<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 13, 2000
REGISTRATION NO. 333-49738
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 1
TO
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
MKS INSTRUMENTS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
MASSACHUSETTS 3823 04-2277512
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
</TABLE>
SIX SHATTUCK ROAD
ANDOVER, MA 01810
(978) 975-2350
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------
JOHN R. BERTUCCI
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
MKS INSTRUMENTS, INC.
SIX SHATTUCK ROAD
ANDOVER, MA 01810
(978) 975-2350
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE
NUMBER, INCLUDING AREA CODE, OF AGENT FOR SERVICE)
------------------------
COPIES TO:
<TABLE>
<S> <C>
MARK G. BORDEN, ESQ. NEIL H. ARONSON, ESQ.
DAVID A. WESTENBERG, ESQ. MINTZ, LEVIN, COHN, FERRIS,
HALE AND DORR LLP GLOVSKY AND POPEO, P.C.
60 STATE STREET ONE FINANCIAL CENTER
BOSTON, MASSACHUSETTS 02109 BOSTON, MASSACHUSETTS 02111
TELEPHONE: (617) 526-6000 TELEPHONE: (617) 542-6000
TELECOPY: (617) 526-5000 TELECOPY: (617) 542-2241
</TABLE>
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective and certain
other conditions under the Merger Agreement are met or waived.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, 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. [ ]
------------------------
THE REGISTRANT HEREBY AMENDS THIS 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
[MKS INSTRUMENTS LOGO]
December 13, 2000
Dear Stockholders of MKS Instruments, Inc.:
I am writing to you today about a proposed merger of Applied Science and
Technology, Inc., referred to in this joint proxy statement/prospectus as
"ASTeX," with MKS Instruments, Inc.
In the merger, each share of ASTeX common stock will be exchanged for
0.7669 of a share of MKS common stock. MKS expects to issue approximately
11,200,000 shares of its common stock in the merger. Upon completion of the
merger, ASTeX stockholders will own approximately 30% of MKS' outstanding common
stock. MKS common stock is traded on the Nasdaq National Market under the
trading symbol "MKSI" and closed at a price of $18.56 per share on December 12,
2000. MKS stockholders will continue to own their existing shares after the
merger.
We cannot complete the merger unless the stockholders of MKS approve the
issuance of MKS common stock to ASTeX stockholders in the merger. The board of
directors of MKS has unanimously approved the merger and recommends that you
approve the issuance of MKS common stock in the merger.
The accompanying joint proxy statement/prospectus provides detailed
information about MKS, ASTeX and the merger. Please give all of this information
your careful attention. In particular, you should carefully consider the
discussion in the section entitled "Risk Factors" beginning on page 11 of the
joint proxy statement/prospectus.
Your vote is very important regardless of the number of shares you own. To
vote your shares, you may use the enclosed proxy card or attend the special
meeting. To approve the proposal submitted to you, you must vote "FOR" the
proposal by following the instructions stated on the enclosed proxy card.
Sincerely,
/S/ JOHN R. BERTUCCI
JOHN R. BERTUCCI
Chairman and Chief Executive Officer
<PAGE> 3
APPLIED SCIENCE AND TECHNOLOGY, INC.
[APPLIED SCIENCE AND TECHNOLOGY LOGO]
A MERGER PROPOSAL -- YOUR VOTE IS VERY IMPORTANT
Dear Stockholders of Applied Science and Technology, Inc.:
The board of directors of Applied Science and Technology, Inc., referred to
in this joint proxy statement/prospectus as "ASTeX," has approved a merger
agreement with MKS Instruments, Inc.
We will hold our annual stockholders' meeting on Friday, January 26, 2001
at 10:00 a.m. local time at the offices of Mintz, Levin, Cohn, Ferris, Glovsky
and Popeo, P.C., One Financial Center, Boston, Massachusetts 02111, at which we
will ask you to adopt the merger agreement. If the merger agreement is adopted:
- ASTeX will become a wholly owned subsidiary of MKS; and
- You will receive 0.7669 of a share of MKS common stock in exchange for
each of your shares of ASTeX common stock.
MKS' common stock is listed on the Nasdaq National Market under the symbol
"MKSI." On December 12, 2000, MKS common stock closed at $18.56 per share.
At our annual meeting, we will also ask you to elect directors and ratify
the selection of our auditors. The directors will serve until the completion of
the proposed merger with MKS or, if earlier, until the expiration of their term
as directors.
PLEASE CAREFULLY CONSIDER ALL OF THE INFORMATION IN THIS JOINT PROXY
STATEMENT/PROSPECTUS REGARDING ASTEX, MKS AND THE MERGER, INCLUDING IN
PARTICULAR THE DISCUSSION IN THE SECTION CALLED "RISK FACTORS" STARTING ON PAGE
11.
Sincerely,
/s/ RICHARD S. POST
RICHARD S. POST
Chairman of the Board and
Chief Executive Officer
<PAGE> 4
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THE MERGER OR THE SECURITIES OF MKS TO
BE ISSUED IN THE MERGER, OR DETERMINED IF THIS JOINT PROXY STATEMENT/PROSPECTUS
IS ACCURATE OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
This joint proxy statement/prospectus is dated December 13, 2000 and is
expected to be first mailed to MKS and ASTeX stockholders on or about December
16, 2000.
SOURCES OF ADDITIONAL INFORMATION
This joint proxy statement/prospectus incorporates important business and
financial information about MKS and ASTeX that is not included or delivered with
this document. This information is available without charge to you upon oral or
written request. Requests for MKS information should be made to Investor
Relations, MKS Instruments, Inc., Six Shattuck Road, Andover, Massachusetts
01810, telephone: (978) 975-2350. Requests for ASTeX information should be made
to Investor Relations, Applied Science and Technology, Inc., 90 Industrial Way,
Wilmington, Massachusetts 01887, telephone: (978) 284-4000.
To obtain timely information of the requested materials prior to the
special meeting of MKS and the annual meeting of ASTeX stockholders, you must
request them no later than January 19, 2001.
Also see "Where You Can Find More Information" on page 103 of this joint
proxy statement/prospectus.
MKS has supplied all information contained in this joint proxy
statement/prospectus relating to MKS, and ASTeX has supplied all information
contained in this joint proxy statement/prospectus relating to ASTeX.
<PAGE> 5
MKS INSTRUMENTS, INC.
SIX SHATTUCK ROAD
ANDOVER, MASSACHUSETTS 01810
(978) 975-2350
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON FRIDAY, JANUARY 26, 2001
We will hold a special meeting of the stockholders of MKS at 10:00 a.m.,
local time, on Friday, January 26, 2001, at the offices of Hale and Dorr LLP, 60
State Street, Boston, Massachusetts 02109.
At the meeting, you will consider and vote on a proposal to approve the
issuance of MKS common stock to the stockholders of ASTeX in the merger of ASTeX
with a wholly owned subsidiary of MKS. Under the merger agreement, each
outstanding share of ASTeX common stock will convert into the right to receive
0.7669 of a share of MKS common stock.
We will transact no other business at the special meeting, except business
which may be properly brought before the special meeting or any adjournment or
postponement of the special meeting.
Only holders of record of shares of MKS common stock at the close of
business on December 7, 2000, the record date for the special meeting, are
entitled to notice of, and to vote at, the special meeting and any adjournment
or postponement of the special meeting.
Your vote is important. Whether or not you plan to attend the special
meeting, please complete, sign and date the enclosed proxy and return it
promptly in the enclosed postage-paid envelope. You may vote in person at the
special meeting, even if you have returned a proxy.
By Order of the Board of Directors
RICHARD S. CHUTE,
Clerk
Andover, Massachusetts
December 13, 2000
<PAGE> 6
APPLIED SCIENCE AND TECHNOLOGY, INC.
90 INDUSTRIAL WAY
WILMINGTON, MASSACHUSETTS 01887
(978) 284-4000
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
December 13, 2000
I am pleased to give you notice of and cordially invite you to attend,
either in person or by proxy, the annual meeting of the stockholders of Applied
Science and Technology, Inc., which will be held on Friday, January 26, 2001, at
10:00 a.m., local time, at the offices of Mintz, Levin, Cohn, Ferris, Glovsky
and Popeo, P.C., One Financial Center, Boston, Massachusetts 02111, and at any
adjournment or adjournments thereof. The purposes of the annual meeting are:
1. To consider and vote on a proposal to adopt a merger agreement
dated as of October 2, 2000 among ASTeX, MKS and an MKS subsidiary. The
merger agreement provides that the MKS subsidiary will be merged with and
into ASTeX. In the merger, each stockholder of ASTeX will receive 0.7669 of
a share of MKS common stock in exchange for each outstanding share of
common stock of ASTeX owned prior to the effective time of the merger. The
merger agreement is attached as Annex A to the enclosed joint proxy
statement/prospectus;
2. To elect two (2) members of the board of directors to serve until
the earlier of the completion of the merger or the expiration of a three
(3) year term;
3. To consider and act upon a proposal to ratify the appointment of
KPMG LLP as independent auditors for ASTeX for the fiscal year ending July
1, 2001; and
4. To transact any other business which properly comes before the
annual meeting.
Only stockholders of record at the close of business on December 7, 2000
will receive notice of and be able to vote at the annual meeting.
The enclosed joint proxy statement/prospectus describes the merger
agreement, the proposed merger and the actions to be taken in connection with
the merger. The holders of a majority of the outstanding shares of ASTeX common
stock entitled to vote must be present or represented by proxy at the annual
meeting in order to constitute a quorum for the transaction of business. It is
important that your shares are represented at the annual meeting regardless of
the number of shares you hold. Whether or not you are able to be at the annual
meeting in person, please sign and return promptly the enclosed proxy card in
the enclosed, postage-paid envelope. You may revoke your proxy in the manner
described in the enclosed joint proxy statement/prospectus at any time before it
is voted at the annual meeting.
Please do not send any stock certificates with your proxy cards.
This notice, and the enclosed proxy card and joint proxy
statement/prospectus, are sent to you by order of ASTeX's board of directors.
JOHN M. TARRH
Secretary
<PAGE> 7
TABLE OF CONTENTS
<TABLE>
<S> <C>
QUESTIONS AND ANSWERS ABOUT THE MERGER...................... 1
SUMMARY..................................................... 4
RISK FACTORS................................................ 11
Risks Relating to the Merger.............................. 11
Risks Relating to MKS' Business........................... 13
Risks Relating to ASTeX's Business........................ 17
CAUTIONARY STATEMENT CONCERNING FORWARD LOOKING
STATEMENTS................................................ 22
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA OF MKS...... 23
SELECTED HISTORICAL CONDENSED CONSOLIDATED FINANCIAL
INFORMATION OF ASTeX...................................... 24
SELECTED UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL
INFORMATION............................................... 25
UNAUDITED COMPARATIVE PER SHARE DATA........................ 27
MARKET PRICE INFORMATION.................................... 29
MKS Market Price Information.............................. 29
ASTeX Market Price Information............................ 29
Recent Closing Prices..................................... 29
Dividends................................................. 30
THE ASTEX ANNUAL MEETING.................................... 31
Date, Time and Place of Meeting........................... 31
What Will Be Voted Upon................................... 31
Record Date and Outstanding Shares........................ 31
Votes Required............................................ 31
Quorum; Abstentions and Broker Non-Votes.................. 31
Voting and Revocation of Proxies.......................... 32
Solicitation of Proxies and Expenses...................... 32
Board Recommendation...................................... 32
THE MKS SPECIAL MEETING..................................... 33
Date, Time and Place of Meeting........................... 33
What Will Be Voted Upon................................... 33
Record Date and Outstanding Shares........................ 33
Vote Required to Approve the Issuance..................... 33
Quorum; Abstentions and Broker Non-Votes.................. 33
Voting and Revocation of Proxies.......................... 34
Solicitation of Proxies and Expenses...................... 34
Board Recommendation...................................... 34
THE MERGER.................................................. 35
Background of the Merger.................................. 35
ASTeX's Reasons For The Merger............................ 38
Recommendation of ASTeX's Board of Directors.............. 40
MKS' Reasons for the Merger............................... 40
Recommendation of MKS' Board of Directors................. 41
Opinion of MKS' Financial Advisor -- Merrill Lynch,
Pierce, Fenner & Smith Incorporated.................... 41
Opinion of ASTeX's Financial Advisor -- CIBC World Markets
Corp................................................... 47
Interests of Executive Officers and Directors of MKS in
the Merger............................................. 52
Interests of Executive Officers and Directors of ASTeX in
the Merger............................................. 52
Treatment of ASTeX Common Stock........................... 53
</TABLE>
i
<PAGE> 8
<TABLE>
<S> <C>
Accounting Treatment of the Merger........................ 53
Regulatory Approvals...................................... 53
Material United States Federal Income Tax
Considerations......................................... 54
Resales of MKS Common Stock Issued in Connection with the
Merger; Affiliate Agreements........................... 55
No Appraisal Rights....................................... 55
Delisting and Deregistration of ASTeX Common Stock
Following the Merger................................... 55
THE MERGER AGREEMENT........................................ 56
General................................................... 56
The Exchange Ratio and Treatment of ASTeX Common Stock.... 56
Treatment of ASTeX Stock Options.......................... 56
Exchange of Certificates.................................. 56
Representations and Warranties............................ 57
Covenants of MKS and ASTeX................................ 58
Conditions to Obligations to Complete the Merger.......... 62
Termination; Expenses and Termination Fees................ 63
Amendment................................................. 65
RELATED AGREEMENTS.......................................... 66
Stockholder Agreements.................................... 66
Affiliate Agreements...................................... 66
Employment Agreements..................................... 66
LEGAL PROCEEDINGS........................................... 67
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL
INFORMATION............................................... 68
MKS' PRINCIPAL STOCKHOLDERS................................. 76
ASTeX's PRINCIPAL STOCKHOLDERS.............................. 78
COMPARISON OF STOCKHOLDER RIGHTS............................ 80
ADDITIONAL PROPOSALS FOR ASTeX ANNUAL MEETING............... 91
ELECTION OF ASTeX DIRECTORS................................. 91
PROPOSAL 1: COMPENSATION OF OFFICERS AND DIRECTORS.......... 95
SUMMARY COMPENSATION TABLE.................................. 95
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT
OF 1934................................................... 102
DIVIDEND POLICY............................................. 102
PROPOSAL 2: RATIFICATION OF AUDITORS........................ 102
STOCKHOLDER PROPOSALS....................................... 102
LEGAL MATTERS............................................... 103
EXPERTS..................................................... 103
WHERE YOU CAN FIND MORE INFORMATION......................... 103
INDEX TO FINANCIAL STATEMENTS............................... F-1
ANNEXES
Annex A Agreement and Plan of Merger........................ A-1
Annex B-1 Opinion of MKS' Financial Advisor, Merrill Lynch,
Pierce, Fenner & Smith Incorporated....................... B-1
Annex B-2 Opinion of ASTeX's Financial Advisor, CIBC World
Markets Corp.............................................. B-2
Annex C-1 ASTeX Stockholder Agreement....................... C-1
Annex C-2 MKS Stockholder Agreement......................... C-2
</TABLE>
ii
<PAGE> 9
QUESTIONS AND ANSWERS ABOUT THE MERGER
Q: WHY DO THE COMPANIES PROPOSE TO MERGE?
A: MKS and ASTeX believe that the merger will provide several benefits to both
companies, including:
- a good strategic fit between the companies;
- the opportunity to take advantage of an expanded and geographically
diverse customer base;
- the opportunity to become a one-stop solution leader for reactive gas
sources and power supplies; and
- the opportunity to gain cost savings by combining infrastructure, supply
chain management and research and development investments.
Q: ARE THERE ANY POTENTIAL DISADVANTAGES TO THE PROPOSED MERGER?
A: MKS has identified a number of potential negative factors that could
materialize as a result of the merger, including the risk that the potential
benefits sought in the merger might not be realized and the potential
adverse effect of the public announcement of the merger on MKS' business,
employees and customers.
ASTeX also has identified a number of potential disadvantages to the merger,
including:
- the risk that the value to be received by ASTeX stockholders in the
merger could decline significantly from that determined as of the date of
the merger agreement due to the fixed exchange ratio used in the merger;
- the risk that potential benefits sought to be achieved in the merger
might not be fully realized;
- the risk that ASTeX's management and technical personnel might not
continue with MKS after the merger and the loss of control over future
operations of ASTeX after the merger; and
- the impact of the loss of ASTeX's status as an independent company on its
stockholders and employees.
Q: WHAT WILL ASTeX STOCKHOLDERS RECEIVE IN THE MERGER?
A: If the merger is completed, ASTeX stockholders will receive 0.7669 of a
share of MKS common stock for each share of ASTeX common stock that they own
and cash, without interest, for any fractional shares.
Q: WHEN DO YOU EXPECT TO COMPLETE THE MERGER OF MKS AND ASTeX?
A: We expect to complete the merger by the end of January 2001, but neither MKS
nor ASTeX can predict the exact timing.
Q: WHO MUST APPROVE THE MERGER?
A: In addition to the approvals of the board of directors of MKS and ASTeX,
which were already obtained, MKS stockholders must approve the issuance of
MKS common stock in the merger and ASTeX stockholders must approve the
merger agreement and the merger.
Q: WHAT VOTE OF MKS STOCKHOLDERS IS REQUIRED TO APPROVE THE ISSUANCE OF MKS
COMMON STOCK IN THE MERGER?
A: The affirmative vote of the holders of at least a majority of the shares of
MKS common stock present or represented by proxy at the MKS special meeting
is required to approve the issuance of MKS common stock in connection with
the merger. John R. Bertucci, MKS' chairman and chief executive officer and
a director of ASTeX, together with members of Mr. Bertucci's family, who
beneficially own a majority of all outstanding shares of MKS common stock,
have agreed to vote in favor of the issuance of the MKS common stock in
connection with the merger. Therefore, MKS stockholder approval is assured.
1
<PAGE> 10
Q: WHAT VOTE OF ASTeX STOCKHOLDERS IS REQUIRED TO APPROVE THE MERGER AGREEMENT
AND THE MERGER?
A: The affirmative vote of the holders of at least a majority of the
outstanding shares of ASTeX common stock is required to approve the merger
agreement and the merger. Richard S. Post and John M. Tarrh, two directors
and executive officers of ASTeX who together own approximately 6.5% of the
outstanding ASTeX common stock, have agreed to vote their shares in favor of
the merger.
Q: DO THE BOARDS OF DIRECTORS OF MKS AND ASTeX RECOMMEND APPROVAL OF THE
PROPOSALS?
A: Yes. For a more complete description of the recommendation of the ASTeX
board of directors, see the section entitled "The Merger -- ASTeX's Reasons
for the Merger; -- Recommendation of ASTeX's Board of Directors" beginning
on page 40. For a more complete description of the recommendation of the MKS
board of directors, see the section entitled "The Merger -- MKS' Reasons for
the Merger; Recommendation of the MKS Board of Directors" beginning on page
41.
Q: WHAT DO I NEED TO DO NOW?
A: MKS and ASTeX urge you to carefully read this joint proxy
statement/prospectus, including its annexes and to consider how the merger
will affect you as a stockholder. You also may want to review the documents
referenced under "Where You Can Find More Information" on page 103.
Q: HOW DO I VOTE?
A: You may indicate how you want to vote on your proxy card. You may also
attend your stockholder meeting and vote in person instead of submitting a
proxy. If you are an ASTeX stockholder and fail either to return your proxy
card or to vote in person at the stockholder meeting, or if you mark your
proxy "abstain," the effect will be a vote against the merger. If you fail
to indicate your vote on your proxy, your proxy will be counted as a vote
for all proposals submitted to you, unless your shares are held in a
brokerage account.
Q: IF MY SHARES ARE HELD IN A BROKERAGE ACCOUNT, WILL MY BROKER VOTE MY SHARES
FOR ME?
A: Your broker cannot vote your shares on the proposal relating to the merger
agreement without instructions from you on how to vote. Therefore, it is
important that you follow the directions provided by your broker regarding
how to instruct your broker to vote your shares. If you are an ASTeX
stockholder and fail to provide your broker with instructions, it will have
the same effect as a vote against the merger.
Q: MAY I CHANGE MY VOTE AFTER I HAVE MAILED IN MY SIGNED PROXY CARD?
A: You may change your vote at any time before the vote takes place at your
stockholder meeting. To change your vote, you may either submit a later
dated proxy card or send a written notice stating that you would like to
revoke your proxy. In addition, you may attend your stockholder meeting and
vote in person. However, if you elect to vote in person at your stockholder
meeting and your shares are held by a broker, bank or other nominee, you
must bring to the stockholder meeting a legal proxy from the broker, bank or
other nominee authorizing you to vote the shares.
Q: WHERE AND WHEN IS THE MKS STOCKHOLDER MEETING?
A: The special meeting of MKS stockholders will be held at 10:00 a.m., local
time, on Friday, January 26, 2001, at Hale and Dorr LLP, 60 State Street,
Boston, Massachusetts 02109.
Q: WHEN AND WHERE IS THE ASTeX ANNUAL MEETING?
A: The annual meeting of ASTeX stockholders will be held at 10:00 a.m., local
time, on Friday, January 26, 2001, at Mintz, Levin, Cohn, Ferris, Glovsky
and Popeo, P.C., One Financial Center, Boston, Massachusetts 02111.
Q: SHOULD ASTeX STOCKHOLDERS SEND IN THEIR CERTIFICATES NOW?
A: No. After MKS and ASTeX complete the merger, MKS' transfer agent will send
instructions to ASTeX stockholders regarding the exchange of shares of ASTeX
common stock for MKS common stock. MKS stockholders
2
<PAGE> 11
should not submit their stock certificates at any time since their shares
will not be exchanged in the merger.
Q: WHOM MAY I CONTACT WITH ANY ADDITIONAL QUESTIONS?
A: MKS stockholders may call Ronald C. Weigner, Vice President and Chief
Financial Officer of MKS, at (978) 975-2350. ASTeX stockholders may call
John M. Tarrh, Vice President and Treasurer of ASTeX, at (978) 284-4135.
3
<PAGE> 12
SUMMARY
This summary highlights selected information from this joint proxy
statement/prospectus and may not contain all of the information that is
important to you. To understand the merger fully and for a more complete
description of the legal terms of the merger, you should read carefully this
entire document and the documents to which we have referred you. See "Where You
Can Find More Information" on page 103. We have included page references
parenthetically to direct you to a more complete description of the topics in
this summary.
THE COMPANIES
MKS Instruments, Inc.
Six Shattuck Road
Andover, Massachusetts 01810
(978) 975-2350
MKS Instruments, Inc., commonly known as MKS, is a leading worldwide
developer, manufacturer and supplier of instruments, components and subsystems
used to measure, control and analyze gases in semiconductor manufacturing and
similar industrial manufacturing processes. MKS sold products to more than 4,000
customers in 1999. In addition to semiconductors, MKS' products are used in
processes to manufacture a diverse range of products, such as optical filters,
fiber optic cables, flat panel displays, magnetic and optical storage media,
architectural glass, solar panels and gas lasers.
Applied Science and Technology, Inc.
90 Industrial Way
Wilmington, Massachusetts 01887
(978) 284-4000
Applied Science and Technology, Inc., commonly known as ASTeX, is a
worldwide leader in the design, development, manufacture and support of high
performance reactive gas modules and power supplies used in semiconductor device
manufacturing and medical markets, as well as etch and deposition systems for
advanced semiconductor packaging, telecommunications and magnetic sensors.
ASTeX's proprietary modules, delivered to semiconductor equipment OEMs, create
reactive gases used to deposit and etch thin films applied during various steps
in the manufacture of semiconductor devices. ASTeX's modules help manufacturers
improve yields, reduce overall production costs and improve time to market.
ASTeX's complete systems, delivered to end users who manufacture thin-film
devices, provide proprietary etch and deposition solutions to high-growth end
markets, including semiconductor packaging, telecommunications and magnetic
sensors.
THE MERGER
(PAGE 35)
Upon the consummation of the merger, ASTeX will become a wholly-owned
subsidiary of MKS. ASTeX stockholders will receive MKS common stock in exchange
for their shares of ASTeX common stock. The merger agreement is attached to this
joint proxy statement/prospectus as Annex A. We encourage you to read the merger
agreement because it is the document that governs the merger.
STOCKHOLDER APPROVAL REQUIRED BY ASTeX
(PAGE 31)
Approval of the merger agreement requires the affirmative approval of the
holders of at least a majority of the outstanding shares of ASTeX common stock.
Dr. Richard S. Post and Mr. John M. Tarrh, two of ASTeX's directors and
executive officers, held approximately 6.5% of the outstanding shares of ASTeX
common stock on November 30, 2000, and have already agreed to vote their shares
in favor of the merger.
4
<PAGE> 13
STOCKHOLDER APPROVAL REQUIRED BY MKS
(PAGE 33)
The affirmative vote of the holders of at least a majority of the shares of
MKS common stock present or represented by proxy at the MKS special meeting of
stockholders is required to approve the issuance of MKS common stock in
connection with the merger. Mr. Bertucci, MKS' chairman and chief executive
officer and a director of ASTeX, together with members of Mr. Bertucci's family,
who beneficially own a majority of all outstanding shares of MKS common stock,
have agreed to vote in favor of the issuance of the MKS common stock in
connection with the merger. Therefore, MKS stockholder approval is assured.
ASTEX BOARD RECOMMENDATION TO STOCKHOLDERS
(PAGE 32)
The ASTeX board of directors has voted unanimously (with Mr. Bertucci
abstaining) to approve the merger agreement and the merger. The ASTeX board of
directors believes that the merger is advisable and in the ASTeX's stockholders'
best interest and recommends that the ASTeX stockholders vote FOR the proposal
to approve the merger agreement and the merger.
MKS BOARD RECOMMENDATION TO STOCKHOLDERS
(PAGE 34)
The MKS board of directors has voted unanimously to approve the merger
agreement and the issuance of MKS common stock in the merger. The MKS board of
directors believes the issuance of MKS common stock in the merger is advisable
and in the MKS stockholders' best interests and recommends that MKS stockholders
vote FOR the proposal to issue MKS common stock in the merger.
WHAT HOLDERS OF ASTEX COMMON STOCK WILL RECEIVE
(PAGE 31)
Each outstanding share of ASTeX common stock will be exchanged for 0.7669
of a share of MKS common stock. We refer in this joint proxy
statement/prospectus to the 0.7669 of a share of MKS common stock into which
each outstanding share of ASTeX common stock will be exchanged in the merger as
the exchange ratio. Based on the exchange ratio of 0.7669 and the number of
shares of ASTeX common stock outstanding on November 30, 2000, a total of
approximately 11,200,000 shares of MKS common stock will be issued in the
merger.
MKS will not issue fractional shares of MKS common stock in connection with
the merger. Instead, MKS will pay cash, without interest, for any fractional
shares.
CONDITIONS TO THE MERGER
(PAGE 62)
The completion of the merger depends on the satisfaction of a number of
conditions, including:
- ASTeX stockholders must have adopted the merger agreement and approved
the merger;
- MKS stockholders must have approved the issuance of MKS common stock in
connection with the merger;
- the listing on the Nasdaq National Market of MKS common stock that will
be issued to ASTeX stockholders in the merger must have been approved;
- the receipt of a legal opinion regarding the treatment of the merger as a
"reorganization" under section 368(a) of the Internal Revenue Code;
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<PAGE> 14
- the registration statement on Form S-4 of which this joint proxy
statement/prospectus is a part must have become effective and not be the
subject of a stop order, and no proceedings seeking a stop order shall
have been threatened or initiated;
- MKS and ASTeX shall each have received a letter from their respective
independent certified public accountants attesting to the qualification
of the merger for "pooling-of-interests" treatment; and
- other customary conditions specified in the merger agreement.
The party entitled to assert any condition to the merger may waive the
condition.
NO SOLICITATION BY ASTEX
(PAGE 60)
Subject to applicable fiduciary duties of the ASTeX board of directors,
ASTeX has agreed that neither it nor any of its subsidiaries will:
- solicit, initiate or encourage any proposal from a third party that might
lead to an alternative transaction;
- enter into discussions or negotiations concerning, or provide any
non-public information to a third party relating to, an alternative
transaction; or
- agree to recommend an alternative transaction to the ASTeX stockholders;
provided that, if ASTeX complies with these requirements, ASTeX may,
before the agreement is adopted by the stockholders of ASTeX, furnish
information to, or enter into discussions or negotiations with, a third
party relating to an unsolicited bona fide written acquisition proposal
or recommend to the ASTeX stockholders an unsolicited bona fide written
acquisition proposal, if the ASTeX Board of Directors:
-- believe that the third party's acquisition proposal would result in
a more favorable transaction than the proposed merger,
-- determine in good faith after consultation with outside legal
counsel that furnishing the information, entering into the discussions, or
recommending the proposal is necessary for the Board of Directors to
fulfill its fiduciary duties, and
-- comply with other requirements in the merger agreement.
ASTeX has also agreed to cause each of its officers, directors, employees,
financial advisors, representatives and agents not to take any of these actions.
TERMINATION OF THE MERGER AGREEMENT
(PAGE 63)
MKS and ASTeX can mutually agree to terminate the merger agreement without
completing the merger if:
- the merger is not completed by March 31, 2001;
- ASTeX stockholders do not approve the merger at a stockholders meeting
convened for that purpose;
- MKS stockholders do not approve the issuance of the MKS common stock to
be issued in connection with the merger at a stockholders meeting
convened for that purpose;
- any order permanently restraining, enjoining or otherwise prohibiting
consummation of the merger shall become final or non-appealable after the
parties have used their commercially reasonable efforts to have such
order removed, repealed or overturned; or
- the other party breaches any material representation, warranty or
covenant in the merger agreement and fails to cure the breach within 30
days of receiving notice of the breach.
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<PAGE> 15
In addition, MKS and ASTeX can each terminate the merger agreement under
certain conditions set forth in the merger agreement and described in this joint
proxy statement/prospectus below.
TERMINATION FEES AND EXPENSES
(PAGE 63)
MKS and ASTeX, generally, will bear their own expenses related to the
merger. However, under some circumstances set forth in the merger agreement,
ASTeX or MKS may be required to reimburse the other up to a maximum of $500,000
for expenses related to the merger.
ASTeX is obligated to pay MKS a termination fee of $9,075,000 if MKS
terminates the merger agreement under the circumstances set forth in the merger
agreement and described below in this joint proxy statement/prospectus.
STOCK OPTIONS
(PAGE 56)
In connection with the merger agreement, MKS will assume all options,
whether vested or unvested, to purchase ASTeX common stock, issued under ASTeX's
stock option plans. Each option to purchase shares of ASTeX common stock
outstanding immediately prior to the closing date will be considered an option
to acquire, on the same terms, 0.7669 of a share of MKS common stock, with the
option exercise price to be adjusted accordingly.
OPINION OF MKS FINANCIAL ADVISOR
(PAGE 41)
In connection with the merger, Merrill Lynch, Pierce, Fenner & Smith
Incorporated, MKS' financial advisor, rendered a written opinion, dated
September 30, 2000, to the MKS board of directors as to the fairness, from a
financial point of view, to MKS of the exchange ratio in the merger. The full
text of the written opinion of Merrill Lynch is attached to this document as
Annex B-1. MKS encourages its stockholders to read the opinion carefully in its
entirety to understand the procedures followed, assumptions made, matters
considered and limitations on the review undertaken by Merrill Lynch in
providing its opinion. The opinion of Merrill Lynch is directed to the MKS board
of directors and does not constitute a recommendation to any stockholder with
respect to any matter relating to the merger.
OPINION OF ASTEX FINANCIAL ADVISOR
(PAGE 47)
In connection with the merger, the ASTeX board received an opinion from
ASTeX's financial advisor, CIBC World Markets Corp., as to the fairness, from a
financial point of view, of the exchange ratio provided for in the merger. ASTeX
has attached the full text of CIBC World Markets' written opinion, dated October
2, 2000, as Annex B-2 to this joint proxy statement/prospectus. ASTeX encourages
its stockholders to read this opinion carefully in its entirety for a
description of the assumptions made, matters considered and limitations on the
review undertaken. CIBC World Markets' opinion is addressed to the ASTeX board
and relates only to the fairness of the exchange ratio from a financial point of
view. The opinion does not address any other aspect of the proposed merger and
does not constitute a recommendation to any stockholder as to any matters
relating to the proposed merger.
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<PAGE> 16
INTERESTS OF EXECUTIVE OFFICERS AND
DIRECTORS OF ASTEX IN THE MERGER
(PAGE 52)
In considering the recommendation of the ASTeX board of directors, ASTeX
stockholders should be aware of the interests that ASTeX executive officers and
directors have in the merger. These include:
- Robert R. Anderson and Hans-Jochen Kahl, current directors of ASTeX, will
become directors of MKS;
- executive officers of ASTeX will receive severance benefits under
pre-existing employment arrangements, if their employment terminates
under certain conditions;
- at the closing of the merger, 558,300 stock options held by the ASTeX
executive officers and directors will be assumed by MKS, and each option
to purchase a share of ASTeX common stock will be converted into an
option to purchase 0.7669 of a share of MKS common stock;
- as of November 30, 2000, the executive officers and directors of ASTeX
held 1,149,651 shares of ASTeX common stock;
- as of November 30, 2000, the executive officers and directors of ASTeX
(other than Mr. Bertucci) owned 33,805 shares of MKS common stock;
- ASTeX officers and directors have customary rights to indemnification
against specified liabilities;
- seven ASTeX executive officers have entered into employment agreements
with MKS, which will become effective upon the closing of the merger; and
- of the 558,300 options held by the ASTeX executive officers and
directors, up to 43,000 will accelerate as a result of the merger.
In considering the fairness of the merger to ASTeX stockholders, the ASTeX
board of directors took into account these interests. Some of these interests
are different from, or in addition to, the interests of ASTeX stockholders
generally in the merger.
INTERESTS OF EXECUTIVE OFFICERS AND
DIRECTORS OF MKS IN THE MERGER
(PAGE 52)
John R. Bertucci, chairman and chief executive officer of MKS, also serves
as a director of ASTeX. Mr. Bertucci owns 22,500 shares of ASTeX common stock
and options to purchase 44,000 shares of ASTeX common stock. In addition, MKS
owns 52,500 shares of ASTeX common stock. In considering the fairness of the
merger to the MKS stockholders, the MKS board of directors took into account Mr.
Bertucci's interests. Some of these interests are different from, or in addition
to, the interests of MKS stockholders generally in the issuance of MKS common
stock in the merger.
ACCOUNTING TREATMENT
(PAGE 53)
MKS expects to account for the merger using the "pooling-of-interests"
method.
MATERIAL UNITED STATES FEDERAL INCOME TAX
CONSIDERATIONS
(PAGE 54)
We have structured the merger in order to qualify as a reorganization under
the Internal Revenue Code. It is our intention that no gain or loss will
generally be recognized by ASTeX stockholders for federal income tax purposes on
the exchange of shares of ASTeX common stock solely for shares of MKS common
stock.
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<PAGE> 17
ASTeX stockholders, however, will recognize gain for federal income tax purposes
on any cash received in lieu of fractional shares.
Tax matters are very complicated, and the tax consequences of the merger to
the ASTeX stockholders will depend on the facts of each ASTeX stockholder's own
situation. Each ASTeX stockholder should consult his, her or its tax advisor for
a full understanding of the tax consequences of the merger.
MKS AND ASTEX STOCKHOLDERS HAVE NO APPRAISAL RIGHTS
(PAGE 55)
Under applicable law, neither MKS nor ASTeX stockholders have appraisal
rights with respect to the merger.
HOW THE RIGHTS OF ASTEX STOCKHOLDERS WILL DIFFER AS MKS STOCKHOLDERS
(PAGE 80)
The rights of ASTeX stockholders as stockholders of MKS, a Massachusetts
corporation, after the merger will be governed by MKS' corporate charter and
by-laws. Those rights differ from the rights of ASTeX stockholders under
Delaware law and ASTeX's corporate charter and by-laws.
FORWARD-LOOKING STATEMENTS MAY PROVE INACCURATE
(PAGE 22)
MKS and ASTeX have made forward-looking statements in this document and in
documents that are incorporated in this document by reference that are subject
to risks and uncertainties. Forward-looking statements include the information
concerning possible or assumed future results of operations of MKS, including
the anticipated cost savings and revenue enhancements from the merger. Also,
when MKS and ASTeX use words such as "believes," "expects," "anticipates,"
"plans" or similar expressions, MKS and ASTeX are making forward-looking
statements. Stockholders should note that many factors could affect the future
financial results of MKS and ASTeX, and could cause these results to differ
materially from those expressed in MKS' and ASTeX's forward-looking statements.
These factors include the following:
- the risk that the process of integrating MKS and ASTeX may disrupt the
business activities of MKS and affect employee morale, thus affecting
MKS' ability to retain key employees;
- the risk that if the merger's anticipated benefits do not meet the
expectations of financial or industry analysts, the market price of MKS
common stock may decline;
- the risk that the failure to complete the merger may result in ASTeX
paying termination fees to MKS and cause ASTeX to nevertheless incur
legal, financial advisory and accounting fees, all of which may dilute
the value of ASTeX's stock and decrease its market price;
- the risk that the merger may cause ASTeX to lose key personnel which
could materially affect ASTeX's business and require ASTeX to incur
substantial costs to recruit replacements for lost personnel;
- the risk that customers of MKS and ASTeX may terminate their relationship
with MKS or ASTeX as a result of concerns over products and services to
be provided following the merger; and
- all of the risks listed under "Risk Factors" in this document.
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<PAGE> 18
MKS PRICE INFORMATION
(PAGE 29)
Shares of MKS common stock are quoted on the Nasdaq National Market. On
September 29, 2000, the last full trading day prior to the public announcement
of the proposed merger, MKS common stock closed at $27.375 per share. On
December 12, 2000, MKS common stock closed at $18.56 per share.
ASTEX PRICE INFORMATION
(PAGE 29)
Shares of ASTeX common stock are also quoted on the Nasdaq National Market.
On September 29, 2000, the last full trading day prior to the public
announcement of the proposed merger, ASTeX common stock closed at $14.750 per
share. On December 12, 2000, ASTeX common stock closed at $14.19 per share.
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<PAGE> 19
RISK FACTORS
You should carefully consider the following risk factors before you decide
whether to vote to approve the proposals submitted to you. You should also
consider the other information in this document.
RISKS RELATING TO THE MERGER
MKS' STOCK PRICE IS VOLATILE AND THE VALUE OF THE MKS COMMON STOCK ISSUED IN THE
MERGER WILL DEPEND ON ITS MARKET PRICE AT THE TIME OF THE MERGER. NO ADJUSTMENT
TO THE EXCHANGE RATIO WILL BE MADE AS A RESULT OF CHANGES IN THE MARKET PRICE OF
MKS' COMMON STOCK.
The market price of MKS common stock, like that of the shares of many other
high technology companies, has been and may continue to be volatile. For
example, from October 1, 1999 to September 30, 2000, MKS common stock traded as
high as $62.25 per share and as low as $16.8125 per share. Since the
announcement of the proposed merger, MKS' stock price has declined from $27.375
on September 29, 2000 to $18.56 per share on December 12, 2000.
At the closing of the merger, holders of ASTeX common stock will exchange
each of their shares of ASTeX common stock for 0.7669 of a share of MKS common
stock. This exchange ratio will not be adjusted for changes in the market price
of MKS' common stock or of ASTeX common stock. In addition, neither MKS nor
ASTeX may terminate or renegotiate the merger agreement, and ASTeX may not
resolicit the vote of its stockholders, solely because of changes in the market
price of MKS common stock or of ASTeX common stock. Any reduction in MKS' common
stock price will result in ASTeX stockholders receiving less value in the merger
at closing. ASTeX stockholders will not know the exact value of MKS common stock
to be issued to them in the merger at the time of the annual meeting of ASTeX
stockholders.
THE COMPLEX PROCESS OF INTEGRATING MKS AND ASTEX MAY DISRUPT THE BUSINESS
ACTIVITIES OF MKS AND AFFECT EMPLOYEE MORALE, THUS AFFECTING MKS' ABILITY TO
RETAIN KEY EMPLOYEES.
Integrating the operations and personnel of MKS and ASTeX will be a complex
process, and it is uncertain that the integration will be completed rapidly or
will achieve the anticipated benefits of the merger. The successful integration
of MKS and ASTeX will require, among other things, integration of their finance,
human resources and sales and marketing groups and coordination of research and
development efforts. The diversion of the attention of MKS' management and any
difficulties encountered in the process of combining the companies could cause
the disruption of the business activities of MKS. Further, the process of
combining MKS and ASTeX could negatively affect employee morale and the ability
of MKS to retain some of its key employees after the merger.
IF THE MERGER'S BENEFITS DO NOT MEET THE EXPECTATIONS OF FINANCIAL OR INDUSTRY
ANALYSTS, THE MARKET PRICE OF MKS COMMON STOCK MAY DECLINE.
The market price of MKS common stock may decline as a result of the merger
if:
- MKS does not achieve the perceived benefits of the merger as rapidly as,
or to the extent, anticipated by financial or industry analysts; or
- the effect of the merger on MKS' financial results is not consistent with
the expectations of financial or industry analysts.
FAILURE TO COMPLETE THE MERGER MAY RESULT IN ASTEX PAYING TERMINATION FEES TO
MKS. THIS FAILURE MAY ALSO DILUTE THE VALUE OF ASTEX'S STOCK, DECREASE ITS
MARKET PRICE AND CAUSE ASTEX TO NEVERTHELESS INCUR LEGAL AND ACCOUNTING FEES.
If the merger is not completed, ASTeX may be subject to a number of
material risks, including:
- MKS may require ASTeX to pay a termination fee of $9,075,000 or reimburse
MKS for expenses of up to $500,000, under the circumstances described in
the agreement;
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<PAGE> 20
- the market price of ASTeX common stock may decline to the extent that the
current market price of ASTeX common stock reflects a market assumption
that the merger will be completed; and
- ASTeX's costs related to the merger, such as its legal and accounting
fees, must be paid even if the merger is not completed.
If the merger is terminated and the ASTeX board of directors seeks another
merger or business combination, ASTeX stockholders cannot be certain that ASTeX
will be able to find a partner willing to pay an equivalent or more attractive
price than the price MKS will pay in the merger.
SOME OF THE OFFICERS AND DIRECTORS OF ASTEX HAVE CONFLICTS OF INTEREST THAT MAY
HAVE INFLUENCED THEM TO SUPPORT OR APPROVE THE MERGER.
ASTeX's officers and directors may have been influenced to approve the
merger because of the following arrangements that provide them with interests in
the merger that are different from, or in addition to, the interests of ASTeX
stockholders in the merger, including the following:
- as of November 30, 2000, the executive officers and directors of ASTeX
owned stock options to purchase an aggregate of 558,300 shares of ASTeX
common stock and owned 1,149,651 shares of ASTeX common stock;
- several officers of ASTeX are entitled to benefits, including severance
packages, under their pre-existing employment agreements with ASTeX if
their employment is terminated upon ASTeX's change of control, such as in
the merger;
- MKS has entered into employment agreements with seven executive officers
of ASTeX which take effect only upon completion of the merger; and
- MKS has agreed to indemnify present and former ASTeX officers and
directors against liability arising out of their service as officers or
directors. MKS will maintain officers' and directors' liability insurance
to cover against this liability for the next six years.
ASTeX stockholders should read more about these interests under "The
Merger -- Interests of Executive Officers and Directors of ASTeX in the Merger"
on page 52.
The ASTeX board of directors was aware of and took into account these
arrangements when it approved the merger. It is possible that these arrangements
may have influenced these directors and officers to support or recommend the
merger.
THE MERGER MAY CAUSE ASTEX TO LOSE KEY PERSONNEL WHICH COULD MATERIALLY AFFECT
ASTEX'S BUSINESS AND REQUIRE ASTEX TO INCUR SUBSTANTIAL COSTS TO RECRUIT
REPLACEMENTS FOR LOST PERSONNEL.
As a result of ASTeX's change in ownership, current and prospective ASTeX
employees may experience uncertainty about their future roles with MKS. This
uncertainty may adversely affect ASTeX's ability to attract and retain key
management, sales, marketing and technical personnel. Any failure to attract and
retain key personnel could have a material adverse effect on the business of
ASTeX and MKS.
CUSTOMERS OF MKS AND ASTEX MAY TERMINATE THEIR RELATIONSHIP WITH MKS OR ASTEX AS
A RESULT OF CONCERNS OVER PRODUCTS AND SERVICES TO BE PROVIDED FOLLOWING THE
MERGER.
The announcement and closing of the merger could cause customers and
potential customers of MKS and ASTeX to cancel orders or to fail to place new
orders. In particular, customers could be concerned about future products and
services or the quality of customer service during the period of integration of
ASTeX and MKS. The loss of customers or the failure to attract new customers
could have a material adverse effect on the future revenues and competitive
position of MKS and ASTeX.
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<PAGE> 21
MKS AND ASTEX ARE SUBJECT TO PENDING LITIGATION AND MAY BE REQUIRED TO EXPEND
SUBSTANTIAL FINANCIAL AND MANAGEMENT RESOURCES TO DEFEND THEIR RESPECTIVE
INTERESTS.
Upon consummation of the merger, MKS will assume responsibility for, and
any potential liability arising from, an action filed against MKS, ASTeX and
each ASTeX director on October 3, 2000 by an ASTeX stockholder as a purported
class action alleging that the defendants breached their fiduciary duties to
ASTeX's stockholders in connection with the merger, including a claim that the
price offered by MKS for the ASTeX common stock in the merger is inadequate.
ASTeX and MKS believe that the suit is without merit and intend to vigorously
defend against the claims; however, ASTeX and MKS can give no assurance as to
the ultimate outcome of the suit. In addition, this litigation, whether or not
decided in favor of MKS, ASTeX and ASTeX's directors, may be costly because of
the expense of litigation and the attendant diversion of employee and management
resources from the day to day operation of the business. The prospect of an
award of substantial financial damages, however likely or unlikely, also must be
considered. An adverse determination in a class action suit could result in
injunctive relief or the payment of money damages, subjecting MKS, ASTeX and
ASTeX's directors to significant liabilities.
RISKS RELATING TO MKS' BUSINESS
MKS' BUSINESS DEPENDS SUBSTANTIALLY ON CAPITAL SPENDING IN THE SEMICONDUCTOR
INDUSTRY WHICH IS CHARACTERIZED BY PERIODIC FLUCTUATIONS THAT MAY CAUSE A
REDUCTION IN DEMAND FOR MKS' PRODUCTS.
MKS estimates that approximately 66% of its sales during 1999 and 77% of
its sales in the first nine months of 2000 were to semiconductor capital
equipment manufacturers and semiconductor device manufacturers, and it expects
that sales to such customers will continue to account for a substantial majority
of its sales. MKS' business depends upon the capital expenditures of
semiconductor device manufacturers, which in turn depend upon the demand for
semiconductors. Periodic reductions in demand for the products manufactured by
semiconductor capital equipment manufacturers and semiconductor device
manufacturers may adversely affect MKS' business, financial condition and
results of operations. Historically, the semiconductor market has been highly
cyclical and has experienced periods of overcapacity, resulting in significantly
reduced demand for capital equipment. For example, in 1996 and 1998, the
semiconductor capital equipment industry experienced significant declines, which
caused a number of MKS customers to reduce their orders. MKS cannot be certain
that semiconductor downturns will not recur. A decline in the level of orders as
a result of any future downturn or slowdown in the semiconductor capital
equipment industry could have a material adverse effect on MKS' business,
financial condition and results of operations.
MKS' QUARTERLY OPERATING RESULTS HAVE VARIED, AND ARE LIKELY TO CONTINUE TO VARY
SIGNIFICANTLY. THIS MAY RESULT IN VOLATILITY IN THE MARKET PRICE FOR MKS'
SHARES.
A substantial portion of MKS' shipments occur shortly after an order is
received and therefore MKS operates with a low level of backlog. As a result, a
decrease in demand for MKS' products from one or more customers could occur with
limited advance notice and could have a material adverse effect on MKS' results
of operations in any particular period.
A significant percentage of MKS' expenses are relatively fixed and based in
part on expectations of future net sales. The inability to adjust spending
quickly enough to compensate for any shortfall would magnify the adverse impact
of a shortfall in net sales on MKS' results of operations. Factors that could
cause fluctuations in MKS' net sales include:
- the timing of the receipt of orders from major customers;
- shipment delays;
- disruption in sources of supply;
- seasonal variations of capital spending by customers;
- production capacity constraints; and
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<PAGE> 22
- specific features requested by customers.
For example, MKS was in the process of increasing its production capacity
when the semiconductor capital equipment market began to experience a
significant downturn in 1996. This downturn had a material adverse effect on
MKS' operating results in the second half of 1996 and the first half of 1997.
After an increase in business in the latter half of 1997, the market experienced
another downturn in 1998, which had a material adverse effect on MKS' 1998 and
first quarter 1999 operating results. As a result of the factors discussed
above, it is likely that MKS will in the future experience quarterly or annual
fluctuations and that, in one or more future quarters, its operating results
will fall below the expectations of public market analysts or investors. In any
such event, the price of MKS' common stock could decline significantly.
THE LOSS OF NET SALES TO ANY ONE OF MKS' MAJOR CUSTOMERS WOULD LIKELY HAVE A
MATERIAL ADVERSE EFFECT ON MKS.
MKS' five largest customers accounted for approximately 43% of its net
sales for the first nine months of 2000, 33% of its net sales in 1999 and 24% of
its net sales in 1998. The loss of a major customer or any reduction in orders
by these customers, including reductions due to market or competitive
conditions, would likely have a material adverse effect on MKS' business,
financial condition and results of operations. During the first nine months of
2000 and during 1999, one customer, Applied Materials, accounted for
approximately 26% and 22%, respectively, of MKS' net sales. While MKS has
entered into a purchase contract with Applied Materials that expires in December
2000 unless it is extended by mutual agreement, none of MKS' significant
customers, including Applied Materials, has entered into an agreement requiring
it to purchase any minimum quantity of MKS' products. The demand for MKS'
products from its semiconductor capital equipment customers depends in part on
orders received by them from their semiconductor device manufacturer customers.
Attempts to lessen the adverse effect of any loss or reduction through the
rapid addition of new customers could be difficult because prospective customers
typically require lengthy qualification periods prior to placing volume orders
with a new supplier. MKS' future success will continue to depend upon:
- its ability to maintain relationships with existing key customers;
- its ability to attract new customers; and
- the success of its customers in creating demand for their capital
equipment products which incorporate MKS' products.
AN INABILITY TO CONVINCE SEMICONDUCTOR DEVICE MANUFACTURERS TO SPECIFY THE USE
OF MKS' PRODUCTS TO MKS' CUSTOMERS, WHO ARE SEMICONDUCTOR CAPITAL EQUIPMENT
MANUFACTURERS, WOULD WEAKEN MKS' COMPETITIVE POSITION.
The markets for MKS' products are highly competitive. Its competitive
success often depends upon factors outside of its control. For example, in some
cases, particularly with respect to mass flow controllers, semiconductor device
manufacturers may direct semiconductor capital equipment manufacturers to use a
specified supplier's product in their equipment. Accordingly, for such products,
MKS' success will depend in part on its ability to have semiconductor device
manufacturers specify that MKS' products be used at their semiconductor
fabrication facilities. In addition, MKS may encounter difficulties in changing
established relationships of competitors that already have a large installed
base of products within such semiconductor fabrication facilities.
IF MKS' PRODUCTS ARE NOT DESIGNED INTO SUCCESSIVE NEW GENERATIONS OF ITS
CUSTOMERS' PRODUCTS, MKS WILL LOSE SIGNIFICANT NET SALES DURING THE LIFESPAN OF
THOSE PRODUCTS.
New products designed by semiconductor capital equipment manufacturers
typically have a lifespan of five to ten years. MKS' success depends on its
products being designed into new generations of equipment for the semiconductor
industry. MKS must develop products that are technologically current so that
they are positioned to be chosen for use in each successive new generation of
semiconductor capital equipment. If MKS products are not chosen by its
customers, MKS' net sales may be reduced during the lifespan of its customers'
products.
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<PAGE> 23
THE SEMICONDUCTOR INDUSTRY IS SUBJECT TO RAPID DEMAND SHIFTS WHICH ARE DIFFICULT
TO PREDICT. AS A RESULT, MKS' INABILITY TO EXPAND ITS MANUFACTURING CAPACITY IN
RESPONSE TO THESE RAPID SHIFTS MAY CAUSE A REDUCTION IN ITS MARKET SHARE.
MKS' ability to increase sales of certain products depends in part upon its
ability to expand its manufacturing capacity for such products in a timely
manner. If MKS is unable to expand its manufacturing capacity on a timely basis
or to manage such expansion effectively, its customers could implement its
competitors' products and, as a result, its market share could be reduced.
Because the semiconductor industry is subject to rapid demand shifts which are
difficult to foresee, MKS may not be able to increase capacity quickly enough to
respond to a rapid increase in demand in the semiconductor industry.
Additionally, capacity expansion could increase MKS' fixed operating expenses
and if sales levels do not increase to offset the additional expense levels
associated with any such expansion, its business, financial condition and
results of operations could be materially adversely affected.
SALES TO FOREIGN MARKETS CONSTITUTE A SUBSTANTIAL PORTION OF MKS' NET SALES.
THEREFORE, MKS' NET SALES AND RESULTS OF OPERATIONS COULD BE ADVERSELY AFFECTED
BY DOWNTURNS IN ECONOMIC CONDITIONS IN COUNTRIES OUTSIDE OF THE UNITED STATES.
International sales, which include sales by MKS' foreign subsidiaries, but
exclude direct export sales (which were less than 10% of MKS' total net sales),
accounted for approximately 29% of net sales for the first nine months of 2000,
31% of net sales in 1999 and 32% of net sales in 1998. MKS anticipates that
international sales will continue to account for a significant portion of MKS'
net sales. In addition, certain of MKS' key domestic customers derive a
significant portion of their revenues from sales in international markets.
Therefore, MKS' sales and results of operations could be adversely affected by
economic slowdowns and other risks associated with international sales.
UNFAVORABLE CURRENCY EXCHANGE RATE FLUCTUATIONS MAY LEAD TO LOWER GROSS MARGINS,
OR MAY CAUSE MKS TO RAISE PRICES WHICH COULD RESULT IN REDUCED SALES.
Currency exchange rate fluctuations could have an adverse effect on MKS'
net sales and results of operations and MKS could experience losses with respect
to its hedging activities. Unfavorable currency fluctuations could require MKS
to increase prices to foreign customers which could result in lower net sales by
MKS to such customers. Alternatively, if MKS does not adjust the prices for its
products in response to unfavorable currency fluctuations, its results of
operations could be adversely affected. In addition, sales made by MKS' foreign
subsidiaries are denominated in the currency of the country in which these
products are sold and the currency it receives in payment for such sales could
be less valuable at the time of receipt as a result of exchange rate
fluctuations. MKS enters into forward exchange contracts and local currency
purchased options to reduce currency exposure arising from intercompany sales of
inventory. However, MKS cannot be certain that its efforts will be adequate to
protect it against significant currency fluctuations or that such efforts will
not expose it to additional exchange rate risks.
COMPETITION FOR PERSONNEL IN THE SEMICONDUCTOR AND INDUSTRIAL MANUFACTURING
INDUSTRIES IS INTENSE.
MKS' success depends to a large extent upon the efforts and abilities of a
number of key employees and officers, particularly those with expertise in the
semiconductor manufacturing and similar industrial manufacturing industries. The
loss of key employees or officers could have a material adverse effect on MKS'
business, financial condition and results of operations. MKS believes that its
future success will depend in part on its ability to attract and retain highly
skilled technical, financial, managerial and marketing personnel. Competition
for such personnel is intense, and MKS cannot be certain that it will be
successful in attracting and retaining such personnel.
15
<PAGE> 24
MKS' PROPRIETARY TECHNOLOGY IS IMPORTANT TO THE CONTINUED SUCCESS OF ITS
BUSINESS. MKS' FAILURE TO PROTECT THIS PROPRIETARY TECHNOLOGY MAY SIGNIFICANTLY
IMPAIR MKS' COMPETITIVE POSITION.
As of November 30, 2000, MKS owns 54 U.S. patents and 53 foreign patents
and has 26 pending U.S. patent applications and 93 pending foreign patent
applications. Although MKS seeks to protect its intellectual property rights
through patents, copyrights, trade secrets and other measures, it cannot be
certain that:
- MKS will be able to protect its technology adequately;
- competitors will not be able to develop similar technology independently;
- any of MKS' pending patent applications will be issued;
- intellectual property laws will protect MKS' intellectual property
rights; or
- third parties will not assert that MKS' products infringe patent,
copyright or trade secrets of such parties.
PROTECTION OF MKS' INTELLECTUAL PROPERTY RIGHTS MAY RESULT IN COSTLY LITIGATION.
Litigation may be necessary in order to enforce MKS' patents, copyrights or
other intellectual property rights, to protect its trade secrets, to determine
the validity and scope of the proprietary rights of others or to defend against
claims of infringement. Such litigation could result in substantial costs and
diversion of resources and could have a material adverse effect on MKS'
business, financial condition and results of operations.
THE MARKET PRICE OF MKS' COMMON STOCK HAS FLUCTUATED AND MAY CONTINUE TO
FLUCTUATE FOR REASONS OVER WHICH MKS HAS NO CONTROL.
The stock market has from time to time experienced, and is likely to
continue to experience, extreme price and volume fluctuations. Recently, prices
of securities of technology companies have been especially volatile and have
often fluctuated for reasons that are unrelated to the operating performance of
the companies. The market price of shares of MKS' common stock has fluctuated
greatly since its initial public offering and could continue to fluctuate due to
a variety of factors. In the past, companies that have experienced volatility in
the market price of their stock have been the objects of securities class action
litigation. If MKS were the object of securities class action litigation, it
could result in substantial costs and a diversion of MKS' management's attention
and resources.
ONE STOCKHOLDER, ALONG WITH MEMBERS OF HIS FAMILY, WILL CONTINUE TO HAVE A
SUBSTANTIAL INTEREST IN MKS.
Upon consummation of the proposed merger, John R. Bertucci, chairman and
chief executive officer of MKS, and members of his family will, in the
aggregate, beneficially own approximately 42% of MKS' outstanding common stock.
As a result, these stockholders, acting together, will be able to exert
substantial influence over actions of MKS.
SOME PROVISIONS OF MKS' ARTICLES OF ORGANIZATION, MKS' BY-LAWS AND MASSACHUSETTS
LAW COULD DISCOURAGE POTENTIAL ACQUISITION PROPOSALS AND COULD DELAY OR PREVENT
A CHANGE IN CONTROL OF MKS.
Anti-takeover provisions could diminish the opportunities for stockholders
to participate in tender offers, including tender offers at a price above the
then current market value of the common stock. Such provisions may also inhibit
increases in the market price of the common stock that could result from
takeover attempts. For example, while MKS has no present plans to issue any
preferred stock, MKS' board of directors, without further stockholder approval,
may issue preferred stock that could have the effect of delaying, deterring or
preventing a change in control of MKS. The issuance of preferred stock could
adversely affect the voting power of the holders of MKS' common stock, including
the loss of voting control to others. In addition, MKS' By-Laws provide for a
classified board of directors consisting of three classes. The classified board
could also have the effect of delaying, deterring or preventing a change in
control of MKS.
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<PAGE> 25
RISKS RELATING TO ASTEX'S BUSINESS
SEMICONDUCTOR INDUSTRY BUSINESS CYCLES HAVE A LARGE EFFECT ON ASTEX'S OPERATING
RESULTS.
ASTeX's business depends heavily upon capital expenditures by manufacturers
of semiconductors. The semiconductor industry is highly cyclical, with periods
of capacity shortage and periods of excess capacity. In periods of excess
capacity, the industry sharply cuts purchases of capital equipment, including
ASTeX's products. Thus, a semiconductor industry downturn or slowdown
substantially reduces ASTeX's revenues and operating results and could hurt
ASTeX's financial condition. During portions of 1998 and 1999, excess capacity
in the semiconductor industry caused semiconductor manufacturers to sharply cut
their capital spending. The excess supply was caused primarily by a period of
over-investment in the industry, as well as by cyclical demand factors. The
shift in demand to low-priced personal computers and currency devaluations in
Asia further reduced profits of semiconductor manufacturers. The downturn in
capital spending reduced ASTeX's sales during these periods, resulting in
significant losses. ASTeX expects that it will continue to depend significantly
on the semiconductor capital equipment industry for the foreseeable future.
