases of existing assets and liabilities. Provisions are made for the U.S.
income tax liability and additional non-U.S. taxes on the undistributed earnings
of non-U.S. subsidiaries.
 
  STOCK-BASED COMPENSATION
 
     The Division participates in Cabot's stock-based compensation plans. In
accordance with the provisions of Statement of Financial Accounting Standards
("SFAS") No. 123, "Accounting for Stock-Based Compensation" ("SFAS 123"), the
Division has elected to account for stock-based compensation plans in accordance
with Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees" ("APB 25"), and related interpretations. The Division discloses the
summary of pro forma effects to reported net income for fiscal 1997, 1998 and
1999, as if the Division had elected to recognize compensation cost based on the
fair value of the options and restricted stock granted by Cabot to employees of
the Division as prescribed by SFAS 123.
 
  EARNINGS PER SHARE
 
     Historical earnings per share data has not been presented because the
Division did not operate as a separate legal entity of Cabot with its own
capital structure.
 
  USE OF ESTIMATES
 
     The preparation of the combined financial statements in conformity with
generally accepted accounting principles requires management to make certain
estimates and assumptions that affect the reported amounts of assets and
liabilities and the disclosure of contingent assets and liabilities at the date
of the combined financial statements and the reported amounts of revenue and
expenses during the reported period. Actual results could differ from those
estimates.
 
                                      F-10

<PAGE>   86
                   CABOT MICROELECTRONICS MATERIALS DIVISION
 
             NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
            (AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
 
  COMPREHENSIVE INCOME
 
     The Division implemented SFAS No. 130 "Reporting Comprehensive Income"
("SFAS 130"), effective October 1, 1998. This standard requires the Division to
report the total changes in division equity that do not result directly from
transactions with stockholders, including those which do not affect retained
earnings. Other comprehensive income recorded by the Division is solely
comprised of accumulated foreign currency translation adjustments, net of
related tax effects. The deferred tax expense associated with foreign currency
translation adjustments was $32, $58, and $492 during fiscal 1997, 1998 and
1999, respectively.
 
  RECENT ACCOUNTING PRONOUNCEMENTS
 
     In April 1998, the American Institute of Certified Public Accountants
("AICPA") issued Statement of Position 98-1, "Accounting for the Costs of
Computer Software Developed or Obtained for Internal Use" ("SOP 98-1"). SOP 98-1
provides guidance regarding whether computer software is internal-use software,
the capitalization of costs incurred for computer software developed or obtained
for internal use and accounting for the proceeds of computer software originally
developed or obtained for internal use and then subsequently sold to the public.
The Division does not expect the impact of adopting SOP 98-1, which will be
effective for the Division in fiscal 2000, to be material to its financial
condition or results of operations.
 
     In April 1998, the AICPA issued Statement of Position 98-5, "Reporting on
the Costs of Start-Up Activities" ("SOP 98-5"). SOP 98-5 requires companies to
expense start-up and organization costs as incurred. SOP 98-5 broadly defines
start-up activities and provides examples to help entities determine costs that
are and are not within the scope of SOP 98-5. SOP 98-5 will be effective for the
Division in fiscal 2000, and its initial application is to be reported as the
cumulative effective of a change in accounting principle. The Division does not
expect the impact of adopting SOP 98-5 to be material to its financial condition
or results of operations.
 
     In June 1998, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 133, "Accounting for Derivative Instruments and Hedging Activities" ("SFAS
133"). SFAS 133 establishes new standards of accounting and reporting for
derivative instruments and hedging activities. SFAS 133 requires that all
derivatives be recognized at fair value in the balance sheet, and the
corresponding gains and losses be reported either in the statement of income or
as a component of comprehensive income, depending on the type of hedging
relationship that exists. The Division does not expect the impact of SFAS 133,
which will be effective for fiscal 2001, to be significant given its limited use
of derivatives.
 
     In December 1999, the Securities and Exchange Commission ("SEC") released
Staff Accounting Bulletin No. 101 ("SAB 101"), which provides guidance on the
recognition, presentation and disclosure of revenue in financial statements
filed with the SEC. The Division is required to be in conformity with the
provisions of SAB 101 no later than October 1, 2000 and does not expect a
material change in its financial condition or results of operations as a result
of SAB 101.
 
3.  ARRANGEMENTS WITH CABOT:
 
     These combined financial statements have been prepared for inclusion in a
registration statement relating to the planned initial public offering (the
"offering") of a portion of the common stock of CMC. Cabot will continue to
beneficially own more than 80% of the outstanding
 
                                      F-11

<PAGE>   87
                   CABOT MICROELECTRONICS MATERIALS DIVISION
 
             NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
            (AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
 
shares of common stock after the offering. In addition, Cabot has announced that
sometime after the offering it intends to distribute, pro rata to its common
stockholders, all of the shares that it owns by means of a tax-free distribution
(subject to board of director's approval and other conditions) (the "spin-off").
 
     CMC's relationship with Cabot following the offering and spin-off will be
governed by the following agreements.
 
  FUMED METAL OXIDE SUPPLY AGREEMENT
 
     The Division has entered into a fumed metal oxide supply agreement with
Cabot which will become effective upon the closing of the offering. Cabot will
continue to be the exclusive supplier of fumed metal oxides, including fumed
silica, for currently existing slurry products. The agreement provides for a
fixed annual increase in the price of fumed silica of approximately 2% and
additional increases if Cabot's raw material costs increase. The agreement
contains provisions requiring Cabot to supply the Division with fumed silica in
specified volumes. The Division is obligated to purchase at least 90% of the
six-month volume forecast and the Division must pay damages to Cabot if the
Division purchases less than that amount. In addition, the Division is obligated
to pay all reasonable costs incurred by Cabot to provide quality control testing
at levels greater than that which Cabot provides to other customers.
 
     Under the agreement, Cabot will also supply fumed alumina on terms
generally similar to those described above. Cabot is not permitted to sell fumed
metal oxides to third parties for use in CMP applications.
 
     Under the agreement, Cabot warrants that its products will meet the
Division's agreed upon product specifications. Cabot will be obligated to
replace noncompliant products with products that meet the agreed upon
specifications. The agreement also provides that any change to product
specifications for fumed metal oxides must be by mutual agreement. Any increased
costs due to product specification changes will be paid by the Division.
 
     Historically, the Division did not provide detailed product specifications
to Cabot and the Division had the ability to return products that met
specifications. Under the Division's new agreement, the Division will provide
detailed specifications and its ability to return products may be limited.
 
     The agreement has an initial term that expires in June 2005 and may be
terminated thereafter by either party on June 30 or December 31 in any year upon
18 months prior written notice.
 
  DISPERSIONS SERVICES AGREEMENT
 
     The Division has entered into a dispersions services agreement with Cabot
which will become effective upon the closing of the offering. The Division will
continue to offer fumed metal oxide dispersions services to Cabot, including the
manufacturing, packaging and testing of the dispersions. Under the agreement,
Cabot shall supply the Division with the fumed metal oxide particles necessary
for the manufacture of the dispersions. The pricing of the dispersions services
will be determined on a cost-plus basis. The Division's obligation to provide
Cabot with dispersions will be limited to certain maximum volumes and Cabot will
be obligated to purchase at least 90% of its six-month volume forecasts provided
to the Division. Cabot agrees not to engage any third party to provide
dispersion services unless the Division is unable to supply the requested or
agreed-upon services. The agreement has an initial term that expires in June
2005
                                      F-12

<PAGE>   88
                   CABOT MICROELECTRONICS MATERIALS DIVISION
 
             NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
            (AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
 
and may be terminated by either party on June 30 or December 31 in any year upon
18 months prior notice.
 