ASTEX'S OPERATING RESULTS OFTEN HAVE LARGE CHANGES FROM QUARTER TO QUARTER.
Sharp swings in demand cause large changes in ASTeX's quarter-to-quarter
results. A number of factors contribute to these sharp changes in demand. For
instance, ASTeX's OEM customers keep inventories of ASTeX's products and may
stop buying from it during periods of weak demand for their products until they
have reduced their inventories. Other factors which cause changes in ASTeX's
quarter-to-quarter results include:
- changes in or cancellation of ASTeX's customers' product plans and
programs;
- delays in, or cancellation of, significant system purchases by customers;
- changes in the mix of ASTeX's products and their gross margins;
- delays in the development, introduction and production of ASTeX's
products;
- new product introductions by competitors and competitive pricing
pressures;
- the time required for it to adjust ASTeX's operating expenses to respond
to changes in sales;
- the timing of ASTeX's acquisitions and their effect on ASTeX's financial
results;
- component shortages resulting in manufacturing delays; and
- pressure by customers to reduce prices, shorten delivery times and extend
payment terms.
ASTEX DEPENDS ON A FEW CUSTOMERS FOR THE MAJORITY OF ITS REVENUES.
A few customers account for a large part of ASTeX's revenues. Sales to
ASTeX's ten largest customers accounted for 79% of revenues in the three months
ended September 30, 2000, 76% of revenues in fiscal year 2000, 76% of revenues
in fiscal year 1999, and 72% of revenues in fiscal year 1998. Sales to ASTeX's
largest customer, Applied Materials, accounted for approximately 55% of revenues
in the three months ended September 30, 2000, 50% of revenues in fiscal year
2000, 45% of revenues in fiscal year 1999, and 40% of revenues in fiscal year
1998. ASTeX expects that sales to Applied Materials will continue to be a large
part of ASTeX's revenues in the future. ASTeX's customers may cancel orders with
few penalties, including orders entered into under long-term supply agreements
with it. If Applied Materials or another major customer reduces orders for any
reason, ASTeX's revenues, operating results, and financial condition will be
hurt.
ASTEX IS SUBJECT TO LENGTHY SALES AND PRODUCT ACCEPTANCE CYCLES.
ASTeX sells the majority of its products to OEMs that incorporate ASTeX's
products into the equipment they sell. OEMs consider using ASTeX's products when
their products are being developed. ASTeX must make a significant capital
investment to develop products for its OEM customers well before their products
are introduced and before it can be sure that it will recover its capital
investment through sales
17
<PAGE> 26
to the OEMs in significant volume. ASTeX is also at risk during the development
phase that ASTeX's product may fail to meet its customers' technical or cost
requirements and may be replaced by a competitive product or alternate
technology solution. If that happens, ASTeX may be unable to recover ASTeX's
development costs. If ASTeX's customers fail to introduce their products in a
timely manner or the market does not accept their products, ASTeX's business and
ASTeX's financial results would be hurt. During any quarter, ASTeX is subject to
a significant change in ASTeX's operating results due to the timing of systems
sales. During any quarter, a significant portion of ASTeX's revenue may be
derived from the sale of a relatively small number of systems. ASTeX's systems
range in price from $250,000 to $3.0 million. Also, sales cycles for larger
systems orders can be much longer than sales cycles for components. Any new
systems introduced by ASTeX may not achieve a significant degree of market
acceptance or, once accepted, may fail to sell well for any significant period.
ASTEX IS GROWING AND MAY BE UNABLE TO MANAGE GROWTH EFFECTIVELY.
ASTeX has been experiencing a period of growth and expansion. This growth
and expansion is placing significant demands on ASTeX's management and ASTeX's
operating systems. ASTeX needs to continue to improve and expand ASTeX's
management, operational and financial systems, procedures and controls,
including accounting and other internal management systems, quality control,
delivery and service capabilities. In addition, ASTeX will need to continue to
attract and retain additional management, research and development and
manufacturing personnel to handle possible future growth. In order to manage
ASTeX's growth, ASTeX may also need to spend significant amounts of cash to:
- fund increases in expenses;
- take advantage of unanticipated opportunities, such as special marketing
opportunities or the development of new products; or
- otherwise respond to unanticipated developments or competitive pressures.
ASTEX MAY HAVE DIFFICULTY MANAGING CYCLES OF GROWTH AND DOWNTURNS.
ASTeX has recently had a cycle of rapid growth followed by a downturn.
These expansions and contractions strain ASTeX's management, manufacturing,
financial and other resources. In an expansion, ASTeX's systems, procedures,
controls and existing space may not be adequate and ASTeX may face difficulties
in hiring and training needed personnel. In a contraction, it may be costly to
maintain current levels of personnel and overhead. If ASTeX fails to manage
growth or downturns effectively, ASTeX's future financial condition, revenues
and operating results could be hurt. ASTeX's severe business cycles exacerbate
the difficulties of attracting and retaining highly qualified personnel who are
vital to ASTeX's success.
ASTEX IS HIGHLY RELIANT ON KEY MANAGEMENT.
ASTeX's success depends to a significant degree upon the continued
contributions of ASTeX's key management, engineering, sales and marketing,
customer support, finance and manufacturing personnel. The loss of any of these
key personnel, who would be extremely difficult to replace, could harm ASTeX's
business and operating results. During downturns in ASTeX's industry, ASTeX has
often experienced significant employee attrition, and ASTeX may experience
further attrition in the event of a future downturn. Although ASTeX has
employment and noncompetition agreements with key members of ASTeX's senior
management team, these individuals or other key employees may nevertheless leave
the company. ASTeX does not have key person life insurance on any of ASTeX's
executives. Competition for management in ASTeX's industry is intense, and ASTeX
may not be successful in attracting and retaining key management personnel.
ASTEX'S MARKETS ARE VERY COMPETITIVE AND COMPETING TECHNOLOGIES MAY RENDER SOME
OR ALL OF ASTEX'S PRODUCTS OR FUTURE PRODUCTS NONCOMPETITIVE.
The markets for ASTeX's products are very competitive. Many of ASTeX's
current and potential competitors have much greater resources than ASTeX has. A
number of established semiconductor
18
<PAGE> 27
equipment manufacturers, including some of ASTeX's significant customers, have
expended significant resources in developing improved reactive gas systems and
components. ASTeX may not be successful in selling ASTeX's products to ASTeX's
customers, regardless of the performance or the price of ASTeX's products.
ASTeX's competitors may develop superior or lower priced products. Moreover,
ASTeX's customers' own markets are highly competitive. ASTeX's customers buy its
products only when they are successful in selling their own products.
Consequently, if ASTeX's customers fail to compete effectively, ASTeX's sales
could be hurt.
RAPID TECHNOLOGY CHANGE MAY MAKE ASTEX'S PRODUCTS OBSOLETE.
Technology changes rapidly in the markets ASTeX serves. ASTeX's success
will depend upon ASTeX's ability to anticipate these changes, enhance ASTeX's
existing products and develop new products to meet customer requirements and
achieve market acceptance. ASTeX may not be able to do those things correctly or
soon enough. If ASTeX fails in these efforts, ASTeX's products will become
obsolete, which will hurt ASTeX's operating results and financial position.
ASTEX MUST ACHIEVE DESIGN WINS TO RETAIN ASTEX'S EXISTING OEM CUSTOMERS AND TO
OBTAIN NEW OEM CUSTOMERS.
The constantly changing nature of semiconductor fabrication technology
requires OEMs to continually design new systems. ASTeX often must work with
these manufacturers early in their design cycles to modify ASTeX's equipment to
meet the requirements of the new systems. Manufacturers typically choose one or
two vendors to provide the products for use with the early system shipments.
Selection as one of these vendors is called a design win. ASTeX must achieve
these design wins in order to retain existing customers and to obtain new
customers. Once a manufacturer chooses a supplier of modules or systems, it is
likely to retain that supplier for an extended period of time. ASTeX's sales and
growth could experience material and prolonged adverse effects if ASTeX fails to
achieve design wins. In addition, design wins do not always result in
substantial sales or profits. ASTeX believes that OEMs often select their
suppliers based on factors such as long-term relationships. Accordingly, ASTeX
may have difficulty achieving design wins from OEMs who are not currently
customers. In addition, ASTeX must compete for design wins for new systems and
products of ASTeX's existing customers, including those with whom ASTeX has had
long-term relationships.
DEVELOPMENT OF NEW PRODUCTS IS RISKY AND ASTEX MAY NOT BE SUCCESSFUL IN
ANTICIPATING MARKET TRENDS.
ASTeX expects to spend a significant amount of time and resources
developing new products and refining existing products and systems. In light of
the long product development cycles inherent in ASTeX's industry, these
expenditures will be made well in advance of the prospect of deriving revenue
from the sale of new systems. ASTeX's ability to commercially introduce and
successfully market new products is subject to a wide variety of challenges
during this development cycle, including start-up bugs, design defects and other
matters that could delay introduction of these systems. In addition, since
ASTeX's customers are not obligated by long-term contracts to purchase ASTeX's
products, ASTeX's anticipated product orders may not materialize, or orders that
do materialize may be cancelled. As a result, if ASTeX does not achieve market
acceptance of new products, ASTeX may not be able to realize sufficient sales in
order to recoup research and development expenditures. ASTeX may also divert
sales and marketing resources from ASTeX's current products in order to
successfully launch and promote ASTeX's new products. This diversion of
resources could have a further negative effect on sales of ASTeX's current
products. The success of ASTeX's product development efforts depends on ASTeX's
ability to anticipate market trends and the price, performance and functionality
requirements of semiconductor device and equipment manufacturers. In order to
anticipate these trends and ensure that critical development projects proceed in
a coordinated manner, ASTeX must continue to collaborate closely with ASTeX's
largest customers. ASTeX's relationships with these and other customers provide
it with access to valuable information regarding trends in the semiconductor
device industry, which enables it to better plan ASTeX's product development
activities. If ASTeX's current relationships with ASTeX's large customers are
impaired, or if ASTeX is unable to develop similar collaborative relationships
with important customers in the future, ASTeX's long-term ability to produce
commercially successful
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<PAGE> 28
products will be impaired. ASTeX's industry is characterized by the need for
continual investment in research and development as well as customer service and
support. As a result of ASTeX's need to maintain ASTeX's spending levels in
these areas, ASTeX's operating results could be materially harmed if ASTeX's
revenues fall below expectations. In addition, because of ASTeX's emphasis on
research and development and technological innovation, ASTeX's operating costs
may increase further in the future. ASTeX expects its level of research and
development expenses to increase in absolute dollar terms for at least the next
several years.
ASTEX CONDUCTS MANUFACTURING AT ONLY A FEW SITES.
ASTeX conducts the majority of its manufacturing at its facilities in
Wilmington, Massachusetts, Colorado Springs, Colorado, and Berlin, Germany.
Future natural or other uncontrollable occurrences at any of ASTeX's
manufacturing facilities that negatively impact ASTeX's manufacturing processes
may not be fully covered by insurance and could have a material adverse effect
on ASTeX's operations and results of operations.
ECONOMIC PROBLEMS IN ASIA MAY HURT ASTEX'S SALES.
Asia is an important region for the markets ASTeX serves and has accounted
for a large part of ASTeX's revenues. In recent years, Asia has experienced
serious economic problems including currency devaluations, debt defaults, lack
of liquidity and recessions. ASTeX's revenues depend upon the capital
expenditures of semiconductor manufacturers, many of whom have operations and
customers in Asia. Serious economic problems in Asia would likely result in a
significant decrease in the sale of equipment to the semiconductor industry.
Economic difficulties in this region could also damage the economies of the U.S.
and Europe and ultimately the domestic demand for ASTeX's products. Therefore,
weak economic conditions in Asia would likely negatively impact ASTeX's future
financial condition, revenues and operating results.
ASTEX'S DEPENDENCE ON SOLE AND LIMITED SOURCE SUPPLIERS COULD AFFECT ITS ABILITY
TO MANUFACTURE PRODUCTS AND SYSTEMS.
ASTeX relies on sole and limited source suppliers for a few of its
components and subassemblies that are critical to the manufacturing of ASTeX's
products. This reliance involves several risks, including the following:
- the potential inability to obtain an adequate supply of required
components;
- reduced control over pricing and timing of delivery of components; and
- the potential inability of its suppliers to develop technologically
advanced products to support ASTeX's growth and development of new
systems.
ASTeX believes that in time ASTeX could obtain and qualify alternative
sources for most sole and limited source parts. Seeking alternative sources of
the parts could require ASTeX to redesign its systems, resulting in increased
costs and likely shipping delays. ASTeX may be unable to redesign its systems,
which could result in further costs and shipping delays. These increased costs
would decrease ASTeX's profit margins if it could not pass the costs to its
customers. Further, shipping delays could damage ASTeX's relationships with
current and potential customers and have a material adverse effect on ASTeX's
business and results of operations.
ASTEX'S DEPENDENCE UPON INTERNATIONAL SALES AND NON-U.S. SUPPLIERS INVOLVES
SIGNIFICANT RISK.
ASTeX does business worldwide, both directly and through sales to United
States-based OEMs, who sell their products internationally. International sales
accounted for 17% of revenues in the three months ended September 30, 2000, 20%
of revenues in fiscal year 2000, 20% of revenues in fiscal year 1999, and 23% of
revenues in fiscal year 1998. International sales will continue to account for a
significant percentage of ASTeX's revenues. In addition, ASTeX relies upon
non-U.S. suppliers for certain components. As a result, a
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<PAGE> 29
major part of ASTeX's revenues and operating results is subject to the risks
associated with international sales. International sales and ASTeX's
relationships with suppliers may be hurt by many factors, including:
- changes in policy or applicable U.S. or foreign laws which result in
burdensome government controls, tariffs, restrictions, embargoes or
export license requirements;
- political and economic instability in ASTeX's target international
markets;
- difficulties of staffing and managing ASTeX's international operations or
representatives;
- shipping delays;
- less favorable foreign intellectual property laws, which make it harder
to protect ASTeX's technology from appropriation by competitors;
- longer payment cycles common in foreign markets;
- difficulties collecting ASTeX's accounts receivable because of the
distance and different legal rules; and
- potential additional U.S. and foreign taxes which increase the amount of
taxes ASTeX has to pay.
ASTEX MAY INCUR FOREIGN CURRENCY EXCHANGE RATE LOSSES.
ASTeX's foreign sales are typically made in U.S. dollars. A strengthening
in the dollar relative to the currencies of those countries where ASTeX does
business would increase the prices of ASTeX's products as stated in those
currencies and hurt ASTeX's sales in those countries. If ASTeX lowers its prices
to reflect a change in exchange rates, ASTeX's profitability in those markets
will go down. In the past, there have been significant fluctuations in the
exchange rates between the dollar and the currencies in those countries in which
ASTeX does business. ASTeX has not historically tried to reduce its exposure to
exchange rate fluctuations by using hedging transactions. However, ASTeX may
choose to do so in the future. It may not be able to do so successfully.
Accordingly, ASTeX may experience economic loss and a negative impact on
earnings and equity as a result of foreign currency exchange rate fluctuations.
PATENTS AND PROPRIETARY INFORMATION MAY NOT BE ADEQUATE TO PROTECT ASTEX'S
BUSINESS.
ASTeX relies on ASTeX's patent and trade secret rights to protect ASTeX's
proprietary technology. As of November 30, 2000, ASTeX owns 34 U.S. patents and
two foreign patents, and has 24 pending U.S. patent applications and 15 pending
foreign applications in various stages of prosecution. The earliest of ASTeX's
key patents expires in 2007. ASTeX owns the commercial rights to proprietary
technology developed under various U.S. government contracts and grants,
including federally funded research contracts. The U.S. government also has
certain rights to the proprietary technology developed under these contracts and
grants. ASTeX also has joint development agreements with industrial and
commercial partners which may result in sole or joint ownership rights to
proprietary technology developed under those agreements. However, ASTeX cannot
be sure that additional patent applications will be filed, that patents will
issue from these applications or that any of ASTeX's patents will withstand
challenges by others.
ASTeX's patents may not provide it with meaningful protection from
competitors, including those who may pursue patents which may block ASTeX's use
of its proprietary technology. In addition, ASTeX relies upon unpatented trade
secrets and seeks to protect them, in part, through confidentiality agreements
with employees, consultants and ASTeX's customers and potential customers. If
these agreements are breached, or if ASTeX's trade secrets become known to or
are independently developed by competitors ASTeX may not have adequate remedies
for such breach. If a competitor's products infringed ASTeX's patents, ASTeX may
sue to enforce its rights in an infringement action. For example, on November
30, 2000, ASTeX brought suit in federal district court in Delaware against
Advanced Energy Industries, Inc. for infringement of ASTeX's patent related to
its Astron product. These suits are costly and divert funds and management and
technical resources from ASTeX's operations. Furthermore, ASTeX cannot be
certain that ASTeX's products or processes will not infringe any patents or
other intellectual property rights of others. If they do infringe the rights of
others, ASTeX may not be able to obtain a license from the intellectual property
owner on commercially reasonable terms or at all. ASTeX's efforts to protect
ASTeX's intellectual property may be less effective in some foreign countries
where intellectual property rights are not as well protected as in the United
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<PAGE> 30
States. Currently, a significant portion of ASTeX's revenue is derived from
sales in foreign countries, including certain countries in Asia, such as Taiwan,
Korea and Japan. The laws of some foreign countries do not protect ASTeX's
proprietary rights to as great an extent as do the laws of the United States,
and many U.S. companies have encountered substantial problems in protecting
their proprietary rights against infringement in such countries, some of which
are countries in which ASTeX has sold and continues to sell products. There is a
risk that ASTeX's means of protecting its proprietary rights may not be adequate
in these countries. For example, ASTeX's competitors in these countries may
independently develop similar technology or duplicate ASTeX's systems. If ASTeX
fails to adequately protect ASTeX's intellectual property in these countries, it
would be easier for ASTeX's competitors to sell competing products in those
countries.
ASTEX IS SUBJECT TO GOVERNMENTAL REGULATIONS.
ASTeX is subject to federal, state, local, and foreign regulations,
including environmental regulations and regulations relating to the design and
operation of ASTeX's power supply products. ASTeX must ensure that these systems
meet certain safety standards, many of which vary across the countries in which
ASTeX's systems are used. For example, the European Union has published
directives specifically relating to power supplies. ASTeX must comply with these
directives in order to ship ASTeX's systems into countries that are members of
the European Union. ASTeX believes it is in compliance with current applicable
regulations, directives and standards and have obtained all necessary permits,
approvals, and authorizations to conduct ASTeX's business. However, compliance
with future regulations, directives and standards could require it to modify or
redesign certain systems, make capital expenditures or incur substantial costs.
If ASTeX does not comply with current or future regulations, directives and
standards:
- ASTeX could be subject to fines;
- ASTeX's production could be suspended; or
- ASTeX could be prohibited from offering particular systems in specified
markets.
CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS.
MKS and ASTeX believe this joint proxy statement/prospectus contains
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995. These statements are subject to risks and
uncertainties and are based on the beliefs and assumptions of management of MKS
and ASTeX of uncertainties, based on information currently available to each
company's management. When we used words such as "believes," "expects,"
"anticipates," "intends," "plans," "estimates," "should," "likely" or similar
expressions, we are making forward-looking statements. Forward-looking
statements include the information concerning possible or assumed future results
of operations of MKS or ASTeX set forth under:
"Summary," "Risk Factors," "Selected Unaudited Pro Forma Condensed Combined
Financial Information," "The Merger -- Background of the Merger," "The
Merger -- ASTeX's Reasons for the Merger," "The Merger -- Recommendation of the
ASTeX board of directors," "The Merger -- MKS' Reasons for the Merger," "The
Merger -- Recommendation of the MKS board of directors," "The Merger -- Opinion
of MKS' Financial Advisor," "The Merger -- Opinion of ASTeX's Financial
Advisor."
Forward-looking statements are not guarantees of performance. They involve
risks, uncertainties and assumptions. The future results and stockholder values
of MKS or ASTeX may differ materially from those expressed in the
forward-looking statements. Many of the factors that will determine these
results and values are beyond MKS' ability to control or predict. Stockholders
are cautioned not to put undue reliance on any forward-looking statements. For
those statements, MKS and ASTeX claim the protection of the safe harbor for
forward-looking statements contained in the Private Securities Litigation Reform
Act of 1995.
The factors discussed under "Risk Factors" that may affect future
performance and the accuracy of forward-looking statements is illustrative, but
by no means exhaustive. Accordingly, all forward-looking statements should be
evaluated with the understanding of their inherent uncertainty.
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SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA OF MKS
The following table presents selected historical consolidated financial
data of MKS. The following selected financial data as of December 31, 1998 and
1999 and for the years ended December 31, 1997, 1998 and 1999 have been derived
from MKS financial statements, incorporated by reference in this joint proxy
statement/prospectus, which have been audited by PricewaterhouseCoopers LLP,
independent accountants, as indicated in their report. The following selected
financial data as of December 31, 1995, 1996 and 1997 and for the years ended
December 31, 1995 and 1996 have been derived from MKS financial statements, not
included in or incorporated by reference into this joint proxy
statement/prospectus, which have been audited by PricewaterhouseCoopers LLP. The
consolidated statement of income data for the nine-month periods ended September
30, 1999 and 2000 and the consolidated balance sheet data at September 30, 2000
are unaudited. In the opinion of MKS' management, all necessary adjustments for
a fair statement (consisting of only normal recurring adjustments), have been
included in the unaudited interim results when read in conjunction with the
audited financial statements and the notes thereto incorporated by reference in
this joint proxy statement/prospectus. The data should be read in conjunction
with the Consolidated Financial Statements, including the Notes thereto,
incorporated by reference in this joint proxy statement/prospectus.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
---------------------------------------------------- -------------------
1995 1996 1997 1998 1999 1999 2000
-------- -------- -------- -------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF INCOME DATA:
Net Sales................ $157,164 $170,862 $188,080 $139,763 $187,083 $132,740 $230,893
Gross profit............. 69,461 68,854 80,474 55,979 79,855 55,757 106,631
Income from operations... 24,106 16,068 23,963 9,135 27,611 17,447 51,908
Net income............... $ 21,658 $ 12,503 $ 20,290 $ 7,186 $ 24,037 16,742 33,053
HISTORICAL NET INCOME PER
SHARE
Basic.................. $ 1.20 $ 0.69 $ 1.12 $ 0.40 $ 1.05 $ 0.75 $ 1.32
======== ======== ======== ======== ======== ======== ========
Diluted................ $ 1.20 $ 0.69 $ 1.10 $ 0.38 $ 1.00 $ 0.72 $ 1.26
======== ======== ======== ======== ======== ======== ========
PRO FORMA STATEMENT OF
INCOME DATA
(UNAUDITED)(1):
Pro forma net income..... $ 13,821 $ 8,248 $ 13,806 $ 5,044 $ 18,412 $ 11,633
Pro forma net income per
share:
Basic.................. $ 0.77 $ 0.46 $ 0.76 $ 0.28 $ 0.81 $ 0.52
======== ======== ======== ======== ======== ========
Diluted................ $ 0.77 $ 0.46 $ 0.76 $ 0.27 $ 0.77 $ 0.50
======== ======== ======== ======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
AS OF DECEMBER 31, AS OF SEPTEMBER 30,
-------------------------------------------------- -------------------
1995 1996 1997 1998 1999 2000
-------- ------- -------- ------- -------- -------------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash
equivalents............. $ 3,650 $ 3,815 $ 2,511 $11,188 $ 35,714 $ 41,097
Working capital........... 32,202 22,404 30,321 31,493 87,088 99,997
Total assets.............. 104,511 95,000 106,536 96,232 174,605 255,753
Short-term obligations.... 15,192 16,124 13,852 12,819 20,828 25,022
Long-term obligations,
less current portion.... 20,462 18,899 15,624 13,786 5,662 4,778
Stockholders' equity...... 48,392 45,498 52,848 54,826 119,169 183,871
</TABLE>
---------------
(1) Data is computed on the same basis as Note 2 of Notes to MKS' consolidated
financial statements for the year ended December 31, 1999, which are
incorporated by reference in this joint proxy statement/prospectus. The
historical net income per share data of MKS does not include provisions for
federal income taxes prior to April 4, 1999 because MKS was treated as an S
corporation for federal and certain state income tax purposes. The pro forma
statement of income data presents net income and net income per share data
as if MKS had been subject to income taxes as a C corporation during the
periods presented. No pro forma presentation is necessary for the nine
months ended September 30, 2000 because MKS was subject to income taxes as a
C corporation for the entire period.
23
<PAGE> 32
SELECTED HISTORICAL CONDENSED CONSOLIDATED
FINANCIAL INFORMATION OF ASTeX
(IN THOUSANDS, EXCEPT PER SHARE DATA)
The following table presents selected historical consolidated financial
data of ASTeX. The statement of operations data for the years ended June 27,
1998, June 26, 1999 and July 1, 2000, and the balance sheet data at June 26,
1999 and July 1, 2000 are derived from ASTeX's audited consolidated financial
statements incorporated by reference into this joint proxy statement/prospectus.
The statement of operations data for the years ended June 29, 1996 and June 28,
1997 and the balance sheet data at June 29, 1996, June 28, 1997 and June 27,
1998 are derived from ASTeX's audited financial statements not included in or
incorporated by reference into this joint proxy statement/prospectus. The
consolidated statement of income data for the three-month periods ended
September 25, 1999 and September 30, 2000, and the consolidated balance sheet
data at September 30, 2000 are unaudited. In the opinion of ASTeX's financial
management all necessary adjustments (consisting only of normal recurring
adjustments) for a fair presentation of the results of operations have been
included in the interim results for the periods presented. Results for the three
months ended September 30, 2000 are not necessarily indicative of the results to
be expected for the full year. This data should be read in conjunction with the
consolidated financial statements, including notes thereto, incorporated by
reference in the joint proxy statement/prospectus.
<TABLE>
<CAPTION>
YEAR ENDED THREE MONTHS ENDED
---------------------------------------------------- -----------------------------
JUNE 29, JUNE 28, JUNE 27, JUNE 26, JULY 1, SEPTEMBER 25, SEPTEMBER 30,
1996 1997 1998 1999 2000 1999 2000
-------- -------- -------- -------- -------- ------------- -------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF INCOME DATA:
Net Sales........................ $39,135 $47,967 $83,436 $78,209 $139,897 $30,602 $41,306
Gross profit..................... 15,771 17,410 28,449 22,654 55,021 11,182 15,174
Income (loss) from operations.... (6,079) 1,659 5,909 (2,574) 19,356 3,889 4,006
Net income (loss)................ $(7,298) $ 938 $ 4,021 $(1,251) $ 14,026 2,630 3,312
HISTORICAL NET INCOME (LOSS) PER
SHARE:
Basic.......................... $ (1.16) $ 0.14 $ 0.50 $ (0.13) $ 1.14 $ 0.23 $ 0.23
======= ======= ======= ======= ======== ======= =======
Diluted........................ $ (1.16) $ 0.14 $ 0.47 $ (0.13) $ 1.09 $ 0.22 $ 0.22
======= ======= ======= ======= ======== ======= =======
</TABLE>
<TABLE>
<CAPTION>
AS OF
-------------------------------------------------------------------------------------------------
JUNE 29, 1996 JUNE 28, 1997 JUNE 27, 1998 JUNE 26, 1999 JULY 1, 2000 SEPTEMBER 30, 2000
------------- ------------- ------------- ------------- ------------ ------------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash
equivalents........ $ 5,182 $ 3,246 $ 7,687 $31,775 $ 78,407 $ 63,587
Working capital...... 19,217 16,956 28,570 52,279 126,109 117,719
Total assets......... 34,361 39,327 51,293 80,535 188,576 193,237
Long-term
obligations, less
current portion.... 6,170 6,369 -- -- 8,210 7,858
Stockholders'
equity............. 21,296 23,489 43,801 67,721 159,143 162,683
</TABLE>
24
<PAGE> 33
SELECTED UNAUDITED PRO FORMA CONDENSED
COMBINED FINANCIAL INFORMATION
On October 2, 2000, MKS agreed to acquire ASTeX. In the merger, MKS will
issue 0.7669 of a share of MKS common stock for each outstanding share of ASTeX
common stock. Based on the number of ASTeX shares outstanding on October 2,
2000, MKS will issue approximately 11,200,000 shares to complete the merger,
representing approximately 30% of MKS' then outstanding shares. In addition, MKS
will assume all ASTeX stock options outstanding as of the date of the merger.
The following table presents selected unaudited pro forma combined
financial data of MKS and ASTeX. The data has been prepared giving effect to the
merger under the "pooling of interests" method of accounting. This information
should be read in conjunction with the unaudited pro forma financial statements
and related notes. The selected unaudited pro forma combined financial data is
presented for illustrative purposes only and is not necessarily indicative of
the operating results or financial position that would have been achieved had
the merger been consummated as of the dates indicated or that may be achieved in
the future.
Since the fiscal years of MKS and ASTeX differ, the periods combined for
purposes of the pro forma combined financial data are as follows, giving effect
to the merger as if it had occurred at the beginning of each period presented:
<TABLE>
<CAPTION>
MKS ASTeX
--- -----
<S> <C>
Fiscal year ended December 31, 1997 Fiscal year ended June 28, 1997
Fiscal year ended December 31, 1998 Fiscal year ended June 27, 1998
Fiscal year ended December 31, 1999 Fiscal year ended June 26, 1999
Nine months ended September 30, 1999 and 2000 Nine months ended September 25, 1999 and
September 30, 2000
</TABLE>
<TABLE>
<CAPTION>
NINE MONTHS
YEAR ENDED DECEMBER 31, ENDED SEPTEMBER 30,
-------------------------------- --------------------
1997 1998 1999 1999 2000
-------- -------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
PRO FORMA STATEMENT OF INCOME DATA:
Net sales........................... $236,047 $223,199 $265,292 $212,597 $350,428
Gross profit........................ 97,884 84,428 102,509 83,919 152,666
Income from operations.............. 25,622 15,044 25,037 25,201 66,978
Net income.......................... $ 21,228 $ 11,207 $ 22,786 $ 22,038 $ 44,601
PRO FORMA NET INCOME PER SHARE:
Basic............................. $ 0.92 $ 0.46 $ 0.76 $ 0.73 $ 1.26
======== ======== ======== ======== ========
Diluted........................... $ 0.90 $ 0.44 $ 0.73 $ 0.69 $ 1.20
======== ======== ======== ======== ========
PRO FORMA STATEMENT OF INCOME DATA
ASSUMING C CORPORATION TAXES(1):
Pro forma net income from above..... $ 21,228 $ 11,207 $ 22,786 $ 22,038
Pro forma adjustment for MKS tax
provision assuming C corporation
tax............................... 6,484 2,142 5,625 5,109
-------- -------- -------- --------
Pro forma net income................ $ 14,744 $ 9,065 $ 17,161 $ 16,929
PRO FORMA NET INCOME PER SHARE:
Basic............................. $ 0.64 $ 0.37 $ 0.57 $ 0.56
======== ======== ======== ========
Diluted........................... $ 0.63 $ 0.36 $ 0.55 $ 0.53
======== ======== ======== ========
</TABLE>
25
<PAGE> 34
<TABLE>
<CAPTION>
AS OF
SEPTEMBER 30, 2000
------------------
(IN THOUSANDS)
<S> <C>
BALANCE SHEET DATA:
Cash and cash equivalents................................... $104,684
Working capital............................................. 210,216
Total assets................................................ 448,990
Short-term obligations...................................... 26,451
Long-term obligations, less current portion................. 12,636
Stockholders' equity........................................ 339,054
</TABLE>
---------------
(1) The historical net income per share data of MKS does not include provisions
for federal income taxes prior to April 4, 1999 because MKS was treated as
an S corporation for federal and certain state income tax purposes. The pro
forma statement of income data presents net income and net income per share
data as if MKS had been subject to income taxes as a C corporation during
the periods presented. No pro forma presentation is necessary for the nine
months ended September 30, 2000 because MKS was subject to income taxes as a
C corporation for the entire period.
26
<PAGE> 35
UNAUDITED COMPARATIVE PER SHARE DATA
The following tables present (a) the basic and diluted net income (loss)
per share and book value per share data for each of MKS and ASTeX on a
historical basis, (b) the historical and pro forma assuming C corporation taxes
for MKS basic and diluted net income per share and book value per share for the
combined company on a pro forma basis and (c) the historical and pro forma
assuming C corporation taxes for MKS basic and diluted net income per share and
book value per share for ASTeX on an equivalent pro forma combined basis. Under
ASTeX equivalent pro forma combined below, ASTeX and MKS show the effect of the
merger from the perspective of an owner of shares of ASTeX common stock. ASTeX
and MKS computed the information set out under that caption by multiplying the
corresponding pro forma financial data by the common stock exchange ratio of
0.7669. The unaudited pro forma combined financial data are not necessarily
indicative of the operating results that would have been achieved had the
transaction been in effect as of the beginning of the periods and should not be
construed as representative of future operations.
<TABLE>
<CAPTION>
NINE MONTHS
YEAR ENDED DECEMBER 31, ENDED SEPTEMBER 30,
----------------------- --------------------
1997 1998 1999 1999 2000
----- ----- ----- ------- -------
<S> <C> <C> <C> <C> <C>
MKS -- HISTORICAL:
Basic net income per share....................... $1.12 $0.40 $1.05 $0.75 $1.32
Diluted net income............................... $1.10 $0.38 $1.00 $0.72 $1.26
Book value(1).................................... $2.93 $3.04 $4.84 $4.63 $7.20
</TABLE>
<TABLE>
<CAPTION>
FISCAL YEAR ENDED THREE MONTHS ENDED
------------------------------- -----------------------------
JUNE 27, JUNE 26, JULY 1, SEPTEMBER 25, SEPTEMBER 30,
1998 1999 2000 1999 2000
-------- -------- ------- ------------- -------------
<S> <C> <C> <C> <C> <C>
ASTeX -- HISTORICAL:
Basic net income (loss) per share...... $0.50 $(0.13) $ 1.14 $0.23 $ 0.23
Diluted net income..................... $0.47 $(0.13) $ 1.09 $0.22 $ 0.22
Book value(1).......................... $5.09 $ 5.93 $11.05 $6.16 $11.23
</TABLE>
<TABLE>
<CAPTION>
NINE MONTHS
YEAR ENDED DECEMBER 31, ENDED SEPTEMBER 30,
----------------------- --------------------
1997 1998 1999 1999 2000
----- ----- ----- ------- -------
<S> <C> <C> <C> <C> <C>
PRO FORMA COMBINED -- PER COMBINED COMPANIES
SHARE(2):
Basic net income per share....................... $0.92 $0.46 $0.76 $0.73 $1.26
Diluted net income............................... $0.90 $0.44 $0.73 $0.69 $1.20
Book value(1).................................... $9.25
</TABLE>
<TABLE>
<CAPTION>
NINE MONTHS
YEAR ENDED DECEMBER 31, ENDED SEPTEMBER 30,
----------------------- --------------------
1997 1998 1999 1999 2000
----- ----- ----- ---- ----
<S> <C> <C> <C> <C> <C>
EQUIVALENT PRO FORMA COMBINED -- PER ASTeX
SHARE(3):
Basic net income per share....................... $0.71 $0.35 $0.58 $0.56 $0.97
Diluted net income............................... $0.69 $0.34 $0.56 $0.53 $0.92
Book value....................................... $7.10
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, NINE MONTHS
----------------------- ENDED SEPTEMBER 30,
1997 1998 1999 1999
----- ----- ----- -------------------
<S> <C> <C> <C> <C>
PRO FORMA COMBINED -- PER COMBINED COMPANIES PRO
FORMA SHARE ASSUMING C CORPORATION TAXES FOR
MKS(2)(4):
Pro forma basic net income per share.............. $0.64 $0.37 $0.57 $0.56
Pro forma diluted net income...................... $0.63 $0.36 $0.55 $0.53
</TABLE>
27
<PAGE> 36
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, NINE MONTHS
----------------------- ENDED SEPTEMBER 30,
1997 1998 1999 1999
----- ----- ----- -------------------
<S> <C> <C> <C> <C>
EQUIVALENT PRO FORMA COMBINED -- PER ASTeX
SHARE ASSUMING C CORPORATION TAXES FOR
MKS(3)(4):
Pro forma basic net income per share.......... $0.49 $0.28 $0.44 $0.43
Pro forma diluted net income.................. $0.48 $0.28 $0.42 $0.41
</TABLE>
---------------
(1) Historical book value per share is computed by dividing stockholders' equity
by the number of shares of common stock outstanding at the end of each
period. Pro forma combined -- per combined companies share book value is
computed by dividing pro forma stockholders' equity by the pro forma number
of shares of MKS common stock which would have been outstanding had the
merger been consummated as of each balance sheet date.
(2) For the purposes of the pro forma, combined net income per share and book
value per share data, MKS' historical financial data for the nine month
periods ended September 30, 1999 and 2000 and the three years ended December
31, 1997, 1998 and 1999 have been combined with ASTeX's financial data for
the nine month periods ended September 25, 1999 and September 30, 2000 and
for the fiscal years ended June 28, 1997, June 27, 1998 and June 26, 1999,
respectively.
(3) ASTeX equivalent pro forma combined amounts are calculated by multiplying
the pro forma combined per share amounts by the exchange ratio of 0.7669 of
a share of MKS common stock for each share of ASTeX common stock.
(4) The historical net income per share data of MKS does not include provisions
for federal income taxes prior to April 4, 1999 because MKS was treated as
an S corporation for federal and certain state income tax purposes. The pro
forma combined -- per combined companies share presents basic and diluted
net income per share data as if MKS had been subject to income taxes as a C
corporation during the periods presented. No pro forma presentation is
necessary for the nine months ended September 30, 2000 because MKS was
subject to income taxes as a C corporation for the entire period.
28
<PAGE> 37
MARKET PRICE INFORMATION
MKS MARKET PRICE INFORMATION
MKS common stock has traded on the Nasdaq National Market under the symbol
"MKSI" since March 30, 1999.
The table below sets forth the range of high and low prices of MKS common
stock as reported on the Nasdaq National Market since March 30, 1999, the date
of MKS' initial public offering.
<TABLE>
<CAPTION>
HIGH LOW
-------- --------
<S> <C> <C>
FISCAL 1999
Quarter ended March 31, 1999........................... $14.500 $13.375
Quarter ended June 30, 1999............................ 19.750 11.875
Quarter ended September 30, 1999....................... 22.500 17.750
Quarter ended December 31, 1999........................ 36.500 19.250
FISCAL 2000
Quarter ended March 31, 2000........................... 62.250 30.500
Quarter ended June 30, 2000............................ 57.000 31.875
Quarter ended September 30, 2000....................... 40.750 16.8125
Quarter ending December 31, 2000 (through December 12,
2000)................................................ 25.8125 14.375
</TABLE>
As of November 30, 2000 MKS had 76 record holders of its common stock.
ASTEX MARKET PRICE INFORMATION
ASTeX common stock has traded on the Nasdaq National Market under the
symbol "ASTX" since November 10, 1993.
The table below sets forth the range of high and low closing prices of
ASTeX common stock as reported on the Nasdaq National Market since the beginning
of its fiscal year ended June 27, 1998.
<TABLE>
<CAPTION>
HIGH LOW
------- -------
<S> <C> <C>
FISCAL 1999 (ended June 26, 1999)
Quarter ended September 26, 1998......................... $ 8.125 $ 3.875
Quarter ended December 26, 1998.......................... 11.000 3.125
Quarter ended March 27, 1999............................. 14.500 9.875
Quarter ended June 26, 1999.............................. 21.375 12.500
FISCAL 2000 (ended July 1, 2000)
Quarter ended September 25, 1999......................... 23.125 16.688
Quarter ended December 25, 1999.......................... 31.250 19.875
Quarter ended March 25, 2000............................. 45.000 29.750
Quarter ended July 1, 2000............................... 35.500 17.375
FISCAL 2001 (ending June 30, 2001)
Quarter ended September 30, 2000......................... 24.875 12.625
Quarter ending December 30, 2000 (through December 12,
2000).................................................. 17.937 11.438
</TABLE>
As of November 30, 2000 ASTeX had 193 record holders of its common stock.
RECENT CLOSING PRICES
The following table sets forth the closing prices per share of MKS common
stock and ASTeX common stock as reported on the Nasdaq National Market on
September 29, 2000, the last full trading day prior to the public announcement
that MKS and ASTeX had entered into the merger agreement, and December 7, 2000,
29
<PAGE> 38
the last full trading day for which closing prices were available at the time of
the printing of this joint proxy statement/prospectus. This table also sets
forth the equivalent price per share of ASTeX common stock on those dates. The
equivalent price per share is equal to the closing price of a share of MKS
common stock on that date multiplied by 0.7669, the exchange ratio in the
merger.
<TABLE>
<CAPTION>
EQUIVALENT
MKS ASTeX PER
COMMON COMMON SHARE
DATE STOCK STOCK PRICE
---- ------- ------- --------------
<S> <C> <C> <C>
September 29, 2000................................. $27.375 $ 14.75 $20.99
December 12, 2000.................................. $18.56 $ 14.19 $14.23
</TABLE>
ASTeX and MKS believe that ASTeX common stock presently trades on the basis
of the value of MKS common stock expected to be issued in exchange for the ASTeX
common stock in the merger, discounted primarily for the uncertainties
associated with the merger.
ASTeX stockholders are advised to obtain current market quotations for MKS
common stock and ASTeX common stock. No assurance can be given as to the market
prices of MKS common stock or ASTeX common stock at any time before completing
the merger or as to the market price of MKS common stock at any time after the
merger. Because the exchange ratio is fixed, the exchange ratio will not be
adjusted to compensate ASTeX stockholders for decreases in the market price of
MKS common stock which could occur before the merger becomes effective. In the
event the market price of MKS common stock decreases or increases prior to
completing the merger, the value of the MKS common stock to be received in the
merger in exchange for ASTeX common stock would correspondingly decrease or
increase.
DIVIDENDS
On September 19, 2000, MKS made a cash payment in the aggregate amount of
$1,594,143, pursuant to its obligations under the Tax Indemnification and S
Corporation Distribution Agreement, entered into by and among MKS and the
stockholders of MKS prior to MKS' initial public offering. Other than that
payment, MKS has not declared or paid cash dividends on MKS common stock. MKS
currently intends to retain earnings, if any, to support its growth strategy and
does not anticipate paying cash dividends in the foreseeable future. Payment of
future dividends, if any, will be at the discretion of the MKS board of
directors after taking into account various factors, including MKS' financial
condition, operating results, current and anticipated cash needs and plans for
expansion.
ASTeX has never paid cash dividends on its capital stock and does not
intend to pay any cash dividends on its common stock in the foreseeable future.
If the merger does not occur, ASTeX currently intends to retain earnings, if
any, to support its operations. Payment of future dividends, if any, will be at
the discretion of ASTeX's board of directors.
30
<PAGE> 39
THE ASTEX ANNUAL MEETING
ASTeX is furnishing this document to holders of ASTeX common stock in
connection with the solicitation by the ASTeX board of directors of proxies to
be voted at the annual meeting to be held on Friday, January 26, 2001, and at
any adjournment of the meeting.
ASTeX will pay all of its expenses in connection with solicitation of the
joint proxy statement/prospectus. Officers, directors and regular employees of
ASTeX, who will receive no additional compensation for their services, may
solicit proxies by telephone or personal call. ASTeX has asked brokers and
nominees who hold stock in their names to give the joint proxy
statement/prospectus to their customers. This document is first being mailed to
ASTeX stockholders on or about December 16, 2000. This document is also
furnished to ASTeX stockholders as a prospectus in connection with the issuance
by MKS of shares of MKS common stock as contemplated by the merger agreement.
DATE, TIME AND PLACE OF MEETING
The annual meeting will be held on Friday, January 26, 2001 at 10:00 a.m.,
local time, at the offices of Mintz, Levin, Cohn, Ferris, Glovsky and Popeo,
P.C., One Financial Center, Boston, Massachusetts 02111.
WHAT WILL BE VOTED UPON
At the annual meeting, stockholders of ASTeX will be asked to:
- adopt the merger agreement with MKS, under which ASTeX will become a
wholly-owned subsidiary of MKS and each outstanding share of ASTeX will
be converted into 0.7669 of a share of common stock of MKS;
- elect two directors of ASTeX, to serve until the earlier of the
expiration of their terms or the effectiveness of the merger;
- ratify the selection of KPMG LLP as ASTeX's independent public
accountants; and
- transact any other business that may properly come before the annual
meeting or any postponements or adjournments of that meeting.
RECORD DATE AND OUTSTANDING SHARES
Only stockholders of record at the close of business on the December 7,
2000 record date for the annual meeting are entitled to notice of, and to vote
at, the annual meeting. Each holder of record of ASTeX common stock at the close
of business on the record date is entitled to one vote for each share then held
on each matter voted on by stockholders. At the close of business on the record
date, there were 14,627,697 shares of ASTeX common stock issued and outstanding
held by 194 holders of record.
VOTES REQUIRED
Under Delaware law, holders of a majority of the outstanding shares of
ASTeX common stock entitled to vote at the annual meeting must vote in favor of
adopting the merger agreement. In addition, nominees for election as directors
at the meeting will be elected by a plurality of the votes of the shares present
in person or represented by proxy at the meeting. Ratification of KPMG LLP as
ASTeX's independent public accountants will require the vote of a majority of
the shares of ASTeX common stock present or represented by proxy and entitled to
vote at the meeting.
QUORUM; ABSTENTIONS AND BROKER NON-VOTES
The holders of a majority of the outstanding shares entitled to vote at the
annual meeting must be present in person or represented by proxy to constitute a
quorum for the transaction of business. Abstentions are counted for purposes of
determining whether a quorum exists. If you hold your shares of ASTeX common
stock through a broker, bank or other nominee, generally the nominee may only
vote your ASTeX common stock in accordance with your instructions. However, if
it has not timely received your instructions, the
31
<PAGE> 40
nominee may vote on matters for which it has discretionary voting authority.
Brokers generally will not have discretionary voting authority to vote on the
proposal to adopt the merger agreement, and generally will have discretionary
voting authority to vote on the nominees for director and the ratification of
accountants. If a nominee cannot vote on a matter because it does not have
discretionary voting authority, this is a "broker non-vote" on that matter.
Broker non-votes are also counted as shares present or represented at the annual
meeting for purposes of determining whether a quorum exists.
For purposes of the vote with respect to the merger agreement required
under Delaware law, a failure to vote, a vote to abstain and a broker non-vote
will each have the same legal effect as a vote against adoption of the merger
agreement. As to the election of directors and the ratification of accountants,
broker non-votes and, with respect to the election of directors, withholdings of
authority to vote are not deemed to be present and represented and are not
entitled to vote, and therefore will have no effect on the outcome of the vote.
If an ASTeX stockholder executes a proxy card without giving instructions,
the shares of ASTeX common stock represented by that proxy card will be voted
"FOR" adoption of the proposed merger agreement, "FOR" the nominees for
directors, and "FOR" the ratification of KPMG LLP as ASTeX's independent public
accountants. The board is not aware of any other matters to be voted on at the
annual meeting. If any other matters properly come before the annual meeting,
including a motion to adjourn the annual meeting in order to solicit additional
proxies, the persons named on the proxy card will vote the shares represented by
all properly executed proxies on those matters in their discretion, except that
shares represented by proxies that have been voted "AGAINST" adoption of the
merger agreement will not be used to vote "FOR" adjournment of the annual
meeting to allow additional time to solicit additional votes "FOR" the merger
agreement.
VOTING AND REVOCATION OF PROXIES
An ASTeX stockholder may revoke his, her or its proxy at any time before
the proxy is exercised by one of the following means:
- sending the secretary of ASTeX a notice revoking it;
- submitting a duly executed proxy with a later date; or
- voting in person at the annual meeting.
All shares represented by each properly executed and not revoked proxy
received by the secretary of ASTeX prior to the annual meeting will be voted in
accordance with the instructions given on the proxy. If no instructions are
indicated, the proxy will be voted to adopt the merger agreement and in favor of
the director nominees.
SOLICITATION OF PROXIES AND EXPENSES
ASTeX will bear the cost of the solicitation of proxies from its
stockholders. In addition to solicitation by mail, brokerage houses and other
custodians, nominees and fiduciaries will send beneficial owners the proxy
materials. ASTeX will, upon request, reimburse those brokerage houses and
custodians for their reasonable expenses. We urge stockholders to vote proxies
without delay.
BOARD RECOMMENDATION
ASTeX's board of directors, with Mr. Bertucci not participating, has
unanimously approved the merger agreement and the merger and believes that the
terms of the merger agreement are fair to, and that the merger is in the best
interests of ASTeX and its stockholders. Therefore, ASTeX's board of directors
recommends that ASTeX stockholders vote for adoption of the merger agreement.
The matters to be considered at the stockholders meeting are of great
importance to the stockholders of ASTeX. Accordingly, ASTeX stockholders are
urged to read and carefully consider the information presented in this document,
and to complete, date, sign and promptly return the enclosed proxy card in the
enclosed postage-paid envelope.
32
<PAGE> 41
THE MKS SPECIAL MEETING
MKS is furnishing this document to holders of MKS common stock in
connection with the solicitation of proxies by the MKS board of directors for
use at the special meeting of MKS stockholders to be held on Friday, January 26,
2001, and any adjournment of the meeting.
This document is first being furnished to MKS stockholders on or about
December 16, 2000.
DATE, TIME AND PLACE OF MEETING
The special meeting will be held on Friday, January 26, 2001, at 10:00
a.m., local time, at the offices of Hale and Dorr, LLP, 60 State Street, Boston,
Massachusetts 02109.
WHAT WILL BE VOTED UPON
At the special meeting, stockholders of MKS will be asked to approve the
issuance of 0.7669 of a share of common stock for each outstanding share of
ASTeX common stock in connection with the merger and to transact any other
business that may properly come before the special meeting or any postponements
or adjournments of that meeting.
RECORD DATE AND OUTSTANDING SHARES
Only stockholders of record of MKS common stock at the close of business on
the December 7, 2000 record date for the special meeting are entitled to notice
of and to vote at the special meeting. As of the close of business on the record
date, there were 25,590,969 shares of MKS common stock outstanding and entitled
to vote, held of record by 88 stockholders. Each MKS stockholder is entitled to
one vote for each share of MKS common stock held as of the record date.
VOTE REQUIRED TO APPROVE THE ISSUANCE
MKS stockholder approval of the issuance of MKS common stock in connection
with the merger is required under the rules of the Nasdaq National Market, in
which MKS' common stock is listed, because the number of shares of MKS common
stock issued in the merger will exceed 20% of the number of outstanding shares
immediately prior to the merger. The affirmative vote of the holders of at least
a majority of the shares of MKS common stock present or represented by proxy at
the special meeting is required to approve the issuance of MKS common stock in
connection with the merger. John R. Bertucci, MKS' chairman and chief executive
officer and a director of ASTeX, together with members of Mr. Bertucci's family,
who beneficially own a majority of all outstanding shares of MKS common stock,
have agreed to vote in favor of the issuance of the MKS common stock in
connection with the merger. Therefore, MKS stockholder approval is assured.
QUORUM; ABSTENTIONS AND BROKER NON-VOTES
An MKS stockholder may abstain from voting on the proposal to approve the
issuance of MKS common stock in connection with the merger by returning a proxy
marked "ABSTAIN."
Under applicable rules, brokers who hold shares in street name for
customers have the authority to vote on some routine proposals when they have
not received instructions from beneficial owners. Under applicable rules, these
brokers are precluded from exercising their voting discretion with respect to
the approval and adoption of non-routine matters such as the proposed issuance
of MKS common stock in connection with the merger. As a result, absent specific
instructions from the beneficial owner of shares held in street name, brokers
are not empowered to vote these shares to approve the proposed issuance of MKS
common stock in connection with the merger.
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Since the required vote to approve the issuance of MKS common stock in
connection with the merger is based on the number of shares present or
represented by proxy at the special meeting, rather than outstanding shares,
abstentions and broker non-votes will have no effect on the outcome of the
proposal.
VOTING AND REVOCATION OF PROXIES
The proxy accompanying this document is solicited on behalf of the MKS
board of directors. MKS stockholders are requested to complete, date and sign
the accompanying proxy and promptly return it in the accompanying envelope or
otherwise mail it to MKS. A number of brokerage firms and banks offer telephone
and Internet voting options. If an MKS stockholder's shares are registered in
street name, the MKS stockholder must check the information forwarded by his,
her or its bank or broker to see which options are available. Please see the
accompanying proxy for more information.
All properly executed proxies received by MKS prior to the special meeting
that are not revoked will be voted at the special meeting in accordance with the
instructions indicated on the proxies, or, if no direction is indicated, to
approve the issuance of MKS common stock in connection with the merger. MKS'
board of directors does not presently intend to bring any other business before
the special meeting and, as of the date of this joint proxy
statement/prospectus, the board knows of no other matters to be brought before
the special meeting. As to any other business that may properly come before the
special meeting, however, it is intended that proxies, in the form enclosed,
will be voted in accordance with the judgment of the persons voting those
proxies. An MKS stockholder who has given a proxy may revoke it at any time
before it is exercised at the special meeting by:
- delivering to the clerk of MKS a written notice, bearing a date later
than the date of the proxy, stating that the proxy is revoked;
- signing and delivering a proxy relating to the same shares and bearing a
later date than the date of the previous proxy prior to the vote at the
special meeting; or
- attending the special meeting and voting in person.
However, if you as an MKS stockholder elect to vote in person at the
special meeting and your shares are held by a broker, bank or other nominee, you
must bring to the special meeting a legal proxy from your broker, bank or other
nominee authorizing you to vote the shares.
SOLICITATION OF PROXIES AND EXPENSES
MKS will bear the cost of the solicitation of proxies from its
stockholders. In addition to solicitation by mail, brokerage houses and other
custodians, nominees and fiduciaries will send beneficial owners the proxy
materials. MKS will, upon request, reimburse those brokerage houses and
custodians for their reasonable expenses. MKS urges its stockholders to vote
proxies without delay.
BOARD RECOMMENDATION
MKS' board of directors has unanimously approved the merger agreement, the
merger and the issuance of MKS common stock in the merger and believes that the
terms of the merger are fair to, and in the best interest of, MKS and its
stockholders. Therefore, MKS' board of directors recommends that MKS
stockholders vote FOR approval of the issuance of MKS common stock in connection
with the merger.
The proposed merger is of great importance to the stockholders of MKS.
Accordingly, MKS' stockholders are urged to read and carefully consider the
information presented in this joint proxy statement/prospectus, and to complete,
date, sign and promptly return the enclosed proxy card in the enclosed
postage-paid envelope.
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THE MERGER
This section of the joint proxy statement/prospectus describes material
aspects of the proposed merger, including the merger agreement. While MKS and
ASTeX believe that the description covers the material terms of the merger and
the related transactions, this summary may not contain all of the information
that is important to you. You should read this entire document and the other
documents referred to in this joint proxy statement/prospectus carefully for a
more complete understanding of the merger.
BACKGROUND OF THE MERGER
MKS and ASTeX have been familiar with each other for several years and have
done business together from time to time. In addition, John R. Bertucci, the
chairman of the board of directors and chief executive officer of MKS, has
served on the board of directors of ASTeX since September 1994.
On July 12, 2000, Mr. Bertucci met in San Francisco during the SEMICON show
with representatives of Merrill Lynch to discuss the consolidation which had
been occurring in the semiconductor subsystems equipment industry.
On July 20, 2000, Merrill Lynch reviewed and discussed with MKS the
relative public market analysis and strategic fit of ASTeX with MKS.
On August 2, 2000, Mr. Bertucci had a telephone discussion with Dr. Richard
S. Post, chairman of the board of directors and chief executive officer of
ASTeX, to set up a breakfast meeting for August 11, 2000 to discuss the
consolidation in the industry.
On August 7, Dr. Post contacted Mr. Bertucci by telephone to discuss the
agenda for ASTeX's August 17 Board meeting. During the conversation, Dr. Post
asked Mr. Bertucci about the topics of discussion for their August 11 meeting.
At that point, Mr. Bertucci indicated that an additional topic included the
parties considering whether a possible merger between the two companies would be
worth considering. Dr. Post and Mr. Bertucci discussed the possible benefits and
risks associated with a merger and Mr. Bertucci gave Dr. Post some examples of
how the relative valuations of the two companies might be determined, and what
the relative valuations of the two companies might be based on those examples.
Later that day, Dr. Post sent an email message to the other members of the ASTeX
board of directors advising them of the interest being expressed by MKS.
On August 11, 2000, Mr. Bertucci met with Dr. Post and presented a letter
to Dr. Post, indicating MKS' strong interest in pursuing a strategic transaction
with ASTeX. At the meeting, Dr. Post and Mr. Bertucci reviewed the potential
strategic merits of a combination of MKS and ASTeX. From August 11, 2000 through
October 2, 2000, Dr. Post and Mr. Bertucci held several additional discussions
relating to the businesses of MKS and ASTeX and a possible business combination
between the companies.
On August 15, 2000, Mr. Bertucci and Dr. Post had a meeting and signed a
confidential information agreement providing for the exchange of non-public
information between the companies.
On August 17, 2000, Mr. Bertucci presented the ASTeX board of directors
with MKS' written proposal for a merger of ASTeX and MKS, in which the ASTeX
stockholders would receive 0.6617 of a share of MKS common stock in exchange for
each ASTeX share. At the meeting, Mr. Bertucci also presented his strategic
vision for MKS and the steps being taken, including the pursuit of acquisitions,
to implement that strategy. Mr. Bertucci then recused himself from this meeting.
The board determined that the merits of a possible business combination between
the companies warranted further discussion and analysis, but that the proposed
consideration of 0.6617 of a share of MKS common stock for each ASTeX share was
not acceptable. The board also authorized Dr. Post to engage a financial advisor
to assist ASTeX in connection with its evaluation of a possible transaction
between ASTeX and MKS, and ASTeX subsequently engaged CIBC World Markets for
this purpose. CIBC World Markets was retained to assist the ASTeX board of
directors in evaluating the financial condition and operating results of ASTeX
and MKS or any other potential acquiror; to assist the board in evaluating and
negotiating the financial terms of the proposed merger with MKS; and to express
its opinion, if requested by the board, as to whether or not the consideration
payable in the proposed merger was fair from a financial point of view to
holders of ASTeX's common stock. ASTeX selected CIBC World Markets based on CIBC
World Markets' extensive experience with semiconductor equipment manufacturers
and its extensive knowledge of ASTeX. Dr. Post communicated the substance of the
ASTeX board's
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determinations to Mr. Bertucci on August 17, 2000, at a dinner meeting of the
ASTeX board of directors, which followed the ASTeX board meeting. The board
asked Mr. Bertucci for his thoughts about the strategic plans and vision of an
ASTeX and MKS merger. Mr. Bertucci stated that the combination of the two
companies could create an enhanced growth platform for future acquisitions and
for innovative product development and product integration. Mr. Bertucci
indicated that the three acquisitions MKS had already made in 2000, combined
with ASTeX and other potential acquisition candidates, could create the broadest
global supplier of components and subsystems serving the semiconductor and
thin-film markets, and fulfill the MKS "around the process, around the world"
business strategy.
On August 25, 2000, ASTeX's board of directors, other than Mr. Bertucci,
met with CIBC World Markets to review publicly available financial and market
information regarding ASTeX, MKS and other publicly traded companies in the
semiconductor capital equipment industry. ASTeX's board of directors discussed
potential merger partners and the potential business synergies and benefits to
ASTeX stockholders. The board of directors authorized CIBC World Markets to
contact MKS and another company, which the board considered as favorable merger
partners. Other companies were rejected for other reasons, primarily lack of
business synergies or concerns regarding future financial performance.
In early September 2000, members of MKS management met with representatives
of Merrill Lynch regarding Merrill Lynch's representation of MKS as its
financial advisor in connection with a possible transaction with ASTeX. Merrill
Lynch served as MKS' financial advisor in connection with the transaction.
During the week of September 4, 2000, members of ASTeX management, together
with representatives of CIBC World Markets, met with members of MKS management
and representatives of Merrill Lynch in order to continue their ongoing
financial and business due diligence investigation of MKS. From September 6,
2000 through the execution of the definitive merger agreement, ASTeX's financial
advisor continued to conduct financial due diligence on MKS and MKS' financial
advisor conducted financial due diligence on ASTeX. On September 7, 2000, MKS
publicly announced its acquisition of D.I.P. Inc. After this announcement, the
strategic fit of D.I.P. with the MKS and ASTeX combination was extensively
discussed during the financial and business due diligence meetings.
On September 9, 2000, Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.,
counsel for ASTeX, provided Hale and Dorr LLP, counsel for MKS, with a draft of
a proposed merger agreement relating to the transaction.
From September 9, 2000 until October 2, 2000, MKS' legal advisors conducted
legal due diligence on ASTeX, and ASTeX's legal advisors conducted legal due
diligence on MKS.
On September 13, 2000, the MKS board of directors met by conference call in
which Mr. Bertucci updated the board on the status of MKS' discussions with
ASTeX. In addition, Hale and Dorr provided Mintz Levin with a revised draft of
the proposed merger agreement. This draft included a proposed option permitting
MKS to purchase up to 19.9% of ASTeX's common stock in the event that the
transaction were terminated for specified circumstances including ASTeX's
acceptance of another party's offer to purchase ASTeX.
Throughout September 2000, members of ASTeX management, together with
ASTeX's financial advisor, met with members of MKS management, together with
MKS' financial advisor, to discuss the valuation of ASTeX and MKS and the
proposed exchange ratio. During this period, ASTeX management regularly
consulted with the ASTeX board of directors and continued to consider other
possible merger candidates.
On September 18, 2000, Mr. Bertucci contacted Dr. Post to present MKS'
revised proposal. Under the revised MKS proposal, the stockholders of ASTeX
would receive 0.7669 of a share of MKS common stock in exchange for each of
their shares of ASTeX common stock. A meeting of the ASTeX board of directors
was called for the morning of September 19, 2000 in order to discuss the revised
terms of the proposed transaction.
On the morning of September 19, 2000, members of MKS management met with
the ASTeX board of directors and management at ASTeX. MKS management presented
to the ASTeX board of directors and management an overview of MKS, its strategic
plan, including integration of acquisitions, and a preliminary overview of the
proposed organizational structure of an MKS and ASTeX combination. On September
19, 2000, after the MKS presentation, the ASTeX board of directors, other than
Mr. Bertucci, who had recused
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himself, held a special meeting. At this meeting, representatives from Mintz
Levin described the terms and conditions of the merger agreement in the form in
which it then stood and the status of the negotiations with Hale and Dorr to
date regarding the agreement. Also at this meeting, the board discussed with
CIBC World Markets various valuation methodologies which would be utilized in
connection with CIBC World Markets' evaluation of the proposed exchange ratio.
The board, with ASTeX's management and advisors, discussed the terms of the
proposed merger at length, with particular attention given to the proposed
exchange ratio, a proposed option to MKS to acquire 19.9% of ASTeX's common
stock and the proposed termination fee. The board instructed the officers of
ASTeX and Mintz Levin to continue to negotiate the terms of the merger
agreement. The ASTeX board also received an update from CIBC World Markets as to
whether the other company which ASTeX had requested that CIBC World Markets
contact regarding a possible merger with ASTeX had indicated any interest. CIBC
World Markets informed the ASTeX board that the other company did not indicate
any interest in a possible transaction at that time. After extensive
discussions, the board reaffirmed its earlier conclusion that a merger with MKS
would provide the best operating synergies. ASTeX has not received any inquiries
of interest from any other company since the announcement of the proposed merger
or during any time in the prior 12 months.
Also on September 19, 2000, the MKS board of directors met by conference
call to discuss the status of the negotiations with ASTeX. The board instructed
the officers of MKS to continue to pursue negotiations with ASTeX.
On September 20, 2000, representatives of Mintz Levin and Hale and Dorr met
at the offices of Hale and Dorr to continue negotiating the terms of the merger
agreement, including the following:
- termination rights under the merger agreement;
- the conditions upon which a termination fee would be payable;
- whether an option would be granted by ASTeX to MKS under the merger
agreement; and
- the representations, warranties and covenants of both parties.
From September 20, 2000 through September 22, 2000, representatives of
Mintz Levin and Hale and Dorr continued to negotiate the terms and conditions of
the merger agreement and, from September 20, 2000 through September 30, 2000,
management of ASTeX and MKS met frequently to discuss various business issues,
including integration of the companies' businesses following the merger. On
September 22, 2000, Hale and Dorr provided Mintz Levin with a revised merger
agreement, which reflected agreement by the parties on the significant remaining
issues, and the removal of the proposed option.
From September 22, 2000 through September 29, 2000, the parties continued
to resolve final issues on the merger agreement, which was presented to the
boards of directors of ASTeX and MKS at their respective meetings on September
30, 2000.
On September 27, 2000, the MKS board of directors met by conference call to
discuss the status of the ASTeX transaction. After the discussion, the board
voted to meet on September 30 to continue its discussions of the ASTeX
transaction.
Also on September 27, 2000, ASTeX's board of directors met with ASTeX's
management and legal and financial advisors to discuss the status of the
proposed transaction.
On September 30, 2000, ASTeX's board of directors, other than Mr. Bertucci,
who had recused himself, held a special meeting, at which representatives of
Mintz Levin and CIBC World Markets outlined the terms of the merger agreement in
its final form, copies of which had been provided to the board of directors in
advance of the meeting. CIBC World Markets then reviewed with the ASTeX board
its financial presentation concerning the proposed merger, as more fully
described below under the caption "-- Opinion of ASTeX's Financial
Advisor -- CIBC World Markets Corp.," copies of which had been provided to the
board of directors in advance of the meeting. At this meeting, CIBC World
Markets also rendered to the board an oral opinion, which opinion was confirmed
by delivery of a written opinion dated October 2, 2000, the date of the merger
agreement, to the effect that, as of the date of the opinion and based on and
subject to the matters described in the opinion, the exchange ratio was fair,
from a financial point of view, to the holders of ASTeX common stock. After
discussion, during which each of the board members expressed his views regarding
the proposed merger, the ASTeX board determined that the proposed merger was
advisable, approved the merger
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agreement in the form in which it had been presented at the meeting, and
resolved to present the merger agreement for approval by the ASTeX stockholders
at a stockholder meeting to be called for that purpose.
Also on September 30, 2000, at a special meeting of MKS' board of
directors, MKS' board discussed with its legal and financial advisors the status
of the negotiations with respect to the merger agreement. Merrill Lynch then
reviewed its financial analysis of the exchange ratio in connection with the
proposed transaction. After discussion, the MKS board approved the terms of the
proposed transaction, approved the merger agreement in the form in which it had
been presented at the meeting and resolved to present the issuance of shares of
MKS common stock in connection with the merger for approval by the MKS
stockholders at a special meeting to be called for that purpose.
ASTeX and MKS entered into the merger agreement as of October 2, 2000. The
companies issued a joint press release announcing the agreement on the morning
of October 2, 2000.
ASTEX'S REASONS FOR THE MERGER
ASTeX's board of directors unanimously approved (with Mr. Bertucci
abstaining) the terms of the merger and determined that the terms of the merger
agreement are fair to, and in the best interests of, ASTeX and its stockholders.
Accordingly, ASTeX's board has approved the merger agreement and the
consummation of the merger and recommends that ASTeX stockholders vote FOR
approval of the merger agreement and the merger. In reaching its decision,
ASTeX's board of directors consulted with ASTeX's management and legal and
financial advisors, and considered the following material factors:
- THE STRATEGIC FIT BETWEEN THE PRODUCTS OFFERED BY MKS AND THOSE OFFERED
BY ASTEX. Management of ASTeX believes that adding the primary products
offered by ASTeX, including reactive gas generators, radio frequency and
microwave power sources, to the products already offered by MKS will
allow the combined company to offer a comprehensive product range to its
OEM and end-user customers in the semiconductor and other advanced
thin-film manufacturing market.
- THE ABILITY OF THE COMBINED ENTITY TO TAKE ADVANTAGE OF A LARGER AND MORE
GEOGRAPHICALLY DIVERSE CUSTOMER BASE. MKS has greater global penetration
of its sales force, customers and installed systems, particularly in
Asia, than does ASTeX, which management of ASTeX expects will enable the
combined company to make additional international sales.
- THE EXISTING RELATIONSHIP BETWEEN ASTEX AND MKS, WHICH MANAGEMENT OF
ASTEX BELIEVES WOULD HELP TO MINIMIZE ANY DIFFICULTIES IN INTEGRATING THE
TWO COMPANIES. Management of ASTeX has become familiar with the
corporate culture and practices of MKS through the two companies'
participation in similar industries and through Mr. Bertucci's
involvement with the ASTeX board of directors. Accordingly, the companies
already have a foundation for the integration of the companies following
the merger.
- THE ABILITY OF THE COMBINED ENTITY TO GROW THROUGH FUTURE
ACQUISITIONS. Management of ASTeX has in the past considered
acquisitions of other companies but has been unable to effect these
transactions due to its smaller financial resources and market
capitalization as contrasted to several other companies. Management of
ASTeX believes that MKS may have the ability to acquire companies which
ASTeX would be less likely to acquire on a stand-alone basis.
- THE PREMIUM OVER ASTEX'S STOCK PRICE REPRESENTED BY THE PROPOSED
CONSIDERATION ON THE TRADING DAY PRIOR TO ANNOUNCEMENT OF THE
TRANSACTION. The proposed consideration in the merger represented a
premium of approximately 42% over the closing price on September 29,
2000, the last trading day prior to the announcement of the merger
agreement.
- THE ABILITY OF ASTEX STOCKHOLDERS TO PARTICIPATE IN THE POTENTIAL FOR
GROWTH OF THE COMBINED COMPANY FOLLOWING THE MERGER. ASTeX stockholders
will be able to retain their equity interest in the form of the MKS
common stock which they will receive in the merger, and thereby
participate in the potential growth of their investment following the
merger.
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In the course of deliberations, the ASTeX board reviewed with ASTeX
management and its legal and financial advisors a number of additional factors
relevant to the merger, including the following:
- historical information concerning MKS' and ASTeX's respective businesses,
financial performance and condition, operations, management and
competitive position, including public reports concerning results of
operations during the most recent fiscal year and fiscal quarter for each
company filed with the SEC;
- ASTeX management's view of the financial condition, results of operations
and businesses of MKS and ASTeX before and after giving effect to the
merger based on management due diligence and the existing relationship
between the companies;
- current financial market conditions and historical market prices,
volatility and trading information with respect to MKS common stock and
ASTeX common stock;
- the terms of the merger agreement, including the parties' respective
representations, warranties and covenants, the conditions to the parties'
respective obligations, and the expected tax-free treatment of the
exchange of ASTeX common stock for MKS common stock to ASTeX's
stockholders;
- ASTeX management's view as to the potential for other third parties to
enter into strategic relationships with or to acquire ASTeX;
- the financial presentation of CIBC World Markets, including CIBC World
Markets' opinion to the ASTeX board as to the fairness, from a financial
point of view and as of the date of the opinion, of the exchange ratio,
as described below under the caption "-- Opinion of ASTeX's Financial
Advisor;" and
- the impact of the merger on ASTeX's employees and customers.
ASTeX's board of directors also considered the provisions of the merger
agreement regarding ASTeX's rights to consider and negotiate other strategic
transaction proposals, as well as the possible effects of the provisions
regarding termination fees. ASTeX's board of directors considered various
alternatives to the merger, including remaining as an independent company and
seeking other strategic partners. ASTeX's board of directors believed that these
factors, including its review of the terms of the merger agreement, supported
the ASTeX board's recommendation of the merger, when viewed together with the
risks and potential benefits of the merger.
ASTeX's board of directors also identified and considered a variety of
potentially negative factors in its deliberations concerning the merger,
including but not limited to:
- the risk that the potential benefits sought in the merger might not be
fully realized;
- the possibility that the merger might not be completed and the potential
adverse effect of the public announcement of the merger on
- ASTeX's significant customers and other key relationships;
- ASTeX's ability to attract and retain key management, marketing and
technical personnel; and
- ASTeX's overall competitive position;
- the risk that despite the efforts of the combined company, key technical
and management personnel might choose not to remain employed by the
combined company; and
- the other risks described under "Risk Factors" starting on page 11 of
this joint proxy statement/prospectus.
ASTeX's board of directors believed that these risks were outweighed by the
potential benefits of the merger. The above discussion is not exhaustive of all
factors considered by ASTeX's board of directors. Each member of ASTeX's board
may have considered different factors, and ASTeX's board evaluated these factors
as a whole and did not quantify or otherwise assign relative weights to factors
considered.
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RECOMMENDATION OF ASTEX'S BOARD OF DIRECTORS
After careful consideration, the ASTeX's board of directors has determined
the merger to be fair to ASTeX stockholders and in ASTeX's stockholders best
interests and declared the merger advisable. ASTeX's board of directors approved
the merger agreement and recommends the adoption of the merger agreement by the
ASTeX stockholders. This recommendation by the ASTeX board of directors was
unanimous, except that Mr. Bertucci recused himself from all board meetings and
related informal board discussions relating to the proposed merger and did not
vote on the proposed merger. In considering the recommendation of the ASTeX
board of directors with respect to the merger agreement, ASTeX stockholders
should be aware that some directors and officers of ASTeX have interests in the
merger that are different from, or are in addition to, the interests of ASTeX
stockholders generally in the merger. Please see the section entitled
"-- Interests of Executive Officers and Directors of ASTeX in the Merger" on
page 52 of this joint proxy statement/prospectus.
MKS' REASONS FOR THE MERGER
The MKS board of directors unanimously concluded that the merger was fair
to, and in the best interest of, MKS and its stockholders. Accordingly, MKS'
board recommends that MKS stockholders vote FOR the issuance of 0.7669 of a
share of MKS common stock for each share of ASTeX common stock to be acquired in
connection with the merger.
The decision of the board of directors was based on several potential
benefits of the merger that it believes will contribute to MKS' success. These
potential benefits include:
- positioning MKS to become a one-stop supplier of instruments, components
and subsystems to measure, control and analyze gases in semiconductor
manufacturing and similar industrial manufacturing processes as well as
to provide reactive gas sources and power supplies;
- strengthening MKS' competitive position by enhancing MKS' critical mass,
combining MKS' and ASTeX's complementary core technologies and building
upon MKS' global infrastructure;
- creating numerous cross-selling opportunities and associated revenue
growth since MKS and ASTeX have complementary product offerings;
- enhancing MKS' financial position, increasing MKS' cash position and
enhancing MKS' ability to complete future acquisitions;
- the acquisition of ASTeX is expected to be accretive to MKS' earnings;
- realizing potential cost savings as a result of combining the two
companies' infrastructure, manufacturing system, supply chain management
and research and development investments; and
- enhanced growth platform as a result of the depth of the combined
management team and the combined technology, complementary core
competencies, and strong geographical and cultural fit.
The MKS board of directors reviewed a number of factors in evaluating the
merger, including but not limited to the following:
- historical information concerning MKS' and ASTeX's respective business
focus, financial performance and condition, operations, technology and
management;
- MKS management's view of the financial condition, results of operations
and business of MKS and ASTeX before and after giving effect to the
merger and the determination by the MKS board of directors of the
merger's effect on stockholder value;
- current financial market conditions and historical stock market prices,
volatility and trading information;
- the consideration MKS will pay in the merger in light of comparable
merger transactions;
- the terms of the merger agreement;
- the impact of the merger on MKS' customers and employees;
- results of the due diligence investigation conducted by MKS' management,
accountants and counsel; and
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- the expectation that the merger will be accounted for as a pooling of
interests transaction for accounting purposes.
During the course of its deliberations concerning the merger, the MKS board
also identified and considered a variety of potentially negative factors that
could materialize as a result of the merger, including the following:
- the risk that the potential benefits sought in the merger might not be
fully realized;
- the possibility that the merger might not be completed, even if approved
by the MKS and ASTeX stockholders;
- the effect of the public announcement of the merger on MKS' and ASTeX's
business, including employees and customers;
- the risks associated with obtaining the necessary approvals required to
complete the merger; and
- other applicable risks described in this joint proxy statement/prospectus
under "Risk Factors" on page 11.
The MKS board concluded that these factors were outweighed by the potential
benefits to be gained by the merger. In view of the wide variety of factors,
both positive and negative, considered by the MKS board, the directors did not
find it practical to, and did not, quantify or otherwise assign relative weights
to the specific factors discussed above.
RECOMMENDATIONS OF MKS' BOARD OF DIRECTORS
After careful consideration, the MKS board of directors has determined the
issuance of MKS common stock in the merger to be fair to MKS stockholders and in
their best interest and declared the issuance advisable. MKS' board of directors
unanimously approved the issuance of MKS common stock in connection with the
merger and recommends approval of the issuance by MKS stockholders.
OPINION OF MKS' FINANCIAL ADVISOR -- MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
MKS retained Merrill Lynch, Pierce, Fenner & Smith Incorporated to act as
its financial advisor in connection with the proposed merger. On September 30,
2000, Merrill Lynch delivered to the MKS board of directors an oral opinion,
subsequently confirmed by delivery of a written opinion dated September 30,
2000, to the effect that, as of that date, and based upon and subject to the
factors and assumptions set forth in the opinion, the exchange ratio was fair,
from a financial point of view, to MKS.
THE FULL TEXT OF MERRILL LYNCH'S OPINION, DATED SEPTEMBER 30, 2000, WHICH
SETS FORTH THE ASSUMPTIONS MADE, MATTERS CONSIDERED, AND QUALIFICATIONS AND
LIMITATIONS ON THE REVIEW UNDERTAKEN BY MERRILL LYNCH, IS ATTACHED AS ANNEX B-2
TO THIS DOCUMENT AND IS INCORPORATED INTO THIS DOCUMENT BY REFERENCE. THE
SUMMARY OF MERRILL LYNCH'S OPINION SET FORTH BELOW IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO THE FULL TEXT OF THE OPINION. MKS STOCKHOLDERS ARE URGED TO READ
THE OPINION CAREFULLY IN ITS ENTIRETY.
MERRILL LYNCH'S OPINION WAS DELIVERED TO THE MKS BOARD OF DIRECTORS FOR ITS
INFORMATION, IS DIRECTED ONLY TO THE FAIRNESS, FROM A FINANCIAL POINT OF VIEW,
OF THE EXCHANGE RATIO TO MKS, DOES NOT ADDRESS ANY OTHER ASPECT OF THE MERGER,
INCLUDING THE MERITS OF THE UNDERLYING DECISION BY MKS TO ENGAGE IN THE MERGER,
AND DOES NOT CONSTITUTE A RECOMMENDATION TO ANY MKS STOCKHOLDER AS TO HOW THE
STOCKHOLDER SHOULD VOTE AS TO ANY MATTER RELATING TO THE MERGER.
In preparing its opinion to the MKS board of directors, Merrill Lynch
performed a variety of financial and comparative analyses, including those
described below. The summary set forth below does not purport to be a complete
description of the analyses underlying Merrill Lynch's opinion or the
presentation made by Merrill Lynch to the MKS board of directors. The
preparation of a fairness opinion is a complex analytic process involving
various determinations as to the most appropriate and relevant methods of
financial analysis and the application of those methods to the particular
circumstances and, therefore, a fairness opinion is not readily susceptible to
partial analysis or summary description. In arriving at its opinion, Merrill
Lynch did not
41
<PAGE> 50
attribute any particular weight to any analysis or factor considered by it, but
rather made qualitative judgments as to the significance and relevance of each
analysis and factor. Accordingly, Merrill Lynch believes that its analyses must
be considered as a whole and that selecting portions of its analyses and
factors, or focusing on information presented in tabular format, without
considering all of the analyses and factors or the narrative description of the
analyses, would create a misleading or incomplete view of the process underlying
its opinion.
In performing its analyses, Merrill Lynch made numerous assumptions with
respect to industry performance, general business, economic, market and
financial conditions and other matters, many of which are beyond the control of
Merrill Lynch, MKS or ASTeX. Any estimates contained in the analyses performed
by Merrill Lynch are not necessarily indicative of actual values or future
results, which may be significantly more or less favorable than suggested by
such analyses. Additionally, estimates of the value of businesses or securities
do not purport to be appraisals or to reflect the prices at which such
businesses or securities might actually be sold. Accordingly, such analyses and
estimates are inherently subject to substantial uncertainty. In addition, as
described above, Merrill Lynch's opinion was among several factors taken into
consideration by the MKS board of directors in making its determination to
approve the merger agreement and the merger. Consequently, Merrill Lynch's
analyses should not be viewed as determinative of the decision of the MKS board
of directors or MKS' management with respect to the fairness of the exchange
ratio set forth in the merger agreement.
In arriving at its opinion, Merrill Lynch, among other things, did the
following:
- reviewed publicly available business and financial information relating
to MKS and ASTeX that Merrill Lynch deemed to be relevant;
- reviewed information, including financial forecasts, relating to the
business, earnings, cash flows, assets, liabilities and prospects of MKS
and ASTeX furnished to or discussed with Merrill Lynch by MKS and ASTeX;
- conducted discussions with members of senior management and
representatives of MKS and ASTeX concerning the matters described above,
as well as their respective businesses and prospects both before and
after giving effect to the merger;
- reviewed the market prices and valuation multiples for MKS' common stock
and ASTeX's common stock and compared them with those of publicly traded
companies that Merrill Lynch deemed to be relevant;
- reviewed the results of operations of MKS and ASTeX and compared them
with those of publicly traded companies that Merrill Lynch deemed to be
relevant;
- compared the proposed financial terms of the merger with the financial
terms of other transactions that Merrill Lynch deemed to be relevant;
- participated in discussions and negotiations among representatives of MKS
and ASTeX and their respective financial and legal advisors;
- reviewed the potential pro forma impact of the merger;
- reviewed a draft dated September 26, 2000 of the merger agreement; and
- reviewed other financial studies and analyses and took into account other
matters as Merrill Lynch deemed necessary, including Merrill Lynch's
assessment of general economic, market and monetary conditions.
In preparing its opinion, Merrill Lynch assumed and relied on the accuracy
and completeness of all information supplied or otherwise made available to
Merrill Lynch, discussed with or reviewed by Merrill Lynch or publicly
available, and has not assumed any responsibility for independently verifying
such information and Merrill Lynch has not undertaken an independent evaluation
or appraisal of any of the assets or liabilities of MKS or ASTeX, and was not
furnished with any evaluations or appraisals. In addition, Merrill Lynch did not
assume any obligation to conduct, nor did it conduct, any physical inspection of
the properties
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<PAGE> 51
or facilities of MKS or ASTeX. Merrill Lynch was not provided with internal
financial forecasts for MKS or ASTeX, but Merrill Lynch did utilize in its
analysis publicly available financial forecasts for MKS and ASTeX which were
reviewed and discussed with the managements and representatives of MKS and
ASTeX, as the case may be, and was advised, and assumed, that such forecasts
reflect reasonable estimates and judgments as to the expected future financial
performance of MKS and ASTeX. Merrill Lynch further assumed that the merger will
be accounted for as a pooling of interests under generally accepted accounting
principles and that it will qualify as a tax-free reorganization for United
States federal income tax purposes. Merrill Lynch also assumed that the final
form of the Merger Agreement would be substantially similar to the last draft
reviewed by Merrill Lynch.
Merrill Lynch's opinion is necessarily based upon market, economic and
other conditions as they existed on, and on the information made available to
Merrill Lynch as of, the date of the opinion. Merrill Lynch did not express any
opinion as to the prices at which the MKS common stock will trade subsequent to
the merger. Although Merrill Lynch evaluated the fairness, from a financial
point of view, of the exchange ratio, Merrill Lynch was not requested to, and
did not, recommend the specific consideration payable in the merger, which
consideration was determined through negotiations between MKS and ASTeX and
approved by the MKS board of directors. No other limitation was imposed on
Merrill Lynch with respect to the investigations made or procedures followed by
Merrill Lynch in rendering its opinion.
The following is a summary of the material analyses performed by Merrill
Lynch in connection with its opinion to the MKS board of directors dated
September 30, 2000. SOME OF THE FINANCIAL ANALYSES SUMMARIZED BELOW INCLUDE
INFORMATION PRESENTED IN TABULAR FORMAT. IN ORDER TO UNDERSTAND FULLY MERRILL
LYNCH'S FINANCIAL ANALYSES, THE TABLES MUST BE READ TOGETHER WITH THE TEXT OF
THE SUMMARY. THE TABLES ALONE DO NOT CONSTITUTE A COMPLETE DESCRIPTION OF THE
FINANCIAL ANALYSES. CONSIDERING THE DATA SET FORTH BELOW WITHOUT CONSIDERING THE
FULL NARRATIVE DESCRIPTION OF THE FINANCIAL ANALYSES, INCLUDING THE
METHODOLOGIES AND ASSUMPTIONS UNDERLYING THE ANALYSES, COULD CREATE A MISLEADING
OR INCOMPLETE VIEW OF MERRILL LYNCH'S FINANCIAL ANALYSES.
SELECTED COMPANIES ANALYSIS
Merrill Lynch compared financial, operating and stock market data of MKS
and ASTeX to corresponding data of the following publicly traded semiconductor
capital equipment companies:
- Advanced Energy Industries Inc.
- ATMI Inc.
- Cognex Corp.
- Coherent Inc.
- CoorsTek Inc.
- Cymer Inc.
- Helix Technology Corp.
Merrill Lynch reviewed enterprise value, calculated as equity market value,
plus total debt, preferred stock and minority investments, less cash and cash
equivalents, of the selected companies as a multiple of revenue, earnings before
interest and taxes, commonly referred to as EBIT, and price-to-earnings for the
last twelve months, commonly referred to as LTM, and estimated calendar years
2000 and 2001. All multiples were based on closing stock prices on September 28,
2000. Estimated financial data for the selected companies were based on publicly
available research analysts' estimates. Estimated financial data for MKS and
ASTeX were based on publicly available research analysts' estimates, which were
reviewed and discussed with the managements and representatives of MKS and
ASTeX, as the case may be. Merrill Lynch then applied a range of selected
multiples for the selected companies to corresponding data of MKS and ASTeX.
This analysis indicated an implied equity reference range for ASTeX of
approximately $21.02 to $40.32 per share and an implied equity reference range
for MKS of approximately $26.76 to $40.63 per share.
None of the selected companies is identical to MKS or ASTeX. Accordingly,
an analysis of the results of the Selected Companies Analysis involves complex
considerations of the selected companies and other factors that could affect the
public trading value of MKS, ASTeX and the selected companies.
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<PAGE> 52
Relative Comparable Companies Analysis. Merrill Lynch compared the implied
per share equity reference ranges for MKS and ASTeX described above in order to
derive an implied exchange ratio reference range for MKS and ASTeX. This
analysis indicated an implied exchange ratio reference range of approximately
0.5252x to 1.1891x.
DISCOUNTED CASH FLOW ANALYSIS
MKS. Merrill Lynch estimated the present value of the stand-alone,
unlevered, after-tax free cash flows that MKS could produce over the calendar
years 2000 through 2004 based on publicly available research analysts'
estimates. Ranges of terminal values were derived using selected multiples of
estimated calendar year 2004 earnings before interest, taxes, depreciation and
amortization, commonly referred to as EBITDA. The free cash flows and terminal
values were then discounted to present value. This analysis indicated an implied
equity reference range for MKS of approximately $28.24 to $40.39 per share.
ASTeX. Merrill Lynch estimated the present value of the stand-alone,
unlevered, after-tax free cash flows that ASTeX could produce over the calendar
years 2000 through 2004 based on publicly available research analysts'
estimates. Ranges of terminal values were derived using selected multiples of
estimated calendar year 2004 EBITDA. The free cash flows and terminal values
were then discounted to present value. This analysis indicated an implied equity
reference range for ASTeX of approximately $26.95 to $36.73 per share.
Relative Discounted Cash Flow Analysis. Merrill Lynch compared the implied
per share equity reference ranges for MKS and ASTeX described above in order to
derive an implied exchange ratio reference range for MKS and ASTeX. This
analysis indicated an implied exchange ratio range of approximately 0.6673x to
1.3007x.
SELECTED MERGER AND ACQUISITION ANALYSIS
Using publicly available information, Merrill Lynch analyzed, among other
things, the purchase prices and implied transaction multiples paid or proposed
to be paid in the following selected transactions in the semiconductor capital
equipment industry. Merrill Lynch also analyzed the premiums to the targets'
one-day and one-month average closing stock prices paid or proposed to be paid
in such transactions:
<TABLE>
<CAPTION>
ACQUIROR TARGET
-------- ------
<S> <C>
- Mattson Technology Inc. - CFM Technologies Inc.
- Mattson Technology Inc. - STEAG Electronic Systems GmBH
- Veeco Instruments Inc. - CVC Inc.
- Veeco Instruments Inc. - Monarch Labs, Inc.
- Applied Materials Inc. - Etec Systems Inc.
- Advantest Corp. - Asia Electronics Holding Co. Inc.
- Oerlikon Buhrle USA Inc. - Plasma Therm Inc.
- Cerprobe Corp. - Oz Technologies Inc.
- ATMI Inc. - MST Analytics Enterprises Inc.
- Veeco Instruments Inc. - Ion Technologies Inc.
- Micro Component Technology, Inc. - Aseco Corporation
- Photronics Inc. - Align Rite International Inc.
- Brooks Automation, Inc. - AutoSimulations Inc.
- Photon Dynamics, Inc. - CR Technology
- Brooks Automation, Inc. - Jenoptik Infab
- BOC Edwards - FSI International Inc.
- ATMI Inc. - Delatech Inc.
- Applied Materials, Inc. - Obsidian, Inc.
- ATMI Inc. - Advanced Chemical Systems International, Inc.
- Amkor Technology Inc. - Anam Semiconductor, Inc.
</TABLE>
44
<PAGE> 53
<TABLE>
<CAPTION>
ACQUIROR TARGET
-------- ------
<S> <C>
- Applied Materials, Inc. - Watkins-Johnson Company (HD Plasma CVD Division)
- Silicon Valley Group - Watkins-Johnson Company (Semiconductor Equipment
Group)
- Air Products and Chemicals Inc. - Hanyang Technology (Majority Stake)
- Electro Scientific Industries Inc. - MicroVision Inc.
- FSI International Inc. - YieldUP International Corporation
- STEAG Electronic Systems GmBH - AG Associates Inc.
- Electro Scientific Industries,Inc. - Testec Corp.
- FEI Co. - Micrion Corp.
- PRI Automation Inc. - Promis Systems Corp., Ltd
- SpeedFam International, Inc. - Integrated Process Equipment Corp.
- Applied Materials, Inc. - Consilium Inc.
- Asyst Technologies, Inc. - Hine Design Incorporated
- US Filter Corp. - Unit Instruments, Inc.
- Advanced Energy Industries Inc. - RF Power Products Inc.
- Ultratech Stepper Inc. - Integrated Solutions Inc.
- Helix Technology Corp. - Granville-Phillips Co.
- ADE Corp. - PhaseShift Technology Inc.
- ATMI Inc. - NOW Technologies Inc.
- Veeco Instruments Inc. - Digital Instruments Inc.
- Aetrium Inc. - WEB Technology Inc.
- Danaher Corp. - Pacific Scientific Co.
- Robotic Vision Systems Inc. - Vanguard Automation Inc.
- PRI Automation Inc. - Equipe Technologies, Inc.
- Electro Scientific Industries Inc. - Applied Intelligent Systems
- Silicon Valley Group - Tinsley Laboratories Inc.
- Eaton Corporation - Fusion Systems Corp.
- Electro Scientific Industries Inc. - Chip Star, Inc.
- ATMI Inc. - Lawrence Semiconductor Laboratories
- Novellus Systems Inc. - Thin Film Battery Inc.
- ATMI Inc. - Advanced Delivery & Chemical Systems
- Lam Research Corp. - OnTrack Systems Inc.
- Electroglas Inc. - Knights Technology
- Veeco Instruments Inc. - Wyko Corp.
- KLA Instruments Corp. - Tencor Instruments
</TABLE>
Merrill Lynch reviewed enterprise values of the selected transactions as
multiples of LTM revenues and reviewed equity values of the selected
transactions as multiples of LTM net income. Merrill Lynch then applied a range
of selected multiples derived from the selected transactions to LTM revenues and
net income for ASTeX. All multiples for the selected transactions were based on
financial information available at the time of the announcement of the relevant
transaction. This analysis indicated the following implied equity reference
ranges for ASTeX:
<TABLE>
<S> <C>
LTM Transaction Revenue Multiple $28.27 to $31.19
LTM Transaction Price-To-Earnings Multiple $27.03 to $32.48
</TABLE>
Merrill Lynch also reviewed the percentage premium paid or proposed to be
paid by the acquiror relative to the target's average price per share for the
one-day and one-month period prior to the public announcement of the proposed
transaction. Merrill Lynch then applied a selected range of premiums for the
selected transactions to the closing price per share of ASTeX on September 28,
2000 and the average closing price for
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<PAGE> 54
the one-month period ending September 28, 2000. This analysis indicated the
following implied equity reference ranges for ASTeX:
<TABLE>
<S> <C>
One-Day Premium $20.13 to $21.99
One-Month Premium $23.04 to $24.77
</TABLE>
No company or transaction used in the Selected Merger and Acquisition
Analysis is identical to MKS, ASTeX or the proposed merger. Accordingly, an
analysis of the results of the Selected Merger and Acquisition Analysis involves
complex considerations of the companies involved and the transactions and other
factors that could affect the acquisition value of the companies and ASTeX.
RELATIVE CONTRIBUTION ANALYSIS
Using estimated financial data for MKS and ASTeX, Merrill Lynch analyzed
the relative contributions of MKS and ASTeX to the combined company's revenue,
gross profit, operating income and net income for calendar years 2000 and 2001.
This analysis indicated the following:
<TABLE>
<CAPTION>
MKS ASTEX
--- -----
<S> <C> <C>
REVENUE
2000 66% 34%
2001 68% 32%
GROSS PROFIT
2000 69% 31%
2001 69% 31%
OPERATING INCOME
2000 74% 26%
2001 72% 28%
NET INCOME
2000 71% 29%
2001 69% 31%
</TABLE>
Based on the exchange ratio of 0.7669x in the merger, current ASTeX
stockholders would own approximately 30% and current stockholders of MKS would
own approximately 70% of the combined company following the merger.
PRO FORMA MERGER ANALYSIS
Merrill Lynch analyzed the potential pro forma effect of the merger on MKS'
estimated earnings per share, commonly referred to as EPS, based on publicly
available research analysts' estimates of EPS and net income, which were
reviewed and discussed with the managements and representatives of MKS and
ASTeX. Based on the exchange ratio of 0.7669x in the merger, this analysis
indicated that the proposed merger would be accretive to MKS' EPS in calendar
year 2001. The actual results achieved by the combined company may vary from
projected results and the variations may be material.
OTHER FACTORS
In the course of preparing its opinion, Merrill Lynch also reviewed and
considered other information and data, including the following:
- the trading characteristics of MKS and ASTeX;
- historical market prices for MKS common stock and ASTeX common stock; and
- the relative exchange ratio of MKS and ASTeX over the last twelve months.
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<PAGE> 55
MISCELLANEOUS
Pursuant to the terms of Merrill Lynch's engagement, MKS has agreed to pay
Merrill Lynch for its financial advisory services in connection with the merger
a fee equal to 1.0% of the aggregate purchase price paid in the merger, payable
in cash upon the closing of the merger. The aggregate fee payable to Merrill
Lynch will be approximately $3.0 million. MKS also has agreed to reimburse
Merrill Lynch for reasonable out-of-pocket expenses incurred by Merrill Lynch in
performing its services and to indemnify Merrill Lynch and related persons and
entities against liabilities, including liabilities under the federal securities
laws, arising out of Merrill Lynch's engagement.
MKS retained Merrill Lynch based upon Merrill Lynch's experience and
expertise. Merrill Lynch is an internationally recognized investment banking and
advisory firm. Merrill Lynch, as part of its investment banking business, is
regularly engaged in the valuation of businesses and securities in connection
with mergers and acquisitions, negotiated underwritings, competitive biddings,
secondary distributions of listed and unlisted securities, private placements
and valuations for corporate and other purposes.
In the ordinary course of business, Merrill Lynch and its affiliates may
actively trade in the securities of MKS and ASTeX for their own accounts and for
the accounts of customers and, accordingly, may at any time hold a long or short
position in such securities.
OPINION OF ASTEX'S FINANCIAL ADVISOR -- CIBC WORLD MARKETS CORP.
ASTeX engaged CIBC World Markets to act as its exclusive financial advisor
in connection with the merger. In connection with this engagement, ASTeX
requested that CIBC World Markets evaluate the fairness, from a financial point
of view, to the holders of ASTeX common stock of the exchange ratio provided for
in the merger. On September 30, 2000, at a meeting of the ASTeX board held to
evaluate the merger, CIBC World Markets rendered an oral opinion, which opinion
was confirmed by delivery of a written opinion dated October 2, 2000, the date
of the merger agreement, to the effect that, as of the date of the opinion and
based on and subject to the matters described in the opinion, the exchange ratio
was fair, from a financial point of view, to the holders of ASTeX common stock.
The full text of CIBC World Markets' written opinion dated October 2, 2000,
which describes the assumptions made, matters considered and limitations on the
review undertaken, is attached to the back of this joint proxy
statement/prospectus as Annex B-2. CIBC World Markets' opinion is addressed to
the ASTeX board and relates only to the fairness of the exchange ratio from a
financial point of view. The opinion does not address any other aspect of the
merger and does not constitute a recommendation to any stockholder as to any
matters relating to the merger. The summary of CIBC World Markets' opinion
described below is qualified in its entirety by reference to the full text of
its opinion. Holders of ASTeX common stock are urged to read the opinion
carefully in its entirety.
In arriving at its opinion, CIBC World Markets:
- reviewed the merger agreement;
- reviewed audited financial statements of ASTeX for the fiscal years ended
June 27, 1998, June 26, 1999 and July 1, 2000, and audited financial
statements of MKS for the fiscal years ended December 31, 1997, December
31, 1998 and December 31, 1999;
- reviewed unaudited financial statements of ASTeX for the two-month period
ended August 31, 2000 and unaudited financial statements of MKS for the
fiscal quarters ended March 31, 2000 and June 30, 2000 and the two-month
period ended August 31, 2000;
- reviewed and discussed with the managements of ASTeX and MKS publicly
available financial forecasts relating to ASTeX and MKS and other
financial and business information relating to ASTeX and MKS;
- reviewed historical market prices and trading volume for ASTeX common
stock and MKS common stock;
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<PAGE> 56
- held discussions with the senior managements of ASTeX and MKS with
respect to the businesses and prospects for future growth of ASTeX and
MKS;
- reviewed and analyzed publicly available financial data for companies
CIBC World Markets deemed comparable to ASTeX and MKS;
- reviewed and analyzed publicly available information for transactions
that CIBC World Markets deemed comparable to the merger;
- performed discounted cash flow analyses of ASTeX and MKS using
assumptions of future performance provided to or discussed with CIBC
World Markets by the managements of ASTeX and MKS;
- reviewed public information concerning ASTeX and MKS; and
- performed other analyses and reviewed other information as CIBC World
Markets deemed appropriate.
In rendering its opinion, CIBC World Markets relied on and assumed, without
independent verification or investigation, the accuracy and completeness of all
of the financial and other information that ASTeX, MKS and their employees,
representatives and affiliates provided to CIBC World Markets. With respect to
publicly available forecasts relating to ASTeX and MKS which CIBC World Markets
reviewed and discussed with the managements of ASTeX and MKS, CIBC World Markets
assumed, at the direction of the managements of ASTeX and MKS, without
independent verification or investigation, that the forecasts were prepared on
bases reflecting reasonable estimates and judgments as to the future financial
condition and operating results of ASTeX and MKS. CIBC World Markets also
assumed, with ASTeX's consent, that the merger would be treated as a tax-free
reorganization for federal income tax purposes and as a pooling of interests in
accordance with generally accepted accounting principles. In addition, CIBC
World Markets assumed with ASTeX's consent that, in the course of obtaining the
necessary regulatory or third party approvals for the merger, no limitations,
restrictions or conditions will be imposed that would have a material adverse
effect on ASTeX, MKS or the contemplated benefits to ASTeX of the merger.
CIBC World Markets did not make or obtain any independent evaluations or
appraisals of the assets or liabilities of ASTeX, MKS or affiliated entities. In
connection with CIBC World Markets' engagement, CIBC World Markets was not
requested to, and CIBC World Markets did not, solicit generally third party
indications of interest in the acquisition of all or a part of ASTeX, although
it did approach one other potential merger candidate on behalf of ASTeX, at
ASTeX's request. CIBC World Markets expressed no opinion as to ASTeX's or MKS'
underlying valuation, future performance or long-term viability, or the price at
which MKS common stock would trade upon or after announcement or consummation of
the merger. CIBC World Markets' opinion was necessarily based on the information
available to CIBC World Markets and general economic, financial and stock market
conditions and circumstances as they existed and could be evaluated by CIBC
World Markets as of the date of its opinion. Although subsequent developments
may affect its opinion, CIBC World Markets does not have any obligation to
update, revise or reaffirm its opinion. ASTeX imposed no other instructions or
limitations on CIBC World Markets with respect to the investigations made or the
procedures followed by it in rendering its opinion.
This summary is not a complete description of CIBC World Markets' opinion
to the ASTeX board or the financial analyses performed and factors considered by
CIBC World Markets in connection with its opinion. The preparation of a fairness
opinion is a complex analytical process involving various determinations as to
the most appropriate and relevant methods of financial analysis and the
application of those methods to the particular circumstances and, therefore, a
fairness opinion is not readily susceptible to summary description. CIBC World
Markets believes that its analyses and this summary must be considered as a
whole and that selecting portions of its analyses and factors or focusing on
information presented in tabular format, without considering all analyses and
factors or the narrative description of the analyses, could create a misleading
or incomplete view of the processes underlying CIBC World Markets' analyses and
opinion.
In performing its analyses, CIBC World Markets considered industry
performance, general business, economic, market and financial conditions and
other matters existing as of the date of its opinion, many of
48
<PAGE> 57
which are beyond ASTeX's and MKS' control. No company, transaction or business
used in the analyses as a comparison is identical to ASTeX, MKS or the merger,
and an evaluation of the results of those analyses is not entirely mathematical.
Rather, the analyses involve complex considerations and judgments concerning
financial and operating characteristics and other factors that could affect the
acquisition, public trading or other values of the companies, business segments
or transactions analyzed.
The estimates contained in CIBC World Markets' analysis and the ranges of
valuations resulting from any particular analysis are not necessarily indicative
of actual values or future results, which may be significantly more or less
favorable than those suggested by its analyses. In addition, analyses relating
to the value of businesses or securities do not necessarily purport to be
appraisals or to reflect the prices at which businesses or securities actually
may be sold. Accordingly, CIBC World Markets' analyses and estimates are
inherently subject to substantial uncertainty.
The type and amount of consideration payable in the merger was determined
through negotiation between ASTeX and MKS and the decision to enter into the
merger was solely that of the ASTeX board. CIBC World Markets' opinion and
financial analyses were only one of many factors considered by the ASTeX board
in its evaluation of the merger and should not be viewed as determinative of the
views of the ASTeX board or management with respect to the merger or the
exchange ratio provided for in the merger.
The following is a summary of the material financial analyses underlying
CIBC World Markets' opinion to the ASTeX board in connection with the merger.
The financial analyses summarized below include information presented in tabular
format. In order to fully understand CIBC World Markets' financial analyses, the
tables must be read together with the text of each summary. The tables alone do
not constitute a complete description of the financial analyses. Considering the
data in the tables below without considering the full narrative description of
the financial analyses, including the methodologies and assumptions underlying
the analyses, could create a misleading or incomplete view of CIBC World
Markets' financial analyses.
Implied Exchange Ratio Analysis.
Using the results derived for ASTeX and MKS from the "Selected Companies
Analysis," "Selected Precedent Transactions Analysis," "Discounted Cash Flow
Analysis" and "Contribution Analysis" described below, CIBC World Markets
calculated an implied exchange ratio reference range for each analysis. CIBC
World Markets then compared the implied exchange ratio reference range derived
from each analysis to the exchange ratio provided for in the merger. This
analysis indicated the following approximate implied exchange ratio reference
ranges, as compared to the exchange ratio in the merger of 0.7669x:
<TABLE>
<CAPTION>
IMPLIED EXCHANGE
RATIO RANGE
-----------------
<S> <C>
Selected Companies Analysis 0.6217x - 0.9797x
Selected Precedent Transactions Analysis 0.6389x - 0.9544x
Discounted Cash Flow Analysis 0.6592x - 1.0616x
Contribution Analysis 0.7008x - 0.8390x
</TABLE>
The "Selected Companies Analysis," "Selected Precedent Transactions
Analysis," "Discounted Cash Flow Analysis" and "Contribution Analysis" performed
by CIBC World Markets for purposes of its "Implied Exchange Ratio Analysis" are
described below:
Selected Companies Analysis. CIBC World Markets compared financial
and stock market information for ASTeX, MKS and the following four selected
publicly held companies in the semiconductor capital equipment industry:
- Advanced Energy Industries Inc.
- CoorsTek, Inc.
- Cymer, Inc.
- Helix Technology Corporation
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<PAGE> 58
CIBC World Markets reviewed equity market values as a multiple of
estimated calendar years 2000 and 2001 earnings per share, commonly
referred to as EPS. All multiples were based on closing stock prices on
September 28, 2000. Estimated financial data for the selected companies
were based on publicly available research analysts' estimates. Estimated
financial data for ASTeX and MKS were based on publicly available research
analysts' estimates and discussions with ASTeX and MKS managements. CIBC
World Markets then applied a range of selected multiples derived from the
selected companies of estimated calendar years 2000 and 2001 EPS to
corresponding financial data of ASTeX and MKS in order to derive implied
equity reference ranges for ASTeX and MKS. This analysis indicated an
implied equity reference range for ASTeX of approximately $17.37 to $21.80
per share and an implied equity reference range for MKS of approximately
$22.25 to $27.93 per share.
Selected Precedent Transactions Analysis. CIBC World Markets reviewed
the purchase prices and implied transaction multiples in the following 28
selected transactions in the semiconductor capital equipment industry:
<TABLE>
<CAPTION>
ACQUIROR TARGET
-------- ------
<S> <C>
- GaSonic International Corporation Gamma Precision Technology, Inc.
- Mattson Technology, Inc. STEAG Electronic System AG
- Mattson Technology, Inc. CFM Technologies, Inc.
- MKS Telvac Engineering Ltd.
- MKS Compact Instruments
- inTest Corporation Temptronic Corporation
- Credence Systems Corporation TMT, Inc.
- Zygo Corporation Firefly Technologies, Inc.
- Veeco Instruments, Inc. CVC, Inc.
- Applied Materials, Inc. Etec Systems, Inc.
- Oerlikon-Buhrle, GmBH Plasma-Therm, Inc.
- Cerprobe Corporation Oz Technologies, Inc.
- ATMI, Inc. MST Analytics, Inc.
- Micro Component Technology, Inc. Aseco Corporation
- Photronics, Inc. Align-Rite International, Inc.
- Align-Rite International, Inc. Harris Corporation
- STEAG Electronics Systems GmBH AG Associates, Inc.
- FEI Company Micrion Corporation
- PRI Automation, Inc. Promis Systems Corporation Ltd.
- SpeedFam International, Inc. Integrated Process Equipment Corp.
- Lumonics, Inc. General Scanning, Inc.
- DuPont Photomasks, Inc. Hewlett-Packard
- Excel Technology, Inc. Synrad, Inc.
- United States Filter Corporation Unit Instrument, Inc.
- Advanced Energy Industries, Inc. RF Power Products, Inc.
- Helix Technology Corporation Granville-Phillips Company
- ADE Corporation Phase Shift Technology, Inc.
- Veeco Instruments, Inc. Digital Instruments, Inc.
</TABLE>
CIBC World Markets reviewed equity purchase prices in the selected
transactions as a multiple of one-year forward and two-year forward EPS.
All multiples for the selected transactions were based on
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publicly available information at the time of announcement of the relevant
transaction. Estimated financial data for ASTeX and MKS were based on
publicly available research analysts' estimates and discussions with ASTeX
and MKS managements. CIBC World Markets then applied a range of selected
multiples derived from the selected transactions of one-year forward and
two-year forward EPS to corresponding financial data of ASTeX and MKS in
order to derive implied equity reference ranges for ASTeX and MKS. This
analysis indicated an implied equity reference range for ASTeX of
approximately $32.55 to $39.79 per share and an implied equity reference
range for MKS of approximately $41.69 to $50.95 per share.
Discounted Cash Flow Analysis. CIBC World Markets performed separate
discounted cash flow analyses for each of ASTeX and MKS to estimate the
present value of the unlevered, after-tax free cash flows that ASTeX and
MKS each could generate over fiscal years 2001 through 2005. Estimated
financial data for ASTeX and MKS were based on publicly available research
analysts' estimates and discussions with ASTeX and MKS managements. CIBC
World Markets calculated a range of estimated EBITDA terminal values by
applying terminal value multiples ranging from 11.0x to 15.0x to ASTeX's
and MKS' projected fiscal year 2005 EBITDA. The present value of the cash
flows and terminal values were calculated using a discount rate of 25.0%.
This analysis indicated an implied equity reference range for ASTeX of
approximately $37.13 to $46.62 per share and an implied equity reference
range for MKS of approximately $43.92 to $56.32 per share.
Contribution Analysis. CIBC World Markets analyzed the relative
contributions of ASTeX and MKS to the combined company's latest 12 months
and estimated calendar years 2000 and 2001 revenue, earnings before
interest, taxes, depreciation and amortization, earnings before interest
and taxes, and net income. Estimated financial data for ASTeX and MKS were
based on publicly available research analysts' estimates and discussions
with ASTeX and MKS managements. This analysis indicated implied selected
contribution reference ranges of approximately 28.0% to 32.0% for ASTeX and
approximately 68.0% to 72.0% for MKS.
Historical Exchange Ratio Analysis.
CIBC World Markets performed a historical exchange ratio analysis comparing
the closing prices of ASTeX common stock and MKS common stock on September 28,
2000 and the average daily closing prices of ASTeX common stock and MKS common
stock for the 30 day, 60 day, 90 day, six month and one year periods preceding
September 28, 2000. This analysis yielded an implied exchange ratio range of
0.4895x to 0.7731x, as compared to the exchange ratio in the merger of 0.7669x,
as indicated below:
<TABLE>
<CAPTION>
IMPLIED
PERIOD EXCHANGE RATIO
------ --------------
<S> <C>
September 28, 2000 0.4929x
30 day average 0.4895x
60 day average 0.5687x
90 day average 0.5918x
six month average 0.5938x
one year average 0.7731x
</TABLE>
Pro Forma Merger Analysis.
CIBC World Markets analyzed the potential pro forma effect of the merger on
MKS' estimated EPS for fiscal years 2000 through 2003 based on publicly
available research analysts' estimates of ASTeX and MKS and discussions with
ASTeX and MKS managements. CIBC World Markets did not take into account for
purpose of this analysis any potential cost savings or other synergies that may
result from the merger. This analysis indicated that the merger could be
dilutive to MKS' estimated EPS in fiscal year 2001 and accretive to MKS'
estimated EPS in fiscal years 2002 and 2003. The actual results achieved by the
combined company may vary from projected results and the variations may be
material.
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Other Factors.
In rendering its opinion, CIBC World Markets also reviewed and considered
other factors, including:
- selected research analysts' reports for ASTeX and MKS, including stock
price estimates of those analysts;
- the 52-week historical trading ranges for ASTeX common stock and MKS
common stock; and
- the relationship between movements in ASTeX common stock and MKS common
stock, movements in the common stock of selected companies in the
semiconductor capital equipment industry and movements in the NASDAQ
National Market Index.
Miscellaneous.
ASTeX selected CIBC World Markets as its financial advisor in connection
with the merger based on CIBC World Markets' reputation, expertise and
familiarity with ASTeX and its business. CIBC World Markets is an
internationally recognized investment banking firm and, as a customary part of
its investment banking business, is regularly engaged in valuations of
businesses and securities in connection with acquisitions and mergers,
underwritings, secondary distributions of securities, private placements and
valuations for other purposes. CIBC World Markets has in the past provided
services to ASTeX unrelated to the merger, for which services CIBC World Markets
has received compensation. In the ordinary course of business, CIBC World
Markets and its affiliates may actively trade the securities of ASTeX and MKS
for their own account and for the accounts of customers and, accordingly, may at
any time hold a long or short position in those securities.
ASTeX has agreed to pay CIBC World Markets for its financial advisory
services upon consummation of the merger an aggregate fee equal to a percentage
of the total consideration, including liabilities assumed, payable in the
merger. It is currently estimated that the aggregate fee payable to CIBC World
Markets will be approximately $2.3 million. In addition, ASTeX has agreed to
reimburse CIBC World Markets for its reasonable out-of-pocket expenses,
including reasonable fees and expenses of its legal counsel, and to indemnify
CIBC World Markets and related parties against liabilities, including
liabilities under the federal securities laws, relating to, or arising out of,
its engagement.
INTERESTS OF EXECUTIVE OFFICERS AND DIRECTORS OF MKS IN THE MERGER
In considering the recommendation of the MKS board of directors with
respect to the issuance of common stock of MKS in connection with the merger,
MKS stockholders should be aware that some executive officers and directors of
MKS have interests in the merger that are in addition to the interests of MKS
stockholders generally. The MKS board of directors was aware of these potential
conflicts and considered them in approving the merger.
John R. Bertucci, chairman of the board of directors and chief executive
officer of MKS, is also a director of ASTeX. Mr. Bertucci owns 22,500 shares of
ASTeX common stock and options to purchase 44,000 shares of ASTeX common stock,
all of which are fully vested. In addition, MKS owns 52,500 shares of ASTeX
common stock.
Mr. Bertucci, his wife, and family trusts controlled by them have entered
into a stockholder agreement with ASTeX relating to the proposed merger. As of
the record date for the special meeting, these parties collectively owned
approximately 60% of the outstanding shares of MKS common stock. In the
stockholder agreement, these parties agreed to vote all of the shares of MKS
common stock over which they exercise voting control in favor of the issuance of
MKS common stock in connection with the merger.
INTERESTS OF EXECUTIVE OFFICERS AND DIRECTORS OF ASTEX IN THE MERGER
When ASTeX stockholders consider the recommendation of the board with
respect to the merger, they should be aware that some officers and directors of
ASTeX have interests in connection with the merger that are different from, or
in addition to the ASTeX stockholders' interests, as summarized below. In making
their
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decision to recommend the merger, the board was aware of these interests and
considered them among the other matters described above under "The
Merger -- ASTeX's Reasons for the Merger."
Officers and directors of ASTeX who own ASTeX common stock will receive
shares of MKS common stock on the same terms as all the other stockholders of
ASTeX.
The members of the ASTeX board of directors and executive officers of ASTeX
beneficially own 1,156,051 shares of ASTeX common stock, and accordingly are
eligible to receive 886,575 shares of MKS common stock in the merger. In
addition, these board members and executive officers hold options to acquire
558,300 shares of ASTeX common stock, with exercise prices ranging from $3.875
to $31.9375 per share, which will be assumed by MKS and be converted into
options to acquire shares of MKS common stock on the same terms as all the other
holders of ASTeX stock options. See "The Merger Agreement -- Treatment of ASTeX
Stock Options." An aggregate of up to 43,000 of the options held by the ASTeX
directors and executive officers will accelerate and vest as result of the
merger.
Seven officers of ASTeX have entered into employment agreements with MKS
which take effect upon completion of the merger. See "Related Agreements
-Employment Agreements" on page 66.
In addition, the executive officers and directors of ASTeX (other than Mr.
Bertucci) own 33,805 shares of MKS common stock.
The merger agreement provides that MKS will indemnify ASTeX officers and
directors against matters existing or occurring at or prior to the effective
time of the merger. See "The Merger Agreement -- Covenants of MKS and
ASTeX -- Director and Officer Indemnification" on page 61.
TREATMENT OF ASTEX COMMON STOCK
In the merger, each share of ASTeX common stock will be exchanged for
0.7669 of a share of MKS common stock.
Holders of ASTeX common stock should not send in any certificates
representing ASTeX common stock. Following the effective time of the merger,
holders of ASTeX common stock will receive instructions for the surrender and
exchange of their stock certificates.
ACCOUNTING TREATMENT OF THE MERGER
MKS and ASTeX intend to account for the merger as a "pooling of interests"
business combination. It is a condition to completion of the merger that
PricewaterhouseCoopers LLP advise MKS and ASTeX that the transactions
contemplated by the merger agreement can properly be accounted for as a "pooling
of interests" business combination. It is also a condition to completion of the
merger that KPMG LLP advise MKS and ASTeX that ASTeX is a pooling candidate for
the merger. These conditions may be waived by MKS. Under the "pooling of
interests" method of accounting, as of the effective time of the merger, the
historical recorded assets and liabilities of ASTeX will be carried forward to
those of MKS at their recorded amounts. In addition, the operating results of
the combined company will include MKS' and ASTeX's operating results for the
entire fiscal year in which the merger is completed, and MKS' and ASTeX's
historical reported operating results for prior periods will be combined and
restated as the operating results of the combined company.
REGULATORY APPROVALS
Under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, MKS may not
complete the acquisition of shares of ASTeX common stock in the merger until
notifications have been furnished to the Federal Trade Commission and the
Antitrust Division of the Department of Justice and the required waiting period
has been satisfied or terminated. MKS and ASTeX each filed a pre-merger
notification and report form with the FTC and the Antitrust Division on November
9, 2000. On November 20, 2000, MKS and ASTeX received notice from the FTC that
the applicable waiting period under the Hart-Scott-Rodino Act was terminated. As
a result, the merger is deemed to have received antitrust approval and may be
consummated, pending compliance with the other closing conditions.
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At any time before the effective time of the merger, the Antitrust
Division, the FTC or a private person or entity could seek under antitrust laws,
among other things, to enjoin the merger and any time after the effective time
of the merger, to cause MKS to divest itself, in whole or in part, of the
surviving corporation of the merger or of businesses conducted by the surviving
corporation of the merger. There can be no assurance that a challenge to the
merger will not be made or that, if a challenge is made, MKS will prevail. The
obligations of MKS and ASTeX to complete the merger was subject to the condition
that any applicable waiting period under the Hart-Scott-Rodino Act shall have
expired without action by the Antitrust Division or the FTC to prevent
completion of the merger. See "The Merger Agreement -- Conditions to Obligations
to Complete the Merger."
MATERIAL UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
The discussion below summarizes the material United States federal income
tax considerations generally applicable to United States holders of ASTeX common
stock who, pursuant to the merger, exchange their ASTeX common stock solely for
MKS common stock. Completion of the merger is conditioned on MKS' receipt of an
opinion from Hale and Dorr LLP (or Mintz, Levin, Cohn, Ferris, Glovsky and
Popeo, P.C. if Hale and Dorr does not provide the opinion) and ASTeX's receipt
of an opinion from Mintz Levin (or Hale and Dorr if Mintz Levin does not provide
the opinion) to the effect that the merger will qualify for federal income tax
purposes as a reorganization within the meaning of Section 368(a) of the
Internal Revenue Code. ASTeX will not waive this condition without resoliciting
stockholder approval. The discussion below reflects the opinions of Hale and
Dorr and Mintz Levin which are included as exhibits 8.1 and 8.2 to the
registration statement of which this joint proxy statement/prospectus forms a
part.