  FACILITIES LEASE ARRANGEMENTS
 
     Following the separation, the Division expects to sublease from Cabot the
land and buildings located in Barry, Wales that the Division has historically
occupied. The building has been included in the Division's property, plant, and
equipment in the financial statements. These assets of the Division had a net
book value of $827 at September 30, 1999 and will be recorded as a dividend to
Cabot upon the offering. The lease will expire after ten years, subject to
earlier termination under certain circumstances.
 
  MASTER SEPARATION AGREEMENT
 
     Prior to the offering, Cabot and its subsidiaries are expected to transfer
substantially all of the assets and liabilities of the Division to CMC. In
addition, the master separation agreement provides for a release and
indemnification of all liabilities between the Division and Cabot existing or
arising from all acts or events occurring or failing to occur prior to the
closing date. The agreement also indemnifies Cabot against any losses in
connection with the conduct of CMC's business and affairs after the spin-off.
 
  INTELLECTUAL PROPERTY AGREEMENT
 
     The Division is expected to enter into an intellectual property agreement,
effective as of the offering, pursuant to which Cabot will transfer to the
Division Cabot's intellectual property rights for the business previously
conducted by the Division. Such intellectual property includes patents,
copyrights, trademarks, the right to sue for infringement of these patents,
copyrights and trademarks, technology and know-how, and licenses and other
rights concerning third-party technology and intellectual property. In addition,
Cabot is expected to assign an undivided one-half interest in various patents
that relate to dispersion technology, which are owned by Cabot and used in
Cabot's dispersion business and the Division's business. Any costs, taxes or
other fees related to the assignments and transfers of intellectual property are
to be paid by the Division.
 
  MANAGEMENT SERVICES AGREEMENT
 
     Effective as of the closing date of the offering, the Division and Cabot
are expected to enter into a management service agreement pursuant to which
Cabot will provide certain administrative and corporate support services to the
Division on an interim or transitional basis. Such services are expected to
include human resources, accounting, treasury, tax, facilities, legal and
information services. The charges for such services are expected to allow Cabot
to recover the fully allocated direct costs of providing such services plus all
out-of-pocket, third party costs and expenses, but without any profit to Cabot.
The management services agreement is expected to commence on the date of the
offering and continue until the earlier of the date of the spin-off or two years
from the completion of the offering. By mutual agreement, Cabot may provide for
the continuation of some services after the spin-off.
 
  INITIAL PUBLIC OFFERING AND DISTRIBUTION AGREEMENT
 
     Prior to the offering, the Division is expected to enter into an initial
public offering and distribution agreement with Cabot which governs the
respective rights and duties of the Division and Cabot with respect to the
offering and the spin-off. This agreement is expected to be effective as of the
closing of the offering. After the offering, Cabot will continue to own a
 
                                      F-13

<PAGE>   89
                   CABOT MICROELECTRONICS MATERIALS DIVISION
 
             NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
            (AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
 
significant portion of the common stock of CMC. As a result, Cabot will continue
to include CMC as a "subsidiary" for financial reporting, accounting and other
purposes. Accordingly, the Division has agreed to certain covenants in the
initial public offering and distribution agreement, which will be binding on CMC
as long as Cabot owns at least 50% of CMC's outstanding common stock. These
covenants include restrictions on incurring debt over a certain amount and
consummating acquisitions that do not meet various financial tests. It is
expected that the Division will not be allowed to take any action which has the
effect of limiting Cabot's ability to freely sell, pledge or otherwise dispose
of shares of CMC common stock. In addition, CMC will not be allowed to issue any
shares of common stock or any rights, warrants or options to acquire CMC common
stock, if after giving effect to such issuance, Cabot would own less than 80% of
the then outstanding shares of CMC common stock. The agreement is expected to
indemnify Cabot against all liabilities out of any material untrue statements or
omissions in the prospectus and registration statement related to the offering.
The Division will be responsible for paying the costs and expenses incurred in
connection with the offering.
 
  TAX-SHARING AGREEMENT
 
     After the offering, the Division will continue to be included in Cabot's
consolidated federal income tax group for as long as Cabot beneficially owns at
least 80% of the total voting power and value of the outstanding common stock.
The Division and Cabot are expected to enter into a tax-sharing agreement
pursuant to which the Division and Cabot will make payments between them to
achieve the same effects as if the Division were to file separate federal, state
and local income tax returns. Under the terms of the tax-sharing agreement,
Cabot will not be required to make any payment to the Division for the use of
the Division's tax attributes that arise prior to the spin-off until such time
as the Division would otherwise be able to utilize such attributes. Each member
of a consolidated group is jointly and severally liable for the federal income
tax liability of each other member of the consolidated group. Accordingly,
although the tax-sharing agreement allocates tax liabilities between the
Division and Cabot, during the period in which the Division is included in
Cabot's consolidated group, the Division could be liable in the event that any
federal tax liability is incurred, but not discharged, by any other member of
Cabot's consolidated group. The Division is also expected to indemnify Cabot in
the event that the expected spin-off is not tax free to Cabot as a result of
various actions taken by or with respect to the Division or the Division's
failure to take various actions.
 
  EMPLOYEE MATTERS AGREEMENT
 
     The Division and Cabot are expected to enter into an employee matters
agreement under which the Division will, with certain exceptions, be solely
responsible for the compensation and benefits of employees of the Division. The
principal exception is expected to be retirement benefits for employees of the
Division. Cabot's tax-qualified retirement plans will retain all assets and
liabilities relating to employees of the Division on and after the offering.
 
4.  ACQUISITION OF SELECTED ASSETS:
 
     On July 3, 1995, the Company acquired selected assets used or created in
connection with the development and sale of polishing slurries. The acquisition
was accounted for using the purchase method of accounting. Accordingly, the
purchase price of $9,800 was allocated to the net assets acquired based on their
estimated fair values. Identifiable intangible assets, consisting primarily of
trade secrets and know-how, distribution rights, customer lists and workforce in
place, were valued at $4,300 and are being amortized on a straight-line basis
over their
                                      F-14

<PAGE>   90
                   CABOT MICROELECTRONICS MATERIALS DIVISION
 
             NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
            (AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
 
estimated useful lives of 7-10 years. The excess of purchase price over the fair
value of the net assets acquired (goodwill) was approximately $2,800, and is
being amortized on a straight-line basis over ten years. Accumulated
amortization of goodwill and other intangible assets as of September 30, 1998
and 1999 was $2,332 and $3,052, respectively. In addition to the purchase price,
the Division also pays a royalty fee in the amount of 2.5% of total slurry
revenue through June 30, 2002. Royalty fees are paid on a monthly basis and are
included in cost of goods sold.
 