The discussion below is, and the opinions of Hale and Dorr and Mintz Levin
will be, based on current provisions of the Internal Revenue Code, currently
applicable United States Treasury regulations promulgated thereunder, and
judicial and administrative decisions and rulings. The opinions of Hale and Dorr
and Mintz Levin are based on the facts, representations and assumptions set
forth or referred to in the opinions, including representations contained in
certificates executed by officers of MKS and ASTeX. The opinions are not binding
on the Internal Revenue Service or the courts, and there can be no assurance
that the Internal Revenue Service or the courts will not take a contrary view.
No ruling from the Internal Revenue Service has been or will be sought. Future
legislative, judicial or administrative changes or interpretations could alter
or modify the statements and conclusions set forth herein, and these changes or
interpretations could be retroactive and could affect the tax consequences of
the merger to MKS, ASTeX and the stockholders of ASTeX.
The discussion below and the opinions of Hale and Dorr and Mintz Levin do
not purport to deal with all aspects of federal income taxation that may affect
particular stockholders in light of their individual circumstances, and are not
intended for stockholders subject to special treatment under federal income tax
law. Stockholders subject to special treatment include insurance companies,
tax-exempt organizations, financial institutions, broker-dealers, foreign
individuals and entities, stockholders who hold their stock as part of a hedge,
appreciated financial position, straddle or conversion transaction, stockholders
who do not hold their stock as capital assets and stockholders who have acquired
their stock upon exercise of employee options or otherwise as compensation. In
addition, the discussion below and such opinions do not consider the effect of
any applicable state, local or foreign tax laws.
Holders of ASTeX common stock are urged to consult their tax advisors as to
the particular tax consequences to them as a result of the merger, including the
applicability and effect of any state, local or foreign tax laws, and of changes
in applicable tax laws.
In the opinion of Hale and Dorr, counsel to MKS, and in the opinion of
Mintz Levin, counsel to ASTeX, the merger will constitute a "reorganization"
within the meaning of Section 368(a) of the Internal Revenue
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Code. Accordingly, subject to the limitations and qualifications referred to
herein, the following tax consequences will result:
- No gain or loss will be recognized by MKS or ASTeX solely as a result of
the merger.
- No gain or loss will be recognized by the holders of ASTeX common stock
upon the receipt of MKS common stock solely in exchange for ASTeX common
stock in the merger, except to the extent of cash received in lieu of
fractional shares.
- Cash payments received by holders of ASTeX common stock in lieu of a
fractional share will be treated as capital gain (or loss) measured by
the difference between the cash payment received and the portion of the
tax basis in the shares of ASTeX common stock surrendered that is
allocable to the fractional share. Any gain (or loss) will be long-term
capital gain (or loss) if the fractional share of ASTeX common stock has
been held for more than one year at the effective time of the merger.
- ASTeX stockholders' aggregate tax basis of the MKS common stock in the
merger, including any fractional share of MKS common stock not actually
received, will be the same as the aggregate tax basis of the ASTeX common
stock surrendered in the exchange.
- The holding period of the MKS common stock received by each ASTeX
stockholder in the merger will include the holding period for the ASTeX
common stock surrendered in the exchange, provided that the ASTeX common
stock surrendered is held as a capital asset at the effective time of the
merger.
A successful Internal Revenue Service challenge to the "reorganization"
status of the merger would result in an ASTeX stockholder recognizing gain or
loss with respect to each share of ASTeX common stock surrendered in the merger
equal to the difference between the ASTeX stockholder's basis in such share and
the fair market value, as of the effective time of the merger, of the MKS common
stock received in exchange. In the event of a successful challenge, an ASTeX
stockholder's aggregate tax basis in the MKS common stock received would equal
its fair market value, and the ASTeX stockholder's holding period for the stock
would begin the day after the merger.
RESALES OF MKS COMMON STOCK ISSUED IN CONNECTION WITH THE MERGER; AFFILIATE
AGREEMENTS
MKS common stock issued in connection with the merger will be freely
transferable, except that shares of MKS common stock received by persons who are
deemed to be "affiliates," as the term is defined by Rule 144 under the
Securities Act, of ASTeX at the effective time of the merger may be resold by
them only in transactions permitted by the resale provisions of Rule 145 under
the Securities Act or as otherwise permitted under the Securities Act.
Each executive officer and director and those who may be an affiliate of
MKS or ASTeX, respectively, has executed a written affiliate agreement
providing, among other things, that the officer, director or affiliate will not
offer, sell, transfer or otherwise dispose of any of their respective MKS or
ASTeX common stock during the period beginning 30 days prior to the merger and
ending when the merger becomes effective. The affiliate agreements further
provide that the officer, director or affiliate will not offer, sell, transfer
or otherwise dispose of any shares of MKS common stock once the merger becomes
effective until MKS has published financial results covering at least 30 days of
combined operations of MKS and ASTeX, except in compliance with the Securities
Act and the related rules and regulations.
NO APPRAISAL RIGHTS
MKS stockholders and ASTeX stockholders are not entitled to exercise
dissenter's or appraisal rights as a result of the merger or to demand payment
for their shares under applicable law.
DELISTING AND DEREGISTRATION OF ASTEX COMMON STOCK FOLLOWING THE MERGER
If the merger is completed, ASTeX's common stock will be delisted from the
Nasdaq National Market and will be deregistered under the Securities Exchange
Act of 1934, as amended.
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THE MERGER AGREEMENT
The following is a brief summary of the material provisions of the merger
agreement, a copy of which is attached as Annex A to this joint proxy
statement/prospectus and is incorporated by reference into this summary. While
we believe that the summary covers the material terms of the merger agreement,
this summary may not contain all of the information that is important to ASTeX
and MKS stockholders. We urge all ASTeX and MKS stockholders to read the merger
agreement in its entirety for a more complete description of the terms and
conditions of the merger and related matters.
GENERAL
In the merger, ASTeX will become a wholly owned subsidiary of MKS. If all
conditions to the merger are satisfied or waived, the merger will become
effective at the time of the filing of a certificate of merger with the
Secretary of State of the State of Delaware and articles of merger with the
Secretary of State of the Commonwealth of Massachusetts.
THE EXCHANGE RATIO AND TREATMENT OF ASTEX COMMON STOCK
At the effective time of the merger, each issued and outstanding share of
ASTeX common stock will be converted into 0.7669 of a share of MKS common stock.
However, shares held in the treasury of ASTeX and shares held by MKS or any of
its wholly owned subsidiaries will be canceled without conversion. MKS will
adjust the exchange ratio for any stock split, reverse split, stock dividend,
reorganization, recapitalization or other similar change with respect to MKS
common stock occurring before the effective time.
Based on the exchange ratio of 0.7669 and the number of shares of ASTeX
common stock outstanding on November 30, 2000, a total of approximately
11,200,000 shares of MKS common stock will be issued in the merger.
TREATMENT OF ASTEX STOCK OPTIONS
At the effective time of the merger, MKS will assume each outstanding
option to purchase shares of ASTeX common stock, whether vested or unvested,
previously granted by ASTeX under its stock option plans and convert them into
options to purchase shares of MKS common stock on the same terms and conditions.
The number of shares of MKS common stock issuable upon the exercise of ASTeX
stock options assumed by MKS in the merger will be adjusted based on the
exchange ratio of 0.7669, and rounded down to the nearest whole number.
The exercise price per share of MKS common stock issuable under each ASTeX
stock option will also be adjusted by dividing (1) the aggregate exercise price
for the ASTeX common stock otherwise purchasable pursuant to each ASTeX option
(assuming for such purposes that such ASTeX option was fully exercisable at such
time) by (2) the number of full shares of MKS common stock deemed purchasable
pursuant to each such ASTeX option. The exercise price will be rounded up to the
nearest whole cent.
MKS has reserved for issuance a sufficient number of shares of its common
stock for delivery if an ASTeX optionholder exercises its options as described
above. After the effective time of the merger, MKS will file a registration
statement on Form S-8 with respect to the assumed ASTeX stock options. During
the period that any options remain outstanding, MKS will use commercially
reasonable efforts to maintain the effectiveness of any registration statement
on Form S-8.
EXCHANGE OF CERTIFICATES
Exchange Agent; Exchange Procedures; No Further Ownership Rights. As soon
as practicable after the effective time of the merger, MKS' exchange agent will
mail to each record holder of ASTeX common stock a letter of transmittal and
instructions for surrendering their certificates. Only those holders who
properly surrender their certificates in accordance with the instructions will
receive certificates representing shares of MKS common stock, cash in lieu of
any fractional shares of MKS common stock, and any dividends or distributions to
which they are entitled. The surrendered certificates representing shares of
ASTeX common
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stock will be canceled. After the effective time of the merger, under the merger
agreement, each certificate representing shares of ASTeX common stock that has
not been surrendered will only represent the right to receive:
- shares of MKS common stock;
- cash in lieu of any fractional shares of MKS common stock; and
- dividends or distributions.
Following the effective time of the merger, ASTeX will not register any
transfers of shares of ASTeX common stock on its stock transfer books.
No Fractional Shares. MKS will not issue any fractional shares of MKS
common stock in the merger. Instead, each holder of shares of ASTeX common stock
exchanged in connection with the merger who would otherwise be entitled to
receive a fraction of a share of MKS common stock will receive cash, without
interest, in an amount equal to the product of the fractional share multiplied
by the closing price per share of MKS common stock on the Nasdaq National Market
on the last trading day immediately prior to the effective time of the merger.
As of the effective time of the merger, MKS will deposit with its designated
exchange agent the shares of MKS common stock issuable in connection with the
merger and cash in an amount sufficient to cover any fractional shares.
Distributions With Respect to Unexchanged Shares. No dividends or other
distributions declared or made on or after the effective time of the merger with
respect to shares of MKS common stock will be paid to the holder of any
unsurrendered ASTeX certificate with respect to the shares of MKS common stock
that the holder is entitled to receive, and no cash payment in lieu of
fractional shares will be paid to the holder until the holder surrenders its
ASTeX certificate. Upon surrender of the certificate, MKS will pay to the record
holder of the certificate, without interest, any dividends or distributions with
respect to the shares of MKS common stock which have a record date on or after
the closing date of the merger and have become payable between the effective
time of the merger and the time of surrender.
Lost, Stolen or Destroyed Certificates. If any certificate representing
shares of ASTeX common stock is lost, stolen or destroyed, an ASTeX stockholder
must provide an appropriate affidavit of that fact to MKS. MKS may also require
the ASTeX stockholder to deliver a bond as indemnity against any claim that may
be made against MKS with respect to any certificates alleged to have been lost,
stolen or destroyed. Only upon receipt of the affidavit, and bond, if requested,
will MKS' exchange agent issue the shares of MKS common stock, any cash payable
for fractional shares, and any dividends or distributions which have become
payable between the effective time of the merger and the time of surrender.
Holders of ASTeX common stock should not send in their certificates until
they receive a letter of transmittal from the exchange agent.
REPRESENTATIONS AND WARRANTIES
The merger agreement contains representations and warranties of MKS and
ASTeX. These relate to:
- their organization, existence, good standing, corporate power and similar
corporate matters;
- their capitalization;
- the authorization, execution, delivery, and performance and the
enforceability of the merger agreement and related matters;
- receipt of an opinion from their respective financial advisors;
- the absence of conflicts, violations and defaults under their corporate
charters and by-laws and other agreements and documents;
- required governmental and third-party consents;
- filings with the Securities and Exchange Commission;
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- their respective financial statements;
- the absence of changes in their respective businesses;
- litigation;
- compliance with laws;
- the required vote of their respective stockholders;
- real property;
- environmental matters;
- accounting matters;
- tax matters;
- labor matters;
- intellectual property;
- brokers and related fees;
- their respective board recommendations regarding approval of the merger;
- assets;
- customers and suppliers;
- the absence of restrictions on business activities; and
- the accuracy of information provided in connection with this joint proxy
statement/prospectus. ASTeX also provided representations relating to:
- employee benefit plans;
- material contracts;
- the absence of existing discussions with third parties regarding an
acquisition proposal;
- the actions by ASTeX's board of directors making the Delaware
antitakeover statute inapplicable to the merger; and
- approval of an amendment to ASTeX's stockholders' rights plan making it
inapplicable to the merger.
COVENANTS OF MKS AND ASTEX
Conduct of ASTeX's Business Prior to the Merger. Except as contemplated by
the merger agreement, ASTeX has agreed that it and its subsidiaries will carry
on their business in the ordinary course in substantially the same manner as
previously conducted. Specifically, ASTeX has agreed that neither it nor any of
its subsidiaries will, without the prior written consent of MKS:
- issue, sell, pledge, dispose of or encumber any shares of capital stock;
- amend its charter or bylaws;
- effect a stock split, combine or reclassify any of its capital stock;
- with specified exceptions, repurchase, redeem or otherwise acquire any
shares of its capital stock or rights to acquire these shares;
- with specified exceptions, issue, sell, pledge or otherwise dispose of or
encumber any capital stock or securities convertible into or exchangeable
or exercisable for options, warrants, calls or other rights to acquire
any shares of capital stock;
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- transfer, lease, license, pledge, mortgage, sell or otherwise dispose of
or encumber any assets or property, other than in the ordinary and usual
course of business;
- incur or modify any indebtedness or guarantee indebtedness or obligations
of another person;
- make any acquisition of, or investment in, assets or stock of another
person or entity whether by way of merger, consolidation, tender offer,
share exchange or other activity;
- with specified exceptions, enter into a transaction with respect to any
merger, consolidation, liquidation or business combination, or any
acquisition or disposition of all or substantially all of the assets or
securities of ASTeX or any of its subsidiaries;
- adopt any stockholder rights plan or further amend the existing ASTeX
stockholder rights plan;
- make any capital expenditure or other expenditures with respect to
property, plant or equipment except pursuant to the ASTeX capital
expenditure budget referenced in the merger agreement;
- change its accounting methods or assumptions underlying these methods
except as required by generally accepted accounting principles;
- pay, discharge, settle or satisfy any claim, liability or obligation
reflected in the most recent consolidated financial statements other than
in the ordinary course of business consistent with past practice or in
accordance with their terms as in effect on the date of the merger
agreement;
- waive any material benefits of, modify in any adverse respect, fail to
enforce, or consent to any matter with respect to which consent is
required under, any confidentiality, standstill or similar agreements to
which ASTeX or any of its subsidiaries is a party;
- modify, amend or terminate any material contract or agreement, or
knowingly waive, release or assign any material rights or claims, except
in the ordinary course of business consistent with past practice;
- enter into any material contract or agreement relating to the
distribution, sale or marketing by third parties of ASTeX's products, or
license any material intellectual property rights to or from any third
party except in the ordinary course of business and consistent with past
practice;
- except as required to comply with applicable law and plans or agreements
existing as of October 2, 2000, and with specified exceptions, take any
action with regard to any plans or agreements related to employee
matters, including adopting or terminating any employee benefit plan or
employment or severance arrangement, materially increasing the
compensation or fringe benefits of, or paying any bonus to, any director,
officer, key employee or consultant, accelerating the payment or vesting
of any compensation or benefits, paying any material benefit not provided
for under any benefit plan existing as of October 2, 2000, or granting
any awards under any bonus, incentive, performance or other incentive
plan;
- make or rescind any tax election, settle or compromise any tax liability,
or amend any tax return;
- initiate, compromise or settle any material litigation or arbitration
proceeding;
- fail to maintain insurance at levels substantially comparable to levels
existing on October 2, 2000;
- fail to pay accounts payable and other obligations in the ordinary course
of business and consistent with past practice; or
- take, or agree to take, any action which would result in ASTeX's
representations and warranties being untrue or incorrect in any material
respect or that would result in the conditions of the merger set forth in
the merger agreement not being satisfied in a material way.
Conduct of MKS' Business Prior to the Merger. Except as contemplated by
the merger agreement, MKS has agreed that it and its subsidiaries will carry on
their business in the ordinary course in substantially
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the same manner as previously conducted. Specifically, MKS has agreed that
neither it nor any of its subsidiaries will, without the prior written consent
of ASTeX:
- issue or sell shares of MKS common stock representing more than 20% of
the outstanding shares of MKS common stock;
- with specified exceptions, amend its articles of organization or bylaws;
- with specified exceptions, repurchase, redeem or otherwise acquire any
shares of its capital stock or rights to acquire those shares; or
- authorize, or enter into, any agreement to do anything prohibited by the
above covenants.
ASTeX is Restricted from Trying to Sell to Another Party. Subject to
applicable fiduciary duties of the ASTeX board of directors, ASTeX has agreed
that from October 2, 2000 through the effective time of the merger or the
termination of the agreement, whichever first occurs, neither it nor any of its
subsidiaries will, directly or indirectly through their officers, directors,
employees, financial advisors, representatives or agents:
- solicit, initiate, or encourage any proposal that could reasonably be
expected to lead to an alternative transaction (as described below under
"-- Termination; Expenses and Termination Fees");
- engage in discussions or negotiations concerning, or provide any
information relating to, an alternative transaction; or
- agree to, or recommend, an alternative transaction to the ASTeX
stockholders.
However, ASTeX and the ASTeX board of directors may, if ASTeX has not
breached this covenant:
- furnish information to, or enter into discussions or negotiations with, a
third party in connection with an unsolicited bona fide written proposal
for an alternative transaction or recommend any unsolicited bona fide
written proposal to the ASTeX stockholders if:
-- the ASTeX board of directors believes in good faith, after
consultation with ASTeX's financial advisor, that the alternative
transaction is reasonably capable of being completed on the terms proposed
and constitutes a superior proposal to this merger, and the ASTeX board of
directors determines in good faith after consultation with outside legal
counsel that it take those actions in order to comply with applicable
fiduciary duties to stockholders;
-- prior to furnishing information to, or entering into discussions or
negotiations with a third party, that third party provides to the ASTeX
board of directors an executed confidentiality agreement no less favorable
than the confidentiality agreement between MKS and ASTeX; and
-- prior to recommending a superior proposal, ASTeX gives MKS at least
five business days' prior notice of its intent to recommend the superior
proposal in order to provide MKS an opportunity to make a counterproposal.
- comply with SEC rules regarding responses to an alternative transaction.
Information Supplied. MKS and ASTeX have agreed that the information
supplied by each to be included or incorporated in this prospectus/proxy
statement and the registration statement on Form S-4 to be filed with the SEC
will not contain any untrue statement of material fact or omit any statement
necessary to make the statements in those documents not misleading. Both further
agree to cooperate in preparing this prospectus/proxy statement, with MKS and
ASTeX each responsible to file this joint proxy statement/prospectus with the
SEC as its preliminary proxy statement and MKS responsible to file the
registration statement on Form S-4 with the SEC. In addition, MKS and ASTeX
agreed to use commercially reasonable efforts to have the S-4 registration
statement declared effective as promptly as practicable after the filing and to
keep it effective as long as necessary to consummate the merger.
Stockholders' Meetings. MKS and ASTeX agreed to hold stockholders'
meetings as promptly as practicable after the registration statement is declared
effective, (i) for ASTeX stockholders to consider and vote on the adoption of
the merger agreement and the approval of the merger and (ii) for MKS to consider
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and vote upon the issuance of the MKS common stock to former ASTeX stockholders
under the terms of the merger. The board of directors of ASTeX and MKS are
obligated to recommend approval of the respective actions to be considered by
the stockholders of ASTeX and MKS, as long as doing so does not violate the
directors' fiduciary duties or any applicable law.
Filings; Other Actions. MKS and ASTeX have also agreed to use their
respective commercially reasonable efforts:
- to obtain any governmental clearances or approvals required under the
antitrust laws and federal and state securities laws before the closing
of the merger;
- to cooperate in the effort to obtain any such government clearances or
consents in connection with the merger;
- to obtain "comfort" letters from the parties' respective independent
public accountants in connection with this joint proxy
statement/prospectus; and
- to take or cause to be taken all actions, do or cause to be done all
things, necessary to consummate the merger and make effective the
transactions contemplated in the merger agreement.
Notification. MKS and ASTeX are obligated to keep the other apprised of
the status of matters relating to the transactions contemplated by the merger
agreement, including without limitation, the threat of litigation, the status of
any ongoing litigation, and the existence of any communication related to the
merger to or from the Federal Trade Commission, Department of Justice or any
other government agency. Neither MKS nor ASTeX will be required to divest any of
their respective businesses, product lines or assets where doing so could have
an adverse effect on their businesses, or take any action if the Department of
Justice or Federal Trade Commission authorizes its staff to move for a
preliminary injunction or restraining order to enjoin the consummation of the
merger.
Accounting. MKS and ASTeX have agreed not to knowingly take any action
inconsistent with treatment of the merger as a "pooling-of-interests" for
accounting purposes.
Stock Exchange Listing and De-listing. MKS agreed to use commercially
reasonable efforts to cause the shares of MKS common stock which will be issued
in the merger to become listed on the Nasdaq National Market. ASTeX agreed to
use commercially reasonable efforts to remove its shares from quotation on the
Nasdaq National Market and de-register those shares as soon as practicable after
the effective date of the merger.
Stock Options. At the effective time of the merger, MKS will assume each
outstanding option to purchase shares of ASTeX common stock, whether vested or
unvested, previously granted by ASTeX under its stock option plans and convert
them into options to purchase shares of MKS common stock on the same terms and
conditions. See "Treatment of ASTeX Stock Options" on page 56.
Election of MKS' Board of Directors. At the effective time of the merger,
MKS will enlarge the size of its board of directors to seven directors,
appointing Robert R. Anderson and Hans-Jochen Kahl as new members of the MKS
board of directors. For biographical information regarding Mr. Anderson and Mr.
Kahl, see "Additional Proposals for the ASTeX Annual Meeting" on page 91.
Director and Officer Indemnification. The merger agreement provides that
MKS will cause the surviving corporation to honor its obligations to indemnify
each present and former director and officer of ASTeX against any costs or
expenses pertaining to matters existing or occurring at or prior to the
effective time of the merger and will not modify those obligations for a period
of six years after the effective time of the merger.
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CONDITIONS TO OBLIGATIONS TO COMPLETE THE MERGER
The obligations of MKS and ASTeX to effect the merger are subject to the
satisfaction or waiver of the following conditions:
- the ASTeX stockholders and MKS, as the sole stockholder of the wholly
owned subsidiary, must have adopted the merger agreement and approved the
merger;
- the MKS stockholders must have approved the issuance of MKS common stock
to former stockholders of ASTeX in connection with the merger;
- the listing on the Nasdaq National Market of MKS common stock that will
be issued to ASTeX stockholders in the merger must have been approved;
- all applicable waiting periods under the Hart-Scott-Rodino Act must have
expired or been terminated;
- MKS and ASTeX must have made all filings and obtained all registrations,
approvals, permits, authorizations and consents required to be obtained
from or filed with any governmental entity which if not obtained or filed
would reasonably likely have a material adverse effect on the business of
MKS;
- no court or government agency must have enacted, issued, promulgated,
enforced or entered into any statute, law, ordinance, rule, regulation,
judgment, decree, injunction or other order that is in effect and
permanently enjoins or otherwise prohibits consummation of the merger;
- the registration statement of which this joint proxy statement/prospectus
is a part must have become effective and not be the subject of a stop
order and no proceedings for that purpose can be threatened or initiated;
- MKS must have received all applicable state securities and "blue sky"
permits and approvals, if any, necessary to consummate the merger; and
- MKS and ASTeX shall each have received a letter from their respective
independent public accountants attesting to the qualification of the
merger for "pooling-of-interests" treatment.
In addition, the obligations of MKS to effect the merger are subject to the
satisfaction or waiver of the following conditions:
- The representations and warranties of ASTeX in the merger agreement must
be true and correct as of the closing date of the merger, except to the
extent any such representation or warranty expressly speaks as of an
earlier date, and MKS must have received a certificate executed on behalf
of ASTeX to that effect;
- ASTeX must have performed, in all material respects, its material
obligations required to be performed by it under the merger agreement at
or prior to the closing date of the merger, and MKS must have received a
certificate executed by an authorized officer on behalf of ASTeX to that
effect;
- MKS shall have received an opinion from its counsel (or from ASTeX's
counsel if MKS' counsel does not provide such an opinion) to the effect
that the merger will be treated as a reorganization for federal income
tax purposes under Section 368(a) of the Internal Revenue Code;
- Between the time of the execution of the merger agreement and the
effective time of the merger, no event shall have occurred which has a
material adverse effect on ASTeX;
- Certain employees of ASTeX must have delivered to MKS executed employment
agreements in the form agreed by the parties; and
- MKS must have received copies of resignations of each of ASTeX's officers
and directors, including the officers and directors of the ASTeX
subsidiaries.
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In addition, the obligation of ASTeX to effect the merger is subject to the
satisfaction or waiver of the following conditions:
- The representations and warranties of MKS in the merger agreement must be
true and correct as of the closing date of the merger, except to the
extent any such representation or warranty expressly speaks as of an
earlier date, and ASTeX must have received a certificate executed on
behalf of MKS to that effect;
- MKS must have performed, in all material respects, their material
obligations required to be performed by them under the merger agreement
at or prior to the closing date of the merger, and ASTeX must have
received a certificate executed by an authorized officer on behalf of MKS
to that effect;
- ASTeX shall have received an opinion from its counsel (or from MKS'
counsel if ASTeX's counsel does not provide such an opinion) to the
effect that the merger will be treated as a reorganization for federal
income tax purposes under Section 368(a) of the Internal Revenue Code;
and
- Between the time of the execution of the merger agreement and the
effective time of the merger, no event shall have occurred which has a
material adverse effect on MKS.
TERMINATION; EXPENSES AND TERMINATION FEES
Termination
The merger agreement may be terminated and the merger abandoned at any time
prior to the effective time of the merger by mutual written consent and action
of the parties' respective board of directors under the following circumstances:
- by either MKS or ASTeX, if the merger is not completed by March 31, 2001;
- by either MKS or ASTeX, if the ASTeX stockholders do not approve the
merger agreement and the merger at a meeting of ASTeX stockholders
convened for that purpose;
- by either MKS or ASTeX, if the MKS stockholders do not approve the
issuance of the MKS common stock in connection with the merger at a
meeting of MKS stockholders convened for that purpose; or
- by either MKS or ASTeX, if any order permanently restraining, enjoining
or otherwise prohibiting consummation of the merger shall become final or
non-appealable after the parties have used their commercially reasonable
efforts to have such order removed, repealed or overturned.
However, the right to terminate pursuant to the above provisions will not
be available to any party that has materially breached its obligations under the
agreement, which breach contributes to the failure of the merger to be
consummated.
In addition, ASTeX can terminate the merger agreement if:
- MKS materially breaches any material covenant or agreement in the merger
agreement that is not curable or, if curable, is not cured within 30 days
of receiving notice of the breach;
- the MKS board of directors fails to recommend approval of the merger in
the proxy statement to the MKS stockholders or withdraws or modifies its
recommendation; or
- ASTeX receives an unsolicited offer for a superior proposal, as
determined by its board of directors in consultation with its financial
advisor, and the ASTeX board determines, in good faith after consultation
with its legal counsel, that it must terminate the merger agreement to
fulfill its fiduciary duties under applicable law.
In addition, MKS can terminate the merger agreement if:
- ASTeX materially breaches any material covenant or agreement in the
merger agreement that is not curable or, if curable, is not cured within
30 days of receiving notice of the breach;
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<PAGE> 72
- the ASTeX board of directors fails to recommend approval of the merger in
the proxy statement to the ASTeX stockholders or withdraws or modifies
its recommendation;
- the ASTeX board of directors approves or recommends to the ASTeX
stockholders an alternative transaction with a third party;
- an alternative transaction is announced and the ASTeX board of directors
fails to recommend against acceptance of the alternative transaction or
fails to reconfirm its recommendation of the merger agreement and the
merger to the ASTeX stockholders within ten business days after MKS
requests that it do so; or
- a third party, other than MKS or an affiliate of MKS, commences a tender
offer or exchange offer for 20% or more or the outstanding common stock
of ASTeX, and the ASTeX board of directors recommends that the ASTeX
stockholders tender their shares in the tender or exchange offer, or
fails to recommend against acceptance of such offer or takes no position
on the tender or exchange offer, each within ten days after the third
party commences the tender or exchange offer.
If either MKS or ASTeX terminates the merger agreement because of any of
the reasons above, all obligations of the parties under the merger agreement
will terminate except for the obligation to pay fees and expenses incurred by
either party in connection with the merger and the requirement to maintain a
confidentiality agreement, and no termination shall relieve MKS or ASTeX from
liability or damages resulting from willful breach of the Agreement.
Expenses
Except as described below, MKS and ASTeX will bear their own expenses
incurred in connection with the merger.
ASTeX has agreed to pay up to $500,000 to MKS as reimbursement for its fees
and expenses paid in connection with the merger upon termination:
- by MKS, where the merger is not completed by March 31, 2001 because the
representations and warranties of ASTeX fail to be true and correct as of
the closing date; or
- by MKS or ASTeX, where the ASTeX stockholders do not approve the merger
agreement and the merger at a meeting of ASTeX stockholders convened for
that purpose, provided no termination fee is otherwise payable to MKS.
See "Termination; Expenses and Termination Fees" at page 63.
MKS has agreed to pay up to $500,000 to ASTeX as reimbursement for its fees
and expenses paid in connection with the merger upon termination:
- by ASTeX, where the merger is not completed by March 31, 2001 because the
representations and warranties of MKS fail to be true and correct as of
the closing date; or
- by MKS or ASTeX, where the MKS stockholders do not approve the issuance
of MKS common stock in connection with the merger at a meeting of MKS
stockholders convened for that purpose.
Termination Fees
ASTeX must pay MKS a termination fee of $9,075,000 upon the earliest to
occur of the following events:
- The termination of the merger agreement by MKS under the following
circumstances:
ASTeX breaches any material covenant or agreement in the merger
agreement that is not curable or, if curable, is not cured within 30 days
of receiving notice of the breach;
the ASTeX board of directors fails to recommend approval of the merger
in the proxy statement to the ASTeX stockholders or withdraws or modifies
its recommendation;
the ASTeX board of directors approves or recommends to the ASTeX
stockholders an alternative transaction with a third party; or
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an alternative transaction is announced and the ASTeX board of
directors fails to recommend against acceptance of the alternative
transaction or fails to reconfirm its recommendation of the merger
agreement and the merger to the ASTeX stockholders within ten business days
after MKS requests that it do so.
- ASTeX receives an unsolicited offer for a superior proposal, as
determined by its board of directors in consultation with its financial
advisor, and the ASTeX board determines, in good faith after consultation
with its legal counsel, that it must terminate the merger agreement to
fulfill its fiduciary duties under applicable law; or
- The termination of the merger agreement by ASTeX or MKS where the ASTeX
stockholders do not approve the merger agreement and the merger at a
meeting of ASTeX stockholders convened for that purpose, if, prior to the
termination of the agreement, a bona fide proposal for an alternative
transaction with respect to ASTeX has been announced.
The merger agreement defines an alternative transaction to mean:
- an acquisition by a third party of more than 20% of the outstanding
shares of ASTeX common stock by a tender offer, exchange offer, merger or
similar transaction;
- an acquisition of control by a third party of more than 20% of the fair
market value of all ASTeX's assets; or
- a public announcement by a third party of a proposal, plan, intention or
agreement to do any of the above.
AMENDMENT
Generally, the board of directors of each of MKS and ASTeX may amend the
merger agreement at any time prior to the effective time. However, after the
ASTeX stockholders approve the merger agreement, any amendment will be
restricted by the Delaware corporation statute. Amendments must be in writing
and signed by all parties.
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RELATED AGREEMENTS
STOCKHOLDER AGREEMENTS
As an inducement to MKS to enter into the merger agreement, on October 2,
2000, Richard S. Post and John M. Tarrh, who beneficially owned an aggregate of
950,488 shares of ASTeX common stock, or 6.5% of the outstanding ASTeX common
stock, on November 30, 2000, entered into a stockholder agreement with MKS. The
stockholder agreement provides that Dr. Post and Mr. Tarrh each agree to vote
their shares in favor of the merger agreement and the merger, and irrevocably
appoint MKS as their proxy for those matters, to vote their shares accordingly.
The proxy automatically terminates upon the termination of the merger agreement.
The stockholder agreement terminates upon the earlier of the merger becoming
effective in accordance with the terms and provisions of the merger agreement or
the termination of the merger agreement.
As an inducement to ASTeX to enter into the merger agreement, on October 2,
2000, John R. Bertucci, his wife, and the trustees of trusts for the benefit Mr.
Bertucci, his wife and their immediate family, who beneficially owned an
aggregate of 15,315,607 shares of MKS common stock, or 59.8% of the outstanding
MKS common stock, on November 30, 2000, entered into a stockholder agreement
with ASTeX. The stockholder agreement provides that Mr. and Mrs. Bertucci and
the Bertucci family trusts agree to vote their shares in favor of issuing MKS
common stock pursuant to the merger agreement, and irrevocably appoint ASTeX as
his, her or its respective proxy to vote for that matter. The proxy
automatically terminates upon the termination of the merger agreement. The
stockholder agreement terminates upon the earlier of the merger becoming
effective in accordance with the terms and provisions of the merger agreement or
the termination of the merger agreement.
AFFILIATE AGREEMENTS
Each executive officer and director of, and those who may be an affiliate
of, MKS or ASTeX has executed a written affiliate agreement providing, among
other things, that the officer, director or affiliate will not offer, sell,
transfer or otherwise dispose of any of the shares of MKS common stock or ASTeX
common stock during the period beginning 30 days prior to the merger and ending
when the merger becomes effective. The affiliate agreements executed by
officers, directors and affiliates of ASTeX and MKS further provide that such
person will not to offer, sell, transfer or otherwise dispose of any shares of
MKS common stock once the merger becomes effective until MKS has published
financial results covering at least 30 days of combined operations of MKS and
ASTeX, except in compliance with the Securities Act and the related rules and
regulations.
EMPLOYMENT AGREEMENTS
In connection with the merger, MKS entered into an employment agreement
with each of Dr. Richard S. Post, John E. Ross, Stanley Burg, William S. Hurley,
Jack J. Schuss, James P. O'Connor and Jill Maunder, all of whom are currently
ASTeX employees. The employment agreements take effect upon the completion of
the merger.
Each agreement sets the base salary for each employee, which is reviewed
annually. The base salaries of each employee under the employment agreements
signed with MKS are equivalent to their existing base salaries with ASTeX. In
addition to a base salary, each employee is entitled, under the MKS Management
Incentive Program, to a bonus equal to a percentage of his or her base salary if
MKS attains specified financial goals during the year. Each employee is also
entitled to standard benefits.
The term of employment for each is for 18 months with earlier termination:
- upon the death of the employee;
- at the election of MKS if the employee fails or refuses to perform the
services required of him or her under the employment agreement; or
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- at the election of MKS if the employee commits any acts not in MKS' best
interest.
Payment by MKS upon termination depends on how employment is terminated:
- if employment is terminated by MKS without cause or by the employee for
good reason within 18 months after the effective date of the merger, the
employee is entitled to receive the compensation and benefits outlined in
such employee's existing employment agreement with ASTeX;
- if employment is terminated by MKS without cause after the first 18
months after the effective date of the merger, the employee is entitled
to receive his or her base salary for 6 months after the date of
termination (12 months after termination in the case of Richard Post) and
is entitled to receive certain other benefits;
- if employment is terminated by death, MKS must pay the employee's estate
the compensation owed to him or her at the end of the month of his or her
death; and
- if employment is terminated at the election of MKS as a result of cause
or as a result of such employee's failure or refusal to perform the
services required of him or her under the employment agreement, MKS must
pay the employee through the last day of actual employment.
Each of the agreements contains non-competition provisions during the term
of employment and for the period of one year after termination of employment.
Under these provisions, the employees may not:
- engage in any competitive business or activity;
- for the 12 months subsequent to termination, work for, employ, become a
partner with, or cause to be employed, any employee, officer or agent of
MKS;
- for the 12 months subsequent to termination, give, sell or lease any
competitive services or goods to any customer of MKS; or
- have any financial interest in or be a director, officer, stockholder,
partner, employee or consultant to any competitor of MKS.
LEGAL PROCEEDINGS
On October 3, 2000, a purported class action lawsuit, Landau v. Applied
Science and Technology, Inc. et al (number 18384NC), was filed by an ASTeX
stockholder against ASTeX, each ASTeX director and MKS. The lawsuit alleges that
the defendants breached their fiduciary duties to ASTeX's stockholders in
connection with the merger, including a claim that the price offered by MKS for
the ASTeX common stock in the merger is inadequate. The lawsuit was filed in the
Chancery Court of the State of Delaware in and for New Castle County and seeks
injunctive relief and unspecified monetary damages. ASTeX and MKS believe that
the suit is without merit and intend to vigorously defend against the claims;
however, ASTeX and MKS can give no assurances as to the ultimate outcome of the
suit.
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UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
The following unaudited pro forma condensed combined financial statements
assume a business combination between MKS and ASTeX accounted for on a pooling
of interests basis and are based on the respective historical financial
statements and the notes thereto, which are incorporated by reference in this
joint proxy statement/prospectus. The unaudited pro forma condensed combined
balance sheet gives effect to the merger as if it had occurred on September 30,
2000, combining the balance sheets of MKS and ASTeX at September 30, 2000. The
unaudited pro forma condensed combined statements of operations give effect to
the merger as if it had occurred at the beginning of each of the periods
presented combining MKS' historical results for the nine months ended September
30, 1999 and 2000 and for each of the years ended December 31, 1999, 1998 and
1997 with ASTeX's historical results for the nine months ended September 25,
1999 and September 30, 2000 and the twelve month periods ended June 28, 1997,
June 27, 1998 and June 26, 1999, respectively.
The pro forma information is presented for illustrative purposes only and
is not necessarily indicative of the operating results or financial position
that would have occurred if the merger had been consummated at the beginning of
the earliest period presented, nor is it necessarily indicative of future
operating results or financial position.
These unaudited pro forma condensed combined financial statements are based
on, and should be read in conjunction with, the historical consolidated
financial statements and the related notes thereto of MKS and ASTeX,
incorporated by reference in this joint proxy statement/prospectus.
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UNAUDITED PRO FORMA CONDENSED
COMBINED BALANCE SHEET
AS OF SEPTEMBER 30, 2000
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
HISTORICAL
-------------------- PRO FORMA PRO FORMA
MKS ASTEX ADJUSTMENTS COMBINED
-------- -------- ----------- ---------
<S> <C> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents......... $ 41,097 $ 63,587 $104,684
Short-term investments............ 6,461 14,524 20,985
Trade and notes receivable, net... 61,908 32,890 94,798
Other receivables................. -- 434 434
Inventories....................... 45,210 26,240 71,450
Deferred tax asset................ 5,371 2,409 7,780
Other current assets.............. 4,769 331 5,100
-------- -------- ------- --------
Total current assets................ 164,816 140,415 305,231
Property and equipment, net......... 34,417 31,429 65,846
Goodwill and other intangible
assets, net....................... 38,737 7,607 46,344
Deferred tax asset.................. -- 732 732
Long-term investments............... 12,100 9,790 21,890
Other assets........................ 5,683 3,264 8,947
-------- -------- ------- --------
Total assets........................ $255,753 $193,237 $ -- $448,990
======== ======== ======= ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term borrowings............. $ 17,352 $ -- $ 17,352
Current portion of long-term
debt........................... 6,825 1,429 8,254
Current portion of capital lease
obligations.................... 845 -- 845
Accounts payable.................. 16,398 8,045 24,443
Accrued compensation.............. 11,294 2,501 13,795
Accrued expenses.................. 10,816 7,316 7,500 (Note 5) 25,632
Accrued income taxes.............. 1,289 1,791 3,080
Commissions payable and customer
advances....................... -- 1,614 1,614
-------- -------- ------- --------
Total current liabilities........... 64,819 22,696 7,500 95,015
Long-term debt...................... 3,830 7,858 11,688
Long-term portion of capital
leases............................ 948 -- 948
Deferred tax liability.............. 1,817 -- 1,817
Other liabilities................... 468 -- 468
Commitments and contingencies
Stockholders' equity:
Preferred stock, $.01 par value... -- -- --
Common stock...................... 113 145 (145) (Note 2) 113
Additional paid-in capital........ 115,098 148,197 145 (Note 2) 263,440
Retained earnings................. 68,152 15,214 (7,500) (Note 5) 75,866
Shareholder receivables........... (777) -- (777)
Accumulated other comprehensive
income (loss).................. 1,285 (873) 412
-------- -------- ------- --------
Total stockholders' equity.......... 183,871 162,683 (7,500) 339,054
-------- -------- ------- --------
Total liabilities and stockholders'
equity............................ $255,753 $193,237 $ -- $448,990
======== ======== ======= ========
</TABLE>
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UNAUDITED PRO FORMA CONDENSED
COMBINED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
HISTORICAL
-------------------- PRO FORMA
MKS ASTEX COMBINED
-------- -------- ---------
<S> <C> <C> <C>
Net sales.................................................. $230,893 $110,371 $341,264
Other revenue.............................................. -- 9,164 9,164
-------- -------- --------
Total net sales............................................ 230,893 119,535 350,428
Cost of sales and other revenue............................ 124,262 73,500 197,762
-------- -------- --------
Gross profit............................................... 106,631 46,035 152,666
Operating expenses:
Research and development................................. 16,115 13,496 29,611
Selling, general and administrative...................... 36,284 16,499 52,783
Amortization of goodwill and other intangible assets..... 2,014 970 2,984
Purchase of in-process technology........................ 310 -- 310
-------- -------- --------
Total operating expenses................................... 54,723 30,965 85,688
-------- -------- --------
Income from operations..................................... 51,908 15,070 66,978
-------- -------- --------
Interest expense........................................... 1,139 197 1,336
Interest income............................................ 2,538 3,371 5,909
Other income (expense)..................................... (209) 248 39
-------- -------- --------
Income before income taxes................................. 53,098 18,492 71,590
Provision for income taxes................................. 20,045 6,944 26,989
-------- -------- --------
Net income................................................. $ 33,053 $ 11,548 $ 44,601
======== ======== ========
Net income per share(Note 2):
Basic.................................................... $ 1.32 $ 0.86 $ 1.26
Diluted.................................................. $ 1.26 $ 0.82 $ 1.20
Weighted average common shares outstanding:
Basic.................................................... 25,048 13,453 35,365
Diluted.................................................. 26,262 14,062 37,046
</TABLE>
70
<PAGE> 79
UNAUDITED PRO FORMA CONDENSED
COMBINED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
HISTORICAL
------------------- PRO FORMA
MKS ASTEX COMBINED
-------- ------- ---------
<S> <C> <C> <C>
Net sales................................................... $132,740 $74,039 $206,779
Other revenue............................................... -- 5,818 5,818
-------- ------- --------
Total net sales............................................. 132,740 79,857 212,597
Cost of sales and other revenue............................. 76,983 51,695 128,678
-------- ------- --------
Gross profit................................................ 55,757 28,162 83,919
Operating expenses:
Research and development.................................. 9,754 7,873 17,627
Selling, general and administrative....................... 28,556 11,090 39,646
Amortization of goodwill and other intangible assets...... -- 682 682
Restructuring charge...................................... -- 763 763
-------- ------- --------
Total operating expenses.................................... 38,310 20,408 58,718
-------- ------- --------
Income from operations...................................... 17,447 7,754 25,201
-------- ------- --------
Interest expense............................................ 1,025 4 1,029
Interest income............................................. 1,346 869 2,215
Other income (expense)...................................... 849 (29) 820
-------- ------- --------
Income before income taxes.................................. 18,617 8,590 27,207
Provision for income taxes.................................. 5,645 3,294 8,939
Non-recurring deferred tax credit........................... (3,770) -- (3,770)
-------- ------- --------
Net income.................................................. $ 16,742 $ 5,296 $ 22,038
======== ======= ========
Net income per share (Note 2):
Basic..................................................... $ 0.75 $ 0.50 $ 0.73
Diluted................................................... $ 0.72 $ 0.47 $ 0.69
Weighted average common shares outstanding:
Basic..................................................... 22,193 10,602 30,324
Diluted................................................... 23,327 11,297 31,991
Pro forma data (Note 3):
Pro forma net income from above........................... $ 22,038
Pro forma adjustment for MKS income tax provision assuming
C corporation tax...................................... 5,109
--------
Pro forma net income........................................ $ 16,929
========
Pro forma net income per share:
Basic..................................................... $ 0.56
Diluted................................................... $ 0.53
Pro forma weighted average common shares outstanding:
Basic..................................................... 30,324
Diluted................................................... 31,797
</TABLE>
71
<PAGE> 80
UNAUDITED PRO FORMA CONDENSED
COMBINED STATEMENT OF OPERATIONS
FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1999
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
HISTORICAL
------------------- PRO FORMA
MKS ASTEX COMBINED
-------- ------- ---------
<S> <C> <C> <C>
Net sales................................................... $187,083 $72,097 $259,180
Other revenue............................................... -- 6,112 6,112
-------- ------- --------
Total net sales............................................. 187,083 78,209 265,292
Cost of sales and other revenue............................. 107,228 55,555 162,783
-------- ------- --------
Gross profit................................................ 79,855 22,654 102,509
Operating expenses:
Research and development.................................. 13,230 9,745 22,975
Selling, general and administrative....................... 39,014 12,460 51,474
Amortization of goodwill and other intangible assets...... -- 763 763
Restructuring charge...................................... -- 2,260 2,260
-------- ------- --------
Total operating expenses.................................... 52,244 25,228 77,472
-------- ------- --------
Income (loss) from operations............................... 27,611 (2,574) 25,037
-------- ------- --------
Interest expense............................................ 1,346 32 1,378
Interest income............................................. 2,154 649 2,803
Other income (expense)...................................... 849 56 905
-------- ------- --------
Income (loss) before income taxes........................... 29,268 (1,901) 27,367
Provision for income taxes.................................. 5,231 (650) 4,581
-------- ------- --------
Net income (loss)........................................... $ 24,037 $(1,251) $ 22,786
======== ======= ========
Net income (loss) per share (Note 2):
Basic..................................................... $ 1.05 $ (0.13) $ 0.76
Diluted................................................... $ 1.00 $ (0.13) $ 0.73
Weighted average common shares outstanding:
Basic..................................................... 22,784 9,398 29,991
Diluted................................................... 23,954 9,398 31,161
Pro forma data (Note 3):
Pro forma net income from above........................... $ 22,786
Pro forma adjustment for MKS income tax provision assuming
C corporation tax...................................... 5,625
--------
Pro forma net income........................................ $ 17,161
========
Pro forma net income per share:
Basic..................................................... $ 0.57
Diluted................................................... $ 0.55
Pro forma weighted average common shares outstanding:
Basic..................................................... 29,991
Diluted................................................... 30,993
</TABLE>
72
<PAGE> 81
UNAUDITED PRO FORMA CONDENSED
COMBINED STATEMENT OF OPERATIONS
FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1998
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
HISTORICAL
------------------- PRO FORMA
MKS ASTEX COMBINED
-------- ------- ---------
<S> <C> <C> <C>
Net sales................................................... $139,763 $77,958 $217,721
Other revenue............................................... -- 5,478 5,478
-------- ------- --------
Total net sales............................................. 139,763 83,436 223,199
Cost of sales and other revenue............................. 83,784 54,987 138,771
-------- ------- --------
Gross profit................................................ 55,979 28,449 84,428
Operating expenses:
Research and development.................................. 12,137 11,253 23,390
Selling, general and administrative....................... 34,707 10,390 45,097
Amortization of goodwill and other intangible assets...... -- 685 685
Acquisition related expenses.............................. -- 212 212
-------- ------- --------
Total operating expenses.......................... 46,844 22,540 69,384
-------- ------- --------
Income from operations...................................... 9,135 5,909 15,044
-------- ------- --------
Interest expense............................................ 1,483 196 1,679
Interest income............................................. 296 514 810
Other income (expense)...................................... 187 260 447
-------- ------- --------
Income before income taxes.................................. 8,135 6,487 14,622
Provision for income taxes.................................. 949 2,466 3,415
-------- ------- --------
Net income.................................................. $ 7,186 $ 4,021 $ 11,207
======== ======= ========
Net income per share (Note 2):
Basic..................................................... $ 0.40 $ 0.50 $ 0.46
Diluted................................................... $ 0.38 $ 0.47 $ 0.44
Weighted average common shares outstanding:
Basic..................................................... 18,053 8,053 24,229
Diluted................................................... 18,720 8,529 25,261
Pro forma data (Note 3):
Pro forma net income from above........................... $ 11,207
Pro forma adjustment for MKS income tax provision assuming
C corporation tax...................................... 2,142
--------
Pro forma net income........................................ $ 9,065
========
Pro forma net income per share:
Basic..................................................... $ 0.37
Diluted................................................... $ 0.36
Pro forma weighted average common shares outstanding:
Basic..................................................... 24,229
Diluted................................................... 25,079
</TABLE>
73
<PAGE> 82
UNAUDITED PRO FORMA CONDENSED
COMBINED STATEMENT OF OPERATIONS
FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1997
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
HISTORICAL
------------------- PRO FORMA
MKS ASTEX COMBINED
-------- ------- ---------
<S> <C> <C> <C>
Net sales................................................... $188,080 $43,935 $232,015
Other revenue............................................... -- 4,032 4,032
-------- ------- --------
Total net sales............................................. 188,080 47,967 236,047
Cost of sales and other revenue............................. 107,606 30,557 138,163
-------- ------- --------
Gross profit................................................ 80,474 17,410 97,884
Operating expenses:
Research and development.................................. 14,673 7,343 22,016
Selling, general and administrative....................... 41,838 6,655 48,493
Amortization of goodwill and other intangible assets...... -- 253 253
Acquisition related expenses.............................. -- 1,500 1,500
-------- ------- --------
Total operating expenses.......................... 56,511 15,751 72,262
-------- ------- --------
Income from operations...................................... 23,963 1,659 25,622
-------- ------- --------
Interest expense............................................ 2,132 585 2,717
Interest income............................................. 271 396 667
Other income (expense)...................................... 166 18 184
-------- ------- --------
Income before income taxes.................................. 22,268 1,488 23,756
Provision for income taxes.................................. 1,978 550 2,528
-------- ------- --------
Net income.................................................. $ 20,290 $ 938 $ 21,228
======== ======= ========
Net income per share (Note 2):
Basic..................................................... $ 1.12 $ 0.14 $ 0.92
Diluted................................................... $ 1.10 $ 0.14 $ 0.90
Weighted average common shares outstanding:
Basic..................................................... 18,053 6,686 23,180
Diluted................................................... 18,388 6,777 23,585
Pro forma data (Note 3):
Pro forma net income from above........................... $ 21,228
Pro forma adjustment for MKS income tax provision assuming
C corporation tax...................................... 6,484
--------
Pro forma net income........................................ $ 14,744
========
Pro forma net income per share:
Basic..................................................... $ 0.64
Diluted................................................... $ 0.63
Pro forma weighted average common shares outstanding:
Basic..................................................... 23,180
Diluted................................................... 23,459
</TABLE>
74
<PAGE> 83
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
1. The unaudited pro forma condensed combined financial statements of MKS and
ASTeX give retroactive effect to the merger which is being accounted for as a
pooling of interests and, as a result, such statements are presented as if
the combining companies had been combined for all periods presented. The
unaudited pro forma condensed combined financial statements reflect the
issuance of 0.7669 of a share of MKS common stock for each share of ASTeX
common stock to effect the merger. The actual number of shares of MKS common
stock to be issued will be determined at the effective date of the merger
based on the exchange ratio and the number of shares of ASTeX common stock
outstanding.
2. The unaudited basic net income (loss) per common share is based upon the
weighted average number of MKS and ASTeX common shares outstanding for each
period using an exchange ratio of 0.7669 of a share of MKS common stock for
each share of ASTeX common stock. The unaudited diluted net income (loss) per
common and dilutive potential common share is based upon the weighted average
number of MKS and ASTeX common and dilutive common shares outstanding for
each period using an exchange ratio of 0.7669 of a share of MKS common stock
for each share of ASTeX common stock. The unaudited pro forma condensed
combined balance sheet reflects the issuance of 11,107,000 shares of MKS
common stock (no par value) in exchange for all of the shares of ASTeX common
stock outstanding at September 30, 2000.
3. Prior to its initial public offering, MKS had been treated as an S
corporation for federal income tax purposes. As a result, MKS paid no
federal, and certain state, income tax, and all of the earnings of MKS were
subject to federal, and certain state, income taxation directly at the
stockholder level. MKS' S corporation status was terminated prior to the
closing of its initial public offering, which occurred on April 4, 1999, at
which time, MKS became subject to corporate income taxation under Subchapter
C of the Internal Revenue Code and applicable state income taxation law. Pro
forma statement of income data has been adjusted to include pro forma income
tax provisions as if MKS had been a C corporation during the relevant
periods, assuming C corporation tax rates.
4. There are no material intercompany transactions included in the unaudited pro
forma condensed combined financial statements. The unaudited pro forma
condensed combined financial statements do not include adjustments to conform
the accounting policies of ASTeX to those followed by MKS. The nature and
extent of such adjustments, if any, will be based upon further study and
analysis and are not expected to be material.
5. MKS and ASTeX currently estimate that they will incur costs of approximately
$7,500,000 associated with the merger. The costs of $7,500,000 consists
primarily of advisor fees, legal and accounting services. These costs have
been reflected in the unaudited pro forma combined balance sheet but have not
been included in the unaudited pro forma combined statement of operations.
75
<PAGE> 84
MKS' PRINCIPAL STOCKHOLDERS
The following table sets forth certain information regarding beneficial
ownership of MKS' common stock as of November 30, 2000, and as adjusted to
reflect the issuance of MKS common stock in the merger, by (1) each of MKS'
directors, (2) each of MKS' executive officers, (3) each person known to MKS to
own beneficially more than 5% of MKS' common stock and (4) all directors and
executive officers as a group.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY OWNED SHARES BENEFICIALLY OWNED
PRIOR TO THE MERGER(1) AFTER THE MERGER(1)
-------------------------- --------------------------
NAME OF BENEFICIAL OWNER NUMBER PERCENTAGE NUMBER PERCENTAGE
------------------------ ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
John R. Bertucci............................. 15,315,607(2) 59.8% 15,366,605(2) 41.7%
Peter R. Younger............................. 50,982(3) * 50,982 *
Ronald C. Weigner............................ 160,957(4) * 160,957 *
John J. Sullivan............................. 301,010 1.2% 301,010 *
Donald K. Smith.............................. 40,813 * 231,755(10) *
William D. Stewart........................... 160,153(5) * 160,153 *
F. Thomas McNabb............................. -- * -- *
Robert L. Klimm.............................. 15,000(6) * -- *
Leo Berlinghieri............................. 122,750(6) * 122,750 *
Richard S. Chute............................. 1,788,583(7) 7.0% 1,788,583 4.9%
Owen W. Robbins.............................. 25,092(6) * 25,092 *
Robert J. Therrien........................... 25,092(6) * 25,092 *
Louis P. Valente............................. 25,092(6) * 25,092 *
other 5% stockholder
Thomas H. Belknap............................ 1,668,696(8) 6.5% 1,668,696 4.5%
All executive officers and directors as a
group (13 persons)......................... 16,267,640(9) 62.2% 16,509,580 44.1%
</TABLE>
---------------
* Denotes ownership of less than 1% of the outstanding shares of MKS common
stock.
(1) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission, and is not necessarily indicative of
beneficial ownership for any other purpose. Under these rules, beneficial
ownership includes any shares as to which the individual or entity has sole
or shared voting power or investment power and any shares which the
individual or entity has the right to acquire within 60 days after November
30, 2000 through the exercise of any stock option, warrant or other right.
However, these shares are not deemed outstanding for purposes of
calculating the percentage ownership of any other person. The inclusion in
this table of any shares does not constitute an admission that the named
stockholder is a direct or indirect beneficial owner of the shares. Unless
otherwise indicated, each person or entity named in the table has sole
voting power and investment power with respect to all shares of capital
stock listed as owned by the person or entity. The percentages prior to the
merger are calculated based on 25,589,873 shares outstanding on November
30, 2000. The percentages after the merger are calculated on an assumed
11,217,981 shares issued in the merger, based on the number of shares of
ASTeX common stock outstanding on November 30, 2000.
(2) Beneficial ownership prior to the merger includes 5,884,629 shares held
directly by Mr. Bertucci, 5,999,141 shares held directly by Mr. Bertucci's
family members, and 3,431,837 shares held by Bertucci family trusts for
which either Mr. or Mrs. Bertucci serves as a co-trustee. In addition,
beneficial ownership after the merger includes 17,255 shares of MKS common
stock and 33,743 shares of common stock subject to options exercisable
within 60 days from November 30, 2000 to be issued in the merger or
issuable in exchange for the ASTeX common stock and options currently owned
by Mr. Bertucci.
(3) Includes 1,532 shares held directly by Mr. Younger, 700 shares held by
certain of the Younger family trusts for which Mr. Younger serves as
trustee, and 48,750 shares subject to options held by Mr. Younger
exercisable within 60 days of November 30, 2000.
76
<PAGE> 85
(4) Includes 1,357 shares held directly by Mr. Weigner and 159,600 shares
subject to options held by Mr. Weigner exercisable within 60 days of
November 30, 2000.
(5) Includes 803 shares held directly by Mr. Stewart and 159,350 shares subject
to options held by Mr. Stewart exercisable within 60 days of November 30,
2000.
(6)Consists of options exercisable within 60 days of November 30, 2000.
(7) Includes 1,763,491 shares held by certain of the Bertucci family trusts for
which Mr. Chute serves as a co-trustee and 25,092 shares subject to options
held by Mr. Chute exercisable within 60 days of November 30, 2000.
(8) Includes 1,668,346 shares held by certain of the Bertucci family trusts for
which Mr. Belknap serves as a co-trustee and 350 shares held directly by
Mr. Belknap.
(9) Includes 580,726 shares subject to options exercisable within 60 days of
November 30, 2000.
(10)Includes 248,979 shares of ASTeX common stock that will be converted to
190,942 shares of MKS common stock after the merger.
77
<PAGE> 86
ASTEX'S PRINCIPAL STOCKHOLDERS
The following table sets forth, as of November 30, 2000, certain
information concerning stock ownership of ASTeX by (i) each person known by
ASTeX to own of record or be the beneficial owner of more than five percent (5%)
of ASTeX common stock, (ii) each of ASTeX's directors, (iii) each executive
officer named in the Summary Compensation Table on page 95, and (iv) all
directors and current executive officers as a group. Except as otherwise
indicated, the stockholders listed in the table have sole voting and investment
powers with respect to the shares indicated.
<TABLE>
<CAPTION>
NUMBER OF SHARES PERCENTAGE
NAME AND ADDRESS OF BENEFICIAL OWNER(1) BENEFICIALLY OWNED(2) OF CLASS(2)
--------------------------------------- --------------------- -----------
<S> <C> <C>
Kopp Investment Advisors, Inc.(3)........................... 1,265,800 8.0%
Richard S. Post, Ph.D.(4)................................... 642,852 4.4%
John M. Tarrh(5)............................................ 327,636 2.2%
Robert R. Anderson(6)....................................... 95,863 *
John Bertucci(7)............................................ 119,000 *
Michel de Beaumont(8)....................................... 94,000 *
Hans-Jochen Kahl(9)......................................... 39,000 *
Brian Chisholm(10).......................................... 10,000 *
Avishay Katz, Ph.D.(11)..................................... 8,163 *
Stanley Burg(12)............................................ 28,800 *
Jill Maunder(13)............................................ 9,600 *
John E. Ross(14)............................................ 20,000 *
All Current Executive Officers and Directors as a Group (11
persons)(15).............................................. 1,420,351 8.9%
</TABLE>
---------------
* Less than one percent (1%) of the outstanding shares of ASTeX common stock.
(1) The address for all officers and directors is c/o Applied Science and
Technology, Inc., 90 Industrial Way, Wilmington, Massachusetts 01887. The
address for Kopp Investment Advisors, Inc. is 7701 France Avenue South,
Suite 500, Edina, Minnesota 55435.
(2) Percentage ownership is based upon 14,627,697 shares of ASTeX common stock
issued and outstanding on November 30, 2000. Pursuant to the rules of the
Securities and Exchange Commission, shares of common stock that an
individual or group has a right to acquire within 60 days from November 30,
2000 pursuant to the exercise of options or warrants are deemed to be
outstanding for the purpose of computing the percentage ownership of such
individual or group, but are not deemed to be outstanding for the purpose
of computing the percentage of ownership of any other person shown in the
table. Except as indicated in footnotes to this table, ASTeX believes that
the stockholders named in this table have sole voting and investment power
with respect to all shares of common stock shown to be beneficially owned
by them based upon information provided to ASTeX by such stockholders.
(3) Based solely upon a Schedule 13G/A filed in February 2000 by Kopp
Investment Advisors, Inc. (KIA) on behalf of KIA, Kopp Holding Company and
Leroy C. Kopp. KIA is an investment adviser that is wholly-owned by Kopp
Holding Company, which is wholly-owned by Leroy C. Kopp. KIA has sole
voting power as to 357,500 of such shares and sole dispositive power as to
235,000 of such shares. Leroy C. Kopp has sole voting and dispositive power
as to 15,000 of such shares.
(4) Includes 14,650 shares of common stock owned by Dr. Post's wife and 20,000
shares of common stock subject to options exercisable within 60 days of
November 30, 2000 held by Dr. Post.
(5) Includes an aggregate of 1,313 shares of common stock owned by Mr. Tarrh's
wife and minor son and 6,400 shares of Common Stock subject to options
exercisable within 60 days of November 30, 2000 held by Mr. Tarrh.
78
<PAGE> 87
(6) Includes 15,000 shares of common stock held in trust for the benefit of a
child of Mr. Anderson, of which Mr. Anderson is the trustee, and 38,000
shares of common stock subject to options exercisable within 60 days of
November 30, 2000 held by Mr. Anderson.
(7) Includes 52,500 shares of common stock held by MKS, of which Mr. Bertucci
is a significant shareholder, and 44,000 shares of common stock subject to
options exercisable within 60 days of November 30, 2000 held by Mr.
Bertucci.
(8) Includes 50,000 shares of common stock held by various trust arrangements,
of which Mr. de Beaumont is a beneficiary and 44,000 shares of common stock
subject to options exercisable within 60 days of November 30, 2000 held by
Mr. de Beaumont.
(9) Includes 29,500 shares of common stock subject to options exercisable
within 60 days of November 30, 2000 options held by Mr. Kahl.
(10) Effective July 28, 2000, Mr. Chisholm is no longer an employee of ASTeX.
(11) Effective June 30, 2000, Dr. Katz is no longer an employee of ASTeX.
(12) Includes 20,400 shares of common stock subject to options exercisable
within 60 days of November 30, 2000 held by Mr. Burg.
(13) Includes 9,000 shares of common stock subject to options exercisable within
60 days of November 30, 2000 held by Ms. Maunder.
(14) Consists of 20,000 shares of common stock subject to options exercisable
within 60 days of November 30, 2000 held by Mr. Ross.
(15) Includes an aggregate of 264,300 shares of common stock subject to options
exercisable within 60 days of November 30, 2000 held by all directors and
current executive officers as a group.
79
<PAGE> 88
COMPARISON OF STOCKHOLDER RIGHTS
The rights of ASTeX stockholders are governed by ASTeX's certificate of
incorporation and bylaws, each as amended, and the laws of the State of
Delaware, and the rights of MKS stockholders are governed by MKS' restated
articles of organization and bylaws and the laws of the Commonwealth of
Massachusetts. After the merger, the ASTeX stockholders will become stockholders
of MKS and accordingly their rights will be governed by MKS' articles of
organization and bylaws, each as amended, and the laws of the Commonwealth of
Massachusetts.
While the rights and privileges of ASTeX stockholders are, in many
instances, comparable to those of the stockholders of MKS, there are some
differences. The following is a summary of the material differences as of the
date of this document between the rights of the ASTeX stockholders and the
rights of the MKS stockholders. These differences arise from differences between
the respective charters and bylaws of ASTeX and MKS and the differences between
and Delaware and Massachusetts law. The following discussion of these
differences is only a summary of the material differences and does not purport
to be a complete description of all the differences. Please consult the Delaware
General Corporation Law and the Massachusetts Business Corporation Law, and the
respective charters and bylaws of ASTeX and MKS for a more complete
understanding of these differences.
The following paragraphs summarize certain differences between the rights
of MKS stockholders and ASTeX stockholders under the restated articles of
organization and bylaws of MKS and certificate of incorporation and bylaws of
ASTeX, and under Massachusetts and Delaware law, as applicable.
<TABLE>
<CAPTION>
ASTEX MKS
(DELAWARE) (MASSACHUSETTS)
---------- ---------------
<S> <C> <C>
AUTHORIZED AND OUTSTANDING ASTeX is authorized to issue MKS is authorized to issue
COMMON STOCK 30,000,000 shares of common 50,000,000 shares of common
stock. On December 7, 2000, the stock. On December 7, 2000, the
ASTeX record date, 14,627,697 MKS record date, 25,590,969
shares of common stock were shares of common stock were
outstanding. Holders are outstanding.
entitled to one vote per share.
AUTHORIZED AND OUTSTANDING The ASTeX certificate of MKS is authorized to issue
PREFERRED STOCK incorporation reserves for 2,000,000 shares of preferred
issuance 1,000,000 shares of stock in one or more series. On
preferred stock, of which the MKS record date, no shares
100,000 shares are designated as of preferred stock were
Series A Junior Participating outstanding.
Preferred Stock. On the ASTeX
record date, no shares of
preferred stock were
outstanding.
SPECIAL MEETING OF Under Delaware law, a special MKS' bylaws provide that a
STOCKHOLDERS meeting of stockholders may be special meeting of stockholders
called by the board of directors may be called by the president
or any other person authorized or the board of directors. A
to do so in the certificate of special meeting may be called by
incorporation or the bylaws. the clerk upon written
ASTeX's bylaws authorize only application of one or more
the board of directors to call a stockholders who are entitled to
special meeting of stockholders. vote at the meeting and hold at
Therefore, stockholders of ASTeX least a one-tenth part in the
are not authorized to call stock entitled to vote at the
special meetings of meeting.
stockholders.
</TABLE>
80
<PAGE> 89
<TABLE>
<CAPTION>
ASTEX MKS
(DELAWARE) (MASSACHUSETTS)
---------- ---------------
<S> <C> <C>
ACTION BY WRITTEN CONSENT IN Under Delaware law, stockholders Under Massachusetts law, any
LIEU OF A STOCKHOLDERS' may take action by written action to be taken by
MEETING consent in lieu of voting at a stockholders may be taken
stockholders meeting. Delaware without a meeting only by
law permits a corporation, unanimous written consent and a
pursuant to a provision in such corporation may not provide
corporation's certificate of otherwise in its articles of
incorporation, to eliminate the organization or bylaws.
ability of stockholders to act
by written consent. ASTeX's MKS' bylaws provide that any
bylaws provide that any action action by stockholders may be
by stockholders may be taken taken without a meeting and by
without a meeting and by written consent if all the
unanimous written consent. stockholders entitled to vote on
the matter consent.
RECORD DATE FOR DETERMINING The ASTeX bylaws provide that The MKS bylaws provide that the
STOCKHOLDERS the board of directors may fix directors may fix a MKS record
an ASTeX record date that shall date not more than sixty days
not be more than sixty days, nor prior to the date of any
less than ten days, before the stockholder meeting, the date
date of the meeting. for the payment of any dividend
or the making of any
distribution to stockholders or
the last day on which the
consent or dissent of
stockholders may be effectively
expressed for any purpose, as
the MKS record date.
If no MKS record date is fixed
and the transfer books are not
closed:
The MKS record date for
determining stockholders having
the right to notice of or to
vote at a meeting of
stockholders shall be at the
close of business on the day
next preceding the day on which
notice is given.
The MKS record date for
determining stockholders for any
other purpose shall be at the
close of business on the day on
which the board of directors
acts with respect thereto.
ADVANCE NOTICE PROVISIONS The ASTeX bylaws require that Board nominations and other
FOR BOARD NOMINATION AND nominations of persons for stockholder business may be
OTHER STOCKHOLDERS election to the board of brought before an annual meeting
BUSINESS -- ANNUAL MEETINGS directors and the proposal of by or at the direction of the
business to be considered at any board of directors or by a
meeting of stockholders must stockholder. For
</TABLE>
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<TABLE>
<CAPTION>
ASTEX MKS
(DELAWARE) (MASSACHUSETTS)
---------- ---------------
<S> <C> <C>
be made by: business to be properly brought
before an annual meeting by a
the board of directors, or proxy stockholder, the stockholder
committee appointed by the board must give timely notice thereof
of directors, or in writing to the clerk of MKS.
To be timely, a stockholder's
a stockholder who gives proper notice must be delivered to or
notice. mailed and received at the
principal executive offices of
For nominations or other MKS not less than sixty days nor
business to be properly brought more than ninety days prior to
before a stockholders meeting by the meeting; provided, however,
a stockholder, the stockholder that in the event that less than
must have given timely notice forty days' notice or prior
thereof in writing to the public disclosure of the date of
secretary of ASTeX and such the meeting is given or made to
other business must otherwise be stockholders, notice by the
a proper matter for stockholder stockholder to be timely must be
action. To be timely, received not later than the
stockholder's notice shall be close of business on the tenth
delivered to the principal day following the day on which
executive offices of ASTeX (i) such notice of the date of the
in the case of an annual meeting annual meeting was mailed or
that is called for a date that such public disclosure was made.
is within thirty days before or
after the anniversary date of
the immediately preceding annual
meeting of stockholders, not
less than sixty days nor more
than ninety days prior to such
anniversary date, and (ii) in
the case of an annual meeting
that is called for a date that
is not within thirty days before
or after the anniversary date of
the immediately preceding annual
meeting, not later than the
close of business on the tenth
day following the day on which
notice of the date of the
meeting was mailed or public
disclosure of the date of the
meeting was made, whichever
occurs first.
ADVANCE NOTICE PROVISIONS Stockholder notice shall be Under Massachusetts law, seven
FOR BOARD NOMINATION AND delivered not later than the days notice is required before
OTHER STOCKHOLDERS close of business on the tenth any stockholder meeting.
BUSINESS -- SPECIAL MEETINGS day following the day on which
notice of the date of the Any board nomination by a
meeting was mailed or public stockholder shall be made
disclosure of the date of the pursuant to timely notice in
meeting was made, whichever writing to the clerk of MKS. To
occurs first. be timely, a stockholder's
notice shall be delivered to the
principal executive offices of
MKS not less than thirty
</TABLE>
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<TABLE>
<CAPTION>
ASTEX MKS
(DELAWARE) (MASSACHUSETTS)
---------- ---------------
<S> <C> <C>
days nor more than ninety days
prior to the date of the
meeting; provided, however, that
in the event that less than
forty days' notice or prior
public disclosure of the date of
the meeting is given or made to
stockholders, timely notice by
the stockholder must be received
not later than the close of
business on the tenth day
following the day on which such
notice of the date of the
meeting was mailed or such
public disclosure was made.
NUMBER OF DIRECTORS The ASTeX bylaws provide that MKS' articles of organization
the board of directors shall be and bylaws provide that its
determined by the board of board of directors shall not
directors; if no such have less than three members,
determination is made, the unless there are less than three
number of directors shall be stockholders.
one.
CLASSIFIED BOARD OF Delaware law provides that a Massachusetts law provides that
DIRECTORS corporation's board of directors a corporation's board of
may be divided into various directors may be divided into
classes with staggered terms of various classes with staggered
office. ASTeX directors are terms of office. MKS' directors
classified into three classes are classified into three
and are elected to a term of classes and are elected to a
three years and hold office term of three years and hold
until their successors are office until their successors
elected and qualified. are elected and qualified.
REMOVAL OF DIRECTORS Under Delaware law, except as MKS' bylaws provide that a
otherwise provided in the director may be removed from
corporation's certificate of office, with or without cause,
incorporation, a director of a by the holders of a majority of
corporation that has a the shares entitled to vote in
classified board of directors the election of directors. A
may be removed only with cause. director may be removed for
The ASTeX bylaws provide that cause by vote of a majority of
any director or the entire board the directors then in office
of directors may be removed by after reasonable notice and an
the holders of a majority of the opportunity to be heard.
shares then entitled to vote at
an election of directors.
BOARD OF DIRECTOR VACANCIES ASTeX's bylaws provide that MKS' bylaws provide that any
vacancies and newly created vacancy in the board of
directorships may be filled by a directors may be filled by vote
majority of the directors then of a majority of the directors
in office, even though less than present at the meeting of
a quorum, or by a sole remaining directors at which a quorum is
director. present.
</TABLE>
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<TABLE>
<CAPTION>
ASTEX MKS
(DELAWARE) (MASSACHUSETTS)
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<S> <C> <C>
NOTICE OF SPECIAL MEETINGS ASTeX's bylaws provide that MKS' bylaws provide that special
OF THE BOARD OF DIRECTORS special meetings of the board of meetings of the board of
directors may be called by the directors may be called by the
chairman of the board, the chairman of the board,
president, or by two or more president, treasurer, or two or
directors on at least two days' more directors or one in the
notice to each director, if such event there is only one
notice is delivered personally director.
or sent by telegram, or on at
least three days' notice if sent
by mail.
APPROVAL OF LOANS TO The ASTeX bylaws do not provide MKS' bylaws do not provide for
OFFICERS for loans to officers. Under loans to officers. Under
Delaware law, a corporation may Massachusetts law, the directors
lend money to or otherwise and officers who participate in
assist any officer or other a loan by the corporation to any
employee whenever the directors of its officers shall be jointly
judge such a loan or assistance and severally liable for any
reasonably to be expected to unpaid portions of the loan,
benefit the corporation. unless a majority of
disinterested shares entitled to
vote for directors approve or
ratify the loan as one
reasonably expected to benefit
the corporation.
INDEMNIFICATION The ASTeX certificate of MKS' bylaws provide that MKS
incorporation and bylaws provide will, to the extent legally
that the directors and officers permissible, indemnify any
shall be indemnified to the person who is or was serving as
fullest extent authorized by law a director or officer of MKS
against any action, proceeding against all liabilities and
or suit brought against such a expenses, including attorneys'
person by reason of the fact fees, judgments and fines
that he or she is or was a incurred by him in connection
director, officer, employee or with the defense of a civil or
agent of ASTeX or serves or criminal proceeding, while in
served at any other enterprise office or thereafter, by reason
as at the request of ASTeX. of his being or having been a
director or officer. No
Under Delaware law, such amendment to or repeal of this
provision may not eliminate or provision of the MKS articles
limit director monetary shall apply to or have any
liability for: effect on the liability or
alleged liability of any
breaches of the director's duty director for or with respect to
of loyalty to the corporation or any acts or omissions of such
its stockholders; director occurring prior to such
amendment or repeal.
acts or omissions not in good
faith involving intentional Under Massachusetts law, a
misconduct or knowing violations director is generally not
of law; exculpated from liability under
provisions of the Massachusetts
the payment of unlawful Business Corporation Law
dividends or unlawful stock relating to unauthorized
repurchases or distributions and loans to
insiders. The Massachusetts
Business
</TABLE>
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<PAGE> 93
<TABLE>
<CAPTION>
ASTEX MKS
(DELAWARE) (MASSACHUSETTS)
---------- ---------------
<S> <C> <C>
redemptions; or Corporation Law provides that no
indemnification may be provided
any transaction in which the with respect to any matter in
director received an improper which the director or officer
personal benefit. shall have been adjudicated not
to have acted in good faith in
the reasonable belief that his
action was:
in the best interest of the
corporation; or
to the extent that such matter
relates to service with respect
to any employee benefit plan, in
the best interests of the
participants or beneficiaries of
such employee benefit plan.
The Massachusetts Business
Corporation Law does not
explicitly address indemnifying
persons against judgments in
actions brought by or in the
right of the corporation. The
previously discussed standard
applies to such cases.
STOCKHOLDER APPROVAL OF Under Delaware law, "business Massachusetts law prohibits a
CERTAIN BUSINESS combinations" by corporations business combination with an
COMBINATIONS with "interested stockholders" interested stockholder,
are subject to a moratorium of generally defined as a person
three or five years, beneficially owning 5% or more
respectively, unless specified of MKS' outstanding voting
conditions are met. The stock, or an interested
prohibited transactions include, stockholder's affiliate or
a merger with, disposition of associate, for a three-year
assets to, or the issuance of period following the date that a
stock to, the interested stockholder becomes an
stockholder, or certain interested stockholder.
transactions that have the
effect of increasing the MKS' bylaws provide that a
proportionate share of the merger or consolidation may be
outstanding securities held by approved by a vote of two-thirds
the interested stockholder. of the shares of the stock
outstanding; however, if a
Under Delaware law, an merger or consolidation has been
interested stockholder may avoid approved by a majority of the
the prohibition against board of directors, then the
effecting certain significant corporation may authorize or
transactions with the approve such action by a vote of
corporation if the board of a majority of the stock
directors, prior to the time outstanding.
such stockholder becomes an
interested stockholder, approves
such transaction or the
transaction by which such
stockholder becomes an
interested
</TABLE>
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<PAGE> 94
<TABLE>
<CAPTION>
ASTEX MKS
(DELAWARE) (MASSACHUSETTS)
---------- ---------------
<S> <C> <C>
stockholder or if at or
subsequent to such time the
board of directors and the
stockholders approve such
transaction. These provisions of
Delaware law apply to a Delaware
corporation unless the
corporation "opts out" of the
provisions in its certificate of
incorporation or bylaws. ASTeX
has not opted out of these
provisions in its certificate of
incorporation or bylaws and
consequently is subject to these
provisions.
PAR VALUE, DIVIDENDS AND The concepts of par value, Under Massachusetts law,
REPURCHASES OF SHARES capital and surplus are retained corporations generally are
under Delaware law. Delaware law permitted to pay dividends as
permits a corporation to declare long as the action is not taken
and pay dividends out of surplus when the corporation is
or, if there is no surplus, out insolvent, does not render the
of the net profits for the corporation insolvent and does
fiscal year in which the not violate the corporation's
dividend is declared and/or for articles of organization. The
the preceding fiscal year as directors of Massachusetts
long as the amount of capital of corporations may be jointly and
the corporation following the severally liable to the
declaration and payment of the corporation to the extent that
dividend is not less than the the directors authorize a
aggregate amount of the capital dividend when the corporation is
represented by the issued and insolvent or where the amount of
outstanding stock of all classes the dividend exceeds the
having a preference upon the permissible amounts and is not
distribution of assets. In repaid to the corporation.
addition, Delaware law generally
provides that a corporation may MKS' articles of organization
redeem or repurchase its shares provide that dividends may be
only if such redemption or declared and paid on its common
repurchase would not impair the stock from funds lawfully
capital of the corporation. available therefor as and when
Notwithstanding the foregoing, a determined by the board of
Delaware corporation may redeem directors and subject to any
or repurchase shares having a preferential dividend rights of
preference upon the distribution any then outstanding preferred
of any of its assets if such stock.
shares will be retired upon
acquisition, and provided that,
after the reduction in capital
made in connection with such
retirement of shares, the
corporation's remaining assets
are sufficient to pay any debts
not otherwise provided for.
DISSENTERS' OR APPRAISAL Under Delaware law, such rights Under Massachusetts law, a
RIGHTS are not available with respect stockholder may, before the
to a taking of
</TABLE>
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<PAGE> 95
<TABLE>
<CAPTION>
ASTEX MKS
(DELAWARE) (MASSACHUSETTS)
---------- ---------------
<S> <C> <C>
merger or consolidation by a the vote on approval of a merger
corporation the shares of which agreement, file with the
are either listed on a national corporation a written objection
securities exchange or held of to the proposed merger stating
record by more than 2,000 that he intends to demand
stockholders if such payment for his shares if the
stockholders are required to merger is consummated. If the
receive only shares of the shares are not voted in favor of
surviving corporation, shares of the merger, the stockholder may
any other corporation which are have the right to demand in
either listed on a national writing from the corporation, as
securities exchange or held of it exists after the merger,
record by more than 2,000 within twenty days after the
holders, cash in lieu of date of mailing to him of notice
fractional shares or a in writing that the merger has
combination of the foregoing. been consummated, payment for
his shares and an appraisal for
the value thereof.
DESCRIPTION OF COMMON STOCK The holders of ASTeX common The holders of MKS common stock
stock are entitled to one vote are entitled to one vote for
for each share held of record on each share held of record on all
all matters submitted to a vote matters submitted to a vote of
of stockholders. Additional stockholders. The voting,
designations and powers, dividend and liquidation rights
preferences and rights and of the holders of common stock
qualifications, limitations or are subject to and qualified by
restrictions thereof of the the rights of the holders of
shares shall be determined by preferred stock. All outstanding
the board of directors from time shares of common stock are fully
to time. All outstanding shares paid and non-assessable and have
of common stock are fully paid no par value per share.
and non-assessable and have a
par value of $0.01 per share.
DESCRIPTION OF PREFERRED Pursuant to the certificate of Pursuant to MKS' articles of
STOCK incorporation, the board of organization, the board of
directors has the authority, directors has the authority,
without further action by the without further action by the
stockholders, to issue up to stockholders, to issue up to
1,000,000 shares of preferred 2,000,000 shares of preferred
stock, $0.01 par value per stock, $0.01 par value per
share, in one or more series and share, in one or more series,
to fix the designations, powers, and in connection with the
preferences, privileges and creation of any such series, by
relative participating, optional resolution or resolutions
or special rights and the providing for the issue of the
qualifications, limitations or shares thereof, to determine and
restrictions thereof, including fix such voting powers, full or
dividend rights, conversion limited, or no voting powers,
rights, voting rights, terms of and such designations,
redemption and liquidation preferences and relative
preferences, any or all of which participating, optional or other
may be greater than the rights special rights, and
of the common stock. The board, qualifications, limitations or
without stockholder approval, restrictions thereof, including
can issue preferred stock with without limitation thereof,
voting, conversion or other dividend rights, conversion
rights that could rights, redemption privileges
and liquidation preferences,
</TABLE>
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<TABLE>
<CAPTION>
ASTEX MKS
(DELAWARE) (MASSACHUSETTS)
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<S> <C> <C>
adversely affect the voting as shall be stated and expressed
power and other rights of the in such resolutions, all to the
holders of common stock. full extent permitted by Chapter
Preferred stock could thus be l56B of the Massachusetts
issued quickly with terms General Laws. Without limiting
calculated to delay or prevent a the generality of the foregoing,
change in control of ASTeX or the resolutions providing for
make removal of management more issuance of any series of
difficult. Additionally, the preferred stock may provide that
issuance of preferred stock may such series shall be superior or
have the effect of decreasing rank equally or be junior to the
the market price of the common preferred stock of any other
stock, and may adversely affect series to the extent permitted
the voting and other rights of by law. No vote of the holders
the holders of common stock. As of the preferred stock or common
of December 13, 2000, there are stock shall be a prerequisite to
no shares of preferred stock the issuance of any shares of
outstanding. any series of the preferred
stock authorized by and
complying with the conditions of
the articles of organization,
the right to have such vote
being expressly waived by all
present and future holders of
the capital stock of the
corporation.
STOCKHOLDER DERIVATIVE SUITS Under Delaware law, a Under Massachusetts law, a
stockholder may only bring a stockholder may only bring a
derivative action on behalf of derivative action if the
the corporation if the stockholder owned stock in the
stockholder was a stockholder at corporation at the time of the
the time of the transaction in act or omission complained of or
question or his or her stock acquired the stock by operation
thereafter devolved upon him or of law from one who was a
her by operation of law. stockholder at such time.
STOCKHOLDER RIGHTS PLAN As described in the rights
agreement dated March 4, 1998
between ASTeX and Continental
Stock Transfer & Trust Company,
as rights agent, each
outstanding share of ASTeX
Common Stock will permit the
holder to purchase one one-
thousandth of a share of ASTeX
Series A Junior Participating
Preferred Stock, par value $0.01
per share, at a price of $70.00
per share, subject to
adjustment.
The rights are not currently
exercisable but will become
exercisable upon the earlier of:
- 10 days following the public
</TABLE>
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<PAGE> 97
<TABLE>
<CAPTION>
ASTEX MKS
(DELAWARE) (MASSACHUSETTS)
---------- ---------------
<S> <C> <C>
announcement that a person or
group has acquired 15% or more
of ASTeX's outstanding common
stock, or
- 10 days following the
commencement of a tender or
exchange offer which, if
completed, would result in the
offeror owning 15% or more of
the outstanding shares of
ASTeX common stock.
When exercisable, each right
permits its holder to buy that
number of shares of a series of
ASTeX's common stock equal in
value to twice the right's
purchase price. The acquirer who
triggers the rights cannot
exercise or transfer its rights.
If, after the rights are
exercisable, ASTeX is involved
in a merger or other business
combination or if 50% or more of
the assets or earning power of
ASTeX and its subsidiaries are
sold, each rightholder will be
allowed to buy shares of the
acquiring company's common stock
at half their average market
value upon paying the right's
purchase price.
The rights will expire on
December 31, 2007, unless
redeemed. The ASTeX board may
redeem the rights at $.01 per
right any time before the tenth
day after the 15% or greater
acquisition. The rights have
anti-takeover effects. They can
cause substantial dilution to a
person or group that attempts to
acquire ASTeX on terms that are
not approved by the board. The
rights should not interfere with
any merger or other business
combination that ASTeX's board
approves since ASTeX can redeem
the rights before
</TABLE>
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<PAGE> 98
<TABLE>
<CAPTION>
ASTEX MKS
(DELAWARE) (MASSACHUSETTS)
---------- ---------------
<S> <C> <C>
they become exercisable.
In connection with the merger,
ASTeX adopted an amendment to
the rights agreement which
excluded the merger from the
provisions of the agreement.
</TABLE>
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<PAGE> 99
ADDITIONAL PROPOSALS FOR ASTEX ANNUAL MEETING
PROPOSAL 1: ELECTION OF ASTEX DIRECTORS
The bylaws of ASTeX provide for a board of directors which is divided into
three classes. Directors constituting approximately one-third of the board of
directors are elected each year for a period of three years at each ASTeX annual
meeting of stockholders. At this annual meeting, ASTeX stockholders will be
asked to vote to re-elect the members of Class I, Dr. Post and Mr. Anderson, to
serve until the earlier of:
- the completion of the merger, and
- the expiration of a three (3) year term.
The terms of the members of Class II, Messrs. Tarrh and Kahl, are scheduled
to expire in 2001, and the terms of the members of Class III, Messrs. de
Beaumont and Bertucci, are scheduled to expire in 2002. Vacancies and newly
created directorships resulting from any increase in the number of authorized
directors may be filled by a majority vote of the directors then remaining in
office. A director elected to fill a vacancy on the board of directors will be
elected for a term expiring at the annual meeting when the term of a director in
such Class would naturally expire. Officers are elected by and serve at the
discretion of the board of directors.
Shares represented by all proxies received by the board of directors and
not so marked as to withhold authority to vote for an individual director, or
for all directors, will be voted (unless one or more nominees are unable or
unwilling to serve) for the election of the nominees named below. The board of
directors expects that each of the nominees will be available for election, but
if any of them is not a candidate at the time the election occurs, it is
intended that such proxy will be voted for the election of another nominee to be
designated by the board of directors to fill any such vacancy.
A plurality of the shares voted affirmatively or negatively at the annual
meeting is required to elect each nominee as a director.
THE BOARD OF DIRECTORS RECOMMENDS THE ELECTION OF DR. RICHARD S. POST AND
MR. ROBERT R. ANDERSON AS DIRECTORS, EACH TO SERVE UNTIL THE EARLIER OF THE
COMPLETION OF THE MERGER AND THE EXPIRATION OF A THREE YEAR TERM, AND PROXIES
SOLICITED BY THE BOARD WILL BE VOTED IN FAVOR THEREOF UNLESS A STOCKHOLDER HAS
INDICATED OTHERWISE ON THE PROXY.
BOARD OF DIRECTORS
The following table sets forth the year each director was elected a
director and the age, positions and offices presently held by each director with
ASTeX:
<TABLE>
<CAPTION>
CLASS TO
WHICH YEAR FIRST
DIRECTOR BECAME A
NAME AGE BELONGS DIRECTOR POSITION
---- --- -------- ---------- --------
<S> <C> <C> <C> <C>
Richard S. Post, Ph.D.*.............. 57 I 1987 Chief Executive Officer and
Chairman of the Board of Directors
John M. Tarrh........................ 53 II 1987 Vice President, Treasurer,
Secretary and Director
Robert R. Anderson*.................. 63 I 1995 Director
Michel de Beaumont................... 58 III 1993 Director
John R. Bertucci..................... 59 III 1994 Director
Hans-Jochen Kahl..................... 61 II 1995 Director
</TABLE>
---------------
* Nominees for election at this annual meeting.
Mr. Jordan L. Golding has served as an advisor to the board of directors
since 1989.
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<PAGE> 100
The board of directors has appointed an executive committee, presently
comprised of Dr. Post and Mr. Tarrh. The executive committee is authorized to
take any action that the board of directors is authorized to act upon with the
exception of the issuance of stock, the sale of all or substantially all of
ASTeX's assets, or any other significant corporate transaction.
All of the directors of ASTeX who were directors during fiscal year 2000
attended at least 75% of the meetings of the board of directors and the
committees on which they served during fiscal year 2000. The board of directors
met five times formally, while the executive committee met informally on a
number of occasions during fiscal year 2000.
The board of directors also has appointed a compensation committee,
presently comprised of Mr. Kahl with Mr. Golding as an advisor, and an audit
committee comprised of Mr. Bertucci and Mr. Anderson, with Mr. Golding as an
advisor. The compensation committee is responsible for negotiating and approving
compensation arrangements for officers, employees, consultants, and directors,
including the granting of options to purchase ASTeX's common stock pursuant to
any of ASTeX's stock option plans. The audit committee was established for the
purposes of (i) reviewing ASTeX's financial results and recommending the
selection of ASTeX's independent auditors; (ii) reviewing the effectiveness of
ASTeX's accounting policies and practices, financial reporting and internal
controls; and (iii) reviewing the scope of independent audit coverages and fees,
and any transactions that may involve a potential conflict of interest and
internal control systems. The compensation and audit committees met two and four
times, respectively, during fiscal year 2000.
None of the directors or executive officers of ASTeX are related by blood,
marriage, or adoption to any of ASTeX's directors or executive officers.
BACKGROUND
The following is a brief summary of the background of each director of
ASTeX, as well as Mr. Golding, an advisor to the board of directors:
RICHARD S. POST, PH.D. has served as ASTeX's chief executive officer and
chairman of the board since its inception in 1987, and as president from ASTeX's
inception until August 2000. Prior to founding ASTeX, Dr. Post served at the
Massachusetts Institute of Technology from 1981 to 1987. At MIT, Dr. Post served
as a senior research scientist, in the position of head of the Mirror
Confinement Division of the Plasma Fusion Center. Dr. Post earned his Ph.D. in
plasma physics from Columbia University and his BS from the University of
California at Berkeley. He has also completed the owner/president management
program at Harvard Business School.
MR. JOHN M. TARRH served as ASTeX's vice president, treasurer and
secretary, and as a director since its inception in 1987. Mr. Tarrh served as
ASTeX's chief financial officer from January 1987 through November 1999. Mr.
Tarrh became the manager of the Mirror Confinement Division of MIT's Plasma
Fusion Center in 1986 where he was responsible for financial management, project
management and administration. Prior to joining the research staff of MIT in
1978, he was the executive vice president -- operations of Magnetic Engineering
Associates, a privately held, high technology company in Cambridge,
Massachusetts which was owned by Sala Magnetics. Mr. Tarrh presently serves as a
director of QC Optics, Inc., a publicly held designer of laser-based defect
detection systems. Mr. Tarrh received his MS in electrical engineering from MIT,
and he earned his BS in electrical engineering from Virginia Polytechnic
Institute and State University.
MR. ROBERT R. ANDERSON has served as a director of ASTeX since October
1995. Since October 1998, Mr. Anderson has served as the chief executive officer
and chairman of the board of directors of Yield Dynamics, Inc. (formerly
Integral Domain Technologies, Inc.), a manufacturer of yield management
software. From 1996 to 1998, Mr. Anderson served as the chief executive officer
of Silicon Valley Research, Inc., a manufacturer of EDA software for integrated
circuit design and manufacture. Mr. Anderson currently serves as chairman of
Silicon Valley. Previously, Mr. Anderson co-founded in 1975 and served as
chairman of the board of directors, chief financial officer and chief operating
officer of KLA Instruments Corporation (now KLA-Tencor), the leading
manufacturer of yield monitoring and process control systems for the semiconduc-
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<PAGE> 101
tor manufacturing industry, from which he retired in 1994. From 1970 to 1975,
Mr. Anderson was chief financial officer of Computervision Corporation, which
developed and marketed software for design automation and product data
management. Mr. Anderson graduated from Bentley College in 1959.
MR. MICHEL DE BEAUMONT has served as a director of ASTeX since January
1993. Since 1981, Mr. de Beaumont has served as a co-founder and director of
American Equities Overseas (U.K.) Ltd. of London, England, a wholly owned
subsidiary of American Equities Overseas Inc. (American Equities), a private
securities brokerage and corporate finance firm. From 1978 to 1981, Mr. de
Beaumont served as a vice president in the London, England Office of American
Securities Corp., which subsequently was the clearing house for American
Equities until 1993. Mr. de Beaumont has also previously served as a vice
president at Smith Barney Harris Upham and Oppenheimer & Co. Mr. de Beaumont
holds degrees in advanced mathematics, physics and chemistry from the
Universities of Poitiers and Paris, and a degree in business administration from
the University of Paris.
MR. JOHN R. BERTUCCI has served as a director of ASTeX since September
1994. From 1974 to 1995, Mr. Bertucci was president, chief executive officer and
a director of MKS. From 1995 to 1999, Mr. Bertucci was chairman, president,
chief executive officer and a director of MKS and, since May 1999, Mr. Bertucci
has been chairman, chief executive officer and a director of MKS. From October
1998, until its acquisition by Corning on June 12, 2000, Mr. Bertucci served as
a director of IntelliSense Corporation, a privately-owned designer and
manufacturer of micro-electronic machined structures. Mr. Bertucci received a MS
in industrial administration and a BS in metallurgical engineering from
Carnegie-Mellon University.
MR. HANS-JOCHEN KAHL has served as a director of ASTeX since October 1995.
From June 1994 through September 1996, Mr. Kahl served as a consultant to Ebara,
a Japanese manufacturer of industrial water pumps and vacuum process equipment
for the semiconductor industry. Mr. Kahl was employed by Leybold AG, formerly
Leybold-Heraeus GmbH, a leading international manufacturer of vacuum pumps and
other vacuum process equipment for the semiconductor industry, from July 1983 to
March 1992, where he served as a managing director and was primarily responsible
for sales, marketing and strategic planning. Mr. Kahl was appointed to the board
of directors of Leybold in 1987, and since November 1996, he has served as a
director of Solid State Measurement, a privately held manufacturer of high
precision measurement tools. Mr. Kahl served as a member of the board of
directors of Compact Instrument Technology, LLC, of Woburn, Massachusetts from
May 1999 until March 2000, when Compact was acquired by MKS.
MR. JORDAN L. GOLDING, a certified public accountant, has served as an
advisor to ASTeX's board of directors since 1989. Mr. Golding served as a
partner in KPMG LLP until his retirement in 1988, where his client
responsibilities included high technology, merchandising, banking and emerging
companies. After service in the U.S. Navy, he became a partner in Golding,
Golding & Company, which in 1967 merged with KPMG LLP. He has served as
president of the Massachusetts Society of Certified Public Accountants and was
chairman of the management advisory services committee of the American Institute
of Certified Public Accountants. Mr. Golding presently serves as a director of
Canadian Western Bank, a publicly held commercial bank. Mr. Golding serves on
the advisory board of New Balance, Inc., the privately held parent company of
New Balance Athletic Shoe, Inc., and of Grand Circle Corporation, the parent
company of Grand Circle Travel, Inc. and Overseas Adventure Travel, Inc., and as
a consultant to other corporations. Mr. Golding earned a MBA from Harvard
Business School and graduated from Harvard College.
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EXECUTIVE OFFICERS
The executive officers of ASTeX as of December 13, 2000, and their ages and
positions held in ASTeX are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Richard S. Post, Ph.D................ 57 Chief Executive Officer and Chairman of the Board of
Directors
John Edward Ross..................... 56 President and Chief Operating Officer
William S. Hurley.................... 56 Senior Vice President and Chief Financial Officer
John M. Tarrh........................ 53 Vice President, Treasurer and Secretary
Stanley M. Burg...................... 60 Senior Vice President, Systems Group
Jill E. Maunder...................... 44 Vice President, Human Resources
Jack J. Schuss, Ph.D................. 48 Vice President, Engineering
</TABLE>
The following is a brief summary of the background of each executive
officer or key employee of ASTeX, other than Dr. Post and Mr. Tarrh, whose
backgrounds are described above:
MR. JOHN EDWARD ROSS has been ASTeX's president and chief operating officer
since August 2000, its senior vice president since February 2000, its vice
president, business development since January 2000 and served as a consultant to
ASTeX since September 1999. From June 1998 to May 1999, Mr. Ross was the senior
vice president of operations at Topaz Technologies, a company which designs and
manufactures professional, wide format ink jet printing systems. From June 1993
to June 1998, Mr. Ross was the general manager and vice president of operations
at Applied Magnetics Corporation, a manufacturer of read/write recording heads
for computer disk drives. Mr. Ross is also a director of Life Quality Products,
Inc., a privately-held company. Mr. Ross holds a B.S. in Chemistry from Hull
University in Hull, England.
WILLIAM S. HURLEY has been ASTeX's senior vice president and chief
financial officer since November 1999. From August 1996 to October 1999, Mr.
Hurley served as vice president and chief financial officer at Cybex
International, Inc., a publicly-held manufacturer of fitness equipment. From
March 1992 to September 1995, Mr. Hurley was vice president-controller and chief
accounting officer at Bolt, Beranek & Newman, Inc. (the former BBN Corporation).
Since June 1993, Mr. Hurley has been a director of L.S. Starrett Co., a
publicly-held company which produces precision measurement equipment. Mr. Hurley
holds an M.B.A. in Finance from Columbia University and a B.S. in Accounting
from Boston College.
MR. STANLEY M. BURG has been ASTeX's senior vice president, systems group
since December 1998. From July 1995 to November 1998, he was chief executive
officer of Sputtered Films, Inc., a privately-owned company involved in the
design and manufacture of high performance sputtering equipment for the
semiconductor and magnetic storage industries. From 1991 to 1995, Mr. Burg was
group vice president of Implex PLC, a U.K. holding company comprised of
wholly-owned subsidiaries in the semiconductor and memory products business.
MS. JILL E. MAUNDER has been ASTeX's vice president of human resources
since February 1998. From February 1996 to February 1998, Ms. Maunder was the
president of Outsourcing Solutions, Inc., a human resources consulting firm.
From September 1993 to January 1996, Ms. Maunder was vice president, human
resources consulting for Strategic Outsourcing, Inc., a human resources
outsourcing practice. Prior to that Ms. Maunder was director, human resources
for Bull HN Worldwide Information Services. Ms. Maunder holds a bachelor of arts
degree in social service from the University of New Hampshire.
JACK J. SCHUSS, PH.D. has been ASTeX's vice president, engineering since
February 2000. From 1997 to 2000, Dr. Schuss was the director of engineering at
Raytheon RF Components, a designer and manufacturer of monolithic microwave
integrated circuit components and modules for the wireless industry and in
support of Raytheon Company's other businesses. From 1992 to 1997, Dr. Schuss
was the engineering manager at Iridium MMA-Raytheon Co. Dr. Schuss holds a Ph.D.
from Princeton University and an S.B. from Massachusetts Institute of
Technology.
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COMPENSATION OF OFFICERS AND DIRECTORS
EXECUTIVE OFFICERS' COMPENSATION
The following table sets forth the compensation paid to Dr. Post, ASTeX's
chief executive officer and chairman of the board of directors, Mr. Ross,
ASTeX's president and chief operating officer, Mr. Burg, ASTeX's senior vice
president, systems group, Ms. Maunder, ASTeX's vice president, human resources,
Mr. Tarrh, ASTeX's vice president, treasurer and secretary, Mr. Katz, ASTeX's
former senior vice president, global customer operations, and Mr. Chisholm,
ASTeX's former senior vice president and chief operating officer, during the
fiscal years ended July 1, 2000, June 26, 1999, and June 27, 1998.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
---------------------------------------------------------------------- ------------
(a) (b) (c) (d) (e) (f)
SECURITIES
FISCAL UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY(1) BONUS OPTIONS COMPENSATION(2)
--------------------------- ------ --------- -------- ------------ ---------------
<S> <C> <C> <C> <C> <C>
Richard S. Post..................... 2000 $255,179 $199,300 33,000 $13,634
Chief Executive Officer and 1999 $220,301 $ 59,264 34,000 $ 1,318
Chairman of the Board 1998 $190,299 $ 52,681 30,000 $ 4,179
John Edward Ross.................... 2000(3) $217,290 $ 45,960 55,000 $ --
President and Chief
Operating Officer
Stanley M. Burg..................... 2000 $193,671 $ 84,869 15,000 $58,363(4)
Senior Vice President, 1999(5) $102,312 $ 40,786 70,000 $ 1,315
Systems Group
Jill E. Maunder..................... 2000 $138,246 $ 52,645 10,000 $ 7,727
Vice President, 1999 $129,038 $ 14,736 10,000 $ 924
Human Resources 1998(5) $ 48,563 $ 5,766 20,000 $30,394(4)
John M. Tarrh....................... 2000 $128,369 $ 43,714 11,000 $ 5,162
Vice President, Treasurer and 1999 $123,676 $ 15,555 10,000 $ 856
Secretary 1998 $104,748 $ 19,563 15,000 $ 3,322
Brian R. Chisholm................... 2000(5) $197,319 $ 98,153 25,000 $ --
Chief Operating Officer and 1999 $175,428 $ 46,734 25,000 $ 658
Senior Vice President(6) 1998 $148,609 $ 34,648 25,000 $ 4,431
Avishay Katz........................ 2000(5) $186,452 $ 76,000 25,000 $ 7,874
Senior Vice President, 1999 $168,039 $ 40,165 25,000 $ 1,224
Global Customer Operations(7) 1998(5) $ 96,720 $ 11,429 45,000 $ --
</TABLE>
---------------
(1) Amounts shown indicate cash compensation earned and received by Drs. Post
and Katz and Messrs. Tarrh, Burg, Ross, and Chisholm and Ms. Maunder; no
amounts were earned but deferred at their election. Dr. Post and Messrs.
Tarrh, Ross, and Burg, and Ms. Maunder participate, and Mr. Chisholm and Dr.
Katz participated, in ASTeX's group health and life insurance programs and
other benefits generally available to all employees of ASTeX.
(2) Amounts shown represent matching contributions made by ASTeX under its
401(k) Plan, unless additional amounts are footnoted below.
(3) Mr. Ross joined ASTeX as an employee on January 4, 2000. Amounts shown in
this column include $27,282 paid for Mr. Ross' services as a consultant to
ASTeX prior to his employment by ASTeX.
(4) Includes one time payment of relocation expenses in amount of $30,000.
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<PAGE> 104
(5) Represents partial year compensation.
(6) Effective July 28, 2000, Mr. Chisholm is no longer an employee of ASTeX.
(7) Effective June 30, 2000, Dr. Katz is no longer an employee of ASTeX.
OPTION GRANTS IN FISCAL YEAR 2000
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES OF STOCK
PRICE APPRECIATION FOR
INDIVIDUAL GRANTS OPTION TERM(4)
---------------------------------------------------------------------------- -----------------------
(a) (b) (c) (d) (e) (f) (g)
NUMBER OF % OF TOTAL
SECURITIES OPTIONS GRANTED TO EXERCISE OR
UNDERLYING OPTIONS EMPLOYEES IN BASE PRICE EXPIRATION
NAME GRANTED(#)(1) FISCAL YEAR(2) ($/SH) DATE(3) 5% 10%
---- ------------------ ------------------ ----------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Richard S. Post...... 33,000 5% $ 22.00 10/04/2004 $200,580 $443,238
Stanley M. Burg...... 15,000 2.3% $ 22.00 10/04/2004 $ 91,173 $201,468
John Edward Ross..... 45,000 6.9% $31.9375 01/04/2005 $397,068 $877,417
10,000 1.5% $20.8125 05/17/2005 $ 57,501 $127,062
Jill E. Maunder...... 10,000 1.5% $ 22.00 10/04/2004 $ 60,782 $134,312
John M. Tarrh........ 11,000 1.7% $ 22.00 10/04/2004 $ 66,860 $147,743
Brian R. Chisholm.... 25,000 3.8% $ 22.00 10/04/2004 $151,955 $335,781
Avishay Katz......... 10,000 1.5% $ 21.75 07/01/2004 $ 60,091 $132,786
15,000 2.3% $ 22.00 10/04/2004 $ 91,173 $201,468
</TABLE>
---------------
(1) The options granted in the fiscal year ended July 1, 2000 are exercisable as
follows: 20% of the shares become exercisable on the date of the issuance of
the options and an additional 20% of the option shares become exercisable on
each successive anniversary date, with full vesting occurring on the fourth
anniversary date.
(2) In the fiscal year ended July 1, 2000, options to purchase a total of
653,445 shares of ASTeX common stock were granted to employees of ASTeX,
including executive officers.
(3) The options are subject to earlier termination upon certain events related
to termination of employment.
(4) The dollar gains under these columns result from calculations discussing
hypothetical growth rates as set by the Commission and are not intended to
forecast future price appreciation of the Common Stock.
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<PAGE> 105
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR END OPTION VALUES
<TABLE>
<CAPTION>
(a) (b) (c) (d) (e)
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS AT
SHARES OPTIONS AT FISCAL YEAR END FISCAL YEAR END
ACQUIRED ON VALUE --------------------------- -----------------------------
NAME EXERCISE(#) REALIZED(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ----------- ----------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Richard S. Post....... 61,048 $788,703.80 6,600 52,800 $ 25,275.00 $639,348.00
Stanley M. Burg....... 15,600 $299,956.25 15,400 54,000 $ 198,475.00 $617,250.00
Jill E. Maunder....... 16,000 $426,750.00 2,000 22,000 $ 7,750.00 $322,000.00
John M. Tarrh......... 34,150 $803,311.58 7,150 17,800 $ 62,975.00 $210,224.90
John Edward Ross(2)... -- -- 11,000 44,000 $ 10,125.00 $ 40,500.00
Brian R. Chisholm..... -- -- 69,600 51,000 $1,323,575.10 $725,500.00
Avishay Katz.......... 30,800 $655,738.19 15,859 48,341 $ 241,153.62 $748,696.30
</TABLE>
---------------
(1) Amounts shown in this column do not necessarily represent actual value
realized from the sale of the shares acquired upon exercise of the option
because in many cases the shares are not sold on exercise but continue to be
held by the executive officer exercising the option. The amounts shown
represent the difference between the option exercise price and the market
price on the date of exercise, which is the amount that would have been
realized if the shares had been sold immediately upon exercise.
(2) Mr. Ross joined ASTeX in January 2000.
COMPENSATION OF DIRECTORS
Messrs. Anderson, Bertucci, de Beaumont and Kahl receive $1,000 per meeting
for participation in board of directors meetings, and $500 per meeting for
participation in Committee meetings. All non-employee directors receive
reimbursement of reasonable travel expenses.
Pursuant to ASTeX's Formula Plan, effective on and commencing as of
November 16, 1995, all non-employee directors received a grant of options to
purchase 18,000 shares of common stock at an exercise price equal to the fair
market value of the common stock on such date of grant. Of the options received
in the foregoing grant, options to purchase 1,000 shares of common stock vested
immediately and the remaining options vested quarterly in increments of options
to purchase 1,000 shares of common stock, subject to the option holder's
continued service as a director of ASTeX. Effective as of November 19, 1998, all
non-employee directors received a grant of options to purchase 8,500 shares of
common stock at an exercise price equal to the fair market value of the common
stock on such grant date, such options vesting in four equal quarterly
installments on each of November 20, 1998, February 20, 1999, May 20, 1999 and
August 20, 1999. Additionally, effective as of November 18, 1999, all
non-employee directors received a grant of options to purchase 11,500 shares of
common stock at an exercise price equal to the fair market value of the common
stock on such grant date, such options vesting in four equal quarterly
installments on each of November 18, 1998, February 18, 2000, May 18, 2000 and
August 18, 2000.
EMPLOYMENT AGREEMENTS, TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL
ARRANGEMENTS
ASTeX has entered into employment agreements with Dr. Post and Mr. Tarrh
which are renewable annually. During the fiscal year ended July 1, 2000, Dr.
Post and Mr. Tarrh had annual salaries of approximately $255,000 and $128,000,
respectively. In September 2000, Dr. Post's base salary was further increased
from approximately $255,000 to approximately $335,000. Under the terms of these
agreements, base salaries and bonuses of officers are determined by the board of
directors, with each officer eligible to receive a bonus if ASTeX exceeds
operating profit goals (exclusive of extraordinary items of gain and loss) for
the fiscal year (the "Bonus Plan"). Pursuant to the Bonus Plan, Dr. Post and Mr.
Tarrh earned bonuses of $199,300 and $43,714, respectively, during the fiscal
year ended July 1, 2000. Dr. Post and Mr. Tarrh are each entitled to receive
benefits offered to ASTeX's employees generally and to receive twelve (12)
months base salary as severance in the event his employment is terminated by
ASTeX without cause. In addition, the employment
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<PAGE> 106
agreements preclude each individual from competing with ASTeX during his
employment and for at least two years thereafter, from disclosing confidential
information, and each agreement contains an ownership provision in ASTeX's favor
for techniques, discoveries and inventions arising during the term of
employment.
Each of the employment agreements for Dr. Post and Mr. Tarrh were amended
in July 1996, to provide that in addition to the severance benefits discussed
above, in the event of a sale or change of control in ASTeX, and if their
employment is terminated without cause, or if they are transferred outside of
Eastern Massachusetts or if they have a significant reduction in responsibility
with ASTeX, then they shall be entitled to receive 299% of their prior year's
compensation (as determined by Section 280G of the Internal Revenue Code of
1986, as amended). These employment agreements, as modified, also provide that
if the executive remains with ASTeX for one year after a sale or change of
control in ASTeX, then he shall receive as a bonus an amount equal to 18 months
of his then current base salary. In addition, in the event of termination
without cause or for good reason following a change of control Dr. Post's and
Mr. Tarrh's stock options vest immediately prior, but subject to, the change of
control.
ASTeX also has entered into employment agreements with Messrs. Ross, Burg,
Hurley and Schuss and Ms. Maunder, each of which are renewable annually.
According to the terms of these agreements, base salaries and bonuses are
determined by the board of directors. Mr. Ross is entitled to a base salary of
$240,006 from the commencement of his employment through September 30, 2001, and
Messrs. Burg's, Hurley's and Schuss' and Ms. Maunder's base salaries for the
fiscal year ended July 1, 2000 were approximately $195,000, $193,213, $175,000
and $140,000, respectively. Under their employment agreements Messrs. Ross
(commencing with Fiscal Year 2001), Burg, Hurley and Schuss, and Ms. Maunder are
eligible to receive an annual bonus of up to 40%, 40%, 30%, 30% and 25%,
respectively, of their then current base salary. They also are entitled to
receive benefits offered to ASTeX's employees generally and to receive, twelve
(12) months for Mr. Ross, and six (6) months for Messrs. Burg, Schuss, Hurley
and Ms. Maunder, base salary or until he/she starts a full time position with
another company, whichever is sooner, as severance in the event his/her
employment is terminated by ASTeX without cause or is not renewed for an
additional term.
In addition, the employment agreements preclude each executive from (i)
competing with ASTeX during their employment, and with respect Mr. Ross for one
(1) year, and with respect to Ms. Maunder for (2) two years, thereafter, and
(ii) from disclosing confidential information, and each agreement contains an
ownership provision in ASTeX's favor for techniques, discoveries and inventions
arising during the term of employment. Under their agreements Messrs. Ross,
Hurley, Burg, Schuss and Ms. Maunder received initial stock option grants of
65,000, 65,000, 45,000, 30,000 and 20,000, respectively. Mr. Ross' options
granted under his employment agreement vest in five equal installments
commencing on the date of grant and thereafter, on the anniversary of the date
he commenced employment with ASTeX, with full acceleration of vesting upon a
change in control. Messrs. Burg's, Hurley's and Schuss' and Ms. Maunder's
options vest 20% six (6) months after the date of the grant with the remaining
80% vesting in four (4) equal annual installments on the anniversary date of
such grant, with an additional 20% of the unvested shares, if any, vesting in
the event of a change in control. Each of these employment agreements also
provides that the officers would receive additional option grants at the
discretion of the ASTeX board of directors.
Messrs. Burg's, Hurley's and Schuss' and Ms. Maunder's employment
agreements were each amended in September 2000. Mr. Ross's employment agreement,
and Messrs. Burg's, Hurley's and Schuss' and Ms. Maunder's employment agreements
as amended, further provide, that in addition to the severance benefits
discussed above, in the event of a sale or change of control in ASTeX, if within
eighteen (18) months thereafter, (i) their employment is terminated without
cause, (ii) they are transferred more than 50 miles from their principal office
(as existed prior to the change of control), (iii) if they have a significant
reduction in responsibility with ASTeX, (iv) their base salary is reduced (other
than a reduction in management salaries generally), or (iv) they become
ineligible for the Management Bonus Program, then they shall be entitled to
receive twelve (12) months base salary as severance.
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401(k) PLAN
Effective July 1990, ASTeX adopted and established a 401(k) Employee
Benefit Plan. Under the 401(k) Plan, any employee who has completed 90 days of
service and has attained the age of 21 years is eligible to participate. Under
the terms of the 401(k) Plan, an employee may defer up to 15% of his or her
compensation through contributions to the 401(k) Plan. Also, ASTeX may make
discretionary matching contributions on behalf of the participating employees.
Amounts contributed to the 401(k) Plan by ASTeX are subject to a six year
vesting schedule. ASTeX made voluntary matching contributions to the 401(k) Plan
during fiscal year 2000 of $392,351.25 on behalf of all eligible employees.
BOARD COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The board of directors established a compensation committee in November
1994. The committee is currently composed of Mr. Kahl, with Mr. Golding serving
as an advisor, and is responsible for setting and administering the policies
which govern annual compensation for ASTeX's executives. Following review and
approval by the committee of the compensation policies, all issues pertaining to
executive compensation are submitted to the board of directors for approval.
The committee believes that the primary objectives of ASTeX's compensation
policies are to attract and retain a management team that can effectively
implement and execute ASTeX's strategic business plan. These compensation
policies include (i) an overall management compensation program that is
competitive with management compensation programs at companies of similar size;
(ii) to recognize individual initiative, leadership and achievement; (iii)
short-term bonus incentives for management to meet ASTeX's net income
performance goals; and (iv) long-term incentive compensation in the form of
stock options and other long-term equity compensation that will encourage
management to continue to focus on shareholder return.
The committee's goal is to use compensation policies to closely align the
interests of ASTeX with the interests of shareholders so that ASTeX's management
have incentives to achieve short-term performance goals while building long-term
value for ASTeX's shareholders. The committee will review its compensation
policies from time to time in order to determine the reasonableness of ASTeX's
compensation programs and to take into account factors which are unique to
ASTeX.
The committee has entered into employment agreements with all of the
officers of ASTeX, which include Drs. Post and English and Messrs. Ross, Tarrh,
Burg, Hurley and Schuss and Ms. Maunder. These agreements are renewable
annually, and provide for termination for cause as well as termination without
cause and limit competition if the officer's employment is terminated.
Base Salaries. For the fiscal year ended July 1, 2000, Dr. Post's base
salary was increased from $228,488 to $265,012.80 per annum; Mr. Tarrh's base
salary was increased from $123,676 to $128,000 per annum; Mr. Chisholm's base
salary was increased from $190,008 to $200,012 per annum; Dr. Katz' base salary
was increased from $168,000 to $186,000 per annum; and Ms. Maunder's base salary
was increased from $133,473 to $140,004 per annum. The base salaries of Mr.
Ross, Mr. Burg and Mr. Schuss in fiscal year 2000 were $190,008, $195,020, and
$175,000, respectively. In September 2000, as part of ASTeX's annual salary
review, Dr. Post's base salary was increased from $265,012.80 to $335,318. The
Compensation Committee believes that these salaries reflect base salaries paid
to senior officers of other companies of similar size and also reflect
improvements in ASTeX's financial performance to date.
Bonus Plan. To further provide incentives for management to continue to
improve operating results, in August 1994, the board of directors implemented
the bonus plan. Pursuant to the bonus plan, the board of directors may grant
bonuses to certain executive officers based on each individual's achievement of
certain specified goals previously approved by the board of directors. The
amounts to be distributed pursuant to the bonus plan are determined by the
amount by which operating profits exceed the operating profit goal, which is
established annually. The Committee believes that the bonus plan provides
significant incentive to the executive officers of ASTeX to exceed the operating
profit goal.
Long Term Incentive Compensation. Long-term incentive compensation, in the
form of stock options, allows the executive officers to share in any
appreciation in the value of ASTeX's common stock. The
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Committee believes that stock option participation aligns executive officers'
interests with those of the stockholders. In addition, the Committee believes
that equity ownership by executive officers helps to balance the short term
focus of annual incentive compensation with a longer term view and may help to
retain key executive officers.
When establishing stock option grant levels, the Committee considers
general corporate performance, the Chief Executive Officer's recommendations,
level of seniority and experience, existing levels of stock ownership, previous
grants of stock options, vesting schedules of outstanding options and the
current stock price.
It is the standard policy of ASTeX to grant an initial stock option grant
to all executive officers at the time they commence employment consistent with
the number of options granted to executive officers in the industry at similar
levels of seniority. In addition, the Committee may also make performance-based
grants throughout the year. In making such performance-based grants, the
Committee considers individual contributions to ASTeX's financial, operational
and strategic objectives.
Senior management also participates in company-wide employee benefit plans,
including ASTeX's 401(k) Plan. Benefits under these plans are not dependent upon
individual performance.
Compensation for Chief Executive Officer. Dr. Post's compensation was
based upon a careful analysis of other comparable public companies' Chief
Executive Officers' compensation and Dr. Post's efforts and success in the
following areas: improving ASTeX's operating results; establishing strategic
goals and objectives for the long-term growth of ASTeX; and advancing ASTeX in
obtaining its strategic goals.
COMPENSATION COMMITTEE
HANS-JOCHEN KAHL,
Chairman
December 13, 2000
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PERFORMANCE GRAPH
The following graph compares the cumulative total stockholder return
(assuming reinvestment of dividends) from investing $100 on July 1, 1995 (the
trading day at the beginning of ASTeX's fiscal year 1996), and plotted on the
last trading day of the fiscal years ended July 1, 1995, June 29, 1996, June 28,
1997, June 27, 1998, June 26, 1999, and July 1, 2000, in each of (i) ASTeX
common stock, (ii) the Nasdaq Market Index of companies; and (iii) a peer group
index based upon Standard Industry Classification number 3559, special industry
machinery, N.E.C., referred to below as the SIC Code Index, which consists of
other companies in special industry machinery. The graph was compiled by Media
General Financial Services, Inc. The stock price performance on the graph below
is not necessarily indicative of future price performance. ASTeX common stock is
listed on the Nasdaq National Market under the ticker symbol "ASTX."