5.  INVENTORIES:
 
     Inventories consisted of the following:
 

<TABLE>
<CAPTION>
                                                            SEPTEMBER 30,
                                                           ----------------
                                                            1998      1999
                                                            ----      ----
<S>                                                        <C>       <C>
Raw materials............................................  $3,466    $3,297
Work in process..........................................      91        73
Finished goods...........................................   2,356     1,899
                                                           ------    ------
          Total..........................................  $5,913    $5,269
                                                           ======    ======
</TABLE>

 
6.  PROPERTY, PLANT AND EQUIPMENT:
 
     Property, plant and equipment consisted of the following:
 

<TABLE>
<CAPTION>
                                                           SEPTEMBER 30,
                                                         ------------------
                                                          1998       1999
                                                          ----       ----
<S>                                                      <C>        <C>
Land...................................................  $ 1,889    $ 4,168
Buildings..............................................    9,539     21,448
Machinery and equipment................................   10,066     15,350
Furniture and fixtures.................................      271        939
Information systems....................................       53        374
Construction in progress...............................    6,285      2,778
                                                         -------    -------
Total property, plant and equipment....................   28,103     45,057
Less: accumulated depreciation.........................   (3,390)    (5,026)
                                                         -------    -------
Net property, plant and equipment......................  $24,713    $40,031
                                                         =======    =======
</TABLE>

 
     Depreciation expense was $1,191, $1,488 and $2,057 during fiscal 1997, 1998
and 1999, respectively.
 
                                      F-15

<PAGE>   91
                   CABOT MICROELECTRONICS MATERIALS DIVISION
 
             NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
            (AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
 
7.  ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES:
 
     Accrued expenses and other current liabilities consisted of the following:
 

<TABLE>
<CAPTION>
                                                            SEPTEMBER 30,
                                                           ----------------
                                                            1998      1999
                                                            ----      ----
<S>                                                        <C>       <C>
Raw material accruals....................................  $1,043    $1,265
Accrued compensation.....................................   1,177     1,568
Warranty accrual.........................................     348       891
Fixed asset accruals.....................................     280       712
Other....................................................   1,108     2,344
                                                           ------    ------
          Total..........................................  $3,956    $6,780
                                                           ======    ======
</TABLE>

 
8.  DEFERRED COMPENSATION
 
     Under the Cabot Supplemental Employee Retirement Plan, certain officers and
employees of the Division elected to defer certain percentages of their
compensation to future periods. Amounts deferred as of September 30, 1998 and
1999 were $233 and $422, respectively.
 
9.  JOINT DEVELOPMENT AGREEMENT:
 
     In September 1998, the Division entered into a three-year joint development
agreement with a customer in the semiconductor industry. Under the agreement,
the Division provides the customer with CMP slurries of up to $3,000 over a
three-year period in exchange for the use of CMP equipment provided by the
customer. The arrangement was accounted for as a nonmonetary transaction in
accordance with APB No. 29 "Accounting for Nonmonetary Transactions." The CMP
equipment was accounted for as an operating lease in accordance with SFAS No.
13, "Accounting for Leases." The cost of leasing the CMP equipment was valued
based upon the slurries that the customer is entitled to receive over the
three-year period. Total revenue and lease expense recognized under this
agreement were $776 and $1,000, respectively, for the year ended September 30,
1999. Deferred revenue of $224 was recorded as of September 30, 1999.
 
10.  PENSION PLANS AND POSTRETIREMENT BENEFITS:
 
     The Division participates in Cabot's noncontributory defined benefit
pension plans which cover substantially all Cabot employees. Those Cabot
employees who accept employment with Cabot Microelectronics Corporation will
terminate employment with Cabot but will maintain their vested and unvested
rights in the pension plans. Pension benefits accrue under several benefit plans
including the Cash Balance Plan ("CBP"), a defined benefit pension plan, and the
Employee Stock Ownership Plan ("ESOP"). Cabot's funding policy is to contribute
annual amounts based on actuarial and economic assumptions designed to achieve
adequate funding of projected benefit obligations. The net periodic pension cost
allocated to the Division on behalf of the Division employees was $26, $96 and
$61 during fiscal 1997, 1998 and 1999, respectively. In November 1988, the ESOP
was funded with Cabot's newly issued Series B Convertible Preferred Stock, which
was acquired with $75,000 borrowed by the ESOP. Benefits provided under Cabot's
defined benefit pension plans are primarily based on years of service and the
employee's compensation. ESOP costs incurred on behalf of employees of the
Division were $75, $90, and $99 during fiscal 1997, 1998 and 1999, respectively.
 
                                      F-16

<PAGE>   92
                   CABOT MICROELECTRONICS MATERIALS DIVISION
 
             NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
            (AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
 
     The Division participates in Cabot's defined benefit postretirement plans
that provide certain healthcare and life insurance benefits to retired
employees. Substantially all of Cabot's U.S. employees become eligible for these
benefits if they have met certain age and service requirements at retirement.
Cabot funds the plans as claims or insurance premiums are incurred.
Postretirement benefit expense is recognized as services are rendered by the
employees. Postretirement benefit costs incurred on behalf of employees of the
Division were $80, $81, and $99 during fiscal 1997, 1998 and 1999, respectively.
 
11.  SAVINGS PLAN AND OTHER INCENTIVE COMPENSATION PLANS:
 
     Cabot sponsors a profit sharing and savings plan called the Cabot
Retirement Incentive Savings Plan ("CRISP"). Substantially all of the Division's
employees are eligible to participate in the plan under which Cabot will make
matching contributions of at least 75% of a participant's contribution up to
7.5% of the participant's eligible compensation, subject to limitations required
by government laws or regulations. Cabot's contributions to the CRISP on behalf
of employees of the Division were $199, $258, and $385 during fiscal 1997, 1998
and 1999, respectively.
 
12.  EQUITY INCENTIVE PLANS AND EMPLOYEE LOANS RECEIVABLE:
 
     Cabot sponsors an Equity Incentive Plan for key employees under which
participants may be granted various types of stock-based awards. Awards under
the 1996 plan have been made as part of Cabot's Long-Term Incentive Program,
which constitutes a significant portion of the awards made under this plan,
consist of restricted stock. Restricted stock could be purchased at a price
equal to 40% of the fair market value on the date of the award or nonqualified
stock options exercisable at the fair market value of Cabot's common stock on
the date of the award. Variations of the restricted stock awards were made to
international employees in order to try to provide results comparable to U.S.
employees. The awards generally vest on the third anniversary of the grant for
employees then employed by Cabot, and the options generally expire five years
from the date of grant. In November 1998, Cabot Board of Directors adopted the
1999 Equity Incentive Plan. The 1999 plan was approved by the stockholders of
Cabot in March 1999. This plan is similar to the 1996 Equity Incentive Plan with
the exception of the purchase price, which was established at a price equal to
30% of the fair market value on the date of the award.
 
     Certain Cabot employees who will become employees of the Company have been
granted nonqualified stock options and restricted stock under these plans. Stock
options have been granted at the fair market value of Cabot's common stock on
the date of grant, vest ratably over four years, and generally expire ten years
from the date of grant. Restricted stock awards enable an employee to purchase
restricted stock at a price equal to 30% or 40% of the fair market value on the
date of the award and such awards generally vest on the third anniversary date
of the award. Compensation expense, equal to the discount on the restricted
stock, is deferred and recorded as a charge to income over the vesting period.
Deferred compensation is recorded as a component of Division equity.
 