[COMPARISON GRAPH]
<TABLE>
<CAPTION>
APPLIED SCIENCE AND
TECHNOLOGY, INC. NASDAQ MARKET INDEX SIC CODE INDEX
------------------- ------------------- --------------
<S> <C> <C> <C>
June 30, 1995 100.00 100.00 100.00
June 28, 1996 107.86 125.88 73.83
June 27, 1997 152.81 151.64 122.76
June 26, 1998 104.44 201.01 97.72
June 25, 1999 284.69 281.68 182.97
June 30, 2000 348.70 423.84 412.24
</TABLE>
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COMPLIANCE WITH SECTION 16(a)
OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
executive officers, directors, and persons who beneficially own more than ten
percent (10%) of ASTeX's stock to file initial reports of ownership on Form 3
and reports of changes in ownership on Form 4 with the Securities and Exchange
Commission and any national securities exchange on which ASTeX's securities are
registered. Executive officers, directors and greater than ten percent (10%)
beneficial owners are required by the Commission's regulations to furnish ASTeX
with copies of all Section 16(a) forms they file.
Based solely on a review of the copies of such forms furnished to ASTeX and
written representations from the executive officers and directors, ASTeX
believes that all its executive officers, directors, and greater than ten
percent (10%) beneficial owners complied with all applicable Section 16(a)
filing requirements, with the following exception: Dr. Post failed to timely
file a Form 4 reporting three exercises of stock options aggregating 61,048
shares.
DIVIDEND POLICY
ASTeX has not paid dividends on its common stock since its inception and
has no intention of paying any dividends in the foreseeable future. ASTeX's
current credit facility arrangements restrict ASTeX's ability to declare cash
dividends without the lender's prior written consent. ASTeX intends to reinvest
future earnings, if any, in the development and expansion of its business. Any
declaration of dividends will be at the election of the board of directors and
will depend upon the earnings, capital requirements and financial position of
ASTeX, general economic conditions, requirements of any bank lending
arrangements which may then be in place, and other pertinent factors.
PROPOSAL 2: RATIFICATION OF AUDITORS
The persons named in the enclosed proxy will vote to ratify the appointment
of KPMG LLP as independent auditors for the fiscal year ending July 1, 2001. The
board proposes that the ASTeX stockholders ratify this appointment, although
such ratification is not required under Delaware law or ASTeX's Certificate of
Incorporation or Bylaws, each as amended. A representative of KPMG LLP is
expected to be present at the annual meeting, and will have the opportunity to
make a statement and answer questions from ASTeX stockholders if he or she so
desires.
The affirmative vote of a majority of the shares present or represented and
voting at the annual meeting is required to ratify the appointment of the
independent auditors.
In the event that the ratification of the appointment of KPMG LLP as the
independent public accountants for ASTeX is not obtained at the meeting, the
board of directors will reconsider its appointment.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE TO APPROVE THE RATIFICATION OF THE
APPOINTMENT OF KPMG LLP AS INDEPENDENT AUDITORS, AND PROXIES SOLICITED BY THE
BOARD WILL BE VOTED IN FAVOR THEREOF UNLESS A STOCKHOLDER HAS INDICATED
OTHERWISE ON THE PROXY.
STOCKHOLDER PROPOSALS
Only if the merger is not completed, ASTeX will set a date for its 2001
annual meeting of stockholders. ASTeX's by-laws provide that in order for a
stockholder to bring business before or propose director nominations at an
annual meeting that is called for a date that is within 30 days before or after
the anniversary date of the immediately preceding annual meeting of
stockholders, the stockholder must give written notice to ASTeX not less than 60
days nor more than 90 days prior to the anniversary date. If the annual meeting
is called for a date that is not within 30 days before or after the anniversary
date of the immediately preceding annual meeting of stockholders, a stockholder
must give written notice to ASTeX not later than the close of business on the
tenth day following the day on which notice of the date of the meeting was
mailed or public
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disclosure of the date of the meeting was made, whichever comes first. The
notice must contain specified information about the proposed business or each
nominee and the stockholder making the proposal or nomination. ASTeX suggests
that proponents submit their proposals by certified mail, return receipt
requested, addressed to the President of ASTeX.
LEGAL MATTERS
The validity of the shares of MKS common stock to be issued in connection
with the merger will be passed on for MKS by Hale and Dorr LLP.
EXPERTS
The financial statements of MKS incorporated in this joint proxy
statement/prospectus by reference to the Annual Report on Form 10-K for the year
ended December 31, 1999 have been so incorporated in reliance on the report of
PricewaterhouseCoopers LLP, independent accountants, given on the authority of
said firm as experts in auditing and accounting.
The consolidated financial statements of ASTeX as of June 26, 1999 and July
1, 2000 and for each of the years in the three-year period ended July 1, 2000,
have been incorporated by reference into this joint proxy statement/prospectus
in reliance upon the report of KPMG LLP, independent certified public accounts,
incorporated by reference herein, and upon the authority of said firm as experts
in accounting and auditing.
WHERE YOU CAN FIND MORE INFORMATION
MKS and ASTeX each file annual, quarterly and special reports, proxy
statements and other information with the Securities and Exchange Commission.
MKS and ASTeX stockholders may read and copy any reports, statements or other
information that MKS or ASTeX files at the Securities and Exchange Commission's
public reference rooms in Washington, D.C., New York, New York and Chicago,
Illinois. Please call the Securities and Exchange Commission at 1-800-SEC-0330
for further information on the public reference rooms. Securities and Exchange
Commission filings are also available to the public from commercial document
retrieval services and at the web site maintained by the Securities and Exchange
Commission at http://www.sec.gov.
MKS filed with the Securities and Exchange Commission a registration
statement on Form S-4 under the Securities Act of 1933 to register with the
Securities and Exchange Commission the MKS common stock issuable pursuant to the
merger agreement. This joint proxy statement/prospectus does not contain all the
information you can find in the registration statement or the exhibits and
schedules to the registration statement. For further information with respect to
MKS, ASTeX and the MKS common stock, please refer to the registration statement,
including the exhibits and schedules. You may inspect and copy the registration
statement, including the exhibits and schedules, as described above. Statements
contained in this joint proxy statement/prospectus about the contents of any
contract or other document are not necessarily complete, and MKS refers you, in
each case, to the copy of the contract or other document filed as an exhibit to
the registration statement.
The Securities and Exchange Commission allows MKS and ASTeX to "incorporate
by reference" information into this proxy statement/prospectus, which means that
MKS and ASTeX can disclose important information to their stockholders by
referring them to another document filed separately with the Securities and
Exchange Commission. The information incorporated by reference is deemed to be
part of this proxy statement/prospectus, except for any information superseded
by information in this proxy statement/prospectus. This proxy
statement/prospectus incorporates by reference the documents set forth below
that MKS and ASTeX have previously filed with the Securities and Exchange
Commission. These documents contain important information that you should read
about MKS and ASTeX and their finances.
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<TABLE>
<CAPTION>
MKS SECURITIES AND EXCHANGE
COMMISSION FILINGS (FILE NO. 000-23621) PERIOD
--------------------------------------- ------
<S> <C>
Annual Report on Form 10-K................................ Fiscal year ended December 31, 1999
Quarterly Report on Form 10-Q............................. Quarter ended March 31, 2000
Quarterly Report on Form 10-Q............................. Quarter ended June 30, 2000
Quarterly Report on Form 10-Q............................. Quarter ended September 30, 2000
Current Report on Form 8-K................................ Filed on June 28, 2000
Current Report on Form 8-K................................ Filed on October 11, 2000
Definitive Proxy Statement on Schedule 14A................ Annual Meeting of Stockholders held
on May 17, 2000
Registration Statement on Form 8-A........................ Filed on March 2, 1999
</TABLE>
<TABLE>
<CAPTION>
ASTEX SECURITIES AND EXCHANGE
COMMISSION FILINGS (FILE NO. 0-22646) PERIOD
------------------------------------- ------
<S> <C>
Current Report on Form 8-K................................ Filed on October 10, 2000
Annual Report on Form 10-K/A.............................. Fiscal year ended July 1, 2000
Quarterly Report on Form 10-Q............................. Quarter ended September 30, 2000
</TABLE>
MKS stockholders may request a copy of the MKS documents described above,
which will be provided at no cost, by contacting MKS Instruments, Inc., Six
Shattuck Road, Andover, Massachusetts 01810, Attention: Ronald C. Weigner,
Telephone: (978) 975-2350.
ASTeX stockholders may request a copy of the ASTeX documents described
above, which will be provided at no cost, by contacting Applied Science and
Technology, Inc., 90 Industrial Way, Wilmington, Massachusetts 01887, Attn: John
M. Tarrh, Telephone: (978) 284-4000.
MKS and ASTeX are each also incorporating by reference additional documents
that they may file with the Securities and Exchange Commission between the date
of this joint proxy statement/prospectus and the date of the special meeting of
MKS stockholders and the annual meeting of the ASTeX stockholders.
MKS has supplied all information contained in this joint proxy
statement/prospectus relating to MKS, and ASTeX has supplied all information
contained in this joint proxy statement/prospectus relating to ASTeX.
MKS and ASTeX stockholders should rely only on the information contained in
this joint proxy statement/prospectus to vote on the proposal(s) to be
considered at their respective stockholders meetings. MKS and ASTeX have not
authorized anyone to provide you with information that is different from what is
contained in this joint proxy statement/prospectus. This joint proxy
statement/prospectus is dated December 13, 2000. MKS and ASTeX stockholders
should not assume that the information contained in this joint proxy
statement/prospectus is accurate as of any date other than December 13, 2000,
and neither the mailing of the joint proxy statement/prospectus to ASTeX and MKS
stockholders nor the issuance of MKS common stock in the merger shall create any
implication to the contrary.
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ANNEX A
--------------------------------------------------------------------------------
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AGREEMENT AND PLAN OF MERGER
BY AND AMONG
APPLIED SCIENCE AND TECHNOLOGY, INC.
MKS INSTRUMENTS, INC.
AND
MANGO SUBSIDIARY CORP.
DATED AS OF OCTOBER 2, 2000
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
<PAGE> 114
TABLE OF CONTENTS
<TABLE>
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<S> <C> <C>
I. THE MERGER; CLOSING; EFFECTIVE TIME......................................... A-1
1.1 The Merger.................................................. A-1
1.2 Closing..................................................... A-1
1.3 Effective Time.............................................. A-1
II. CERTIFICATE OF INCORPORATION AND BYLAWS OF THE SURVIVING CORPORATION.......
A-1
2.1 The Certificate of Incorporation............................ A-1
III. OFFICERS AND DIRECTORS OF THE SURVIVING CORPORATION....................... A-2
3.1 Directors................................................... A-2
3.2 Officers.................................................... A-2
IV. EFFECT OF THE MERGER ON CAPITAL STOCK; EXCHANGE OF CERTIFICATES............
A-2
4.1 Effect on Capital Stock..................................... A-2
4.2 Exchange of Certificates for Shares......................... A-2
4.3 Appraisal Rights............................................ A-4
4.4 Adjustments to Exchange Ratio............................... A-4
4.5 Unvested Stock.............................................. A-5
V. REPRESENTATIONS AND WARRANTIES OF THE COMPANY............................... A-5
5.1 Organization, Good Standing and Qualification............... A-5
5.2 Capital Structure........................................... A-6
5.3 Corporate Authority; Approval and Fairness.................. A-6
5.4 Governmental Filings; No Violations......................... A-7
5.5 Company Reports: Financial Statements....................... A-8
5.6 Absence of Certain Changes.................................. A-8
5.7 Litigation.................................................. A-8
5.8 Employee Benefits........................................... A-8
5.9 Compliance with Laws........................................ A-10
5.10 Required Vote............................................... A-10
5.11 Owned and Leased Real Properties............................ A-10
5.12 Environmental Matters....................................... A-10
5.13 Accounting and Tax Qualification Matters.................... A-11
5.14 Taxes....................................................... A-11
5.15 Labor Matters............................................... A-12
5.16 Intellectual Property....................................... A-12
5.17 Agreements, Contracts and Commitments....................... A-13
5.18 Brokers and Finders......................................... A-13
5.19 Board Recommendation........................................ A-14
5.20 No Existing Discussions..................................... A-14
5.21 Section 203 of the DGCL Not Applicable...................... A-14
5.22 Rights Agreement............................................ A-14
5.23 Assets...................................................... A-14
</TABLE>
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<TABLE>
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5.24 Customers and Suppliers..................................... A-14
5.25 Business Activity Restrictions.............................. A-14
5.26 Disclosure.................................................. A-15
5.27 No Other Representations or Warranties...................... A-15
VI. REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB.................... A-15
6.1 Ownership of Company Shares................................. A-15
6.2 Capitalization of Merger Sub................................ A-15
6.3 Organization, Good Standing and Qualification............... A-15
6.4 Capital Structure........................................... A-16
6.5 Corporate Authority: Approval and Fairness.................. A-16
6.6 Governmental Filings; No Violations......................... A-17
6.7 Parent Reports; Financial Statements........................ A-17
6.8 Absence of Certain Changes.................................. A-17
6.9 Litigation.................................................. A-17
6.10 Compliance with Laws........................................ A-18
6.11 Required Vote............................................... A-18
6.12 No Owned Real Properties.................................... A-18
6.13 Environmental Matters....................................... A-18
6.14 Accounting and Tax Qualification Matters.................... A-18
6.15 Taxes....................................................... A-19
6.16 Labor Matters............................................... A-19
6.17 Intellectual Property....................................... A-19
6.18 Brokers and Finders......................................... A-20
6.19 Board Recommendation........................................ A-20
6.20 Assets...................................................... A-20
6.21 Customers and Suppliers..................................... A-20
6.22 Business Activity Restrictions.............................. A-21
6.23 Disclosure.................................................. A-21
6.24 No Other Representations or Warranties...................... A-21
VII. COVENANTS................................................................. A-21
7.1 Interim Covenants........................................... A-21
7.2 Acquisition Proposals....................................... A-23
7.3 Information Supplied........................................ A-24
7.4 Shareholders' Meetings...................................... A-25
7.5 Filings; Other Actions; Notification........................ A-25
7.6 Accounting.................................................. A-27
7.7 Access...................................................... A-27
7.8 Affiliates.................................................. A-27
7.9 Stock Exchange Listing and De-listing....................... A-28
7.10 Publicity................................................... A-28
7.11 Stock Options; Election of Directors........................ A-28
7.12 Expenses.................................................... A-29
</TABLE>
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<TABLE>
<CAPTION>
PAGE
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<S> <C> <C>
7.13 Indemnification; Directors' and Officers' Insurance......... A-29
7.14 Takeover Statute............................................ A-30
7.15 Parent Vote................................................. A-30
7.16 "Pooling of Interests" Letters.............................. A-30
7.17 Offers of Employment........................................ A-30
7.18 Stockholder Litigation...................................... A-30
VIII. CONDITIONS............................................................... A-31
8.1 Conditions to Each Party's Obligation to Effect the
Merger...................................................... A-31
8.2 Conditions to Obligations of Parent and Merger Sub.......... A-31
8.3 Conditions to Obligations of the Company.................... A-32
IX. TERMINATION................................................................ A-33
9.1 Termination by Mutual Consent............................... A-33
9.2 Termination by Either Parent or the Company................. A-33
9.3 Termination by the Company.................................. A-33
9.4 Termination by Parent....................................... A-33
9.5 Effect of Termination and Abandonment....................... A-34
9.6 Fees and Expenses........................................... A-34
X. MISCELLANEOUS AND GENERAL................................................... A-35
10.1 Survival.................................................... A-35
10.2 Modification or Amendment................................... A-35
10.3 Waiver of Conditions........................................ A-35
10.4 Counterparts................................................ A-35
10.5 Governing Law and Venue; Waiver of Jury Trial............... A-35
10.6 Notices..................................................... A-36
10.7 Entire Agreement: no other representations.................. A-36
10.8 No Third Party Beneficiaries................................ A-36
10.9 Obligations of Parent and of the Company.................... A-37
10.10 Severability................................................ A-37
10.11 Interpretation.............................................. A-37
10.12 Assignment.................................................. A-37
10.13 Glossary of Terms........................................... A-37
</TABLE>
<TABLE>
<CAPTION>
EXHIBITS
--------
<S> <C> <C>
Exhibit A-1 Company Stockholder Agreement
Exhibit A-2 Parent Stockholder Agreement
Exhibit B-1 Form of Company Affiliates Letter
Exhibit B-2 Form of Parent Affiliates Letter
</TABLE>
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (hereinafter called this "AGREEMENT"), dated
as of October 2, 2000, by and among Applied Science and Technology, Inc., a
Delaware corporation (the "COMPANY"), MKS Instruments, Inc., a Massachusetts
corporation ("PARENT"), and Mango Subsidiary Corp., a Delaware corporation and a
wholly-owned subsidiary of Parent ("MERGER SUB").
RECITALS
WHEREAS, the respective boards of directors of each of Parent, Merger Sub
and the Company have approved this Agreement and adopted the plan of merger (the
"PLAN") set forth herein whereby Merger Sub will merge with and into the Company
upon the terms and subject to the conditions set forth in this Agreement (the
"MERGER");
WHEREAS, it is intended that, for federal income tax purposes, the Merger
shall qualify as a reorganization under the provisions of Section 368(a) of the
Internal Revenue Code of 1986, as amended, and the rules and regulations
promulgated thereunder (the "CODE");
WHEREAS, for financial accounting purposes, it is intended that the Merger
shall be accounted for as a "POOLING-OF-INTERESTS"; and
WHEREAS, the Company, Parent and Merger Sub desire to make certain
representations, warranties, covenants and agreements in connection with this
Agreement.
NOW, THEREFORE, in consideration of the premises, and of the
representations, warranties, covenants and agreements contained herein, the
parties hereto, intending to be legally bound, agree as follows:
I. THE MERGER; CLOSING; EFFECTIVE TIME
1.1 The Merger. Upon the terms and subject to the conditions set forth in
this Agreement, at the Effective Time (as hereinafter defined), Merger Sub shall
be merged with and into the Company and the separate corporate existence of
Merger Sub shall thereupon cease. The Company shall be the surviving corporation
in the Merger (sometimes hereinafter referred to as the "SURVIVING
CORPORATION"), and the separate corporate existence of the Company with all its
rights, privileges, immunities, powers and franchises shall continue unaffected
by the Merger, except as set forth in Section 3. The Merger shall have the
effects specified in the Delaware General Corporation Law (the "DGCL").
1.2 Closing. The closing of the Merger (the "CLOSING") shall take place
(i) at the offices of Hale and Dorr LLP, 60 State Street, Boston, Massachusetts
02109 at 10:00 A.M. on the third business day after the last to be satisfied or
waived of the conditions set forth in Section 8 hereof (other than those
conditions that by their nature are to be satisfied at the Closing, but subject
to the satisfaction or waiver of those conditions) shall be satisfied or waived
in accordance with this Agreement or (ii) at such other place and time and/or on
such other date as the Company and Parent may agree in writing (the "CLOSING
DATE").
1.3 Effective Time. As soon as practicable following the Closing, the
Company and Parent will cause a Certificate of Merger reflecting the provisions
set forth in this Agreement (the "CERTIFICATE OF MERGER") to be executed by the
Company and Merger Sub and delivered for filing to the Secretary of State of the
State of Delaware (the "DEPARTMENT") as provided in Section 251 of the DGCL. The
Merger shall become effective at the time when the Certificate of Merger has
been duly filed with the Department or at such later time agreed by the parties
in writing and provided in the Certificate of Merger (the "EFFECTIVE TIME").
II. CERTIFICATE OF INCORPORATION AND BYLAWS OF THE SURVIVING CORPORATION
2.1 The Certificate of Incorporation. Subject to the provisions of
Section 7.13 regarding indemnification, the Certificate of Incorporation, as
amended, of the Merger Sub as in effect immediately prior to the
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Effective Time shall be the certificate of incorporation of the Surviving
Corporation (the "CERTIFICATE"), until duly amended as provided therein or by
applicable law.
2.2 The Bylaws. The bylaws of the Merger Sub in effect immediately prior
to the Effective Time shall be the bylaws of the Surviving Corporation (the
"BYLAWS"), until duly amended as provided therein or by applicable law.
III. OFFICERS AND DIRECTORS OF THE SURVIVING CORPORATION
3.1 Directors. The board of directors of the Surviving Corporation shall
consist of the Board of Directors of Merger Sub until their respective
successors have been duly elected or appointed and qualified or until their
earlier death, resignation or removal in accordance with the Articles and the
Bylaws as in effect from time to time.
3.2 Officers. The persons listed on Schedule 3.2 shall, from and after
the Effective Time, be the officers of the Surviving Corporation until their
successors have been duly elected or appointed and qualified or until their
earlier death, resignation or removal in accordance with the Articles and the
Bylaws.
IV. EFFECT OF THE MERGER ON CAPITAL STOCK; EXCHANGE OF CERTIFICATES
4.1 Effect on Capital Stock. At the Effective Time, as a result of the
Merger and without any action on the part of the holder of any capital stock of
the Company:
(a) Merger Consideration. Each share of the Common Stock, par value
$0.01 per share, of the Company (the "COMPANY COMMON STOCK") issued and
outstanding immediately prior to the Effective Time (a "SHARE" and,
collectively, the "SHARES") (other than Shares owned by Parent, Merger Sub
or any other direct or indirect Subsidiary of Parent (collectively, the
"PARENT COMPANIES") or Shares that are owned by the Company or any direct
or indirect wholly-owned Subsidiary of the Company and in each case not
held on behalf of third parties (collectively, "EXCLUDED SHARES")),
together with any Company Rights (as defined in Section 5.2(a)) attached
thereto or associated therewith, shall be converted into and become
exchangeable for (the "MERGER CONSIDERATION") 0.7669 share (as such number
of shares may be adjusted in accordance with the terms of this Agreement,
the "EXCHANGE RATIO") of Common Stock, no par value per share, of Parent
("PARENT COMMON STOCK").
At the Effective Time, all Shares and all Company Rights shall no longer be
outstanding and shall be cancelled and retired and shall cease to exist, and
each certificate (a "SHARE CERTIFICATE") formerly representing any of such
Shares or Company Rights (other than Excluded Shares) shall thereafter represent
only the right to the Merger Consideration and the right, if any, to receive
pursuant to Section 4.2(e) cash in lieu of fractional shares of Parent Common
Stock into which such Shares otherwise would have been converted pursuant to
this Section 4.1(a) and any distribution or dividend pursuant to Section 4.2(c).
All Company Options (as defined in Section 5.2(a)) shall be converted into
options to purchase Parent Common Stock in accordance with Section 7.11(a)
herein.
(b) Cancellation of Shares. Each Excluded Share shall cease to be
outstanding, shall be cancelled and retired without payment of any
consideration therefor and shall cease to exist.
(c) Merger Sub. Each share of Common Stock, par value $.01 per share,
of Merger Sub issued and outstanding immediately prior to the Effective
Time shall be converted into one share of common stock of the Surviving
Corporation.
4.2 Exchange of Certificates for Shares.
(a) Exchange Agent. At the Effective Time, Parent shall deposit, or
shall cause to be deposited, with an exchange agent (the "EXCHANGE AGENT"),
selected by Parent with the Company's prior approval for the benefit of the
holders of Shares, certificates representing the shares of Parent Common
Stock, and, after the Effective Time, if applicable, any cash dividends or
other distributions with respect to the Parent Common Stock to be issued or
paid pursuant to the penultimate sentence of Section 4.1(a) in
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exchange for Shares outstanding immediately prior to the Effective Time
upon due surrender of the Share Certificates (or affidavits of loss in lieu
thereof) pursuant to the provisions of this Section 4 (such certificates
for shares of Parent Common Stock, together with the amount of any cash
dividends or other distributions payable with respect thereto (and any
dividends or other distributions payable with respect thereto from time to
time), being hereinafter referred to as the "EXCHANGE FUND").
(b) Exchange Procedures. As soon as practicable after the Effective
Time, the Surviving Corporation shall cause the Exchange Agent to mail to
each holder of record of Shares at the Effective Time (other than holders
of Excluded Shares) (i) a letter of transmittal specifying that delivery of
the Share Certificates shall be effected, and risk of loss and title to the
Share Certificates shall pass, only upon delivery of the Share Certificates
(or affidavits of loss in lieu thereof) to the Exchange Agent, such letter
of transmittal to be in such form and have such other provisions as Parent
and the Company shall reasonably agree, and (ii) instructions for use in
effecting the surrender of the Share Certificates in exchange for (A)
certificates representing shares of Parent Common Stock and (B) any unpaid
dividends and other distributions and cash in lieu of fractional shares to
be paid pursuant to this Agreement (such instructions shall include
instructions for the payment of the Merger Consideration, cash in lieu of
fractional shares, and dividends or other distributions to a Person other
than the Person in whose name the surrendered Share Certificate is
registered on the transfer books of the Company). Subject to Section
4.2(g), upon proper surrender of a Share Certificate for cancellation to
the Exchange Agent together with such letter of transmittal, duly completed
and executed, the holder of such Share Certificate shall be entitled to
receive in exchange therefor (x) a certificate representing that number of
whole shares of Parent Common Stock that such holder is entitled to receive
pursuant to this Section 4, (y) a check in the amount (after giving effect
to any required tax withholdings) of (A) any cash in lieu of fractional
shares plus (B) any unpaid non-stock dividends and any other dividends or
other distributions that such holder has the right to receive pursuant to
the provisions of this Section 4, and the Share Certificate so surrendered
shall forthwith be cancelled. No interest will be paid or accrued on any
amount payable upon due surrender of the Share Certificates. In the event
of a transfer of ownership of Shares that is not registered in the transfer
records of the Company, a certificate representing the proper number of
shares of Parent Common Stock, together with a check for any cash to be
paid upon due surrender of the Share Certificate and any other dividends or
distributions in respect thereof, may be issued and/or paid to such a
transferee if the Share Certificate formerly representing such Shares is
presented to the Exchange Agent, accompanied by all documents required to
evidence and effect such transfer.
For the purposes of this Agreement, the term "PERSON" shall mean any
individual, corporation (including not-for-profit), general or limited
partnership, limited liability company, joint venture, estate, trust,
association, organization, Governmental Entity (as hereinafter defined) or other
entity of any kind or nature.
(c) Distributions with Respect to Unexchanged Shares; Voting.
(i) All shares of Parent Common Stock to be issued pursuant to the Merger
shall be deemed issued and outstanding as of the Effective Time and whenever a
dividend or other distribution is declared by Parent in respect of the Parent
Common Stock, the record date for which is at or after the Effective Time, that
declaration shall include dividends or other distributions in respect of all
shares of Parent Common Stock issuable pursuant to this Agreement. No dividends
or other distributions in respect of the Parent Common Stock shall be paid to
any holder of any unsurrendered Share Certificate until such Share Certificate
is surrendered for exchange in accordance with this Section 4. Following
surrender of any Share Certificate, there shall be issued and/or paid to the
holder of the certificates representing whole shares of Parent Common Stock
issued in exchange therefor, without interest, (A) at the time of such
surrender, the dividends and other distributions with a record date after the
Effective Time theretofore payable with respect to such whole shares of Parent
Common Stock and not paid and (B) at the appropriate payment date, the dividends
and other distributions payable with respect to such whole shares of Parent
Common Stock with a record date after the Effective Time but with a payment date
subsequent to surrender.
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(ii) Holders of unsurrendered Share Certificates shall be entitled
to vote after the Effective Time at any meeting of Parent stockholders
the number of whole shares of Parent Common Stock which such holder
thereof is entitled to receive upon exchange of such Share Certificates,
regardless of whether such holders have exchanged their Share
Certificates.
(d) Transfers. After the Effective Time, there shall be no transfers
on the stock transfer books of the Company of the Shares that were
outstanding immediately prior to the Effective Time.
(e) Fractional Shares. Notwithstanding any other provision of this
Agreement to the contrary, no fractional shares of Parent Common Stock will
be issued pursuant to the Merger and any holder of Shares entitled to
receive a fractional share of Parent Common Stock but for this Section
4.2(e) shall be entitled to receive a cash payment in lieu thereof, which
payment shall represent such holder's proportionate interest in a share of
Parent Common Stock based on the closing price per share of Parent Common
Stock as reported in The Wall Street Journal, New York City Edition or, if
not reported thereby, another reasonably agreed authoritative source on the
trading day immediately preceding the Effective Time.
(f) Termination of Exchange Fund. Any portion of the Exchange Fund
that remains unclaimed by the stockholders of the Company for 180 days
after the Effective Time shall be returned to Parent. Any stockholders of
the Company who have not theretofore complied with this Section 4 shall
thereafter look only to Parent for payment of the Merger Consideration and
any cash dividends and other distributions in respect thereof payable
and/or issuable pursuant to Section 4.1 and Section 4.2(c) upon due
surrender of their Share Certificates (or affidavits of loss in lieu
thereof), in each case, without any interest thereon.
(g) Lost, Stolen or Destroyed Share Certificates. In the event any
Share Certificate shall have been lost, stolen or destroyed, upon the
making of an affidavit of that fact by the Person claiming such Share
Certificate to be lost, stolen or destroyed and, if required by Parent, the
posting by such Person of a bond in customary amount as indemnity against
any claim that may be made against it with respect to such Share
Certificate, the Exchange Agent will issue in exchange for such lost,
stolen or destroyed Share Certificate the shares of Parent Common Stock and
any cash payable and any unpaid dividends or other distributions
deliverable in respect thereof pursuant to Section 4.2(c) upon due
surrender of the Shares represented by such Share Certificate pursuant to
this Agreement.
(h) No Liability. To the extent permitted by applicable law, none of
the Parent, the Merger Sub, the Company, the Surviving Corporation or the
Exchange Agent shall be liable to any holder of Shares or of Parent Common
Stock, as the case may be, for such shares (or dividends or distributions
with respect thereto) delivered to a public official pursuant to any
applicable abandoned property, escheat or similar law. If any Share
Certificate shall not have been surrendered prior to 180 days after the
Effective Time (or immediately prior to such earlier date on which any
shares of Parent Common Stock, and any cash payable to the holder of such
Share Certificate pursuant to this Section 4 or any dividends or
distributions payable to the holder of such Share Certificate would
otherwise escheat to or become the property of any Governmental Entity (as
defined in Section 5.4(a)), any such shares of Parent Common Stock or cash,
dividends or distributions in respect of such Share Certificate shall, to
the extent permitted by applicable law, become the property of the
Surviving Corporation, free and clear of all claims or interest of any
person previously entitled thereto.
(i) Affiliates. Notwithstanding anything herein to the contrary,
Certificates surrendered for exchange by any "AFFILIATE" of the Company
(as defined in Section 7.8(a)) shall not be exchanged until the Parent
has received a Company Affiliate Agreement (as defined in Section
7.8(a)) from such Affiliate.
4.3 Appraisal Rights. No appraisal rights shall be available to holders
of Shares in connection with the Merger in accordance with the provisions of
Section 262 of the DGCL.
4.4 Adjustments to Exchange Ratio. The Exchange Ratio shall be adjusted
to reflect the effect of any reclassification, stock split, reverse split, stock
dividend (including any dividend or distribution of securities convertible into
Parent Common Stock or Shares), reorganization, recapitalization or other like
change with
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respect to Parent Common Stock or Shares occurring (or for which a record date
is established) after the date hereof and prior to the Effective Time.
4.5 Unvested Stock. At the Effective Time, unvested Shares, if any,
awarded to employees, directors or consultants pursuant to any of the Company's
plans or arrangements and outstanding immediately prior to the Effective Time
shall be converted into unvested shares of Parent Common Stock in accordance
with the Exchange Ratio and shall remain subject to the same terms, restrictions
and vesting schedule (including acceleration provisions, if any) as in effect
immediately prior to the Effective Time. All outstanding rights which the
Company may hold immediately prior to the Effective Time to repurchase unvested
Shares, if any, shall be assigned to the Parent in the Merger and shall
thereafter be exercisable by Parent upon the same terms and conditions in effect
immediately prior to the Effective Time, except that the shares purchasable
pursuant to such rights and the purchase price payable per share shall be
adjusted to reflect the Exchange Ratio.
V. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to the Parent and the Merger Sub that
the statements contained in this Section 5 are true and correct, except as set
forth herein or in the disclosure letter delivered by the Company to the Parent
on or before the date of this Agreement (the "COMPANY DISCLOSURE LETTER"). The
Company Disclosure Letter shall be arranged in paragraphs corresponding to the
numbered and lettered paragraphs contained in this Section 5 and the disclosure
in any paragraph shall qualify other paragraphs in this Section 5 only to the
extent that it is reasonably apparent from a reading of such disclosure that it
also qualifies or applies to such other paragraphs.
5.1 Organization, Good Standing and Qualification. Each of the Company
and its Subsidiaries (as hereinafter defined) is a corporation duly organized,
validly existing and in good standing or of active status, as applicable, under
the laws of its jurisdiction of organization and has all requisite corporate or
similar power and authority to own and operate its properties and assets and to
carry on its business as presently conducted and is qualified to do business and
is in good standing as a foreign corporation in each jurisdiction where the
ownership or operation of its properties or conduct of its business requires
such qualification, except where the failure to be so qualified or in good
standing would not have a Company Material Adverse Effect (as hereinafter
defined). The Company has made available to Parent complete and correct copies
of the Company's and its Subsidiaries' articles of incorporation and bylaws (or
comparable governing instruments), as amended to the date hereof. The Company's
and its Subsidiaries' articles of incorporation and bylaws (or comparable
governing instruments) so delivered are in full force and effect.
As used in this Agreement, the term "SUBSIDIARY" means, with respect to the
Company, Parent or Merger Sub, as the case may be, any entity, whether
incorporated or unincorporated, of which at least a majority of the securities
or ownership interests having by their terms ordinary voting power to elect a
majority of the board of directors or other persons performing similar functions
is directly or indirectly owned or controlled by such party or by one or more of
its respective Subsidiaries or by such party and any one or more of its
respective Subsidiaries.
As used in this Agreement, the term "COMPANY MATERIAL ADVERSE EFFECT" means
a material adverse effect on the financial condition, properties, business,
results of operations or prospects of the Company and its Subsidiaries taken as
a whole; provided, however, that any such effect resulting from any change (i)
in law, rule, regulation or generally accepted accounting principles ("GAAP") or
interpretations thereof, (ii) in economic or business conditions generally or in
the industries of the Company or any of its Subsidiaries specifically in a
manner not disproportionate to the manner in which such conditions affect other
companies generally or other companies in the industries of the Company or any
of its Subsidiaries, as the case may be, or (iii) as a proximate result of the
execution and delivery of this Agreement and the contemplated consummation of
the transactions contemplated hereby shall not be considered when determining if
a Company Material Adverse Effect has occurred.
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5.2 Capital Structure.
(a) The authorized capital stock of the Company consists of 30,000,000
shares of Company Common Stock and 1,000,000 shares of preferred stock,
$.01 par value per share ("COMPANY PREFERRED STOCK"), of which 100,000
shares are designated Series A Junior Participating Preferred Stock. As of
the close of business on the date hereof, (i) 14,550,519 shares of Company
Common Stock were issued and outstanding, (ii) no shares of Company Common
Stock were held in the treasury of the Company or by Subsidiaries of the
Company, and (iii) no shares of the Company Preferred Stock were issued and
outstanding. Section 5.2(a) of the Company Disclosure Letter lists the
number of shares of Company Common Stock reserved for future issuance
pursuant to stock options granted and outstanding as of the date of this
Agreement and the plans under which such options were granted
(collectively, the "COMPANY STOCK PLANS") and sets forth a complete and
accurate list of all holders of outstanding options to purchase shares of
Company Common Stock (such outstanding options, the "COMPANY OPTIONS")
under the Company Stock Plans, indicating the number of shares of Company
Common Stock subject to each Company Option, and the exercise price, the
date of grant, vesting schedule and the expiration date thereof. All
outstanding shares of Company Common Stock are, and all shares of Company
Common Stock subject to issuance as specified in the previous sentence,
upon issuance on the terms and conditions specified in the instruments
pursuant to which they are issuable, will be, duly authorized, validly
issued, fully paid and nonassessable and not subject to or issued in
violation of any purchase option, call option, right of first refusal,
preemptive right, subscription right or any similar right under any
provision of the DGCL, the Company's certificate of incorporation or bylaws
or any agreement to which the Company is a party or is otherwise bound.
There are no obligations, contingent or otherwise, of the Company or any of
its Subsidiaries to repurchase, redeem or otherwise acquire any shares of
the Company Common Stock or other capital stock of the Company or any of
its Subsidiaries. Each of the outstanding shares of capital stock or other
securities of each of the Company's Subsidiaries is duly authorized,
validly issued, fully paid and nonassessable and owned by the Company or a
direct or indirect wholly-owned Subsidiary of the Company, free and clear
of any lien, pledge, security interest, claim, limitation on the Company's
voting rights or other encumbrance. Except for (x) pursuant to Company
Stock Plans and (y) the rights ("COMPANY RIGHTS") issued and issuable under
the Company's Shareholder Rights Plan, dated as of March 4, 1998 between
the Company and American Stock Transfer and Trust Company (the "COMPANY
RIGHTS PLAN") there are no preemptive or other outstanding rights, options,
warrants, conversion rights, stock appreciation rights, redemption rights,
repurchase rights, agreements, arrangements or commitments to issue or to
sell any shares of capital stock or other securities of the Company or any
of its Subsidiaries or any securities or obligations convertible or
exchangeable into or exercisable for, or giving any Person a right to
subscribe for or acquire, any securities of the Company or any of its
Subsidiaries, and no securities or obligations evidencing such rights are
authorized, issued or outstanding. The Company does not have outstanding
any bonds, debentures, notes or other obligations the holders of which have
the right to vote (or convertible into or exercisable for securities having
the right to vote) with the stockholders of the Company on any matter
("VOTING DEBT"). To the knowledge of the executive officers of the Company,
other than the Company Stockholder Agreement to be delivered by Richard S.
Post and John M. Tarrh, there are no agreements or understandings with
respect to the voting (including voting trusts and proxies) or sale or
transfer (inc luding agreements imposing transfer restrictions) of any
shares of capital stock of the Company or any of its Subsidiaries.
(b) Except as set forth in the Company Reports (as defined below)
filed prior to the date of this Agreement, neither the Company nor any of
its Subsidiaries directly or indirectly owns any equity, membership,
partnership or similar interest in, or any interest convertible into or
exchangeable or exercisable for any equity, membership, partnership or
similar interest in, any corporation, partnership, joint venture, limited
liability company or other business association or entity, whether
incorporated or unincorporated.
5.3 Corporate Authority; Approval and Fairness.
(a) The Company has all requisite corporate power and authority and
has taken all corporate action necessary in order to execute, deliver and
perform its obligations under this Agreement and to
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consummate, subject only to approval of this Agreement by the holders of a
majority of the outstanding Shares (the "COMPANY REQUISITE VOTE"), the
Merger and the transactions contemplated hereby. This Agreement has been
duly executed and delivered by the Company, and assuming due authorization,
execution and delivery of this Agreement by Parent and Merger Sub, is a
valid and legally binding agreement of the Company enforceable against the
Company in accordance with its terms, subject to bankruptcy, insolvency,
fraudulent transfer, reorganization, moratorium and similar laws of general
applicability relating to or affecting creditors' rights and to general
equity principles (the "BANKRUPTCY AND EQUITY EXCEPTION").
(b) The Board of Directors of the Company (A) has approved this
Agreement and adopted the Plan set forth in this Agreement and (B) has
received the opinion of its financial advisors, CIBC World Markets Corp.,
to the effect that the Exchange Ratio pursuant to this Agreement is fair
from a financial point of view to the holders of the Shares.
5.4 Governmental Filings; No Violations.
(a) Except with respect to Environmental Laws, which are specifically
addressed in Section 5.12, other than the filings and/or notices (A)
pursuant to Section 1.3 and (B) under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended (the "HSR ACT"), the Securities Act of
1933, as amended (the "SECURITIES ACT"), and the Securities Exchange Act of
1934, as amended (the "EXCHANGE ACT"), no notices, reports or other filings
are required to be made by the Company with, nor are any consents,
registrations, approvals, permits or authorizations required to be obtained
by the Company from, any governmental or regulatory authority, agency,
commission, body or other governmental entity (each a "GOVERNMENTAL
ENTITY"), in connection with the execution and delivery of this Agreement
by the Company and the consummation by the Company of the Merger and the
other transactions contemplated hereby.
(b) The execution, delivery and performance of this Agreement by the
Company do not, and the consummation by the Company of the Merger and the
other transactions contemplated hereby will not, constitute or result in
(A) a breach or violation of, or a default under, either the certificate of
incorporation of the Company or bylaws of the Company or the comparable
governing instruments of any of its Subsidiaries, (B) a breach or violation
of, a default under, the acceleration of any obligations or the creation of
a lien, pledge, security interest or other encumbrance on the assets of the
Company or any of its Subsidiaries (with or without notice, lapse of time
or both) pursuant to, any agreement, lease, contract, note, mortgage,
indenture, arrangement or other obligation ("CONTRACTS") binding upon the
Company or any of its Subsidiaries or any Law or governmental or
non-governmental permit, license, judgment, injunction, order, decree,
statute, law, ordinance, rule or regulation to which the Company or any of
its Subsidiaries is subject or (C) any change in the rights or obligations
of any party under any of the Contracts, except, in the case of clause (B)
above, for any breach, violation, default, acceleration, creation or change
that would not have a Company Material Adverse Effect or prevent,
materially delay or materially impair the ability of the Company to
consummate the transactions contemplated by this Agreement.
5.5 Company Reports: Financial Statements. The Company has made or, as
appropriate, will make, available to Parent each registration statement, report,
proxy statement or information statement required to be filed by it since July
1, 2000 (the "AUDIT DATE") and prior to the Effective Time, including the
Company's Annual Report on Form 10-K for the fiscal year ended July 1, 2000 in
the form (including exhibits, annexes and any amendments thereto) filed with the
Securities and Exchange Commission (the "SEC") (collectively, including
amendments of any such reports as amended, the "COMPANY REPORTS"). The Company
Reports (i) were or will be filed on a timely basis, (ii) were or will be
prepared in compliance in all material respects with the applicable requirements
of the Securities Act and the Exchange Act, as the case may be, and the rules
and regulations of the SEC thereunder applicable to such Company Reports, and
(iii) did not or will not at the time they were or are filed contain any untrue
statement of a material fact or omit to state a material fact required to be
stated in such Company Reports or necessary in order to make the statements in
such Company Reports, in the light of the circumstances under which they were
made, not misleading. No
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Subsidiary of the Company is required to file any forms, reports or other
documents with the SEC. Each of the consolidated balance sheets included in or
incorporated by reference into the Company Reports (including the related notes
and schedules) fairly presents the consolidated financial position of the
Company and its Subsidiaries as of its date and each of the consolidated
statements of income and of consolidated statements of cash flow included in or
incorporated by reference into the Company Reports (including any related notes
and schedules) fairly presents the consolidated results of operations and cash
flows, as the case may be, of the Company and its Subsidiaries for the periods
set forth therein (subject, in the case of unaudited statements, to the absence
of notes and normal year-end audit adjustments, which will not be material), in
each case in accordance with GAAP consistently applied during the periods
involved, except as may be noted therein.
5.6 Absence of Certain Changes. Except as disclosed in the Company
Reports or as permitted hereunder, since the Audit Date and through the date
hereof, the Company and its Subsidiaries taken as a whole have conducted their
business only in, and have not engaged in any material transaction other than
according to, the ordinary and usual course of such business and there has not
been (i) any change in the financial condition, properties, business, results of
operations or prospects of the Company and its Subsidiaries that has had, or
would be reasonably expected to have, a Company Material Adverse Effect; (ii)
any material damage, destruction or other casualty loss with respect to any
material asset or material property owned, leased or otherwise used by the
Company or any of its Subsidiaries, not covered by insurance; (iii) any
declaration, setting aside or payment of any dividend or other distribution in
respect of the capital stock of the Company; (iv) any change by the Company in
accounting principles, practices or methods which is not required or permitted
by GAAP; or (v) any other action that would have required Parent consent
pursuant to Section 7.1(a). Since the Audit Date and through the date hereof,
except as provided for herein or as disclosed in the Company Reports, there has
not been any material increase in the compensation payable or that could become
payable by the Company or any of its Subsidiaries to officers or key employees
or any material amendment of any of the Compensation and Benefit Plans (as
hereinafter defined) other than increases or amendments in the ordinary course.
5.7 Litigation. Except with respect to Environmental Laws, which are
specifically addressed in Section 5.12, and except as disclosed in the Company
Reports, there are no civil, criminal or administrative actions, suits, claims,
hearings, investigations or proceedings pending or, to the knowledge of the
executive officers of the Company, threatened against or affecting the Company
or any of its Subsidiaries, except for those that would not have a Company
Material Adverse Effect or prevent or materially burden or materially impair the
ability of the Company to consummate the transactions contemplated by this
Agreement, nor any judgment, decree, injunction, rule or rules of any
Governmental Entity pending or, to the knowledge of the executive officers of
the Company, threatened against or affecting the Company or any of its
Subsidiaries, except for those that would not have a Company Material Adverse
Effect or prevent or materially burden or materially impair the ability of the
Company to consummate the transactions contemplated by this Agreement. There are
no judgments, orders or decrees outstanding against the Company which,
individually or in the aggregate, have had or are reasonably likely to have a
Company Material Adverse Effect.
5.8 Employee Benefits.
(a) A true and correct copy of each bonus, deferred compensation,
pension, retirement, profit-sharing, thrift, savings, employee stock
ownership, stock bonus, stock purchase, restricted stock, stock option,
employment, termination, severance, compensation, medical, health or other
plan, agreement, policy or arrangement, including, without limitation, any
employee benefit plan under the Employee Retirement Income Security Act of
1974, as amended ("ERISA"), maintained or contributed to by the Company,
its Subsidiaries or any entity which is considered one employer with the
Company under Section 4001 of ERISA or Section 414 of the Code (an "ERISA
AFFILIATE") (the "COMPENSATION AND BENEFIT PLANS") and any trust agreement
or insurance contract forming a part of such Compensation and Benefit Plans
has been made available to Parent prior to the date hereof. In addition,
where relevant, the following documents regarding the Compensation and
Benefit Plans of the Company and its Subsidiaries has been made available
to Parent: (i) administrative service agreements; (ii) summary plan
descriptions; and (iii) IRS Form 5500s, Form 5500C and Form 5500R for the
last three (3) years. The Compensation and Benefit Plans are listed in
Section 5.8 of the Company Disclosure Letter and any
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Compensation and Benefit Plans containing "CHANGE OF CONTROL" or similar
provisions therein are specifically identified in Section 5.8 of the
Company Disclosure Letter.
(b) All Compensation and Benefit Plans covering Employees (the
"PLANS") are in compliance with all applicable laws, including the Code and
ERISA, to the extent applicable and the laws of any applicable foreign
jurisdiction, except for any noncompliance that would not have a Company
Material Adverse Effect or prevent or materially burden or materially
impair the ability of the Company to consummate the transactions
contemplated by this Agreement. Each Compensation and Benefit Plan has been
administered in accordance with its terms and the requirements of ERISA and
the Code, to the extent applicable. Each Plan that is an "EMPLOYEE PENSION
BENEFIT PLAN" within the meaning of Section 3(2) of ERISA (a "PENSION
PLAN") and that is intended to be qualified under Section 401(a) of the
Code has received or is the subject of a favorable determination letter
from the Internal Revenue Service (the "IRS") with respect to "TRA" (as
defined in Section 1 of Rev. Proc. 93-39) and no such determination letter
has been revoked and revocation has not been threatened, and no act or
omission has occurred that is reasonably likely to result in revocation of
any such favorable letter. As of the date hereof, there is no audit or
investigation by any Governmental Entity underway, and there are no
termination proceedings or to the knowledge of the executive officers of
the Company, other claims (except claims for benefits payable in the
ordinary course) suits or proceedings threatened against or involving any
Compensation and Benefit Plans that would give rise to any liability.
Neither the Company, its Subsidiaries, nor any employee, officer or
director thereof, nor, any third-party with respect to Compensation and
Benefit Plans, has engaged or failed to engage in any conduct with respect
to any Compensation and Benefit Plan that could subject the Company or any
of its Subsidiaries to any material fine, penalty, tax or liability of any
kind under the Code or ERISA or could require indemnification by the
Company or any of its Subsidiaries.
(c) Neither the Company, its Subsidiaries nor any ERISA Affiliate has
ever maintained a Compensation and Benefit Plan subject to Section 412 of
the Code or Title IV of ERISA. At no time has the Company, its Subsidiaries
or any ERISA Affiliate been obligated to contribute to any "MULTIEMPLOYER
PLAN" as defined in ERISA.
(d) All contributions required to be made under the terms of any
Compensation and Benefit Plan as of the date hereof have been timely made.
(e) Except as required by Code Section 4980B or any similar state law,
neither the Company nor its Subsidiaries has any obligations for retiree
health and life benefits under any Compensation and Benefit Plan nor any
unfunded obligation under any other Compensation and Benefit Plan for
post-employment benefits. The Company, its Subsidiaries and its ERISA
Affiliates have at all times complied with the continuation coverage
requirements of Code Section 4980B, or similar state law.
(f) The consummation of the Merger and the other transactions
contemplated by this Agreement will not (w) entitle any Employees to
severance pay, (x) accelerate the time of payment or vesting or trigger any
payment or funding (through a grantor trust or otherwise) of compensation
or benefits under, increase the amount payable or trigger any other
material obligation pursuant to, any of the Compensation and Benefit Plans,
(y) result in any breach or violation of, or a default under, any of the
Compensation and Benefit Plans, or (z) provide any payment that may be
subject to the tax imposed by Section 4999 of the Code or included in the
determination of such person's "PARACHUTE PAYMENT" under Section 280G of
the Code.
(g) No Compensation and Benefit Plan or related documentation
prohibits the Company or any Subsidiary from amending or terminating such
Compensation and Benefit Plan.
No Compensation and Benefit Plan is funded by, associated with or related
to a "VOLUNTARY EMPLOYEE'S BENEFICIARY ASSOCIATION" within the meaning of
Section 501(c)(9) of the Code.
(h) Notwithstanding anything to the contrary contained in this Section
5.8, the representations and warranties contained in this Section 5.8,
other than the representations and warranties set forth in
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paragraph (f) above, shall be deemed to be true and correct unless such
failures to be true and correct are reasonably likely to have a Company
Material Adverse Effect.
5.9 Compliance with Laws. Exclusive of Environmental Laws which are
specifically dealt with in Section 5.12 below, the business of the Company and
its Subsidiaries taken as a whole is not being conducted in violation of any
federal, state, local or foreign law, statute, ordinance, rule, regulation,
judgment, order, injunction, decree, arbitration award, agency requirement,
license or permit of any Governmental Entity (collectively, "LAWS"), except for
violations that would not have a Company Material Adverse Effect or prevent or
materially burden or materially impair the ability of the Company to consummate
the transactions contemplated by this Agreement. Exclusive of Environmental Laws
which are specifically dealt with in Section 5.12 below, no investigation or
review by any Governmental Entity with respect to the Company or any of its
Subsidiaries is pending or, to the knowledge of the executive officers of the
Company, threatened, nor has any Governmental Entity indicated an intention to
conduct the same, except for those the outcome of which would not have a Company
Material Adverse Effect or prevent or materially burden or materially impair the
ability of the Company to consummate the transactions contemplated by this
Agreement. The Company and its Subsidiaries each has all permits, licenses,
franchises, variances, exemptions, orders and other governmental authorizations,
consents and approvals ("PERMITS") from Governmental Entities necessary to
conduct its business as presently conducted, except for those the absence of
which would not have a Company Material Adverse Effect or prevent or materially
burden or materially impair the ability of the Company to consummate the
transactions contemplated by this Agreement. The Company and its Subsidiaries
are in compliance with the terms of the Permits, except where the failure to so
comply, individually or in the aggregate, is not reasonably likely to have a
Company Material Adverse Effect. No Permit will cease to be effective as a
result of the consummation of transactions contemplated by this Agreement,
except where the cessation of effectiveness, individually or in the aggregate,
will not have a Company Material Adverse Effect.
5.10 Required Vote. The Company shareholder approval, being the
affirmative vote of a majority of the Shares entitled to vote, is the only vote
of the holders of any class or series of the securities of Company necessary to
approve this Agreement, the Merger and the other transactions contemplated
hereby.
5.11 Owned and Leased Real Properties.
(a) Except as disclosed in the Company Reports, the Company and its
Subsidiaries do not own any real property.
(b) The Company has provided to the Parent a complete and accurate
list of all real property leased by the Company or its Subsidiaries
(collectively "COMPANY LEASES") and the location of the premises. The
Company is not in default under any of the Company Leases, except where the
existence of such defaults, individually or in the aggregate, has not had,
and is not reasonably likely to have a Company Material Adverse Effect.
Each of the Company Leases is in full force and effect and will not cease
to be in full force and effect as a result of the transactions contemplated
by this Agreement.
5.12 Environmental Matters. Except as disclosed in the Company Reports
and except for such matters that would not have a Company Material Adverse
Effect, the Company and its Subsidiaries: (i) are in compliance with all
applicable Environmental Laws (as hereinafter defined); (ii) have not received
any notice from any Governmental Entity or any third party alleging any
violation of, or liability under, any applicable Environmental Laws; (iii) are
not subject to any court order, administrative order or decree arising under any
Environmental Law; (iv) to the knowledge of the executive officers of the
Company, do not own or operate any property that has been contaminated with any
Hazardous Substance (as hereinafter defined) and (v) are not subject to any
claims, demands or notifications concerning liability for any Hazardous
Substance disposal or contamination.
Parent and Merger Sub acknowledge that the representations and warranties
contained in this Section 5.12 are the only representations and warranties being
made by the Company with respect to compliance with, or liability or claims
under, Environmental Laws or with respect to permits issued or required under
Environmental Laws, that no other representation by the Company contained in
this Agreement shall apply to
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any such matters and that no other representation or warranty, express or
implied, is being made with respect thereto.
As used herein, the term "ENVIRONMENTAL LAW" means any federal, state,
local or foreign statute, law, regulation, order, decree, permit, authorization,
common law or agency requirement as in effect and as interpreted as of the date
hereof relating to (A) the protection, investigation or restoration of the
environment, human health, worker safety, or the protection of natural resources
or (B) the handling, use, presence, disposal, release or threatened release of,
or exposure to, any Hazardous Substance.
As used herein, the term "HAZARDOUS SUBSTANCE" means any substance that is
listed, classified or regulated as such pursuant to any Environmental Law
including any petroleum product or by-product, asbestos-containing material,
lead-containing paint or plumbing, polychlorinated biphenyls, radioactive
material or radon.
5.13 Accounting and Tax Qualification Matters. As of or prior to the date
hereof, neither the Company nor any of its Affiliates (as defined in Section
7.8(a)) has taken or agreed to take any action, nor do the executive officers of
the Company have any knowledge of any fact or circumstance relating to the
Company, that would prevent Parent from accounting for the business combination
to be effected by the Merger as a "POOLING-OF-INTERESTS" or prevent the Merger
from qualifying as a "REORGANIZATION" within the meaning of Section 368 (a) of
the Code.
5.14 Taxes.
(a) The Company and each of its Subsidiaries (i) have duly and timely
filed (taking into account any extension of time within which to file) all
Tax Returns (as defined below) required to be filed by any of them and all
such filed Tax Returns are complete and accurate in all respects, (ii) have
paid all Taxes (as defined below) owed by the Company and each of its
Subsidiaries (whether or not shown on any Tax Return) or that the Company
or any of its Subsidiaries are obligated to withhold from amounts owing to
any employee, creditor or third party, except with respect to matters
contested in good faith and (iii) have not waived any statute of
limitations with respect to Taxes or agreed to any extension of time with
respect to a Tax assessment or deficiency, except, in each case, for those
failures to file or pay or those waivers that would not have a Company
Material Adverse Effect. As of the date hereof, there are not pending or,
to the knowledge of the executive officers of the Company, threatened in
writing, any audits, examinations, investigations or other proceedings in
respect of Taxes or Tax matters.
(b) Neither the Company nor any Subsidiary has made any payments, is
obligated to make any payments, or is a party to any agreement that could
obligate it to make any payments that will be an "EXCESS PARACHUTE PAYMENT"
under Code Section 280G.
(c) Neither the Company nor any Subsidiary has any actual or potential
liability for any Taxes of any person (other than the Company and its
Subsidiaries) under Treasury Regulation Section 1.1502-6 (or any similar
provision of federal, state, local, or foreign law), or as a transferee or
successor, by contract, or otherwise.
(d) Neither the Company nor any Subsidiary is a "CONSENTING
CORPORATION" within the meaning of Section 341(f) of the Code, and none of
the assets of the Company or the Subsidiaries are subject to an election
under Section 341(f) of the Code.
(e) None of the assets of the Company or any Subsidiary is property
that is required to be treated as being owned by any other person pursuant
to the provisions of former Section 168(f)(8) of the Code.
(f) None of the assets of the Company or any Subsidiary is "TAX-EXEMPT
USE PROPERTY" within the meaning of Section 168(h) of the Code.
(g) None of the assets of the Company or any Subsidiary directly or
indirectly secures any debt the interest on which is tax exempt under
Section 103(a) of the Code.
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(h) Neither the Company nor any Subsidiary has undergone a change in
its method of accounting resulting in an adjustment to its taxable income
pursuant to Section 481(h) of the Code.
(i) Neither the Company nor any Subsidiary is or has ever been a
member of a group of corporations with which it has filed (or been required
to file) consolidated, combined or unitary Tax Returns, other than a group
of which only the Company and the Subsidiaries are or were members.
(j) The Company has never participated in or cooperated with an
international boycott within the meaning of Section 999 of the Code.
As used in this Agreement, (i) the term "TAX" (including, with correlative
meaning, the terms "TAXES", and "TAXABLE") includes all federal, state, local
and foreign income, profits, franchise, gross receipts, environmental, customs
duty, capital stock, severances, stamp, payroll, sales, employment,
unemployment, disability, use, property, withholding, excise, transfer
production, value added, ad valorem occupancy and other taxes, duties or
assessments of any nature whatsoever, imposed by the United States of America or
any state, local or foreign government, or any agency thereof, or other
political subdivision of the United States or any such government, together with
all interest, penalties and additions imposed with respect to such amounts and
any interest in respect of such penalties and additions, and (ii) the term "TAX
RETURN" includes all returns and reports (including elections, declarations,
disclosures, schedules, estimates and information returns) required to be
supplied to a Tax authority relating to Taxes.
5.15 Labor Matters. Neither the Company nor any of its Subsidiaries is a
party to or otherwise bound by any collective bargaining agreement, contract or
other agreement or understanding with a labor union or labor organization.
Neither the Company nor any of its Subsidiaries is the subject of any proceeding
asserting that the Company or any of its Subsidiaries has committed an unfair
labor practice nor is there pending or, to the knowledge of the executive
officers of the Company, threatened, nor since January 1, 1998 has there been
any labor strike, dispute, walk-out, work stoppage, slow-down or lockout
involving the Company or any of its Subsidiaries, except for those that would
not have a Company Material Adverse Effect or prevent or materially burden or
materially impair the ability of the Company to consummate the transactions
contemplated by this Agreement.
5.16 Intellectual Property.
(a) The Company and/or one or more of its Subsidiaries owns, or is
licensed or otherwise possesses valid rights to use, all patents,
trademarks, trade names, service marks, domain names, copyrights, and any
applications therefor, technology, know-how, computer software programs or
applications, and tangible or intangible proprietary information or
materials that are used in the business of the Company and its Subsidiaries
as conducted as of the date hereof, except for any such failures to own, be
licensed or possess that would not have a Company Material Adverse Effect,
and to the knowledge of the executive officers of the Company all patents,
trademarks, trade names, service marks and copyrights owned by the Company
and/or its Subsidiaries are valid and subsisting, except for those the
invalidity of which would not have a Company Material Adverse Effect.
(b) Except as disclosed in Company Reports or except as would not have
a Company Material Adverse Effect:
(i) the Company is not, nor will it be as a result of the execution
and delivery of this Agreement or the performance of its obligations
hereunder, in violation of any licenses, sublicenses and other
agreements as to which the Company is a party as of the date hereof and
pursuant to which the Company is authorized to use any third-party
patents, trademarks, service marks, copyrights, domain names, trade
secrets or computer software (collectively, "THIRD-PARTY INTELLECTUAL
PROPERTY RIGHTS"), except for those items listed in Section 5.16(a)(i)
of the Company Disclosure Letter.