     In May 1999, Cabot adopted a stock purchase assistance plan whereby Cabot
may extend credit to its employees to purchase restricted shares of Cabot
Corporation common stock awarded under Cabot's 1999 Equity Incentive Plan. Prior
to this date, loans were made available to employees by a third party financial
institution. On June 30, 1999, Cabot purchased, from a financial institution,
all such full recourse loans to Cabot employees outstanding as of that date. As
of September 30, 1999, notes receivable from employees of the Division totaled
approximately $1,383 and are included as a separate component of Division equity
because the restricted stock
 
                                      F-17

<PAGE>   93
                   CABOT MICROELECTRONICS MATERIALS DIVISION
 
             NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
            (AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
 
serves as collateral for the notes. Upon the closing of the planned initial
public offering, any restricted stock receivables related to securities which
employees have elected to convert from Cabot to CMC will become receivables of
CMC.
 
  RESTRICTED STOCK
 
     Shares of restricted stock awarded to employees of the Division are
summarized as follows:
 

<TABLE>
<CAPTION>
                                                                       WEIGHTED
                                                                       AVERAGE
                                                         RESTRICTED    EXERCISE
                                                           STOCK        PRICE
                                                         ----------    --------
<S>                                                      <C>           <C>
Outstanding at September 30, 1996......................    46,100       $ 9.67
Granted................................................    31,500        19.55
  Vested...............................................    (8,800)        6.14
  Canceled.............................................        --           --
                                                          -------
Outstanding at September 30, 1997......................    68,800        14.64
  Granted..............................................    48,200        17.09
  Vested...............................................   (10,000)       10.00
  Canceled.............................................      (300)       14.13
                                                          -------
Outstanding at September 30, 1998......................   106,700        16.19
  Granted..............................................    95,300        33.09
  Vested...............................................   (30,300)        9.62
  Canceled.............................................    (4,700)       17.70
                                                          -------
Outstanding at September 30, 1999......................   167,000       $26.98
                                                          =======
</TABLE>

 
     Total compensation expense recognized by the Division for restricted stock
based awards under APB 25 amounted to $242, $449, and $900 during fiscal 1997,
1998 and 1999, respectively.
 
                                      F-18

<PAGE>   94
                   CABOT MICROELECTRONICS MATERIALS DIVISION
 
             NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
            (AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
 
  STOCK OPTIONS
 
     Cabot stock option activity related to employees of the Division is
summarized as follows:
 

<TABLE>
<CAPTION>
                                                                     WEIGHTED
                                                                     AVERAGE
                                                           STOCK     EXERCISE
                                                          OPTIONS     PRICE
                                                          -------    --------
<S>                                                       <C>        <C>
Balance at September 30, 1996...........................  13,072      $ 9.13
Granted.................................................   1,300       23.88
  Exercised.............................................      --          --
  Canceled..............................................      --          --
                                                          ------
Balance at September 30, 1997...........................  14,372       10.46
  Granted...............................................  17,615       35.31
  Exercised.............................................  (4,000)       8.72
  Canceled..............................................      --          --
                                                          ------
Balance at September 30, 1998...........................  27,987       26.35
  Granted...............................................  63,000       27.00
  Exercised.............................................  (2,400)      10.47
  Canceled..............................................  (5,850)      35.31
                                                          ------
Balance at September 30, 1999...........................  82,737      $26.67
                                                          ======
</TABLE>

 
     There were no options granted at prices below the quoted market price of
common stock.
 
     Additional information about outstanding options to purchase Cabot common
stock held by employees of the Division at September 30, 1999 is as follows:
 

<TABLE>
<CAPTION>
                                         OUTSTANDING                        EXERCISABLE
                           ----------------------------------------    ---------------------
                                           WEIGHTED        WEIGHTED                 WEIGHTED
                                            AVERAGE        AVERAGE                  AVERAGE
                            NUMBER        CONTRACTUAL      EXERCISE     NUMBER      EXERCISE
RANGE OF EXERCISE PRICE    OF SHARES    LIFE (IN YEARS)     PRICE      OF SHARES     PRICE
-----------------------    ---------    ---------------    --------    ---------    --------
<S>                        <C>          <C>                <C>         <C>          <C>
$7.59-$10.47.............    6,272            .97           $ 7.75       6,272       $ 7.75
$23.88-$35.31............   76,465           2.46            28.22         400        26.70
                            ------                          ------       -----       ------
                            82,737                          $26.67       6,672       $ 8.89
                            ======                          ======       =====       ======
</TABLE>

 
     As permitted by SFAS 123, Cabot has chosen to continue to account for stock
options in accordance with the provisions of APB 25 and, accordingly, no
compensation expense related to stock option grants was recorded.
 
                                      F-19

<PAGE>   95
                   CABOT MICROELECTRONICS MATERIALS DIVISION
 
             NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
            (AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
 
     Pro forma information regarding net income is required by SFAS 123 and has
been determined as if the Division had accounted for stock options under the
fair value method using the Black-Scholes option-pricing model and the following
assumptions:
 

<TABLE>
<CAPTION>
                                                         YEAR ENDED SEPTEMBER 30,
                                                       -----------------------------
                                                        1997       1998       1999
                                                        ----       ----       ----
<S>                                                    <C>        <C>        <C>
Expected stock price volatility......................      26%        34%        35%
Risk free interest rate..............................    6.54%      5.63%      5.42%
Expected life of options.............................  4 years    4 years    4 years
Expected annual dividends............................    $0.40      $0.44      $0.44
</TABLE>

 
     The estimated weighted average fair value of options granted by Cabot to
employees of the Division during fiscal 1997, 1998 and 1999 were $6.37, $11.00,
and $8.24, respectively. Had the fair value based method been adopted, the
Division's pro forma net income for fiscal 1997, 1998 and 1999 would have been
$707, $4,218 and $12,213, respectively.
 
13.  INCOME TAXES:
 
     Income before income taxes was as follows:
 

<TABLE>
<CAPTION>
                                                                SEPTEMBER 30,
                                                          -------------------------
                                                          1997     1998      1999
                                                          ----     ----      ----
<S>                                                       <C>     <C>       <C>
Domestic................................................  $293    $6,178    $18,655
Foreign.................................................   370       270        421
                                                          ----    ------    -------
          Total.........................................  $663    $6,448    $19,076
                                                          ====    ======    =======
</TABLE>

 
     Taxes on income consisted of the following:
 

<TABLE>
<CAPTION>
                                                                SEPTEMBER 30,
                                                          -------------------------
                                                          1997      1998      1999
                                                          ----      ----      ----
<S>                                                       <C>      <C>       <C>
U.S. federal and state:
Current.................................................  $(156)   $1,953    $6,522
  Deferred..............................................    (17)     (182)     (234)
                                                          -----    ------    ------
Total...................................................   (173)    1,771     6,288
                                                          -----    ------    ------
Foreign:
  Current...............................................     20       401       489
  Deferred..............................................    108        39        19
                                                          -----    ------    ------
Total...................................................    128       440       508
                                                          -----    ------    ------
Total U.S. and foreign..................................  $ (45)   $2,211    $6,796
                                                          =====    ======    ======
</TABLE>

 
                                      F-20

<PAGE>   96
                   CABOT MICROELECTRONICS MATERIALS DIVISION
 
             NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
            (AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
 
     The provision for income taxes at the Division's effective tax rate
differed from the provision for income taxes at the statutory rate as follows:
 

<TABLE>
<CAPTION>
                                                                SEPTEMBER 30,
                                                          -------------------------
                                                          1997      1998      1999
                                                          ----      ----      ----
<S>                                                       <C>      <C>       <C>
Computed tax expense at the federal statutory rate......  $ 232    $2,257    $6,677
U.S. benefits from research and development
activities..............................................   (353)     (367)     (344)
State taxes, net of federal effect......................     10        58       508
Impact of foreign taxation at different rates,
  repatriation and other................................     62       354       155
Foreign sales corporation...............................    (17)     (118)     (243)
Other, net..............................................     21        27        43
                                                          -----    ------    ------
(Benefit) provision for income taxes....................  $ (45)   $2,211    $6,796
                                                          =====    ======    ======
</TABLE>

 
     Significant components of deferred income taxes were as follows:
 

<TABLE>
<CAPTION>
                                                               SEPTEMBER 30,
                                                              ----------------
                                                               1998      1999
                                                               ----      ----
<S>                                                           <C>       <C>
Deferred tax assets:
  Amortization..............................................  $  281    $  367
  Employee benefits.........................................     596     1,118
  Inventory.................................................     100        89
  Product warranty..........................................     122       168
  Accrued legal fees........................................      64       105
  State and local taxes.....................................      67       144
  Other.....................................................      58       133
                                                              ------    ------
          Total deferred tax assets.........................  $1,288    $2,124
                                                              ======    ======
Deferred tax liabilities:
  Depreciation and amortization.............................  $  698    $  827
  Translation adjustment....................................      90       582
                                                              ------    ------
          Total deferred tax liabilities....................  $  788    $1,409
                                                              ======    ======
</TABLE>

 
14.  COMMITMENTS AND CONTINGENCIES:
 
  LEASE COMMITMENTS
 
     Cabot, on behalf of the Division, leases certain transportation vehicles,
warehouse facilities, office space, machinery and equipment under cancelable and
noncancelable leases, most of which expire within ten years and may be renewed
by the Division. Rent expense under such arrangements during fiscal 1997, 1998
and 1999 totaled $160, $150 and $1,439, respectively.
 
                                      F-21

<PAGE>   97
                   CABOT MICROELECTRONICS MATERIALS DIVISION
 
             NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
            (AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
 
     Future minimum rental commitments under noncancelable leases as of
September 30, 1999 are as follows:
 

<TABLE>
<S>                                                   <C>
2000................................................  $1,327
2001................................................   1,092
2002................................................      69
2003................................................      26
2004................................................      11
2005 and thereafter.................................      --
                                                      ------
                                                      $2,525
                                                      ======
</TABLE>

 
  OTHER LONG-TERM COMMITMENTS
 
     Cabot, on behalf of the Division, has a long term supply agreement with the
Division's largest customer. The agreement was designed to provide this customer
with specified quantities of polishing slurries at agreed-upon prices. This
agreement expires in January 2002.
 
     The Division has an agreement with Davies Imperial Coatings, Inc.
("Davies") pursuant to which Davies will perform certain agreed upon dispersion
services for the Division. The Division has agreed to purchase minimum amounts
of services per year and has also agreed to invest $150,000 per year in capital
improvements or other expenditures to maintain capacity at the Davies
dispersions facility. The initial term of this agreement expires in October
2004, with automatic one-year renewals, and contains a 90 day cancellation
clause executable by either party.
 
  CONTINGENCIES
 
     In June 1998, a lawsuit was commenced by Rodel, Inc. ("Rodel") against
Cabot seeking injunctive relief and damages relating to allegations that Cabot,
through the Division, is infringing on a United States patent that Rodel owns.
The action is presently in discovery and a trial is scheduled to begin in
November 2000. In April 1999, Rodel commenced a second lawsuit against Cabot
seeking injunctive relief and damages relating to allegations that Cabot is
infringing two other United States patents owned by an affiliate of Rodel. In
the first lawsuit, the only product that is specifically alleged to infringe a
Rodel patent is the Division's W2000 slurry, which is used to polish tungsten
and which currently accounts for a significant portion of the Division's
revenue. The second lawsuit does not allege infringement by any specific
products; instead, it cites one of Cabot's patents (which relates to a CMP
polishing slurry for metal surfaces including, among other things, aluminum and
copper) as evidence of infringement by Cabot through the manufacture and sale of
unspecified products. At this stage, the Division cannot predict whether or to
what extent Rodel will make specific infringement claims with respect to any of
the Division's products other than the Division's W2000 slurry in these or any
future proceedings. It is possible that Rodel will claim that many of the
Division's products infringe its patents.
 
     Although Cabot is the only named defendant in these lawsuits, the Division
has agreed to indemnify Cabot for any and all losses and expenses arising out of
this litigation as well as any other litigation arising out of the Division's
business. Cabot and the Division believe that they have meritorious defenses to
these actions and intend to vigorously defend themselves. However, it is not
possible to predict the ultimate outcome of these lawsuits. These claims, even
 
                                      F-22

<PAGE>   98
                   CABOT MICROELECTRONICS MATERIALS DIVISION
 
             NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
            (AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
 
if they are without merit, could be expensive and time consuming to defend and
could adversely affect the Division's business, financial condition and results
of operations.
 
15.  FINANCIAL INFORMATION BY INDUSTRY SEGMENT AND GEOGRAPHIC AREA:
 
     The Division has adopted SFAS No. 131, "Disclosure about Segments of an
Enterprise and Related Information" ("SFAS 131"), which was effective for the
fiscal year ended September 30, 1999.
 
     The Division operates predominantly in one industry segment -- the
development, manufacture, and sale of CMP slurries. Although the Division's
products can be categorized into various product lines and periodic financial
information is available by product line, management determined that the
Division's business is considered one reportable segment in accordance with the
aggregation criteria under SFAS 131.
 
     The Division does not classify export sales as foreign sales. Financial
information by geographic area was as follows:
 

<TABLE>
<CAPTION>
                                                               1997       1998       1999
                                                               ----       ----       ----
<S>                                                           <C>        <C>        <C>
Revenue:
United States...............................................  $33,650    $55,600    $89,666
  Europe....................................................    1,561      3,231      4,789
  Asia......................................................        0          0      4,235
                                                              -------    -------    -------
Total.......................................................  $35,211    $58,831    $98,690
                                                              =======    =======    =======
Property, plant and equipment, net:
  United States.............................................  $14,975    $17,376    $25,324
  Europe....................................................    2,220      2,461      3,836
  Asia......................................................        0      4,876     10,871
                                                              -------    -------    -------
Total.......................................................  $17,195    $24,713    $40,031
                                                              =======    =======    =======
</TABLE>

 
16.  SUBSEQUENT EVENT (UNAUDITED):
 
     In December 1999, the Company obtained a letter of commitment from a bank
for a line of credit arrangement whereby the Company will be able to borrow an
aggregate amount of up to $25,000 for working capital and expenditure needs. The
term of the credit arrangement is three years. The Company will be required to
pay a fee on the $25,000 commitment amount until the loan agreement is signed
and will be required to pay a fee on unused portion of the commitment amount
after the loan agreement is signed. The commitment from the bank will be subject
to the consummation of the initial public offering of the Company's common stock
and certain limits for the aggregate indebtedness of the Company and its
subsidiaries at the time of closing of this credit arrangement.
 