(ii) no claims with respect to (a) the patents, registered and
material unregistered trademarks and service marks, domain names,
registered copyrights, trade names, and any applications therefor, trade
secrets or computer software owned by the Company or any of its
Subsidiaries (collectively,
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the "COMPANY INTELLECTUAL PROPERTY RIGHTS") or (b) Third-Party
Intellectual Property Rights are currently pending or, to the knowledge
of the executive officers of the Company, are threatened by any Person;
(iii) to the knowledge of the executive officers of the Company
there are not any valid grounds for any bona fide claims (a) to the
effect that the sale, licensing or use of any product or service as
used, sold or licensed by the Company or any of its Subsidiaries as of
the date hereof, infringes on any copyright, patent, trademark, service
mark, domain name or trade secret; (b) against the use by the Company or
any of its Subsidiaries of any Company Intellectual Property Rights or
the Third-Party Intellectual Property Rights used in the business of the
Company or any of its Subsidiaries as currently conducted; (c)
challenging the ownership, validity or enforceability of any of the
Company Intellectual Property Rights; or (d) challenging the license or
legally enforceable right to use of the Third-Party Intellectual Rights
by the Company or any of its Subsidiaries; and
(iv) to the knowledge of the executive officers of the Company,
there is no unauthorized use, infringement or misappropriation of any of
the Company Intellectual Property Rights by any third party, including
any employee or former employee of the Company or any of its
Subsidiaries.
(v) The Company and its Subsidiaries have taken reasonable measures
to protect the proprietary nature of the Company Intellectual Property
Rights that are material to the business of the Company and its
Subsidiaries, taken as a whole, and to maintain in confidence all trade
secrets and confidential information owned or used by the Company or any
of its Subsidiaries and that are material to the business of the Company
and its Subsidiaries, taken as a whole.
5.17 Agreements, Contracts and Commitments.
(a) Other than the contracts identified on the exhibit indices of the
Company Reports filed prior to the date of this Agreement (the "COMPANY
MATERIAL CONTRACTS"), there are no contracts or agreements that are
material to the business, assets, condition (financial or otherwise) or
results of operations of the Company and its Subsidiaries. Each Company
Material Contract has not expired by its terms and is in full force and
effect. Neither the Company nor any of its Subsidiaries is in violation of
or in default under (nor does there exist any condition which, upon the
passage of time or the giving of notice or both, would cause such a
violation of or default under) any loan or credit agreement, note, bond,
mortgage, indenture, lease, permit, concession, franchise, license or other
contract, arrangement or understanding to which it is a party or by which
it or any of its properties or assets is bound, except for violations or
defaults which, individually or in the aggregate, have not resulted in, and
are not reasonably likely to result in, a Company Material Adverse Effect.
(b) Section 5.17(b) of the Company Disclosure Letter sets forth a
complete list of each contract or agreement to which the Company or any of
its Subsidiaries is a party or bound with any Affiliate of the Company
(other than any Subsidiary which is a direct or indirect wholly owned
Subsidiary of the Company). Complete and accurate copies of all the
agreements, contracts and arrangements set forth in Section 5.17(b) of the
Company Disclosure Letter have heretofore been furnished to the Parent.
Except as disclosed in the Company Reports filed prior to the date of this
Agreement, neither the Company nor any of its Subsidiaries has entered into
any transaction with any director, officer or other affiliate of the
Company or any of its Subsidiaries or any transaction that would be subject
to proxy statement disclosure pursuant to Item 404 of Regulation S-K.
5.18 Brokers and Finders. Except for CIBC World Markets Corp., neither
the Company nor any of its officers, directors or employees has employed any
broker or finder or incurred any liability for any brokerage fees, commissions
or finders' fees in connection with the Merger or the other transactions
contemplated by this Agreement. CIBC World Market Corp.'s fees and expenses will
be paid by the Company. Section 5.18 of the Company Disclosure Letter sets forth
a complete and accurate list of the estimated fees and expenses incurred and to
be incurred by the Company and any of its Subsidiaries in connection with this
Agreement and the transactions contemplated by this Agreement (including the
fees and expenses of CIBC World Markets Corp. and of the Company's legal counsel
and accountants).
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5.19 Board Recommendation. The Company Board, at a meeting duly called
and held, has by a unanimous vote (with John R. Bertucci abstaining), (i)
determined and declared that this Agreement and the transactions contemplated
hereby, including the Merger, are advisable and fair to and in the best
interests of Company and the shareholders of Company, and (ii) resolved to
recommend that the holders of Shares approve this Agreement and the transactions
contemplated herein, including the Merger. Each of Richard S. Post and John M.
Tarrh, simultaneously with the execution of this Agreement, has executed a
Stockholder Agreement, in the form attached hereto as Exhibit A-1 (the "COMPANY
STOCKHOLDER AGREEMENT"), agreeing to vote all shares of Company Common Stock
owned by them in favor of the transactions contemplated by this Agreement.
5.20 No Existing Discussions. As of the date of this Agreement, neither
the Company nor any of its Subsidiaries is engaged, directly or indirectly, in
any discussions or negotiations with any other party with respect to an
Acquisition Proposal (as defined in Section 7.2).
5.21 Section 203 of the DGCL Not Applicable. The Board of Directors of
the Company has taken all actions necessary so that the restrictions contained
in Section 203 of the DGCL applicable to a "BUSINESS COMBINATION" (as defined in
Section 203) will not apply to the execution, delivery or performance of this
Agreement, the Company Stockholder Agreement or the consummation of the Merger
or the other transactions contemplated by this Agreement or the Company
Stockholder Agreement.
5.22 Rights Agreement. The Company has duly entered into an amendment to
the Company Rights Plan, a signed copy of which has been delivered to the
Parent, and taken all other action necessary or appropriate so that the entering
into of this Agreement or the Company Stockholder Agreement do not and will not
result in the ability of any person to exercise any of the Company Rights under
the Company Rights Plan or enable or require the Company Rights issued
thereunder to separate from the Shares to which they are attached or to be
triggered or become exercisable or cease to be redeemable.
5.23 Assets. Each of the Company and its Subsidiaries owns or leases all
tangible assets necessary for the conduct of its businesses as presently
conducted and as presently proposed to be conducted. All of such tangible assets
which are owned, are owned free and clear of all mortgages, security interests,
pledges, liens and encumbrances ("LIENS") except for (i) Liens which are
disclosed in the Company Reports filed prior to the date of this Agreement and
(ii) other Liens which, individually and in the aggregate, do not materially
interfere with the ability of the Company and its Subsidiaries to conduct their
business as currently conducted and as presently proposed to be conducted and
have not resulted in, and are not reasonably likely to result in, a Company
Material Adverse Effect. The tangible assets of the Company and its
Subsidiaries, taken as a whole, are free from material defects, have been
maintained in accordance with normal industry practice, are in good operating
condition and repair (subject to normal wear and tear) and are suitable for the
purpose for which they are presently used.
5.24 Customers and Suppliers. No customer of the Company or any of its
Subsidiaries that represented 5% or more of the Company's consolidated revenues
in the fiscal year ended July 1, 2000 has indicated to the Company or any of its
Subsidiaries that it will stop, or decrease the rate of, buying materials,
products or services from the Company or any of its Subsidiaries. No supplier of
the Company or any of its Subsidiaries has indicated to the Company or any of
its Subsidiaries that it will stop, or decrease the rate of, supplying
materials, products or services to them, which cessation or decrease,
individually or in the aggregate, is reasonably likely to have a Company
Material Adverse Effect.
5.25 Business Activity Restrictions. There is no non-competition or other
similar agreement, commitment, judgment, injunction or order to which the
Company or any Subsidiary of the Company is a party or subject to that has or
could reasonably be expected to have the effect of prohibiting or impairing the
conduct of the business by the Company in any material respect. The Company has
not entered into any agreement under which it is restricted in any material
respect from selling, licensing or otherwise distributing any of its technology
or products, or providing services to, customers or potential customers or any
class of customers, in any geographic area, during any period of time or any
segment of the market or line of business.
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5.26 Disclosure. No representation or warranty by Company in this
Agreement, nor any statement, schedule, document or exhibit hereto furnished or
to be furnished by or on behalf of Company pursuant to this Agreement or in
connection with transactions contemplated hereby, contains or shall contain any
untrue statement of material fact or omits or shall omit a material fact
necessary to make the statements contained herein or therein not misleading.
5.27 No Other Representations or Warranties. Except for the
representations and warranties contained in this Section 5, neither the Company
nor any other Person makes any other express or implied representation or
warranty on behalf of the Company or any of its Affiliates.
VI. REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
The Parent and the Merger Sub, jointly and severally, represent and warrant
to the Company that the statements contained in this Section 6 are true and
correct, except as set forth herein or in the disclosure schedule delivered by
the Parent to the Company on or before the date of this Agreement (the "PARENT
DISCLOSURE LETTER"). The Parent Disclosure Letter shall be arranged in
paragraphs corresponding to the numbered and lettered paragraphs contained in
this Section 6 and the disclosure in any paragraph shall qualify other
paragraphs in this Section 6 only to the extent that it is reasonably apparent
from a reading of such document that it also qualifies or applies to such other
paragraphs.
6.1 Ownership of Company Shares. Neither Parent nor any of its
Subsidiaries (i) owns any of the Shares, and (ii) will acquire any of the Shares
prior to the Effective Time.
6.2 Capitalization of Merger Sub. The authorized capital stock of Merger
Sub consists of 1,000 shares of Common Stock, par value $.01 per share, of
Merger Sub all of which are validly issued and outstanding. All of the issued
and outstanding capital stock of Merger Sub is, and at the Effective Time will
be, owned by Parent, and there are (i) no other shares of capital stock or
voting securities of Merger Sub authorized, (ii) no securities of Merger Sub
convertible into or exchangeable for shares of capital stock or voting
securities of Merger Sub and (iii) no options or other rights to acquire from
Merger Sub, and no obligations of Merger Sub to issue, any capital stock, voting
securities or securities convertible into or exchangeable for capital stock or
voting securities of Merger Sub. Merger Sub has not conducted any business prior
to the date hereof and has no, and prior to the Effective Time will have no,
assets, liabilities or obligations of any nature other than those incident to
its formation and pursuant to or in connection with this Agreement and the
Merger and the other transactions contemplated by this Agreement.
6.3 Organization, Good Standing and Qualification. Each of Parent and its
Subsidiaries is a corporation duly organized, validly existing and in good
standing under the laws of its jurisdiction of organization and has all
requisite corporate or similar power and authority to own and operate its
properties and assets and to carry on its business as presently conducted and is
qualified to do business and is in good standing as a foreign corporation in
each jurisdiction where the ownership or operation of its properties or conduct
of its business requires such qualification, except where the failure to be so
qualified or in good standing would not have a Parent Material Adverse Effect
(as hereinafter defined). Parent has made available to the Company a complete
and correct copy of Parent's and the Merger Sub's article of organization and
bylaws (or comparable governing instruments), as amended and/or restated to the
date hereof. Parent's and its Subsidiaries' articles of organization and bylaws
(or comparable governing instruments) are in full force and effect.
As used in this Agreement, the term "PARENT MATERIAL ADVERSE EFFECT" means
a material adverse effect on the financial condition, properties, business or
results of operations of Parent and its Subsidiaries taken as a whole; provided,
however, that any such effect resulting from any change (i) in law, rule, or
regulation or GAAP or interpretations thereof (ii) in economic or business
conditions generally or in the industries of the Parent or any of its
Subsidiaries specifically in a manner not disproportionate to the manner in
which such conditions affect other companies generally or other companies in the
industries of the Parent or any of its Subsidiaries, as the case may be, or
(iii) as a proximate result of the execution and delivery of this Agreement and
the contemplated consummation of the transactions contemplated hereby shall not
be considered when determining if a Parent Material Adverse Effect has occurred.
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6.4 Capital Structure. The authorized capital stock of the Parent
consists of 50,000,000 shares of Parent Common Stock and 2,000,000 shares of
preferred stock, $.01 par value per share (the "PARENT PREFERRED STOCK"). As of
the close of business on the date hereof, 25,532,257 shares of Parent Common
Stock were issued and outstanding and no shares of Parent Preferred Stock were
issued and outstanding. As of the close of business on the date hereof, there
were an aggregate of 2,899,361 shares of Parent Common Stock subject to
outstanding options pursuant to the Parent's Amended and Restated 1995 Stock
Incentive Plan, 1996 Amended and Restated Director Stock Option Plan and 1997
Director Stock Option Plan. In addition, 427,286 shares of Parent Common Stock
are reserved for future issuance pursuant to the 1999 Employee Stock Purchase
Plan. All outstanding shares of Parent Common Stock are, and all shares of
Parent Common Stock subject to issuance as specified above, upon issuance on the
terms and conditions specified in the instruments pursuant to which they are
issuable, will be, duly authorized, validly issued, fully paid and
nonassessable. All of the shares of Parent Common Stock issuable pursuant to
Section 4.1(a) in connection with the Merger, when issued in accordance with
this Agreement, will be duly authorized, validly issued, fully paid and
nonassessable and not subject to or issued in violation of any purchase option,
call option, right of first refusal, preemptive right, subscription right or any
similar right under any provision of the Parent's or Merger Sub's charter or
bylaws or any agreement to which the Parent or Merger Sub is a party or is
otherwise bound. There are no obligations, contingent or otherwise, of the
Parent or any of its Subsidiaries to repurchase, redeem or otherwise acquire any
shares of the Parent Common Stock or other capital stock of the Parent or any of
its Subsidiaries. Each of the outstanding shares of capital stock or other
securities of each of Merger Sub is duly authorized, validly issued, fully paid
and nonassessable and owned by Parent or a direct or indirect wholly-owned
Subsidiary of Parent, free and clear of any lien, pledge, security interest,
claim or other encumbrance. Except as set forth above, there are no preemptive
or other outstanding rights, options, warrants, conversion rights, stock
appreciation rights, redemption rights, repurchase rights, agreements,
arrangements or commitments to issue or to sell any shares of capital stock or
other securities of Parent or Merger Sub or any securities or obligations
convertible or exchangeable into or exercisable for, or giving any Person a
right to subscribe for or acquire, any securities of Parent or Merger Sub, and
no securities or obligations evidencing such rights are authorized, issued or
outstanding. Parent does not have outstanding any bonds, debentures, notes or
other obligations the holders of which have the right to vote (or convertible
into or exercisable for securities having the right to vote) with the
stockholders of Parent on any matter ("PARENT VOTING DEBT"). To the knowledge of
the executive officers of Parent, other than the Parent Stockholder Agreement to
be delivered by John R. Bertucci, Claire R. Bertucci and certain Bertucci family
trusts, there are no agreements or understandings with respect to the voting
(including voting trusts and proxies) or sale or transfer (including agreements
imposing transfer restrictions) of any shares of capital stock of the Parent or
any of its Subsidiaries.
6.5 Corporate Authority: Approval and Fairness.
(a) Each of Parent and Merger Sub has all requisite corporate power
and authority and has taken all corporate action necessary in order to
execute, deliver and perform its obligations under this Agreement, and to
consummate, subject only to approval by the holders of a majority of the
outstanding shares of Parent Common Stock of the issuance of Parent Common
Stock pursuant to Section 4 hereof (the "PARENT REQUISITE VOTE"), the
Merger and the transactions contemplated hereby. This Agreement has been
duly executed and delivered by Parent and Merger Sub and, assuming due
authorization, execution and delivery of this Agreement by the Company, is
a valid and legally binding agreement of Parent and Merger Sub, enforceable
against each of Parent and Merger Sub in accordance with its terms, subject
to the Bankruptcy and Equity Exception. The Parent Common Stock, when
issued, will be registered under the Securities Act and registered or
exempt from registration under any applicable state securities or "BLUE
SKY" laws.
(b) The Board of Directors of each of the Parent and the Merger Sub
has approved this Agreement and adopted the Plan set forth in this
Agreement. The Board of Directors of Parent has received the opinion of its
financial advisors, Merrill, Lynch, Pierce, Fenner & Smith Incorporated, to
the effect that the Merger Consideration to be issued by Parent is fair,
from a financial point of view, to Parent.
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6.6 Governmental Filings; No Violations.
(a) Except with respect to Environmental Laws, which are specifically
addressed in Section 6.13, other than the filings and/or notices (A)
pursuant to Section 1.3, (B) under the HSR Act, the Securities Act and the
Exchange Act, (C) to comply with state securities or "BLUE SKY" laws and
(D) required to be made with The Nasdaq Stock Market, Inc., no notices,
reports or other filings are required to be made by Parent or Merger Sub
with, nor are any consents, registrations, approvals, permits or
authorizations required to be obtained by Parent or Merger Sub from, any
Governmental Entity, in connection with the execution and delivery of this
Agreement by Parent and Merger Sub and the consummation by Parent and
Merger Sub of the Merger and the other transactions contemplated hereby.
(b) The execution, delivery and performance of this Agreement by
Parent and Merger Sub do not, and the consummation by Parent and Merger Sub
of the Merger and the other transactions contemplated hereby will not,
constitute or result in (A) a breach or violation of, or a default under,
either the articles of organization or bylaws of Parent, the certificate of
incorporation or bylaws of Merger Sub or the comparable governing
instruments of any of Parent's Subsidiaries, (B) a breach or violation of,
or a default under, the acceleration of any obligations or the creation of
a lien, pledge, security interest or other encumbrance on the assets of
Parent or any of its Subsidiaries (with or without notice, lapse of time or
both) pursuant to, any Contracts binding upon Parent or any of its
Subsidiaries or any Law or governmental or non-governmental permit,
license, judgment, injunction, order, decree, statute, law, ordinance, rule
or regulation to which Parent or any of its Subsidiaries is subject or (C)
any change in the rights or obligations of any party under any of the
Contracts, except, in the case of clause (B) above, for any breach,
violation, default, acceleration, creation or change that would not have a
Parent Material Adverse Effect or prevent, materially delay or materially
impair the ability of Parent or Merger Sub to consummate the transactions
contemplated by this Agreement.
6.7 Parent Reports; Financial Statements. Parent has made, or, as
appropriate, will make, available to the Company each registration statement,
report, proxy statement or information statement filed by it since December 31,
1999 (the "PARENT AUDIT DATE") and prior to the Effective Time, including (i)
Parent's Annual Report on Form 10-K for the fiscal year ended December 31, 1999,
(ii) Parent's Quarterly Reports on Form 10-Q for the quarterly periods ended
March 31, 2000 and June 30, 2000, (iii) Form 8-K filed with the SEC on June 28,
2000, (iv) Registration Statement on Form S-8 filed with the SEC on February 28,
2000, and (v) Registration Statement on Form S-3 filed with the SEC on April 10,
2000 and amendments thereto, each in the form (including exhibits, annexes and
any amendments thereto) filed with the SEC (collectively, including amendments
of any such reports as amended, the "PARENT REPORTS"). The Parent Reports (i)
were or will be filed on a timely basis, (ii) were or will be prepared in
compliance in all material respects with the applicable requirements of the
Securities Act and the Exchange Act, as the case may be, and the rules and
regulations of the SEC thereunder applicable to such Parent Reports, and (iii)
did not or will not at the time they were or are filed contain any untrue
statement of a material fact or omit to state a material fact required to be
stated in such Parent Reports or necessary in order to make the statements in
such Parent Reports, in the light of the circumstances under which they were
made, not misleading. No Subsidiary of the Parent is required to file any forms,
reports or other documents with the SEC. Each of the consolidated balance sheets
included in or incorporated by reference into the Parent Reports (including the
related notes and schedules) fairly presents the consolidated financial position
of Parent and its Subsidiaries as of its date and each of the consolidated
statements of income and of changes in financial positions included in or
incorporated by reference into the Parent Reports (including any related notes
and schedules) fairly presents the consolidated results of operations and cash
flows, as the case may be, of Parent and its Subsidiaries for the periods set
forth therein (subject, in the case of unaudited statements, to the absence of
notes and normal year-end audit adjustments, which will not be material), in
each case in accordance with GAAP consistently applied during the periods
involved, except as may be noted therein.
6.8 Absence of Certain Changes. Except as disclosed in the Parent Reports
or as set forth on Section 6.8 of the Parent Disclosure Letter, since the Parent
Audit Date and through the date hereof, Parent and its Subsidiaries taken as a
whole have conducted their business only in, and have not engaged in any
material transaction other than according to, the ordinary and usual course of
such business and there has not been (i) any change in the financial condition,
properties, business, results of operations or prospects of Parent
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and its Subsidiaries that has had, or is reasonably likely to have, a Parent
Material Adverse Effect; (ii) any material damage, destruction or other casualty
loss with respect to any material asset or material property owned, leased or
otherwise used by Parent or any of its Subsidiaries, not covered by insurance;
(iii) any change by Parent in accounting principles, practices or methods which
is not required or permitted by GAAP; or (iv) any declaration, setting aside or
payment of any dividend or other distribution in respect of the capital stock of
Parent, except for dividends or other distributions on its capital stock
publicly announced prior to the date hereof or in the ordinary course of
business consistent with past practice.
6.9 Litigation. Except with respect to Environmental Laws, which are
specifically addressed in Section 6.13, and except as disclosed in the Parent
Reports, there are no civil, criminal or administrative actions, suits, claims,
hearings, investigations or proceedings pending or, to the knowledge of the
executive officers of the Parent, threatened against or affecting the Parent or
any of its Subsidiaries, except for those that would not have a Parent Material
Adverse Effect or prevent or materially burden or materially impair the ability
of the Parent or Merger Sub to consummate the transactions contemplated by this
Agreement, nor any judgment, decree, injunction, rule or rules of any
Governmental Entity pending or, to the knowledge of the executive officers of
the Parent, threatened against or affecting the Parent or any of its
Subsidiaries, except for those that would not have a Parent Material Adverse
Effect or prevent or materially burden or materially impair the ability of the
Parent or Merger Sub to consummate the transactions contemplated by this
Agreement. There are no judgments, orders or decrees outstanding against the
Parent which, individually or in the aggregate, have had or are reasonably
likely to have a Parent Material Adverse Effect.
6.10 Compliance with Laws. The business of Parent and its Subsidiaries
taken as a whole is not being conducted in violation of any Laws, except for
violations that would not have a Parent Material Adverse Effect or prevent or
materially burden or materially impair the ability of Parent to consummate the
transactions contemplated by this Agreement. No investigation or review by any
Governmental Entity with respect to Parent or any of its Subsidiaries is pending
or, to the knowledge of the executive officers of Parent, threatened, nor has
any Governmental Entity indicated an intention to conduct the same, except for
those the outcome of which would not have a Parent Material Adverse Effect or
prevent or materially burden or materially impair the ability of Parent to
consummate the transactions contemplated by this Agreement. Parent and its
Subsidiaries each has all Permits from Governmental Entities necessary to
conduct its business as presently conducted, except for those the absence of
which would not have a Parent Material Adverse Effect or prevent or materially
burden or materially impair the ability of Parent or Merger Sub to consummate
the Merger and the other transactions contemplated by this Agreement. The Parent
and its Subsidiaries are in compliance with the terms of the Permits, except
where the failure to so comply, individually or in the aggregate, is not
reasonably likely to have a Parent Material Adverse Effect. No Permit will cease
to be effective as a result of the consummation of transactions contemplated by
this Agreement, except where the cessation of effectiveness, individually or in
the aggregate, will not have a Parent Material Adverse Effect.
6.11 Required Vote. The Parent shareholders approval, being the
affirmative vote of a majority of the Parent Common Stock entitled to vote, is
the only vote of the holders of any class or series of the securities of Parent
necessary to approve this Agreement, the Merger and the other transactions
contemplated hereby.
6.12 No Owned Real Properties. Except as disclosed in the Parent Reports,
the Parent and its Subsidiaries do not own any real property.
6.13 Environmental Matters. Except as disclosed in the Parent Reports and
except for such matters that would not have a Parent Material Adverse Effect,
Parent and its Subsidiaries: (i) are in compliance with all applicable
Environmental Laws; (ii) have not received any notice from any Governmental
Entity or any third party alleging any violation of, or liability under, any
applicable Environmental Laws; (iii) are not subject to any court order,
administrative order or decree arising under any Environmental Law; (iv) to the
knowledge of the executive officers of Parent do not own or operate any property
that has been contaminated with any Hazardous Substance; and (v) are not subject
to any claims, demands or notifications concerning liability for any Hazardous
Substance disposal or contamination.
6.14 Accounting and Tax Qualification Matters. As of or prior to the date
hereof, neither Parent nor any of its Affiliates has taken or agreed to take any
action, nor do the executive officers of Parent have any knowledge of any fact
or circumstance, that would prevent Parent from accounting for the business
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combination to be effected by the Merger as a "POOLING-OF-INTERESTS" or prevent
the Merger from qualifying as a "REORGANIZATION" within the meaning of Section
368(a) of the Code. It is the present plan and intention of Parent to (a) cause
the Company to continue at least one significant historic business line, or to
use a significant portion of the Company's historic business assets in a
business, in each case within the meaning of Treasury Regulation 1.368-1(d)
promulgated under the Internal Revenue Code and (b) maintain the Company as a
separate subsidiary which is directly owned by the Parent and not to liquidate
the Company or merge the Company with any other entity; provided, however,
Parent may cause the Company to be merged into Parent.
6.15 Taxes. Parent and each of its Subsidiaries (i) have duly and timely
filed (taking into account any extension of time within which to file) all Tax
Returns required to be filed by any of them and all such filed Tax Returns are
complete and accurate in all respects, (ii) have paid all Taxes owed by the
Parent and each of its Subsidiaries (whether or not shown on any Tax Return)
that are shown as due on such filed Tax Returns or that Parent or any of its
Subsidiaries are obligated to withhold from amounts owing to any employee,
creditor or third party, except with respect to matters contested in good faith,
and (iii) have not waived any statute of limitations with respect to Taxes or
agreed to any extension of time with respect to a Tax assessment or deficiency,
except, in each case, for those failures to file or pay or those waivers that
would not have a Parent Material Adverse Effect. As of the date hereof, there
are not pending or, to the knowledge of the executive officers of Parent,
threatened in writing, any audits, examinations, investigations or other
proceedings in respect of Taxes or Tax matters.
6.16 Labor Matters. Neither the Parent nor any of its Subsidiaries is a
party to or otherwise bound by any collective bargaining agreement, contract or
other agreement or understanding with a labor union or labor organization.
Neither Parent nor any of its Subsidiaries is the subject of any proceeding
asserting that Parent or any of its Subsidiaries has committed an unfair labor
practice nor is there pending or, to the knowledge of the executive officers of
Parent, threatened, nor since January 1, 1998 has there been any labor strike,
dispute, walk-out, work stoppage, slow-down or lockout involving Parent or any
of its Subsidiaries, except for those that would not have a Parent Material
Adverse Effect or prevent or materially burden or materially impair the ability
of Parent to consummate the transactions contemplated by this Agreement.
6.17 Intellectual Property.
(a) Parent and/or one or more of its Subsidiaries owns, or is licensed
or otherwise possesses valid rights to use, all patents, trademarks, trade
names, service marks, domain names, copyrights, and any applications
therefor, technology, know-how, computer software programs or applications,
and tangible or intangible proprietary information or materials that are
used in the business of Parent and its Subsidiaries as conducted as of the
date hereof, except for any such failures to own, be licensed or possess
that would not have a Parent Material Adverse Effect, and to the knowledge
of the executive officers of Parent all patents, trademarks, trade names,
service marks and copyrights owned by Parent and/or its Subsidiaries are
valid and subsisting, except for those the invalidity of which would not
have a Parent Material Adverse Effect.
(b) Except as disclosed in Parent Reports or except as would not have
a Parent Material Adverse Effect:
(i) Parent is not, nor will it be as a result of the execution and
delivery of this Agreement or the performance of its obligations
hereunder, in violation of any licenses, sublicenses and other
agreements as to which Parent is a party as of the date hereof and
pursuant to which Parent is authorized to use any third-party patents,
trademarks, service marks, domain names, copyrights, trade secrets or
computer software (collectively, "PARENT THIRD-PARTY INTELLECTUAL
PROPERTY RIGHTS");
(ii) no claims with respect to (a) the patents, registered and
material unregistered trademarks and service marks, domain names,
registered copyrights, trade names, and any applications therefor, trade
secrets or computer software owned by Parent or any of its Subsidiaries
(collectively, the "PARENT INTELLECTUAL PROPERTY RIGHTS") or (b) Parent
Third-Party Intellectual Property Rights are
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currently pending or, to the knowledge of the executive officers of
Parent, are threatened by any Person;
(iii) to the knowledge of the executive officers of Parent there
are not any valid grounds for any bona fide claims (a) to the effect
that the sale, licensing or use of any product or service as used, sold
or licensed by Parent or any of its Subsidiaries, infringes on any
copyright, patent, trademark, service mark, domain names or trade
secret; (b) against the use by Parent or any of its Subsidiaries of any
Parent Intellectual Property Rights or Parent Third-Party Intellectual
Property Rights used in the business of Parent or any of its
Subsidiaries as currently conducted; (c) challenging the ownership,
validity or enforceability of any of the Parent Intellectual Property
Rights; or (d) challenging the license or legally enforceable right to
use of the Parent Third-Party Intellectual Rights by Parent or any of
its Subsidiaries; and
(iv) to the knowledge of the executive officers of Parent, there is
no unauthorized use, infringement or misappropriation of any of the
material Parent Intellectual Property Rights by any third party,
including any employee or former employee of Parent or any of its
Subsidiaries.
(v) The Parent and its Subsidiaries have taken reasonable measures
to protect the proprietary nature of the Parent Intellectual Property
Rights that are material to the business of the Parent and its
Subsidiaries, taken as a whole, and to maintain in confidence all trade
secrets and confidential information owned or used by the Parent or any
of its Subsidiaries and that are material to the business of the Parent
and its Subsidiaries, taken as a whole.
6.18 Brokers and Finders. Except for Merrill, Lynch, Pierce, Fenner &
Smith, neither Parent nor any of its Affiliates, officers, directors or
employees has employed any broker or finder or incurred any liability for any
brokerage fees, commissions or finders' fees in connection with the Merger or
the other transactions contemplated by this Agreement. The Parent shall pay the
fees and expenses of Merrill Lynch and Company. Section 6.18 of the Parent
Disclosure Letter sets forth the estimated fees and expenses of Merrill Lynch
and Company incurred and to be incurred by the Parent and any of its
Subsidiaries in connection with this Agreement and the transactions contemplated
by this Agreement.
6.19 Board Recommendation. The Parent Board, at a meeting duly called and
held, has by a unanimous vote, (i) determined and declared that this Agreement
and the transactions contemplated hereby, including the Merger, are advisable
and fair to and in the best interests of Parent and the shareholders of Parent
and (ii) resolved to recommend that the holders of Parent Common Stock approve
the issuance of Parent Common Stock pursuant to the Merger. John R. Bertucci,
Claire R. Bertucci and certain Bertucci family trusts, simultaneously with the
execution of this Agreement, have executed the Parent Stockholder Agreement, in
the form attached hereto as Exhibit A-2 (the "PARENT STOCKHOLDER AGREEMENT"),
agreeing to vote all shares of Parent Common Stock owned by them in favor of the
transactions contemplated by this Agreement.
6.20 Assets. Each of the Parent and its Subsidiaries owns or leases all
tangible assets necessary for the conduct of its businesses as presently
conducted and as presently proposed to be conducted. All of such tangible assets
which are owned, are owned free and clear of all Liens except for (i) Liens
which are disclosed in the Parent Reports filed prior to the date of this
Agreement and (ii) other Liens which, individually and in the aggregate, do not
materially interfere with the ability of the Parent and its Subsidiaries to
conduct their business as currently conducted and as presently proposed to be
conducted and have not resulted in, and are not reasonably likely to result in,
a Parent Material Adverse Effect. The tangible assets of the Parent and its
Subsidiaries, taken as a whole, are free from material defects, have been
maintained in accordance with normal industry practice, are in good operating
condition and repair (subject to normal wear and tear) and are suitable for the
purpose for which they are presently used.
6.21 Customers and Suppliers. No customer of the Parent or any of its
Subsidiaries that represented 5% or more of the Parent's consolidated revenues
in the fiscal year ended December 31, 1999 has indicated to the Parent or any of
its Subsidiaries that it will stop, or decrease the rate of, buying materials,
products or services from the Parent or any of its Subsidiaries. No supplier of
the Parent or any of its Subsidiaries has
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indicated to the Parent or any of its Subsidiaries that it will stop, or
decrease the rate of, supplying materials, products or services to them, which
cessation or decrease, individually or in the aggregate, is reasonably likely to
have a Parent Material Adverse Effect.
6.22 Business Activity Restrictions. There is no non-competition or other
similar agreement, commitment, judgment, injunction or order to which the Parent
or any Subsidiary of the Parent is a party or subject to that has or could
reasonably be expected to have the effect of prohibiting or impairing the
conduct of the business by the Parent in any material respect. The Parent has
not entered into any agreement under which it is restricted in any material
respect from selling, licensing or otherwise distributing any of its technology
or products, or providing services to, customers or potential customers or any
class of customers, in any geographic area, during any period of time or any
segment of the market or line of business.
6.23 Disclosure. No representation or warranty by Parent and/or Merger
Sub in this Agreement, nor any statement, certificate, schedule, document or
exhibit hereto furnished or to be furnished by or on behalf of Parent and/or
Merger Sub pursuant to this Agreement or in connection with transactions
contemplated hereby, contains or shall contain any untrue statement of material
fact or omits or shall omit a material fact necessary to make the statements
contained herein or therein not misleading.
6.24 No Other Representations or Warranties Except for the
representations and warranties contained in this Section 6, neither Parent or
Merger Sub nor any other Person makes any other express or implied
representation or warranty on behalf of Parent, Merger Sub or any of their
respective Affiliates.
VII. COVENANTS
7.1 Interim Covenants.
(a) Interim Operations of the Company. From the date hereof through
the Effective Time, the Company covenants and agrees that its business and
the business of its Subsidiaries shall be conducted in the ordinary and
usual course and, to the extent consistent therewith, it and its
Subsidiaries shall use their respective commercially reasonable efforts to
preserve its business organization intact and maintain its existing
relations and goodwill with customers, suppliers, distributors, creditors,
lessors, employees and business associates. Without limiting the generality
of the foregoing, the Company covenants and agrees as to itself and its
Subsidiaries that, from the date hereof and prior to the Effective Time
(unless Parent shall otherwise approve in writing, and except as otherwise
expressly contemplated by this Agreement or by Law):
(i) it shall not (A) issue, sell, pledge, dispose of or encumber
any capital stock owned by it in any of its Subsidiaries; (B) amend its
certificate of incorporation or bylaws or the comparable governing
instruments of any of its Subsidiaries; (C) split, combine or reclassify
its outstanding shares of capital stock; or (D) repurchase, redeem or
otherwise acquire any shares of its capital stock or any securities
convertible into or exchangeable or exercisable for any shares of its
capital stock, except in connection with the Company Stock Plans, or
permit any of its Subsidiaries to purchase or otherwise acquire, any
shares of its capital stock or any securities convertible into or
exchangeable or exercisable for any shares of its capital stock;
(ii) neither it nor any of its Subsidiaries shall (A) issue, sell,
pledge, dispose of or encumber any shares of, or securities convertible
into or exchangeable or exercisable for, or options, warrants, calls,
commitments or rights of any kind to acquire, any shares of its capital
stock of any class or any Voting Debt or any other property or assets
(other than Shares issuable pursuant to Company Options outstanding on
the date hereof under the Company Stock Plans); (B) other than in the
ordinary and usual course of business, transfer, lease, license,
guarantee, sell, mortgage, pledge, dispose of or encumber any other
property or assets (including capital stock of any of its Subsidiaries);
(C) incur or modify any indebtedness for borrowed money or guarantee any
such indebtedness of another Person; or (D) by any means, make any
acquisition of, or investment in, assets or stock (whether by way of
merger, consolidation, tender offer, share exchange or other activity)
of any Person;
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(iii) neither it nor any of its Subsidiaries shall enter into any
transaction involving a merger, consolidation, reorganization, share
exchange, or similar transaction involving, or any purchase of any
assets or any securities of, it or any of its Subsidiaries;
(iv) it shall not adopt any stockholder rights plan or, except as
provided in Section 5.22, alter or further amend the Company Rights Plan
or the Company Rights;
(v) neither it nor any of its Subsidiaries shall make any capital
expenditures or other expenditures with respect to property, plant or
equipment except pursuant to the capital expenditure budget set forth in
Section 7.1(a)(v) of the Company Disclosure Letter;
(vi) neither it nor any of its Subsidiaries shall make any changes
in accounting methods, principles or practices, except insofar as may
have been required by a change in GAAP or, except as so required, change
any assumption underlying, or method of calculating, any bad debt,
contingency or other reserve;
(vii) neither it nor any of its Subsidiaries shall (A) pay,
discharge, settle or satisfy any claims, liabilities or obligations
(whether absolute, accrued, asserted or unasserted, contingent or
otherwise), other than the payment, discharge or satisfaction, in the
ordinary course of business consistent with past practice or in
accordance with their terms as in effect on the date of this Agreement,
of claims, liabilities or obligations reflected or reserved against in,
or contemplated by, the most recent consolidated financial statements
(or the notes thereto) of the Company included in the Company Reports
filed prior to the date of this Agreement (to the extent so reflected or
reserved against) or incurred since the date of such financial
statements in the ordinary course of business consistent with past
practice, or (B) waive any material benefits of, modify in any adverse
respect, fail to enforce, or consent to any matter with respect to which
its consent is required under, any confidentiality, standstill or
similar agreements to which the Company or any of its Subsidiaries is a
party;
(viii) neither it nor any of its Subsidiaries shall except in the
ordinary course of business consistent with past practice, modify, amend
or terminate any material contract or agreement to which the Company or
any of its Subsidiaries is party, or knowingly waive, release or assign
any material rights or claims (including any write-off or other
compromise of any accounts receivable of the Company of any of its
Subsidiaries);
(ix) neither it nor any of its Subsidiaries shall except in the
ordinary course of business consistent with past practice (A) enter into
any material contract or agreement relating to the distribution, sale or
marketing by third parties of the products, of, or products licensed by,
the Company or any of its Subsidiaries or (B) license any material
intellectual property rights to or from any third party;
(x) neither it nor any of its Subsidiaries shall except as required
to comply with applicable law or agreements, plans or arrangements
existing on the date hereof, (A) adopt, enter into, terminate or amend
any employment, severance or similar agreement or benefit plan for the
benefit or welfare of any current or former director, officer, employee
or consultant or any collective bargaining agreement, (B) except as
provided in Section 7.1(a)(x) of the Company Disclosure Letter, increase
in any material respect the compensation or fringe benefits of, or pay
any bonus to, any director, officer, key employee or consultant, (C)
accelerate the payment, right to payment or vesting of any compensation
or benefits, including any outstanding options or restricted stock
awards, (D) pay any material benefit not provided for as of the date of
this Agreement under any benefit plan, (E) grant any awards under any
bonus, incentive, performance or other compensation plan or arrangement
or benefit plan (including the grant of stock options, stock
appreciation rights, stock based or stock related awards, performance
units or restricted stock, or the removal of existing restrictions in
any benefit plans or agreements or awards made thereunder); provided,
however, that the Company shall be permitted to grant options (with
exercise prices equal to the fair market value of the Company Common
Stock on the respective dates of grant) to purchase Shares under the
Company Stock Plans in the ordinary course of business consistent with
past practice, or (F) take any action other
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than in the ordinary course of business consistent with past practice to
fund or in any other way secure the payment of compensation or benefits
under any employee plan, agreement, contract or arrangement or benefit
plan;
(xi) it shall not make or rescind any Tax election, settle or
compromise any Tax liability or amend any Tax return;
(xii) neither it nor any of its Subsidiaries shall initiate,
compromise or settle any material litigation or arbitration proceeding;
(xiii) neither it nor any of its Subsidiaries shall fail to
maintain insurance at levels substantially comparable to levels existing
as of the date of this Agreement;
(xiv) neither it nor any of its Subsidiaries shall fail to pay
accounts payable and other obligations in the ordinary course of
business consistent with past practice; or
(xv) authorize any of, or commit or agree, in writing or otherwise,
to take any of, the foregoing actions or any action which would make any
representation or warranty of the Company in this Agreement untrue or
incorrect in any material respect, or would materially impair or prevent
the occurrence of any the conditions contained in Section 7 hereof.
(b) Interim Operations of Parent. From the date hereof through the
Effective Time, Parent covenants and agrees that its business and the
business of its Subsidiaries shall be conducted in the ordinary and usual
course and, to the extent consistent therewith, it and its Subsidiaries
shall use their respective commercially reasonable efforts to preserve its
business organization intact and maintain its existing relations and
goodwill with customers, suppliers, distributors, creditors, lessors,
employees and business associates. Without limiting the generality of the
foregoing, Parent covenants and agrees as to itself and its Subsidiaries
that, from the date hereof and prior to the Effective Time (unless the
Company shall otherwise approve in writing, and except as otherwise
expressly contemplated by this Agreement or by Law):
(i) it shall not (w) issue or sell shares of Parent Common Stock
representing more than 20% of the outstanding Parent Common Stock; (x)
except as indicated on Section 7.1(b) to the Parent Disclosure Letter,
amend its articles of organization or bylaws or the comparable governing
instruments of any of its Subsidiaries; or (y) repurchase, redeem or
otherwise acquire any shares of its capital stock or any securities
convertible into or exchangeable or exercisable for any shares of its
capital stock, except in connection with the Parent's existing stock
plans, or permit any of its Subsidiaries to purchase or otherwise
acquire, any shares of its capital stock or any securities convertible
into or exchangeable or exercisable for any shares of its capital stock;
or
(ii) neither it nor any of its Subsidiaries will authorize or enter
into an agreement to do anything prohibited by the foregoing.
7.2 Acquisition Proposals.
(a) From and after the date of this Agreement until the earlier of the
termination of this Agreement in accordance with its terms or the Effective
Time, the Company and its Subsidiaries shall not, directly or indirectly,
through any officer, director, employee, financial advisor, representative
or agent (x) solicit, initiate, or encourage any inquiries or proposals
that constitute, or could reasonably be expected to lead to, a proposal or
offer for a merger, consolidation, business combination, sale of
substantial assets, tender offer, sale of shares of capital stock
(excluding sales pursuant to existing Compensation and Benefit Plans) or
similar transaction involving the Company or any of its Subsidiaries, other
than the transactions contemplated by this Agreement (any of the foregoing
inquiries or proposals being referred to in this Agreement as an
"ACQUISITION PROPOSAL"), (y) engage in negotiations or discussions
concerning, or provide any information to any person or entity relating to,
any Acquisition Proposal, or (z) agree to or recommend any Acquisition
Proposal; provided, however, that, if the Company has not breached this
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Section 7.2, nothing contained in this Agreement shall prevent the Company
or its Board of Directors, prior to the adoption of this Agreement by the
shareholders of the Company, from:
(i) furnishing information to, or entering into discussions or
negotiations with, any person or entity in connection with an unsolicited
bona fide written Acquisition Proposal by such person or entity or
recommending an unsolicited bona fide written Acquisition Proposal to the
shareholders of the Company, if and only to the extent that:
(A) the Board of Directors of the Company believes in good faith
(after consultation with its financial advisor) that such Acquisition
Proposal is reasonably capable of being completed on the terms proposed
and would, if consummated, result in a transaction more favorable than
the transaction contemplated by this Agreement (any such more favorable
Acquisition Proposal being referred to in this Agreement as a "SUPERIOR
PROPOSAL") and the Company's Board of Directors determines in good faith
after consultation with outside legal counsel that such action is
necessary for such Board of Directors to fulfill its fiduciary duties,
(B) prior to furnishing such non-public information to, or entering
into discussions or negotiations with, such person or entity, such Board
of Directors receives from such person or entity an executed
confidentiality agreement with terms no less favorable to such party
than those contained in the Confidentiality Agreement, and
(C) prior to recommending a Superior Proposal or terminating this
Agreement in respect thereof, the Company shall provide the Parent with
at least five business days' notice of its proposal to do so, during
which time the Parent may make, and in such event the Company shall
consider, a counterproposal to such Superior Proposal; or
(ii) complying with Rule 14d-9 and 14e-2 promulgated under the
Exchange Act with respect to an Acquisition Proposal; provided, however,
that neither the Company nor its Board of Directors, shall, except as
permitted by paragraph (i) of this section, propose to approve or recommend
an Acquisition Proposal.
(b) The Company will immediately cease any and all existing
activities, discussions or negotiations with any parties conducted
heretofore of the nature described in Section 7.2(a) and will use
reasonable efforts to obtain the return of any confidential information
furnished to any such parties.
(c) The Company shall notify the Parent immediately (but in any event,
within one (1) business day) after receipt by the Company (or its advisors)
of any Acquisition Proposal or any request for nonpublic information in
connection with an Acquisition Proposal. Such notice shall be made orally
and in writing and shall indicate in reasonable detail the identify of the
offer and the terms and conditions of such proposal, inquiry or contact.
The Company shall continue to keep the Parent promptly informed of any
change in the status of any such discussions or negotiations and the terms
being discussed or negotiated
(d) Nothing in this Section 7.2 shall (i) permit the Company to
terminate this Agreement (except as specifically provided in Section 9.3
hereof), or (ii) permit the Company to enter into any agreement with
respect to an Acquisition Proposal during the term of this Agreement (other
than a confidentiality agreement of the type referred to in Section 7.2(a)
above).
(e) Without limiting the foregoing, it is understood that any
violation of the restrictions set forth in this Section 7.2 by any director
or officer of the Company or any of its Subsidiaries or any investment
banker, financial advisor, attorney, accountant or other representative of
the Company or any of its Subsidiaries shall be deemed to be a breach of
this Section 7.2 by the Company.
7.3 Information Supplied.
(a) The Company and Parent each agrees, as to itself and its
Subsidiaries, that none of the information supplied or to be supplied by it
or its Subsidiaries for inclusion or incorporation by reference in (i) the
Registration Statement on Form S-4 to be filed with the SEC by Parent in
connection with the
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issuance of shares of Parent Common Stock in the Merger (including the
joint proxy statement and prospectus (the "PROSPECTUS/PROXY STATEMENT")
constituting a part thereof) (the "S-4 REGISTRATION STATEMENT") will, at
the time the S-4 Registration Statement becomes effective under the
Securities Act, contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which they were
made, not misleading, and (ii) the Prospectus/Proxy Statement and any
amendment or supplement thereto will, at the date of mailing to
shareholders of Company and Parent and at the times of the meetings of
shareholders of the Company and Parent to be held in connection with the
Merger, contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they
were made, not misleading.
(b) As soon as practicable following the date of this Agreement,
Company and Parent shall prepare the Prospectus/Proxy Statement. Company
shall, in cooperation with Parent, file the Prospectus/Proxy Statement with
the SEC as its preliminary proxy statement and Parent shall, in cooperation
with Company, prepare and file with the SEC the Registration Statement, in
which the Prospectus/Proxy Statement will be included. Each of Company and
Parent shall use commercially reasonable efforts to have the Registration
Statement declared effective under the Securities Act as promptly as
practicable after such filing and to keep the Registration Statement
effective as long as is necessary to consummate the Merger. Parent and
Company shall mail the Prospectus/Proxy Statement to their respective
stockholders as promptly as practicable after the Registration Statement is
declared effective under the Securities Act and, if necessary, after the
Prospectus/Proxy Statement shall have been so mailed, promptly circulate
supplemental or amended proxy material, and, if required in connection
therewith, resolicit proxies.
7.4 Shareholders' Meetings. The Company will take, in accordance with
applicable law and its certificate of incorporation and bylaws, all action
necessary to convene a meeting of holders of Shares (the "SHAREHOLDERS'
MEETING") as promptly as practicable after the S-4 Registration Statement is
declared effective to consider and vote upon the approval of this Agreement and
such other matters as may be appropriate. The Board of Directors of the Company
shall recommend such approval and shall take all lawful action reasonably
necessary to solicit such approval; provided, however, that the Company's
adoption of this Agreement and the recommendation of the Board of Directors of
the Company may be withdrawn if the Company terminates this Agreement pursuant
to Section 9.3.
Parent will take, in accordance with applicable law and its articles of
organization and bylaws, all action necessary to convene a meeting of holders of
Parent Common Stock (the "PARENT STOCKHOLDERS' MEETING") as promptly as
practicable after the S-4 Registration Statement is declared effective to
consider and vote upon the approval of the issuance of Parent Common Stock
pursuant to this Agreement and such other matters as may be appropriate. The
Board of Directors of Parent shall recommend such approval and shall take all
lawful action reasonably necessary to solicit such approval.
7.5 Filings; Other Actions; Notification.
(a) Parent and the Company shall promptly, following the date hereof,
prepare and file with the SEC the Prospectus/Proxy Statement, and Parent
shall promptly, following the date hereof, prepare and file with the SEC
the S-4 Registration Statement. Parent and the Company each shall use its
commercially reasonable efforts to have the S-4 Registration Statement
declared effective under the Securities Act as promptly as practicable
after such filing, and as soon as practicable thereafter mail the
Prospectus/Proxy Statement to its shareholders and, if necessary after the
Prospectus/Proxy Statement is mailed, promptly circulate amended
supplemental proxy material, and, if required, resolicit proxies. Parent
shall also use its commercially reasonable efforts to obtain prior to the
effective date of the S-4 Registration Statement all necessary state
securities law or "BLUE SKY" permits and approvals required in connection
with the Merger and to consummate the other transactions contemplated by
this Agreement and will pay all expenses incident thereto.
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(b) The Company and Parent each shall use commercially reasonable
efforts to cause to be delivered to the other party and its directors a
letter of its independent auditors, dated (i) the date on which the S-4
Registration Statement shall become effective and (ii) the Closing Date,
and addressed to the other party and its directors, in form and substance
customary for "COMFORT" letters delivered by independent public accountants
in connection with registration statements similar to the S-4 Registration
Statement.
(c) The Company and Parent shall cooperate with each other and use
(and shall cause their respective Subsidiaries to use) their respective
commercially reasonable efforts to take or cause to be taken all actions,
and do or cause to be done all things, necessary, proper or advisable on
its part under this Agreement and applicable Laws to consummate and make
effective the Merger and the other transactions contemplated by this
Agreement as soon as practicable, including preparing and filing as soon as
practicable all documentation to effect all necessary notices, reports and
other filings and to obtain as soon as practicable all consents,
registrations, approvals, permits and authorizations necessary or advisable
to be obtained from any third party and/or any Governmental Entity in order
to consummate the Merger or any of the other transactions contemplated by
this Agreement. Subject to applicable Laws relating to the exchange of
information, Parent and the Company shall have the right to review in
advance, and to the extent practicable each will consult the other on, all
the information relating to Parent or the Company, as the case may be, and
any of their respective Subsidiaries, that appear in any filing made with,
or written materials submitted to, any third party and/or any Governmental
Entity in connection with the Merger and the other transactions
contemplated by this Agreement. In exercising the foregoing right, each of
the Company and Parent shall act reasonably and as promptly as practicable.
(d) The Company and Parent each shall, upon request by the other,
furnish the other with all information concerning itself, its Subsidiaries,
directors, officers and stockholders and such other matters as may be
reasonably necessary or advisable in connection with the Prospectus/Proxy
Statement, the S-4 Registration Statement or any other statement, filing,
notice or application made by or on behalf of Parent, the Company or any of
their respective Subsidiaries to any third party and/or any Governmental
Entity in connection with the Merger and the transactions contemplated by
this Agreement.
(e) Subject to any confidentiality obligations and the preservation of
any attorney-client privilege, the Company and Parent each shall keep the
other apprised of the status of matters relating to completion of the
transactions contemplated hereby, including promptly furnishing the other
with copies of notices or other communications received by Parent or the
Company, as the case may be, or any of its Subsidiaries, from any third
party and/or any Governmental Entity with respect to the Merger and the
other transactions contemplated by this Agreement.
(f) Subject to the terms hereof, the Parent and the Company agree, and
shall cause each of their respective Subsidiaries, to cooperate and to use
their respective commercially reasonable efforts to obtain any government
clearances or approvals required for Closing under the HSR Act, the Sherman
Act, as amended, the Clayton Act, as amended, the Federal Trade Commission
Act, as amended, and any other federal, state or foreign law, or,
regulation or decree designed to prohibit, restrict or regulate actions for
the purpose or effect of monopolization or restraint of trade
(collectively, "ANTITRUST LAWS"), to respond as promptly as practicable to
any government requests for information under any Antitrust Law and to
contest and resist any action, including any legislative, administrative or
judicial action and to have vacated, lifted, reversed or overturned any
decree, judgment, injunction or other order (whether temporary, preliminary
or permanent) (an "ANTITRUST ORDER") that restricts, prevents or prohibits
the consummation of the Merger or any other transactions contemplated by
this Agreement under any Antitrust Law. Each of the Company and Parent
shall (i) give the other party prompt notice of the commencement or threat
of commencement of any legal proceeding by or before any Governmental
Entity with respect to the Merger or any of the other transactions
contemplated by this Agreement, (ii) keep the other party informed as to
the status of any such legal proceeding or threat and (iii) promptly inform
the other party of any communication to or from the Federal Trade
Commission, the Department of Justice or any other Governmental Entity
regarding the Merger. Except as may be prohibited by any Governmental
Entity or by any Law, the Company and Parent will consult and
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cooperate with one another, and will consider in good faith the views of
one another, in connection with any analysis, appearance, presentation,
memorandum, brief, argument, opinion or proposal made or submitted in
connection with any legal proceeding under or relating to the HSR Act or
any other foreign, federal or state antitrust or fair trade Laws. In
addition, except as may be prohibited by any Governmental Entity or by any
Law, in connection with any legal proceeding under or relating to the HSR
Act or any other foreign, federal or state antitrust or fair trade Law or
any other similar legal proceeding, each of the Company and Parent will
permit authorized Representatives of the other party to be present at each
meeting or conference relating to any such legal proceeding and to have
access to and be consulted in connection with any document, opinion or
proposal made or submitted to any Governmental Entity in connection with
any such legal proceeding. Notwithstanding anything to the contrary in this
Agreement, neither the Company, the Parent nor any of their respective
Subsidiaries shall be required to (x) divest any of their respective
businesses, product lines or assets, or to take or agree to take any other
action or agree to any limitation, that could reasonably be expected to
have a Parent Material Adverse Effect or (y) take any action under this
Section if the United States Department of Justice or the United States
Federal Trade Commission authorizes its staff to seek a preliminary
injunction or restraining order to enjoin consummation of the Merger.
7.6 Accounting. Both Parent and the Company agree not to knowingly take
or cause to be taken any action, whether before or after the Effective Time,
that would disqualify the Merger as a "POOLING OF INTERESTS" for accounting
purposes
7.7 Access. Upon reasonable notice, and except as may otherwise be
required by applicable Law, the Company and Parent each shall (and shall each
cause its Subsidiaries to) afford the other's officers, employees, counsel,
accountants and other authorized representatives ("REPRESENTATIVES") reasonable
access, during normal business hours throughout the period prior to the
Effective Time, to its properties, books, contracts and records and, during such
period, each shall (and each shall cause its Subsidiaries to) furnish promptly
to the other all information concerning its business, properties and personnel
as may reasonably be requested; provided, that no investigation pursuant to this
Section shall affect or be deemed to modify any representation or warranty made
by the Company, Parent or Merger Sub; and, provided, further, that the foregoing
shall not require the Company or Parent to permit any inspection, or to disclose
any information, that in the reasonable judgment of the Company or Parent, as
the case may be, would result in the disclosure of any trade secrets of third
parties or violate any of its obligations with respect to confidentiality if the
Company or Parent, as the case may be, shall have used reasonable efforts to
obtain the consent of such third party to such inspection or disclosure. All
requests for information made pursuant to this Section shall be directed to an
executive officer of the Company or Parent, as the case may be, or such Person
as may be designated by any of their respective executive officers, as the case
may be. All such information shall be governed by the terms of the
Confidentiality Agreement.
7.8 Affiliates.
(a) At least ten (10) days prior to the date of the Shareholders'
Meeting, the Company shall deliver to Parent a list of names and addresses
of those Persons who the Company expects will be, as of thirty (30) days
prior to the Effective Time, "AFFILIATES" of the Company for the purposes
of applicable interpretations regarding the pooling-of-interests method of
accounting. There shall be added to such list the names and addresses of
any other Person subsequently identified by the Company as a Person who may
be deemed within thirty (30) days prior to the Effective Time to be an
affiliate of the Company for the purposes described above. The Company
shall exercise its commercially reasonable efforts to deliver or cause to
be delivered to Parent, prior to the date of the Shareholders' Meeting,
from each affiliate of the Company identified in the foregoing list (as the
same may be supplemented as aforesaid), a letter dated as of the date of
the Shareholders' Meeting substantially in the form attached as Exhibit B-1
(the "COMPANY AFFILIATES LETTER").
(b) At least ten (10) days prior to the date of the Parent
Stockholders' Meeting, Parent shall deliver to the Company a list of names
and addresses of those Persons who Parent expects will be, as of thirty
(30) days prior to the Effective Time, "AFFILIATES" of Parent for the
purposes of applicable
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interpretations regarding the "POOLING-OF-INTERESTS" method of accounting.
There shall be added to such list the names and addresses of any other
Person as being a Person who may be deemed within thirty (30) days prior to
the Effective Time to be such an affiliate of Parent for the purposes
described above. Parent shall exercise its commercially reasonable efforts
to deliver or cause to be delivered to the Company, prior to the date of
the Parent Stockholders' Meeting, from each of such affiliates of Parent
identified in the foregoing list (as the same may be supplemented as
aforesaid), a letter dated as of the Closing Date substantially in the form
attached as Exhibit B-2 (the "PARENT AFFILIATES LETTER").
7.9 Stock Exchange Listing and De-listing. Parent shall use its
commercially reasonable efforts to cause the shares of Parent Common Stock to be
issued in the Merger to be approved for listing on the Nasdaq National Market
prior to the Closing Date. The Surviving Corporation shall use its commercially
reasonable efforts to cause the Shares to be removed from quotation on the
Nasdaq National Market and de-registered under the Exchange Act as soon as
practicable following the Effective Time.
7.10 Publicity. The initial press release with respect to the Merger
shall be a joint press release and thereafter the Company and Parent each shall
consult with the other prior to issuing any press releases or otherwise making
public announcements with respect to the Merger and the other transactions
contemplated by this Agreement and prior to making any filings with any third
party and/or any Governmental Entity (including any national securities exchange
or national market systems) with respect thereto, except as may be required by
law or by obligations pursuant to any listing agreement with or rules of any
national securities exchange or national market system.
7.11 Stock Options; Election of Directors.
(a) Stock Options.
(i) Each Company Option under the Company Stock Plans shall, at the
Effective Time, in accordance with the terms of the Company Stock Plans
pursuant to which such Company Options were issued, be deemed to
constitute options to acquire, on the same terms and conditions as were
applicable under such Company Options immediately prior to the Effective
Time, a number of shares of Parent Common Stock equal to the product
(rounded down to the nearest whole number) obtained by multiplying (x)
the number equal to the number of Shares the holder of each such Company
Option would have been entitled to receive immediately prior to the
Effective Time had such holder exercised such Company Option in full
(assuming for such purposes that such Company Option was fully
exercisable at such time) immediately prior to the Effective Time and
(y) the Exchange Ratio, at a price per share of Parent Common Stock
(rounded up to the nearest whole cent) equal to (A) the aggregate
exercise price for the Shares otherwise purchasable pursuant to each
such Company Option (assuming for such purposes that such Company Option
was fully exercisable at such time) divided by (B) the number of full
shares of Parent Common Stock deemed purchasable pursuant to each such
Company Option in accordance with the foregoing; provided, however, the
term, exercisability, vesting schedule, status as an "INCENTIVE STOCK
OPTION" under Section 422 of the Code, if applicable, and all of the
other terms of the Options shall otherwise remain unchanged, and any
such adjustment for a Company option intended to be an incentive stock
option shall comply with Section 422 of the Code.