                                      F-23

<PAGE>   99
                   CABOT MICROELECTRONICS MATERIALS DIVISION
 
             NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
            (AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
 
17.  VALUATION AND QUALIFYING ACCOUNTS:
 
     The following table sets forth activities in the Division's allowance for
doubtful accounts:
 

<TABLE>
<CAPTION>
                                              BALANCE AT                                BALANCE AT
                                              BEGINNING     CHARGES TO                    END OF
                                               OF YEAR       EXPENSES     DEDUCTIONS       YEAR
            ACCOUNTS RECEIVABLE               ----------    ----------    ----------    ----------
<S>                                           <C>           <C>           <C>           <C>
Year ended:
September 30, 1997..........................     $50            $--          $--            $50
  September 30, 1998........................      50            --            --            50
  September 30, 1999........................      50            --            --            50
</TABLE>

 
                                      F-24

<PAGE>   100
 

                                  UNDERWRITING
 
     Cabot Microelectronics, Cabot Corporation and the underwriters named below
have entered into an underwriting agreement with respect to the shares being
offered. Subject to certain conditions, each underwriter has severally agreed to
purchase the number of shares indicated in the following table. Goldman, Sachs &
Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated and FleetBoston
Robertson Stephens Inc. are the representatives of the underwriters.
 

<TABLE>
<CAPTION>
                        UNDERWRITERS                          NUMBER OF SHARES
                        ------------                          ----------------
<S>                                                           <C>
Goldman, Sachs & Co. .......................................
Merrill Lynch, Pierce, Fenner & Smith
 Incorporated...............................................
FleetBoston Robertson Stephens Inc..........................
                                                                  --------
          Total.............................................
                                                                  ========
</TABLE>

 
                            ------------------------
 
     If the underwriters sell more shares than the total number set forth in the
table above, the underwriters have an option to buy up to an additional
          shares from us to cover such sales. They may exercise that option for
30 days. If any shares are purchased pursuant to this option, the underwriters
will severally purchase shares in approximately the same proportion as set forth
in the table above.
 
     The following tables show the per share and total underwriting discounts
and commissions to be paid to the underwriters by us. Such amounts are shown
assuming both no exercise and full exercise of the underwriters' option to
purchase additional shares.
 

<TABLE>
<CAPTION>
                                 PAID BY
                         CABOT MICROELECTRONICS
                       ---------------------------
                       NO EXERCISE   FULL EXERCISE
                       -----------   -------------
<S>                    <C>           <C>
Per Share............    $              $
Total................    $              $
</TABLE>

 
     Shares sold by the underwriters to the public will initially be offered at
the initial public offering price set forth on the cover of this prospectus. Any
shares sold by the underwriters to securities dealers may be sold at a discount
of up to $     per share from the initial public offering price. Any such
securities dealers may resell any shares purchased from the underwriters to
certain other brokers or dealers at a discount of up to $     per share from the
initial public offering price. If all the shares are not sold at the initial
public offering price, the representatives may change the offering price and the
other selling terms.
 
     We and Cabot have agreed with the underwriters not to sell or otherwise
dispose any of our common stock or securities convertible into or exchangeable
for shares of our common stock during the period from the date of this
prospectus continuing through the date 180 days after the date of this
prospectus, except with the prior written consent of the representatives. This
agreement does not apply to any existing employee benefit plans. See "Shares
Eligible for Future Sale" for a discussion of transfer restrictions.
 
     Prior to this offering, there has been no public market for the shares. The
initial public offering price will be negotiated among us and the
representatives. Among the factors to be considered in determining the initial
public offering price of the shares, in addition to prevailing market
conditions, will be our historical performance, estimates of the business
potential and earnings prospects of our company, an assessment of our management
and the consideration of the above factors in relation to market valuation of
companies in related businesses.
 
     We will apply to have the common stock included for quotation on Nasdaq
under the symbol "CCMP".
 
     In connection with this offering, the underwriters may purchase and sell
shares of common stock in the open market. These transactions may include short
sales, stabilizing transactions and purchases to cover posi-
 
                                       U-1

<PAGE>   101
 
tions created by short sales. Short sales involve the sale by the underwriters
of a greater number of shares than they are required to purchase in the
offering. Stabilizing transactions consist of certain bids or purchases made for
the purpose of preventing or retarding a decline in the market price of the
common stock while the offering is in progress.
 
     The underwriters also may impose a penalty bid. This occurs when a
particular underwriter repays to the underwriters a portion of the underwriting
discount received by it because the representatives have repurchased shares sold
by or for the account of such underwriter in stabilizing or short covering
transactions.
 
     These activities by the underwriters may stabilize, maintain or otherwise
affect the market price of the common stock. As a result, the price of the
common stock may be higher than the price that otherwise might exist in the open
market. If these activities are commenced, they may be discontinued by the
underwriters at any time. These transactions may be effected on Nasdaq, in the
over-the-counter market or otherwise.
 
     FleetBoston Robertson Stephens, an underwriter in this offering, is an
affiliate of the lending bank under our credit facility. Merrill Lynch, Pierce,
Fenner & Smith Incorporated, also an underwriter in this offering, is an
affiliate of Merrill Lynch Bank & Trust, the lending bank for the loan facility
available to all recipients of restricted stock grants.
 
     The underwriters do not expect sales to discretionary accounts to exceed
five percent of the total number of shares offered.
 
     We estimate that our share of the total expenses of the offering, excluding
underwriting discounts and commissions, will be approximately $          .
 
     We have agreed to indemnify the several underwriters against certain
liabilities, including liabilities under the Securities Act.
 
                                       U-2

<PAGE>   102
 
-------------------------------------------------------
-------------------------------------------------------
 
  No dealer, salesperson or other person is authorized to give any information
or to represent anything not contained in this prospectus. You must not rely on
any unauthorized information or representations. This prospectus is an offer to
sell only the common units offered hereby, but only under circumstances and in
jurisdictions where it is lawful to do so. The information contained in this
prospectus is current only as of its date.
 
                               ------------------
 
 
                              TABLE OF CONTENTS
 

<TABLE>
<S>                                       <C>
Prospectus Summary......................    3
Risk Factors............................    8
Use of Proceeds.........................   17
Dividend Policy.........................   17
Capitalization..........................   18
Dilution................................   19
Selected Financial Data.................   20
Unaudited Pro Forma Combined
  Statement of Income...................   22

Management's Discussion And Analysis of
  Financial Condition And Results of
  Operations............................   24
Business................................   32
Management..............................   46
Relationships Between Our Company and
  Cabot Corporation.....................   55
Security Ownership of Principal
  Stockholder and Management............   63
Description of Capital Stock............   64
Shares Eligible for Future Sale.........   72
Legal Matters...........................   74
Experts.................................   74
Where You Can Find More Information.....   74
Index to Financial Statements...........  F-1
Underwriting............................  U-1
</TABLE>

 
                               ------------------
 
     Through and including             , 2000 (the 25th day after the date of
this prospectus), all dealers effecting transactions in these securities,
whether or not participating in this offering, may be required to deliver a
prospectus. This is in addition to a dealer's obligation to deliver a prospectus
when acting as an underwriting and with respect to an unsold allotment or
subscription.
-------------------------------------------------------
-------------------------------------------------------
-------------------------------------------------------
-------------------------------------------------------
 
                                            Shares
 
                             CABOT MICROELECTRONICS
 
                                  CORPORATION
 
                                  Common Stock
 
                               ------------------
 
                                     [LOGO]
 
                               ------------------
 
                              GOLDMAN, SACHS & CO.
 
                              MERRILL LYNCH & CO.
 
                               ROBERTSON STEPHENS
 
                      Representatives of the Underwriters
-------------------------------------------------------
-------------------------------------------------------

<PAGE>   103
 

 
                                   PART II
 
                     INFORMATION NOT REQUIRED IN PROSPECTUS
 

ITEM 13.  OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
 
     The following table sets forth expenses and costs payable by Cabot
Microelectronics (other than underwriting discounts and commissions) expected to
be incurred in connection with the issuance and distribution of the securities
described in this registration statement. All amounts are estimated except for
the Securities and Exchange Commission's registration fee and the National
Association of Securities Dealers' filing fee.
 

<TABLE>
<CAPTION>
                                                              AMOUNT
                                                              ------
<S>                                                           <C>
Registration fee under Securities Act.......................  $19,800
NASD filing fee.............................................    8,000
Nasdaq National Market fees.................................     *
Legal fees and expenses.....................................     *
Accounting fees and expenses................................     *
Printing and engraving expenses.............................     *
Registrar and transfer agent fees...........................     *
Miscellaneous expenses......................................     *
                                                              -------
          Total.............................................  $
                                                              =======
</TABLE>

 
---------------
* To be filed by amendment.
 

ITEM 14.  INDEMNIFICATION OF DIRECTORS AND OFFICERS.
 
     Section 145 of the Delaware General Corporation Law (the "DGCL") provides
that a corporation may indemnify directors and officers as well as other
employees and individuals against expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement in connection with specified
actions, suits and proceedings, whether civil, criminal, administrative, or
investigative (other than an action by or in the right of the corporation -- a
"derivative action"), if they acted in good faith and in a manner they
reasonably believed to be in or not opposed to the best interests of the
corporation and, with respect to any criminal action or proceeding, had no
reasonable cause to believe their conduct was unlawful. A similar standard is
applicable in the case of derivative actions, except that indemnification only
extends to expenses (including attorneys' fees) incurred in connection with the
defense or settlement of such action, and the statute requires court approval
before there can be any indemnification where the person seeking indemnification
has been found liable to the corporation. The statute provides that it is not
exclusive of other indemnification that may be granted by a corporation's
certificate of incorporation, bylaws, disinterested director vote, stockholder
vote, agreement, or otherwise.
 
     Our bylaws and our certificate of incorporation require us to indemnify to
the fullest extent authorized by the DGCL any person made or threatened to be
made a party to an action, suit or proceeding, whether criminal, civil,
administrative or investigative, by reason of the fact that he or she is or was
a director or officer of the Company, or is or was serving at the request of the
Company as a director, officer, employee or agent of another corporation or of a
partnership, joint venture, trust or other enterprise.
 
     As permitted by section 102(b)(7) of the DGCL, our certificate of
incorporation eliminates the liability of a director to the corporation or its
stockholders for monetary damages for such breach of fiduciary duty as a
director, except for liabilities arising (a) from any breach of the director's
duty of loyalty to the corporation or its stockholders; (b) from acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law; (c) under
 
                                      II-1

<PAGE>   104
 
section 174 of the DGCL; or (d) from any transaction from which the director
derived an improper personal benefit.
 
     We intend to obtain primary and excess insurance policies insuring its
directors and officers and those of its subsidiaries against certain liabilities
they may incur in their capacity as directors and officers. Under these
policies, the insurer, on our behalf, may also pay amounts for which we have
granted indemnification to the directors or officers.
 
     Additionally, reference is made to the Underwriting Agreement filed as
Exhibit 1.1 to this registration statement, which provides for indemnification
by our Underwriters, their directors and officers who sign the registration
statement and persons who control us, under certain circumstances.
 

ITEM 15.  RECENT SALES OF UNREGISTERED SECURITIES.
 
     None.
 

ITEM 16.  EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
 
     (A) Exhibits
 
     The following documents are filed as exhibits to this registration
statement:
 

<TABLE>
<CAPTION>
EXHIBIT
NUMBER                       EXHIBIT DESCRIPTION
-------  ------------------------------------------------------------
<C>      <S>
   1.1   Form of Underwriting Agreement.*
   3.1   Certificate of Incorporation of Cabot Microelectronics
         Corporation.*
   3.2   By-Laws of Cabot Microelectronics Corporation.*
   4.1   Form of Cabot Microelectronics Corporation common stock
         certificate.*
   4.2   Form of Shareholder Rights Agreement.*
   5.1   Opinion of Fried, Frank, Harris, Shriver & Jacobson
         regarding the legality of the shares being registered.*
  10.1   Form of Master Separation Agreement, between Cabot
         Microelectronics Corporation and Cabot Corporation.*
  10.2   Form of IPO and Distribution Agreement, between Cabot
         Microelectronics Corporation and Cabot Corporation.*
  10.3   Form of Tax Sharing Agreement, between Cabot
         Microelectronics Corporation and Cabot Corporation.*
  10.4   Form of Management Services Agreement, between Cabot
         Microelectronics Corporation and Cabot Corporation.*
  10.5   Form of Fumed Metal Oxide Supply Agreement, between Cabot
         Microelectronics Corporation and Cabot Corporation.*
  10.6   Form of Intellectual Property and Confidentiality Agreement,
         between Cabot Microelectronics Corporation and Cabot
         Corporation.*
  10.7   Form of Trademark License Agreement, between Cabot
         Microelectronics Corporation and Cabot Corporation.*
  10.8   Form of Dispersion Services Agreement, between Cabot
         Microelectronics Corporation and Cabot Corporation.*
  10.9   Form of Employee Matters Agreement, between Cabot
         Microelectronics Corporation and Cabot Corporation.*
</TABLE>

 
                                      II-2

<PAGE>   105
 

<TABLE>
<CAPTION>
EXHIBIT
NUMBER                       EXHIBIT DESCRIPTION
-------  ------------------------------------------------------------
<C>      <S>
 10.10   Form of Registration Rights Agreement, between Cabot
         Microelectronics Corporation and Cabot Corporation.*
 10.11   Purchase Agreement between Cabot Corporation and Intel
         Corporation.*
 10.12   Form of Lease, between Cabot Microelectronics Corporation
         and Davies Imperial Coatings, Inc. for the property located
         in Hammond, IN.*
 10.13   Form of Sublease for Barry, Wales facility.*
 10.14   2000 Equity Incentive Plan.*
  21.1   List of Subsidiaries.*
  23.1   Consent of PricewaterhouseCoopers, LLP.
  23.2   Consent of Fried, Frank, Harris, Shriver & Jacobson
         (included in Exhibit 5.1).*
  24.1   Power of Attorney (included on signature page).
  27.1   Financial Data Schedule.
</TABLE>

 
---------------
* To be filed by amendment.
 
(B) Financial Statement Schedules
 
     Financial statement schedules have been omitted because they are not
applicable or the required information is shown in the combined financial
statements or notes thereto.
 

ITEM 17.  UNDERTAKINGS.
 
     Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
 
     The undersigned registrant hereby undertakes that:
 
     (1) To provide to the underwriters at the closing specified in the
underwriting agreement certificates in such denominations and registered in such
names as required by the underwriters to permit prompt delivery to each
purchaser.
 
     (2) For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act shall be deemed to be part of this registration
statement as of the time it was declared effective.
 
     (3) For the purpose of determining any liability under the Securities Act
of 1933, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
 
                                      II-3

<PAGE>   106
 

                                   SIGNATURES
 
     Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Aurora, State of
Illinois, on January 20, 2000.
 
                                          CABOT MICROELECTRONICS CORPORATION
 
                                          By:     /s/ MATTHEW NEVILLE
                                            ------------------------------------
                                              Matthew Neville
                                              President and Chief Executive
                                              Officer
 
     The undersigned directors and officers of Cabot Microelectronics
Corporation hereby constitute and appoint Matthew Neville and William C.
McCarthy and each of them with full power to act without the other and with full
power of substitution and resubstitution, our true and lawful attorneys-in-fact
with full power to execute in our name and behalf in the capacities indicated
below this Registration Statement on Form S-1 and any and all amendments
thereto, including post-effective amendments to this Registration Statement and
to sign any and all additional registration statements relating to the same
offering of securities as this Registration Statement that are filed pursuant to
Rule 462(b) of the Securities Act of 1933, and to file the same, with all
exhibits thereto and other documents in connection therewith, with the
Securities and Exchange Commission and hereby ratify and confirm that all such
attorneys-in-fact, or any of them, or their substitutes shall lawfully do or
cause to be done by virtue hereof.
 
     Pursuant to the requirements of the Securities Act, this registration
statement has been signed by the following persons in the capacities and on the
dates indicated.
 

<TABLE>
<CAPTION>
               SIGNATURE                                  TITLE                          DATE
               ---------                                  -----                          ----
<C>                                        <S>                                     <C>
                                           Chairman of the Board
         /s/ KENNETT F. BURNES                                                     January 20, 2000
---------------------------------------
           Kennett F. Burnes
 
                                           President and Chief Executive
                                             Officer, Director (Principal
                                             Executive Officer)
          /s/ MATTHEW NEVILLE                                                      January 20, 2000
---------------------------------------
            Matthew Neville
 
                                           Vice President and Chief Financial
                                             Officer (Principal Financial and
                                             Accounting Officer)
        /s/ WILLIAM C. MCCARTHY                                                    January 20, 2000
---------------------------------------
          William C. McCarthy
 
                                           Director
         /s/ SAMUEL W. BODMAN                                                      January 20, 2000
---------------------------------------
           Samuel W. Bodman
 
                                           Director
        /s/ WILLIAM P. NOGLOWS                                                     January 20, 2000
---------------------------------------
          William P. Noglows
</TABLE>

 
                                      II-4

<PAGE>   107
 

                                 EXHIBITS INDEX
 

<TABLE>
<CAPTION>
EXHIBIT
NUMBER                        EXHIBIT DESCRIPTION
-------   ------------------------------------------------------------
<C>       <S>
 1.1      Form of Underwriting Agreement.*
 3.1      Certificate of Incorporation of Cabot Microelectronics
          Corporation.*
 3.2      By-Laws of Cabot Microelectronics Corporation.*
 4.1      Form of Cabot Microelectronics Corporation common stock
          certificate.*
 4.2      Form of Shareholder Rights Agreement.*
 5.1      Opinion of Fried, Frank, Harris, Shriver & Jacobson
          regarding the legality of the shares being registered.*
10.1      Form of Master Separation Agreement, between Cabot
          Microelectronics Corporation and Cabot Corporation.*
10.2      Form of IPO and Distribution Agreement, between Cabot
          Microelectronics Corporation and Cabot Corporation.*
10.3      Form of Tax Sharing Agreement, between Cabot
          Microelectronics Corporation and Cabot Corporation.*
10.4      Form of Management Services Agreement, between Cabot
          Microelectronics Corporation and Cabot Corporation.*
10.5      Form of Fumed Metal Oxide Supply Agreement, between Cabot
          Microelectronics Corporation and Cabot Corporation.*
10.6      Form of Intellectual Property and Confidentiality Agreement,
          between Cabot Microelectronics Corporation and Cabot
          Corporation.*
10.7      Form of Trademark License Agreement, between Cabot
          Microelectronics Corporation and Cabot Corporation.*
10.8      Form of Dispersion Services Agreement, between Cabot
          Microelectronics Corporation and Cabot Corporation.*
10.9      Form of Employee Matters Agreement, between Cabot
          Microelectronics Corporation and Cabot Corporation.*
10.10     Form of Registration Rights Agreement, between Cabot
          Microelectronics Corporation and Cabot Corporation.*
10.11     Purchase Agreement between Cabot Corporation and Intel
          Corporation.*
10.12     Form of Lease, between Cabot Microelectronics Corporation
          and Davies Imperial Coatings, Inc. for the property located
          in Hammond, IN.*
10.13     Form of Sublease for Barry, Wales facility.*
10.14     2000 Equity Incentive Plan.*
21.1      List of Subsidiaries.*
23.1      Consent of PricewaterhouseCoopers, LLP.
23.2      Consent of Fried, Frank, Harris, Shriver & Jacobson
          (included in Exhibit 5.1).*
24.1      Power of Attorney (included on signature page).
27.1      Financial Data Schedule.
</TABLE>

 
---------------
* To be filed by amendment.





<PAGE>   1
 
                                                                    EXHIBIT 23.1
 
                       CONSENT OF INDEPENDENT ACCOUNTANTS
 
     We hereby consent to the use in this Registration Statement on Form S-1 of
our report dated November 5, 1999 relating to the financial statements of Cabot
Microelectronics Materials Division, a division of Cabot Corporation, which
appears in such Registration Statement. We also consent to the references to us
under the headings "Experts" and "Selected Financial Data" in such Registration
Statement.
 
                                            /s/ PRICEWATERHOUSECOOPERS LLP
 
Boston, Massachusetts
January 20, 2000





<TABLE> <S> <C>

<ARTICLE> 5
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
       
<S>                             <C>
<PERIOD-TYPE>                   YEAR
<FISCAL-YEAR-END>                          SEP-30-1999
<PERIOD-START>                             OCT-01-1998
<PERIOD-END>                               SEP-30-1999
<EXCHANGE-RATE>                                      1
<CASH>                                              38
<SECURITIES>                                         0
<RECEIVABLES>                                   19,938
<ALLOWANCES>                                        50
<INVENTORY>                                      5,269
<CURRENT-ASSETS>                                26,120
<PP&E>                                          45,057
<DEPRECIATION>                                   5,026
<TOTAL-ASSETS>                                  70,274
<CURRENT-LIABILITIES>                            7,775
<BONDS>                                              0
<PREFERRED-MANDATORY>                                0
<PREFERRED>                                          0
<COMMON>                                             0
<OTHER-SE>                                      62,077
<TOTAL-LIABILITY-AND-EQUITY>                    70,274
<SALES>                                         98,690
<TOTAL-REVENUES>                                98,690
<CGS>                                           47,891
<TOTAL-COSTS>                                   47,891
<OTHER-EXPENSES>                                     0
<LOSS-PROVISION>                                     0
<INTEREST-EXPENSE>                                   0
<INCOME-PRETAX>                                 19,076
<INCOME-TAX>                                     6,796
<INCOME-CONTINUING>                                  0
<DISCONTINUED>                                       0
<EXTRAORDINARY>                                      0
<CHANGES>                                            0
<NET-INCOME>                                    12,280
<EPS-BASIC>                                          0
<EPS-DILUTED>                                        0
        

</TABLE>