(ii) At or prior to the Effective Time, the Company shall make all
necessary arrangements with respect to the Company Stock Plans to permit
the assumption of the Company Options by Parent. Effective at the
Effective Time, Parent shall assume each Company Option in accordance
with the terms of the Stock Plans under which it was issued and the
stock option agreement by which it is evidenced. At or prior to the
Effective Time, Parent shall take all corporate action necessary to
reserve for issuance a sufficient number of shares of Parent Common
Stock for delivery upon exercise of Company Options. As soon as
practicable after the Effective Time, Parent shall file a registration
statement on Form S-8, or, if unavailable, a registration statement on
Form S-3 (or any successor forms), or another appropriate form with
respect to the Parent Common Stock subject to Company Options, and shall
use its commercially reasonable efforts to cause such registration
statement to become and remain effective (and maintain the current
status of the prospectus or
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prospectuses contained therein), as well as comply with any applicable
state securities or "BLUE SKY" laws, for so long as any Company Options
remain outstanding.
(iii) Prior to the Effective Time, the Board of Directors of Parent
shall take all actions necessary to ensure that the options to purchase
Parent Common Stock (resulting from Company Options) held by the
officers and directors of the Company in accordance with this Section
7.11(a) shall be exempt for purposes of Rule 16b-3 under the Exchange
Act.
(b) Election to Parent's Board of Directors. At the Effective Time of
the Merger, Parent shall increase the size of its Board of Directors to
seven members and cause (i) Robert R. Anderson to be appointed to the Board
of Directors of Parent as a member of the class of directors whose terms
will expire at the annual meeting of stockholders to be held in 2002, and
(ii) Hans-Jochen Kahl to be appointed to the Board of Directors of Parent
as a member of the class of directors whose terms will expire at the annual
meeting of stockholders to be held in 2003.
7.12 Expenses. Parent shall pay all charges and expenses, including those
of the Exchange Agent, in connection with the transactions contemplated in
Section 4. Except as otherwise provided in this Section 7.12 and Section 9.6,
whether or not the Merger is consummated, all costs and expenses incurred in
connection with this Agreement and the Merger and the other transactions
contemplated by this Agreement shall be paid by the party incurring such
expense.
7.13 Indemnification; Directors' and Officers' Insurance.
(a) The Certificate shall contain the provisions with respect to
indemnification set forth in Article VII of the bylaws of the Company on
the date of this Agreement and shall provide for indemnification to the
fullest extent permitted by and in accordance with the DGCL, which
provisions shall not be amended, repealed or otherwise modified for a
period of six years after the Effective Time (or, in the case of matters
known prior to the Effective Time which have not been resolved prior to the
sixth anniversary of the Effective Time, until such matters are finally
resolved) in any manner that would adversely affect the rights thereunder
of individuals who at any time prior to the Effective Time were directors
or officers of the Company in respect of actions or omissions occurring at
or prior to the Effective Time (including, without limitation, the
transactions contemplated by this Agreement).
(b) Following the Effective Time, Parent shall indemnify and hold
harmless, to the fullest extent permitted under applicable law (and Parent
shall also advance expenses as incurred to the fullest extent permitted
under applicable law), each present and former director and officer of the
Company and its Subsidiaries (collectively, the "INDEMNIFIED PARTIES")
against any costs or expenses (including attorneys' fees), judgments,
fines, losses, claims, damages or liabilities (collectively, "COSTS")
reasonably incurred in connection with any claim, action, suit, proceeding
or investigation, whether civil, criminal, administrative or investigative,
arising out of or pertaining to matters existing or occurring at or prior
to the Effective Time, including the transactions contemplated by this
Agreement.
(c) Any Indemnified Party wishing to claim indemnification under
paragraph (b) of this Section 7.13, upon receiving written notification of
any such claim, action, suit, proceeding or investigation, shall promptly
notify Parent thereof, but the failure to so notify shall not relieve
Parent of any liability it may have to such Indemnified Party to the extent
that such failure does not prejudice Parent. In the event of any such
claim, action, suit, proceeding or investigation (whether arising before or
after the Effective Time), (i) Parent shall have the right within ten (10)
days following the notification of Parent by the Indemnified Person of such
claim, action, suit, proceeding or investigation to assume the defense
thereof (with counsel of its selection, which may be regular corporate
counsel to Parent) and Parent shall not be liable to such Indemnified
Parties for any legal expenses of other counsel subsequently incurred by
such Indemnified Parties in connection with the defense thereof, except
that if Parent elects not to assume such defense, or representation of the
Indemnified Parties by counsel selected by Parent would pose a conflict of
interest, the Indemnified Parties may retain counsel satisfactory to them,
and Parent shall pay all reasonable fees and expenses of such counsel for
the Indemnified Parties. If such indemnity is not available with respect to
any Indemnified Party, then Parent and the Indemnified Party shall
contribute to
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the amount payable in such proportion as is appropriate to reflect the
relative faults and benefits of the Surviving Corporation (in the case of
Parent) and the Indemnified Parties. No settlements shall be made on behalf
of an Indemnified Party without such Indemnified Party's consent unless
such settlement provide for a full release of such Indemnified Party. No
Indemnified Party may enter into any settlement without the prior written
consent of the Parent.
(d) The Surviving Corporation shall maintain the Company's existing
officers' and directors' liability insurance ("D&O INSURANCE") for a period
of six years after the Effective Time so long as the annual premium
therefor is not in excess of 200% of the last annual premium paid prior to
the date hereof (the "CURRENT PREMIUM"); provided, however, that if the
existing D&O Insurance is terminated or cancelled during such six-year
period, the Surviving Corporation shall use commercially reasonable efforts
to obtain as much D&O Insurance as can be obtained for the remainder of
such period for a premium not in excess (on an annualized basis) of 200% of
the Current Premium and shall agree to indemnify the directors and officers
for any Costs not covered by such D&O Insurance.
(e) The provisions of this Section are intended to be for the benefit
of, and shall be enforceable by, each of the Indemnified Parties, their
heirs and their representatives and shall be in addition to any other
rights to indemnification (e.g. any assumed indemnification obligations).
7.14 Takeover Statute. If any Takeover Statute is or may become
applicable to the Merger or the other transactions contemplated by this
Agreement, each of Parent and the Company and their respective Board of
Directors shall grant such approvals and take such actions as are reasonably
necessary so that such transactions may be consummated as promptly as
practicable on the terms contemplated by this Agreement or by the Merger and
otherwise act to eliminate or minimize the effect's of such statute or
regulation on such transactions.
7.15 Parent Vote. Parent shall vote (or consent with respect to) or cause
to be voted (or a consent to be given with respect to) any Shares and any shares
of common stock of Merger Sub beneficially owned by it or any of its Affiliates
or with respect to which it or any of its Affiliates has the power (by
agreement, proxy or otherwise) to cause to be voted (or to provide a consent),
in favor of the approval of this Agreement at the Shareholders' Meeting or any
other meeting of stockholders of the Company or Merger Sub, respectively, at
which this Agreement shall be submitted for approval and at all adjournments or
postponements thereof (or, if applicable, by any action of stockholders of
either the Company or Merger Sub by consent in lieu of a meeting).
7.16 "POOLING OF INTERESTS" Letters. Each of Parent and the Company shall
use their respective commercially reasonable efforts to obtain from their
respective independent accountants the "POOLING OF INTERESTS" letters described
in Section 8.1(h).
7.17 Offers of Employment. At the Effective Time, the Parent or Surviving
Corporation shall offer to employ all employees of the Company as of immediately
prior to the Effective Time on terms and conditions that are substantially the
same as their terms and conditions immediately prior to the Effective Time.
Parent will give credit for past services of such employees with the Company or
its Affiliates for purposes of eligibility, vesting and benefits levels to the
extent permitted under the Parent's employee benefits plans. The employees of
the Company will be provided with benefits under employee benefit plans that are
not materially less favorable in the aggregate than the Plans provided by the
Parent to its employees.
7.18 Stockholder Litigation. Until the earlier of the termination of this
Agreement in accordance with its terms or the Effective Time, the Company shall
give the Parent the opportunity to participate in the defense or settlement of
any stockholder litigation against the Company or its Board of Directors
relating to this Agreement or any of the transactions contemplated by this
Agreement, and shall not settle any such litigation without the Parent's prior
written consent, which will not be unreasonably withheld or delayed.
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VIII. CONDITIONS
8.1 Conditions to Each Party's Obligation to Effect the Merger. The
respective obligation of each party to effect the Merger is subject to the
satisfaction or waiver at or prior to the Effective Time of each of the
following conditions:
(a) Stockholder Approval. This Agreement shall have been duly approved
by holders of Shares constituting the Company Requisite Vote and shall have
been duly approved by the sole stockholder of Merger Sub (prior to the
execution of this Agreement) in accordance with applicable law and the
certificate of incorporation or articles of organization and bylaws of each
such corporation (or other organizational documents of such corporation)
and the issuance of Parent Common Stock pursuant to this Agreement shall
have been duly approved by the holders of Parent Common Stock constituting
the Parent Requisite Vote in accordance with the Massachusetts Business
Corporation Law.
(b) Nasdaq National Market Listing. The shares of Parent Common Stock
issuable to the stockholders of the Company pursuant to this Agreement
shall have been authorized for listing on the Nasdaq National Market.
(c) HSR. The waiting period applicable to the consummation of the
Merger under the HSR Act shall have expired or been earlier terminated.
(d) Other Regulatory Consents. Other than the filing provided for in
Section 1.3, the parties shall have made or filed all notices, reports or
other filings required to be made or filed with, and obtained all
registrations, approvals, permits or authorizations required to be obtained
from or filed with, any Governmental Entity as contemplated by Sections 5.4
and 6.6 ("GOVERNMENTAL CONSENTS") which if not obtained or filed would be
reasonably likely to have a Parent Material Adverse Effect (assuming for
this purpose that the Effective Time had occurred, and, at such time, the
Company is a Subsidiary of Parent).
(e) Litigation. No court or Governmental Entity of competent
jurisdiction shall have enacted, issued, promulgated, enforced or entered
any statute, law, ordinance, rule, regulation, judgment, decree, injunction
or other order that is in effect and permanently enjoins or otherwise
prohibits consummation of the Merger (collectively, an "ORDER").
(f) S-4. The S-4 Registration Statement shall have become effective
under the Securities Act. No stop order suspending the effectiveness of the
S-4 Registration Statement shall have been issued, and no proceedings for
that purpose shall have been initiated or be threatened, by the SEC.
(g) Blue Sky Approvals. Parent shall have received all state
securities and "BLUE SKY" permits and approvals, if any, necessary to
consummate the transactions contemplated hereby.
(h) "POOLING OF INTERESTS" Letters. (i) Parent and the Company shall
have each received a letter from PriceWaterhouseCoopers LLP, independent
accountants to Parent, dated as of the Closing Date and addressed to Parent
and the Company, stating that the acquisition of the Company by Parent will
be treated as a "POOLING OF INTERESTS" as described in Accounting
Principles Board Opinion No. 16 and applicable rules and regulations of the
SEC, and (ii) Parent and the Company shall have received a letter from KPMG
LLP, independent accountants to the Company, dated as of the Closing Date
and addressed to Parent and the Company, stating that the Company is a
pooling candidate for purposes of the transactions contemplated hereby in
conformity with GAAP as described in Accounting Principles Board Opinion
No. 16 and applicable rules and regulations of the SEC.
8.2 Conditions to Obligations of Parent and Merger Sub. The obligations
of Parent and Merger Sub to effect the Merger are also subject to the
satisfaction or waiver by Parent at or prior to the Effective Time of the
following conditions:
(a) Representations and Warranties. The representations and warranties
of the Company set forth in this Agreement shall be true and correct as of
the Closing Date as though made on and as of the Closing Date (except to
the extent any such representation or warranty expressly speaks as of an
earlier date), and Parent shall have received a certificate signed on
behalf of the Company by an executive
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officer of the Company to such effect; provided, however, that
notwithstanding anything herein to the contrary, this Section (a) shall be
deemed to have been satisfied as to representations and warranties not
qualified by materiality or Company Material Adverse Effect even if such
representations or warranties are not so true and correct unless the
failure of such representations or warranties to be so true and correct
would have a Company Material Adverse Effect or would prevent, materially
delay or materially impair the ability of the Company to consummate the
transactions contemplated by this Agreement.
(b) Performance of Obligations of the Company. The Company shall have
performed in all material respects all material obligations required to be
performed by it under this Agreement at or prior to the Closing Date, and
Parent shall have received a certificate signed on behalf of the Company by
an executive officer the Company to such effect.
(c) Tax Opinion. Parent shall have received the opinion of Hale and
Dorr LLP, counsel to Parent, dated the Closing Date, to the effect that the
Merger will be treated for Federal income tax purposes as a reorganization
within the meaning of Section 368 (a) of the Code; provided that if Hale
and Dorr LLP does not render such opinion, this condition shall nonetheless
be deemed satisfied if Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.
renders such opinion to Parent (it being agreed that Parent and the Company
shall each provide reasonable cooperation, including making reasonable
representations, to Hale and Dorr LLP or Mintz, Levin, Cohn, Ferris,
Glovsky and Popeo, P.C., as the case may be, to enable them to render such
opinion).
(d) No Company Material Adverse Effect. Between the date of this
Agreement and the Effective Time, there shall not have occurred any Company
Material Adverse Effect, nor shall there have been any change, event or
condition that, with the passage of time, would reasonably be expected to
result in a Company Material Adverse Effect.
(e) Employment Agreement. The employment agreements between the Parent
and each of those individuals listed on Schedule 8.2(e) of this Agreement
shall be in full force and effect.
(f) Resignations. The Parent shall have received written resignations,
effective as of the Effective Time, of each officer and director of the
Company and its Subsidiaries.
8.3 Conditions to Obligations of the Company. The obligation of the
Company to effect the Merger is also subject to the satisfaction or waiver by
the Company at or prior to the Effective Time of the following conditions:
(a) Representations and Warranties. The representations and warranties
of Parent and Merger Sub set forth in this Agreement shall be true and
correct as of the Closing Date as though made on and as of the Closing
Date, (except to the extent any such representation and warranty expressly
speaks as of an earlier date) and the Company shall have received a
certificate signed on behalf of Parent by an executive officer of Parent
and on behalf of Merger Sub by an executive officer of Merger Sub in each
case to such effect; provided, however, that notwithstanding anything
herein to the contrary, this Section (a) shall be deemed to have been
satisfied as to representations and warranties not qualified by materiality
or Parent Material Adverse Effect even if such representations or
warranties are not so true and correct unless the failure of such
representations or warranties to be so true and correct would have a Parent
Material Adverse Effect or would prevent Parent from consummating the
transactions contemplated by this Agreement.
(b) Performance of Obligations of Parent and Merger Sub. Each of
Parent and Merger Sub shall have performed in all material respects all
material obligations required to be performed by it under this Agreement at
or prior to the Closing Date, and the Company shall have received a
certificate signed on behalf of Parent and Merger Sub by an executive
officer of Parent to such effect.
(c) Tax Opinion. The Company shall have received the opinion of Mintz,
Levin, Cohn, Ferris, Glovsky and Popeo, P.C., counsel to the Company, dated
the Closing Date, to the effect that the Merger will be treated for Federal
income tax purposes as a reorganization within the meaning of Section 368
(a) of the Code; provided that if Mintz, Levin, Cohn, Ferris, Glovsky and
Popeo, P.C. does not render
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such opinion, this condition shall nonetheless be deemed satisfied if Hale
and Dorr LLP renders such opinion to the Company (it being agreed that
Parent and the Company shall each provide reasonable cooperation, including
making reasonable representations, to Mintz, Levin, Cohn, Ferris, Glovsky
and Popeo, P.C. or Hale and Dorr LLP, as the case may be, to enable them to
render such opinion).
(d) No Parent Material Adverse Effect. Between the date of this
Agreement and the Effective Time, there shall not have occurred any Parent
Material Adverse Effect, nor shall there have been any change, event or
condition that, with the passage of time, would reasonably be expected to
result in a Parent Material Adverse Effect.
IX. TERMINATION
9.1 Termination by Mutual Consent. This Agreement may be terminated and
the Merger may be abandoned at any time prior to the Effective Time, whether
before or after the approval by stockholders of the Company and Parent,
respectively, each referred to in Section 7.1(a), by mutual written consent of
the Company and Parent by action of their respective Boards of Directors.
9.2 Termination by Either Parent or the Company. This Agreement may be
terminated and the Merger may be abandoned at any time prior to the Effective
Time by action of the Board of Directors of either Parent or the Company if (a)
the Merger shall not have been consummated by March 31, 2001, whether such date
is before or after the date of receipt of the Company Requisite Vote and/or the
Parent Requisite Vote (the "TERMINATION DATE"), (b) the approval of the
Company's stockholders required by Section 8.1(a) shall not have been obtained
at a meeting duly convened therefor or at any adjournment or postponement
thereof, (c) the approval of Parent's stockholders as required by Section 8.1(a)
shall not have been obtained at a meeting duly convened therefor or at any
postponement or adjournment thereof or (d) any Order permanently restraining,
enjoining or otherwise prohibiting consummation of the Merger shall become final
and non-appealable after the parties have used their respective commercially
reasonable efforts to have such Order removed, repealed or overturned (whether
before or after the approval by the stockholders of the Company); provided, that
the right to terminate this Agreement shall not be available to any party that
has breached in any material respect its obligations under this Agreement in any
manner that shall have proximately contributed to the occurrence of the failure
of the Merger to be consummated.
9.3 Termination by the Company. This Agreement may be terminated and the
Merger may be abandoned at any time prior to the Effective Time, whether before
or after the approval by stockholders of the Company referred to in Section
8.1(a), by action of the Board of Directors of the Company if (a) there has been
a material breach by Parent or Merger Sub of any material covenant or agreement
contained in this Agreement that is not curable or, if curable, is not cured
within thirty (30) days after written notice of such breach is given by the
Company to the party committing such breach; (b) the Board of Directors of the
Parent shall have failed to recommend approval of the Merger in the Proxy
Statement or shall have withdrawn or modified its recommendation of the Merger;
or (c) (i) the Company after the date hereof has received an unsolicited
Acquisition Proposal that its Board of Directors has determined after
consultation with its financial advisor is a Superior Proposal, (ii) the Company
has complied with all of the provisions of Section 7.2(a)(i), (iii) the Board of
Directors of the Company has determined in good faith after consultation with
its outside legal counsel that termination of this Agreement is necessary for
such Board of Directors to fulfill with its fiduciary duties under applicable
law, and (iv) the Company, contemporaneously with, and as a condition to, its
termination of this Agreement, pays to Parent the fees and expenses provided for
in Section 9.6.
9.4 Termination by Parent. This Agreement may be terminated and the
Merger may be abandoned at any time prior to the Effective Time by action of the
Board of Directors of Parent if (a) there has been a material breach by the
Company of any material covenant or agreement contained in this Agreement that
is not curable or, if curable, is not cured within thirty (30) days after
written notice of such breach is given by Parent to the party committing such
breach; (b) the Board of Directors of the Company shall have failed to recommend
approval of the Merger in the Proxy Statement or shall have withdrawn or
modified its recommendation of the Merger; (c) the Board of Directors of the
Company shall have approved or recommended to the stockholders of the Company an
Alternative Transaction (as defined in Section 9.6(d)
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below); (d) an Alternative Transaction shall have been announced or otherwise
publicly known and the Board of Directors of the Company shall have (A) failed
to recommend against acceptance of such Alternative Transaction by its
shareholders within ten (10) days of delivery of a written request from the
Parent for such action or (B) failed to reconfirm its approval and
recommendation of this Agreement and the transactions contemplated hereby within
ten (10) days of delivery of a written request from the Parent for such action
or (e) a tender offer or exchange offer for 20% or more of the outstanding
Shares is commenced (other than by the Parent or an Affiliate of the Parent) and
the Board of Directors of the Company recommends that the shareholders of the
Company tender their shares in such tender or exchange offer or, within ten (10)
days after such tender or exchange offer, fails to recommend against acceptance
of such offer or takes no position with respect to the acceptance thereof.
9.5 Effect of Termination and Abandonment. In the event of termination of
this Agreement and the abandonment of the Merger pursuant to this Section 9
(other than as set forth in Section 9.6), this Agreement shall become void and
of no effect with no liability on the part of any party hereto (or of any of its
directors, officers, employees, agents, legal and financial advisors or other
representatives); provided, however, that except as otherwise provided herein,
no such termination shall relieve any party hereto of any liability or damages
resulting from any willful breach of this Agreement.
9.6 Fees and Expenses.
(a) The Company shall pay the Parent up to $500,000 as reimbursement
for expenses of the Parent actually incurred relating to the transactions
contemplated by this Agreement prior to termination (including, but not
limited to, fees and expenses of the Parent's counsel, accountants and
financial advisors, but excluding any discretionary fees paid to such
financial advisors), upon the termination of this Agreement (i) by the
Parent pursuant to Section 9.2(a) as a result of the failure of the Company
to satisfy the condition set forth in Section 8.2(a); or (ii) by the Parent
or the Company pursuant to Section 9.2(b) under circumstances in which no
fee is payable to Parent under Section 9.6(b).
(b) The Company shall pay the Parent a termination fee of $9,075,000
upon the earliest to occur of the following events: (i) the termination of
this Agreement by the Parent pursuant to Section 9.4; (ii) the termination
of this Agreement by the Company pursuant to Section 9.3(c); or (iii) the
termination of this Agreement by either Parent or the Company pursuant to
Section 9.2(b) if, at or prior to such termination, a bona fide proposal
for an Alternative Transaction with respect to the Company shall have been
publicly announced. Any termination fee paid by the Company pursuant to
this Section 9.6(b) shall be the Parent's sole and exclusive remedy for any
termination of this Agreement in accordance with the provisions of this
Section 9.6(b).
(c) If the Company fails to promptly pay to the Parent any expense
reimbursement or fee due hereunder, the defaulting party shall pay the
costs and expenses (including legal fees and expenses) in connection with
any action, including the filing of any lawsuit or other legal action,
taken to collect payment, together with interest on the amount of any
unpaid fee at the publicly announced prime rate of Fleet Bank, N.A. plus
five percent per annum, compounded quarterly, from the date such expense
reimbursement or fee was required to be paid.
(d) As used in this Agreement, "ALTERNATIVE TRANSACTION" means either
(i) a transaction pursuant to which any person (or group of persons) other
than the Parent or its affiliates (a "THIRD PARTY"), acquires more than 20%
of the outstanding Shares pursuant to a tender offer or exchange offer or
otherwise, (ii) a merger or other business combination involving the
Company pursuant to which a Third Party acquires more than 20% of the
outstanding Shares or of the entity surviving such merger or business
combination, (iii) any other transaction pursuant to which any Third Party
acquires control of assets (including for this purpose the outstanding
equity securities of Subsidiaries of the Company, and the entity surviving
any merger or business combination including any of them) of the Company
having a fair market value equal to more than 20% of the fair market value
of all the assets of the Company immediately prior to such transaction, or
(iv) any public announcement by a Third Party of a proposal, plan or
intention to do any of the foregoing or any agreement to engage in any of
the foregoing.
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(e) The Parent shall pay the Company up to $500,000 as reimbursement
for expenses of the Company actually incurred relating to the transactions
contemplated by this Agreement prior to termination (including, but not
limited to, fees and expenses of the Company's counsel, accountants and
financial advisors, but excluding any discretionary fees paid to such
financial advisors), upon the termination of this Agreement (i) by the
Company pursuant to Section 9.2(a) as a result of the failure of the Parent
to satisfy the condition set forth in Section 8.3(a), or (ii) by the Parent
or the Company pursuant to Section 9.2(c).
X. MISCELLANEOUS AND GENERAL
10.1 Survival. This Section 10 and the agreements of the Company, Parent
and Merger Sub contained in Sections 7.6 (Accounting), 7.9 (Stock Exchange
Listing and De-listing), 7.11 (Stock Options; Election of Directors), 7.12
(Expenses) and 7.13 (Indemnification; Directors' and Officers' Insurance) and
7.16 (Offers of Employment) shall survive the consummation of the Merger. This
Section 10, the agreements of the Company, Parent and Merger Sub contained in
Section 7.12 (Expenses), Section 9.5 (Effect of Termination and Abandonment) and
the Confidentiality Agreement and the Standstill Agreement (each as hereinafter
defined) shall survive the termination of this Agreement. All other
representations, warranties, covenants and agreements in this Agreement shall
not survive the consummation of the Merger or the termination of this Agreement.
10.2 Modification or Amendment. Subject to the provisions of applicable
Law, at any time prior to the Effective Time, the parties hereto may modify or
amend this Agreement, by written agreement executed and delivered by duly
authorized officers of the respective parties.
10.3 Waiver of Conditions. The conditions to each of the parties'
obligations to consummate the Merger are for the sole benefit of such party and
may be waived by such party in whole or in part to the extent permitted by
applicable law.
10.4 Counterparts. This Agreement may be executed in any number of
counterparts, each such counterpart being deemed to be an original instrument,
and all such counterparts shall together constitute the same agreement.
10.5 Governing Law and Venue; Waiver of Jury Trial. THIS AGREEMENT SHALL
BE DEEMED TO BE MADE IN AND IN ALL RESPECTS SHALL BE INTERPRETED, CONSTRUED AND
GOVERNED BY AND IN ACCORDANCE WITH THE LAW OF THE STATE OF DELAWARE WITHOUT
REGARD TO THE CONFLICT OF LAW PRINCIPLES THEREOF. The parties hereby irrevocably
submit to the jurisdiction of the courts of the Commonwealth of Massachusetts
and the Federal courts of the United States of America located in the
Commonwealth of Massachusetts solely in respect of the interpretation and
enforcement of the provisions of this Agreement and of the documents referred to
in this Agreement, and in respect of the transactions contemplated hereby, and
hereby waive, and agree not to assert, as a defense in any action, suit or
proceeding for the interpretation or enforcement hereof or of any such document,
that it is not subject thereto or that such action, suit or proceeding may not
be brought or is not maintainable in said courts or that the venue thereof may
not be appropriate or that this Agreement or any such document may not be
enforced in or by such courts, and the parties hereto irrevocably agree that all
claims with respect to such action or proceeding shall be heard and determined
in such a Commonwealth of Massachusetts or Federal court. The parties hereby
consent to and grant any such court jurisdiction over the person of such parties
and over the subject matter of such dispute and agree that mailing of process or
other papers in connection with any such action or proceeding in the manner
provided in Section 10.6 or in such other manner as may be permitted by law
shall be valid and sufficient service thereof.
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10.6 Notices. Any notice, request, instruction or other document to be
given hereunder by any party to the others shall be in writing and delivered
personally or sent by registered or certified mail, postage prepaid, or by
facsimile:
if to Parent or Merger Sub:
MKS Instruments, Inc.
Six Shattuck Road
Andover, Massachusetts 01810
Fax: (978) 975-3756
Attention: John R. Bertucci, Chairman and CEO
with a copy to:
Hale and Dorr LLP
60 State Street
Boston, Massachusetts 02109
Attention: Mark G. Borden, Esq.
Fax: (617) 526-5000
if to the Company:
Applied Science and Technology, Inc.
90 Industrial Way
Wilmington, Massachusetts 01887
Fax: (978) 284-4442
Attention: Richard S. Post, Chairman and CEO
with a copy to:
Mintz, Levin, Cohn, Ferris,
Glosky and Popeo, P.C.
One Financial Center
Boston, Massachusetts 02111
Attention: Neil H. Aronson, Esq.
Fax: (617) 542-2241
or to such other persons or addresses as may be designated in writing by the
party to receive such notice as provided above.
10.7 Entire Agreement: no other representations. This Agreement including
any exhibits hereto), the Company Disclosure Letter, the Parent Disclosure
Letter, the Confidentiality Agreement, dated August 15, 2000, between Parent and
Company (the "CONFIDENTIALITY AGREEMENT"), and the Standstill Agreement, dated
August 15, 2000 between Parent and Company (the "STANDSTILL AGREEMENT")
constitute the entire agreement, and supersede all other prior agreements,
understandings, representations and warranties both written and oral, among the
parties, with respect to the subject matter hereof. EACH PARTY HERETO AGREES
THAT, EXCEPT FOR THE REPRESENTATIONS AND WARRANTIES CONTAINED IN THIS AGREEMENT,
THE CONFIDENTIALITY AGREEMENT AND THE STANDSTILL AGREEMENT, NEITHER PARENT AND
MERGER SUB NOR THE COMPANY MAKES ANY OTHER REPRESENTATIONS OR WARRANTIES, AND
EACH HEREBY DISCLAIMS ANY OTHER REPRESENTATIONS OR WARRANTIES MADE BY ITSELF OR
ANY OF ITS OFFICERS, DIRECTORS, EMPLOYEES, AGENTS, FINANCIAL AND LEGAL ADVISORS
OR OTHER REPRESENTATIVES, WITH RESPECT TO THE EXECUTION AND DELIVERY OF THIS
AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY, NOTWITHSTANDING THE DELIVERY
OR DISCLOSURE TO THE OTHER OR THE OTHER'S REPRESENTATIVES OF ANY DOCUMENTATION
OR OTHER INFORMATION WITH RESPECT TO ANY ONE OR MORE OF THE FOREGOING.
10.8 No Third Party Beneficiaries. Except as provided in Section 7.11
(Stock Options; Election of Director), Section 7.13 (Indemnification; Directors'
and Officers' Insurance), and Section 7.16 (Offers of
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Employment) this Agreement is not intended to confer upon any Person other than
the parties hereto any rights or remedies hereunder.
10.9 Obligations of Parent and of the Company. Whenever this Agreement
requires a Subsidiary of Parent to take any action, such requirement shall be
deemed to include an undertaking on the part of Parent to cause such Subsidiary
to take such action. Whenever this Agreement requires a Subsidiary of the
Company to take any action, such requirement shall be deemed to include an
undertaking on the part of the Company to cause such Subsidiary to take such
action and, after the Effective Time, on the part of the Surviving Corporation
to cause such Subsidiary to take such action.
10.10 Severability. The provisions of this Agreement shall be deemed
severable and the invalidity or unenforceability of any provision shall not
affect the validity or enforceability of the other provisions hereof. If any
provision of this Agreement, or the application thereof to any Person or any
circumstance, is invalid or unenforceable, (a) a suitable and equitable
provision shall be substituted therefor in order to carry out, so far as may be
valid and enforceable, the intent and purpose of such invalid or unenforceable
provision and (b) the remainder of this Agreement and the application of such
provision to other Persons or circumstances shall not be affected by such
invalidity or unenforceability, nor shall such invalidity or unenforceability
affect the validity or enforceability of such provision, or the application
thereof, in any other jurisdiction.
10.11 Interpretation. The table of contents and headings herein are for
convenience of reference only, do not constitute part of this Agreement and
shall not be deemed to limit or otherwise affect any of the provisions hereof.
Where a reference in this Agreement is made to a Section or Exhibit, such
reference shall be to a Section of or Exhibit to this Agreement unless otherwise
indicated. Whenever the words "INCLUDE," "INCLUDES" or "INCLUDING" are used in
this Agreement, they shall be deemed to be followed by the words "WITHOUT
LIMITATION."
10.12 Assignment. This Agreement shall not be assignable by operation of
law or otherwise.
10.13 Glossary of Terms. The following sets forth the location of
definitions of capitalized terms defined in the body of this Agreement:
<TABLE>
<S> <C>
"Acquisition Proposal" Section 7.2(a)
"Affiliates" Section 7.8(a)
"Alternative Transaction" Section 9.6(d)
"Antitrust Laws" Section 7.5(e)
"Antitrust Order" Section 7.5(e)
"Audit Date" Section 5.5
"Bankruptcy and Equity Exception" Section 5.3(a)
"Bylaws" Section 2.2
"Certificate" Section 2.1
"Certificate of Merger" Section 1.3
"Closing" Section 1.2
"Closing Date" Section 1.2
"Code" 2nd Recital
"Company Affiliates Letter" Section 7.8(a)
"Company Common Stock" Section 4.1(a)
"Company Disclosure Letter" Section 5
"Company Intellectual Property Rights" Section 5.16(b)(ii)
"Company Leases" Section 5.11(a)
"Company Material Adverse Effect" Section 5.1
"Company Options" Section 5.2
"Company Preferred Stock" Section 5.2(a)
"Company Reports" Section 5.5
"Company Requisite Vote" Section 5.3(a)
</TABLE>
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<PAGE> 154
<TABLE>
<S> <C>
"Company Rights" Section 5.2(a)
"Company Rights Plan" Section 5.2(a)
"Company Stock Plans" Section 5.2
"Company Stockholder Agreement" Section 5.19
"Compensation and Benefit Plans" Section 5.8
"Confidentiality Agreement" Section 10.7
"Contracts" Section 5.4(b)
"Costs" Section 7.13(b)
"Current Premium" Section 7.13(d)
"D&O Insurance" Section 7.13(d)
"Department" Section 1.3
"DGCL" Section 1.1
"Effective Time" Section 1.3
"Environmental Law" Section 5.12
"ERISA" Section 5.8(b)
"ERISA Affiliate" Section 5.8(a)
"Exchange Act" Section 5.4(a)
"Exchange Agent" Section 4.2(a)
"Exchange Fund" Section 4.2(a)
"Exchange Ratio" Section 4.1(a)
"Excluded Shares" Section 4.1(a)
"GAAP" Section 5.1
"Governmental Entity" Section 5.4(a)
"Governmental Consents" Section 8.1(d)
"Hazardous Substance" Section 5.12
"HSR Act" Section 5.4(a)
"Indemnified Parties" Section 7.13(b)
"IRS" Section 5.8(b)
"Laws" Section 5.8
"Liens" Section 5.23
"Merger" 1st Recital
"Merger Consideration" Section 4.1(a)
"Order" Section 8.1(e)
"Parent Affiliates Letter" Section 7.8(b)
"Parent Audit Date" Section 6.7
"Parent Common Stock" Section 4.1(a)
"Parent Companies" Section 4.1(a)
"Parent Disclosure Letter" Section 6
"Parent Intellectual Property Rights" Section 6.17(b)(ii)
"Parent Material Adverse Effect" Section 6.3
"Parent Reports" Section 6.7
"Parent Requisite Vote" Section 6.7
"Parent Common Stock" Section 4.1(a)
"Parent Companies" Section 4.1(a)
"Parent Stock Plan" Section 6.4
"Parent Stockholder Agreement" Section 6.19
"Parent Preferred Stock" Section 6.4
"Parent Shareholders' Meeting" Section 7.4
</TABLE>
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<PAGE> 155
<TABLE>
<S> <C>
"Parent Third-Party Intellectual Property Rights" Section 6.17(b)(i)
"Parent Voting Debt" Section 6.4
"Pension Plan" Section 5.8
"Permits" Section 5.9
"Person" Section 4.2(b)
"Plans" Section 5.8
"Prospectus/Proxy Statement" Section 7.3
"Representatives" Section 7.7
"S-4 Registration Statement" Section 7.3
"SEC" Section 5.5
"Securities Act" Section 5.4(a)
"Share" Section 4.1(a)
"Shares" Section 4.1(a)
"Share Certificate" Section 4.1(a)
"Shareholders' Meeting" Section 7.4
"Standstill Agreement" Section 10.7
"Subsidiary" Section 5.1
"Superior Proposal" Section 7.2(a)(i)(A)
"Surviving Corporation" Section 1.1
"Tax" Section 5.14
"Tax Return" Section 5.14
"Taxable" Section 5.14
"Taxes" Section 5.14
"Termination Date" Section 9.2
"Third Party" Section 9.6(e)
"Third-Party Intellectual Property Rights" Section 5.16(b)(i)
"Voting Debt" Section 5.2(a)
</TABLE>
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<PAGE> 156
IN WITNESS WHEREOF, this Agreement has been duly executed and delivered by
the duly authorized officers of the parties hereto as of the date first written
above.
APPLIED SCIENCE AND TECHNOLOGY, INC.
By: /s/ RICHARD S. POST
----------------------------------
Name: Richard S. Post
Title: Chairman and Chief
Executive Officer
MKS INSTRUMENTS, INC.
By: /s/ JOHN R. BERTUCCI
----------------------------------
Name: John R. Bertucci
Title: Chairman and Chief
Executive Officer
MANGO SUBSIDIARY CORP.
By: /s/ JOHN R. BERTUCCI
----------------------------------
Name: John R. Bertucci
Title: President
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<PAGE> 157
ANNEX B-1
[LETTERHEAD OF MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED]
September 30, 2000
Board of Directors
MKS Instruments, Inc.
Six Shattuck Road
Andover, MA 01810-2449
Members of the Board of Directors:
MKS Instruments, Inc. ("MKS") and Applied Science and Technology, Inc.
("ASTeX") propose to enter into an Agreement and Plan of Merger (the
"Agreement") pursuant to which Mango Subsidiary Corp., a Delaware corporation
and a wholly owned subsidiary of MKS, will be merged with and into ASTeX (the
"Merger") and each outstanding share of the common stock, par value $0.01 per
share, of ASTeX (the "ASTeX Common Stock") will be converted into the right to
receive 0.7669 of a share (the "Exchange Ratio") of common stock, no par value,
of MKS (the "MKS Common Stock").
You have asked us whether, in our opinion, the Exchange Ratio is fair from
a financial point of view to MKS.
In arriving at the opinion set forth below, we have, among other things:
(1) Reviewed certain publicly available business and financial information
relating to MKS and ASTeX that we deemed to be relevant;
(2) Reviewed certain information, including financial forecasts, relating
to the business, earnings, cash flows, assets, liabilities and
prospects of MKS and ASTeX, furnished to or discussed with us by MKS
and ASTeX;
(3) Conducted discussions with members of senior management and
representatives of MKS and ASTeX concerning the matters described in
clauses 1 and 2 above, as well as their respective businesses and
prospects before and after giving effect to the Merger;
(4) Reviewed the market prices and valuation multiples for the MKS Common
Stock and the ASTeX Common Stock and compared them with those of
certain publicly traded companies that we deemed to be relevant;
(5) Reviewed the results of operations of MKS and ASTeX and compared them
with those of certain publicly traded companies that we deemed to be
relevant;
(6) Compared the proposed financial terms of the Merger with the financial
terms of certain other transactions that we deemed to be relevant;
(7) Participated in certain discussions and negotiations among
representatives of MKS and ASTeX and their respective financial and
legal advisors;
(8) Reviewed the potential pro forma impact of the Merger;
(9) Reviewed a draft dated September 26, 2000 of the Agreement; and
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<PAGE> 158
[MERRILL LYNCH LOGO]
(10) Reviewed such other financial studies and analyses and took into
account such other matters as we deemed necessary, including our
assessment of general economic, market and monetary conditions.
In preparing our opinion, we have assumed and relied on the accuracy and
completeness of all information supplied or otherwise made available to us,
discussed with or reviewed by us, or publicly available, and we have not assumed
any responsibility for independently verifying such information or undertaken an
independent evaluation or appraisal of any of the assets or liabilities
(contingent or otherwise) of MKS or ASTeX or been furnished with any such
evaluation or appraisal. In addition, we have not assumed any obligation to
conduct, nor have we conducted any physical inspection of the properties or
facilities of MKS and ASTeX. As you are aware, we have not been provided with
internal financial forecasts for MKS or ASTeX, but have utilized in our analysis
publicly available financial forecasts for MKS and ASTeX which have been
reviewed and discussed with the managements and representatives of MKS and
ASTeX, as the case may be, and have been advised, and have assumed, that such
forecasts reflect reasonable estimates and judgments as to the expected future
financial performance of MKS and ASTeX. We have further assumed that the Merger
will be accounted for as a pooling of interests under generally accepted
accounting principles and that it will qualify as a tax-free reorganization for
U.S. federal income tax purposes. We have also assumed that the final form of
the Agreement will be substantially similar to the last draft reviewed by us.
Our opinion is necessarily based upon market, economic and other conditions
as they exist and can be evaluated on, and on the information made available to
us as of, the date hereof.
We are acting as financial advisor to MKS in connection with the Merger and
will receive a fee from MKS for our services contingent upon the consummation of
the Merger. In the ordinary course of our business, we may actively trade the
MKS Common Stock and other securities of MKS as well as the ASTeX Common Stock
and other securities of ASTeX, for our own account and for the accounts of
customers and, accordingly, may at any time hold a long or short position in
such securities.
This opinion is for the use and benefit of the Board of Directors of MKS in
its evaluation of the Merger. Our opinion does not address the merits of the
underlying decision by MKS to engage in the Merger and does not constitute a
recommendation to any shareholder as to how such shareholder should vote on the
proposed Merger or any matter related thereto.
We are not expressing any opinion herein as to the prices at which the MKS
Common Stock will trade following the announcement or consummation of the
Merger.
On the basis of, and subject to the foregoing, we are of the opinion that,
as of the date hereof, the Exchange Ratio is fair from a financial point of view
to MKS.
Very truly yours,
/s/ Merrill Lynch, Pierce, Fenner &
Smith Incorporated
MERRILL LYNCH, PIERCE, FENNER &
SMITH INCORPORATED
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<PAGE> 159
ANNEX B-2
[LETTERHEAD OF CIBC WORLD MARKETS CORP.]
October 2, 2000
The Board of Directors
Applied Science and Technology, Inc.
90 Industrial Way
Wilmington, Massachusetts 01887
Members of the Board:
You have asked CIBC World Markets Corp. ("CIBC World Markets") to render a
written opinion ("Opinion") to the Board of Directors as to the fairness, from a
financial point of view, to the holders of the common stock of Applied Science
and Technology, Inc. ("AST") of the Exchange Ratio (defined below) provided for
in the Agreement and Plan of Merger, dated as of October 2, 2000 (the "Merger
Agreement"), by and among AST, MKS Instruments, Inc. ("MKS") and Mango
Subsidiary Corp., a wholly owned subsidiary of MKS ("Merger Sub"). The Merger
Agreement provides for, among other things, the merger of Merger Sub with and
into AST (the "Merger") pursuant to which each outstanding share of the common
stock, par value $0.01 per share, of AST ("AST Common Stock") will be converted
into the right to receive 0.7669 (the "Exchange Ratio") of a share of the common
stock, no par value, of MKS ("MKS Common Stock").
In arriving at our Opinion, we:
(a) reviewed the Merger Agreement;
(b) reviewed audited financial statements of AST for the fiscal years ended
June 27, 1998, June 26, 1999 and July 1, 2000 and audited financial
statements of MKS for the fiscal years ended December 31, 1997, December
31, 1998 and December 31, 1999;
(c) reviewed unaudited financial statements of AST for the two-month period
ended August 31, 2000 and unaudited financial statements of MKS for the
fiscal quarters ended March 31, 2000 and June 30, 2000 and the two-month
period ended August 31, 2000;
(d) reviewed and discussed with the managements of AST and MKS publicly
available financial forecasts relating to AST and MKS and certain other
financial and business information relating to AST and MKS;
(e) reviewed historical market prices and trading volume for AST Common Stock
and MKS Common Stock;
(f) held discussions with the senior managements of AST and MKS with respect to
the businesses and prospects for future growth of AST and MKS;
(g) reviewed and analyzed certain publicly available financial data for certain
companies we deemed comparable to AST and MKS;
(h) reviewed and analyzed certain publicly available information for
transactions that we deemed comparable to the Merger;
(i) performed discounted cash flow analyses of AST and MKS using certain
assumptions of future performance provided to or discussed with us by the
managements of AST and MKS;
(j) reviewed public information concerning AST and MKS; and
(k) performed such other analyses and reviewed such other information as we
deemed appropriate.
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<PAGE> 160
The Board of Directors
Applied Science and Technology, Inc.
October 2, 2000
Page 2
In rendering our Opinion, we relied upon and assumed, without independent
verification or investigation, the accuracy and completeness of all of the
financial and other information provided to or discussed with us by AST, MKS and
their respective employees, representatives and affiliates. With respect to
publicly available forecasts relating to AST and MKS which we reviewed and
discussed with the managements of AST and MKS, we assumed, at the direction of
the managements of AST and MKS, without independent verification or
investigation, that such forecasts were prepared on bases reflecting reasonable
estimates and judgments as to the future financial condition and operating
results of AST and MKS. We also have assumed, with the consent of AST, that the
Merger will be treated as a tax-free reorganization for federal income tax
purposes and as a pooling of interests in accordance with generally accepted
accounting principles. In addition, we have assumed with the consent of AST
that, in the course of obtaining the necessary regulatory or third party
approvals for the Merger, no limitations, restrictions or conditions will be
imposed that would have a material adverse effect on AST, MKS or the
contemplated benefits to AST of the Merger. We have neither made nor obtained
any independent evaluations or appraisals of the assets or liabilities
(contingent or otherwise) of AST, MKS or affiliated entities. In connection with
our engagement, we were not requested to, and we did not, solicit generally
third party indications of interest in the acquisition of all or a part of AST.
We are not expressing any opinion as to the underlying valuation, future
performance or long-term viability of AST or MKS or the price at which the MKS
Common Stock will trade upon or subsequent to announcement or consummation of
the Merger. Our Opinion is necessarily based on the information available to us
and general economic, financial and stock market conditions and circumstances as
they exist and can be evaluated by us on the date hereof. It should be
understood that, although subsequent developments may affect this Opinion, we do
not have any obligation to update, revise or reaffirm the Opinion.
As part of our investment banking business, we are regularly engaged in
valuations of businesses and securities in connection with acquisitions and
mergers, underwritings, secondary distributions of securities, private
placements and valuations for other purposes.
We have acted as financial advisor to AST in connection with the Merger and to
the Board of Directors of AST in rendering this Opinion and will receive a fee
for our services, a significant portion of which is contingent upon consummation
of the Merger. We also will receive a fee upon the delivery of this Opinion.
CIBC World Markets has in the past provided services to AST unrelated to the
proposed Merger, for which services we have received compensation. In the
ordinary course of business, CIBC World Markets and its affiliates may actively
trade securities of AST and MKS for their own account and for the accounts of
customers and, accordingly, may at any time hold a long or short position in
such securities.
Based upon and subject to the foregoing, and such other factors as we deemed
relevant, it is our opinion that, as of the date hereof, the Exchange Ratio is
fair, from a financial point of view, to the holders of AST Common Stock. This
Opinion is for the use of the Board of Directors of AST in its evaluation of the
Merger and does not constitute a recommendation to any stockholder as to how
such stockholder should vote on any matters relating to the Merger.
Very truly yours,
/s/ CIBC World Markets Corp.
CIBC WORLD MARKETS CORP.
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<PAGE> 161
ANNEX C-1
STOCKHOLDER AGREEMENT
STOCKHOLDER AGREEMENT, dated as of October 2, 2000 (this "AGREEMENT"),
among the stockholders listed on the signature page(s) hereto (collectively,
"STOCKHOLDERS" and each individually, a "STOCKHOLDER"), Applied Science and
Technology, Inc., a Delaware corporation (the "COMPANY") and MKS Instruments,
Inc., a Massachusetts corporation ("PARENT"). Capitalized terms used and not
otherwise defined herein shall have the respective meanings assigned to them in
the Merger Agreement referred to below.
WHEREAS, as of the date hereof, the Stockholders collectively own of record
and beneficially shares of capital stock of the Company as set forth on Schedule
I hereto (such shares, together with any other voting or equity of securities of
the Company hereafter acquired by any Stockholder prior to the termination of
this Agreement, being referred to herein collectively as the "SHARES");
WHEREAS, concurrently with the execution of this Agreement, Parent and the
Company are entering into an Agreement and Plan of Merger, dated as of the date
hereof (the "MERGER AGREEMENT"), pursuant to which, upon the terms and subject
to the conditions thereof, a subsidiary of Parent will be merged with and into
the Company, and the Company will be the surviving corporation as a wholly-owned
subsidiary of the Parent (the "MERGER"); and
WHEREAS, as a condition to the willingness of Parent to enter into the
Merger Agreement, Parent has required that the Stockholders agree, and in order
to induce Parent to enter into the Merger Agreement the Stockholders are willing
to agree, to vote in favor of adopting the Merger Agreement and approving the
Merger, upon the terms and subject to the conditions set forth herein.
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements contained herein, and intending to be legally bound hereby, the
parties hereby agree, severally and not jointly, as follows:
SECTION 1. Voting of Shares.
(a) Each Stockholder covenants and agrees that until the termination
of this Agreement in accordance with the terms hereof, at the Shareholders'
Meeting or any other meeting of the stockholders of the Company, however
called, and in any action by written consent of the stockholders of the
Company, such Stockholder will vote, or cause to be voted, all of his
respective Shares in favor of adoption of the Merger Agreement and approval
of the Merger contemplated by the Merger Agreement, as the Merger Agreement
may be modified or amended from time to time in a manner not adverse to the
Stockholders.
(b) Each Stockholder hereby irrevocably grants to, and appoints,
Parent, and any individual designated in writing by Parent, and each of
them individually, as his proxy and attorney-in-fact (with full power of
substitution), for and in his name, place and stead, to vote his Shares at
the Shareholders' Meeting or any other meeting of the stockholders of the
Company, however called, and in any action by written consent of the
stockholders of the Company with respect to any of the matters specified
in, and in accordance and consistent with, this Section 1. Each Stockholder
understands and acknowledges that Parent is entering into the Merger
Agreement in reliance upon the Stockholder's execution and delivery of this
Agreement. Each Stockholder hereby affirms that the irrevocable proxy set
forth in this Section 1(b) is given in connection with the execution of the
Merger Agreement, and that such irrevocable proxy is given to secure the
performance of the duties of such Stockholder under this Agreement. Except
as otherwise provided for herein, each Stockholder hereby (i) affirms that
the irrevocable proxy is coupled with an interest and may under no
circumstances be revoked, (ii) ratifies and confirms all that the proxies
appointed hereunder may lawfully do or cause to be done by virtue hereof
and (iii) affirms that such irrevocable proxy is executed and intended to
be irrevocable in accordance with the provisions of Section 212(e) of the
Delaware General Corporation Law. Notwithstanding any
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<PAGE> 162
other provisions of this Agreement, the irrevocable proxy granted hereunder
shall automatically terminate upon the termination of this Agreement.
SECTION 2. Representations and Warranties of the Stockholders. Each
Stockholder on his own behalf hereby severally represents and warrants to Parent
with respect to himself and his ownership of the Shares as follows:
(a) Ownership of Shares. On the date hereof, the Shares are owned
beneficially by Stockholder or his nominee. Stockholder has sole voting
power, without restrictions, with respect to all of the Shares.
(b) Power; Binding Agreement. Stockholder has the legal capacity,
power and authority to enter into and perform all of his obligations, under
this Agreement. The execution, delivery and performance of this Agreement
by Stockholder will not violate any material agreement to which Stockholder
is a party, including, without limitation, any voting agreement,
stockholders' agreement, partnership agreement or voting trust. This
Agreement has been duly and validly executed and delivered by Stockholder
and constitutes a valid and binding obligation of Stockholder, enforceable
against Stockholder in accordance with its terms, subject to applicable
bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium
and similar laws affecting creditors' rights and remedies generally and
subject, as to enforceability, to general principles of equity (regardless
of whether enforcement is sought in a proceeding at law or in equity).
(c) No Conflicts. The execution and delivery of this Agreement do not,
and the consummation of the transactions contemplated hereby will not,
conflict with or result in any violation of, or default (with or without
notice or lapse of time, or both) under, or give rise to a right of
termination, cancellation or acceleration of any obligation or to loss of a
material benefit under, any provision of any loan or credit agreement,
note, bond, mortgage, indenture, lease, or other agreement, instrument,
permit, concession, franchise, license, judgment, order, decree, statute,
law, ordinance, rule or regulation applicable to Stockholder or any of its
properties or assets, other than such conflicts, violations or defaults or
terminations, cancellations or accelerations which individually or in the
aggregate do not materially impair the ability of Stockholder to perform
its obligations hereunder.
SECTION 3. Termination. This Agreement shall terminate upon the earliest
to occur of (i) the Effective Time (as such term is defined in the Merger
Agreement) or (ii) any termination of the Merger Agreement in accordance with
the terms thereof; provided that no such termination shall relieve any party of
liability for a willful breach hereof prior to termination.
SECTION 4. Specific Performance. The parties hereto agree that
irreparable damage would occur in the event any provision of this Agreement was
not performed in accordance with the terms hereof and that the parties shall be
entitled to specific performance of the terms hereof, in addition to any other
remedy at law or in equity.
SECTION 5. Fiduciary Duties. Each Stockholder is signing this Agreement
solely in such Stockholder's capacity as an owner of his respective Shares, and
nothing herein shall prohibit, prevent or preclude such Stockholder from taking
or not taking any action in his capacity as an officer or director of the
Company, to the extent permitted by the Merger Agreement.
SECTION 6. Miscellaneous.
(a) This Agreement constitutes the entire agreement between the
parties hereto with respect to the subject matter hereof and supersedes all
prior agreements and understandings, both written and oral, between the
parties with respect thereto. This Agreement may not be amended, modified
or rescinded except by an instrument in writing signed by each of the
parties hereto.
(b) If any term or other provision of this Agreement is invalid,
illegal or incapable of being enforced by any rule of law, or public
policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect. Upon such determination that
any term or other provision is invalid, illegal or incapable of being
enforced, the parties hereto shall negotiate in good faith to modify this
Agreement so as to effect the original intent of the parties as closely as
possible to the fullest extent
C-1-2
<PAGE> 163
permitted by applicable law in a mutually acceptable manner in order that
the terms of this Agreement remain as originally contemplated to the
fullest extent possible.
(c) Whenever the context may require, any pronouns used in this
Agreement shall include the corresponding masculine, feminine or neuter
forms, and the singular form of nouns and pronouns shall include the
plural, and vice versa.
(d) This Agreement shall be governed by and construed in accordance
with the laws of the State of Delaware without regard to the principles of
conflicts of law thereof.
(e) This Agreement may be executed in counterparts, each of which
shall be deemed an original and all of which together shall constitute one
and the same instrument.
C-1-3
<PAGE> 164
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to
be signed individually or by its respective duly authorized officer as of the
date first written above.
APPLIED SCIENCE AND TECHNOLOGY, INC.
By: /s/ RICHARD S. POST
-------------------------------------
Name: Richard S. Post
Title: Chairman and Chief Executive
Officer
MKS INSTRUMENTS, INC.
By: /s/ JOHN R. BERTUCCI
-------------------------------------
Name: John R. Bertucci
Title: Chairman and Chief Executive
Officer
STOCKHOLDERS:
/s/ RICHARD S. POST
----------------------------------------
Richard S. Post
/s/ JOHN M. TARRH
----------------------------------------
John M. Tarrh
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<PAGE> 165
ANNEX C-2
STOCKHOLDER AGREEMENT
STOCKHOLDER AGREEMENT, dated as of October 2, 2000 (this "Agreement"),
among the stockholders listed on the signature page(s) hereto (collectively,
"Stockholders" and each individually, a "Stockholder"), Applied Science and
Technology, Inc., a Delaware corporation (the "Company") and MKS Instruments,
Inc., a Massachusetts corporation ("Parent"). Capitalized terms used and not
otherwise defined herein shall have the respective meanings assigned to them in
the Merger Agreement referred to below.
WHEREAS, as of the date hereof, the Stockholders collectively own of record
and beneficially shares of capital stock of the Parent as set forth on Schedule
I hereto (such shares, together with any other voting or equity of securities of
the Parent hereafter acquired by any Stockholder prior to the termination of
this Agreement, being referred to herein collectively as the "Shares");
WHEREAS, concurrently with the execution of this Agreement, Parent and the
Company are entering into an Agreement and Plan of Merger, dated as of the date
hereof (the "Merger Agreement"), pursuant to which, upon the terms and subject
to the conditions thereof, a subsidiary of Parent will be merged with and into
the Company, and the Company will be the surviving corporation as a wholly-owned
subsidiary of the Parent (the "Merger"); and
WHEREAS, as a condition to the willingness of Company to enter into the
Merger Agreement, Company has required that the Stockholders agree, and in order
to induce Company to enter into the Merger Agreement the Stockholders are
willing to agree, to vote in favor of adopting the Merger Agreement and
approving the Merger, upon the terms and subject to the conditions set forth
herein.
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements contained herein, and intending to be legally bound hereby, the
parties hereby agree, severally and not jointly, as follows:
Section 1. Voting of Shares.
(a) Each Stockholder covenants and agrees that until the termination of
this Agreement in accordance with the terms hereof, at the Parent Shareholders'
Meeting or any other meeting of the stockholders of the Parent, however called,
and in any action by written consent of the stockholders of the Parent, such
Stockholder will vote, or cause to be voted, all of his respective Shares in
favor of the issuance of shares of Parent Common Stock pursuant to the Merger
Agreement, as the Merger Agreement may be modified or amended from time to time
in a manner not adverse to the Stockholders.
(b) Each Stockholder hereby irrevocably grants to, and appoints, Company,
and any individual designated in writing by Company, and each of them
individually, as his proxy and attorney-in-fact (with full power of
substitution), for and in his name, place and stead, to vote his Shares at the
Parent Shareholders' Meeting or any other meeting of the stockholders of the
Parent, however called, and in any action by written consent of the stockholders
of the Parent with respect to any of the matters specified in, and in accordance
and consistent with, this Section 1. Each Stockholder understands and
acknowledges that Company is entering into the Merger Agreement in reliance upon
the Stockholder's execution and delivery of this Agreement. Each Stockholder
hereby affirms that the irrevocable proxy set forth in this Section 1(b) is
given in connection with the execution of the Merger Agreement, and that such
irrevocable proxy is given to secure the performance of the duties of such
Stockholder under this Agreement. Except as otherwise provided for herein, each
Stockholder hereby (i) affirms that the irrevocable proxy is coupled with an
interest and may under no circumstances be revoked, (ii) ratifies and confirms
all that the proxies appointed hereunder may lawfully do or cause to be done by
virtue hereof and (iii) affirms that such irrevocable proxy is executed and
intended to be irrevocable in accordance with the provisions of Section 41 of
Chapter 156B of the Massachusetts General Laws Notwithstanding any other
provisions of this Agreement, the irrevocable proxy granted hereunder shall
automatically terminate upon the termination of this Agreement.
C-2-1
<PAGE> 166
Section 2. Representations and Warranties of the Stockholders. Each
Stockholder on his own behalf hereby severally represents and warrants to
Company with respect to himself and his ownership of the Shares as follows:
(a) Ownership of Shares. On the date hereof, the Shares are owned
beneficially by Stockholder or his nominee. Stockholder has sole voting
power, without restrictions, with respect to all of the Shares.
(b) Power; Binding Agreement. Stockholder has the legal capacity,
power and authority to enter into and perform all of his obligations, under
this Agreement. The execution, delivery and performance of this Agreement
by Stockholder will not violate any material agreement to which Stockholder
is a party, including, without limitation, any voting agreement,
stockholders' agreement, partnership agreement or voting trust. This
Agreement has been duly and validly executed and delivered by Stockholder
and constitutes a valid and binding obligation of Stockholder, enforceable
against Stockholder in accordance with its terms, subject to applicable
bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium
and similar laws affecting creditors' rights and remedies generally and
subject, as to enforceability, to general principles of equity (regardless
of whether enforcement is sought in a proceeding at law or in equity).
(c) No Conflicts. The execution and delivery of this Agreement do
not, and the consummation of the transactions contemplated hereby will not,
conflict with or result in any violation of, or default (with or without
notice or lapse of time, or both) under, or give rise to a right of
termination, cancellation or acceleration of any obligation or to loss of a
material benefit under, any provision of any loan or credit agreement,
note, bond, mortgage, indenture, lease, or other agreement, instrument,
permit, concession, franchise, license, judgment, order, decree, statute,
law, ordinance, rule or regulation applicable to Stockholder or any of its
properties or assets, other than such conflicts, violations or defaults or
terminations, cancellations or accelerations which individually or in the
aggregate do not materially impair the ability of Stockholder to perform
its obligations hereunder.
Section 3. Termination. This Agreement shall terminate upon the earliest
to occur of (i) the Effective Time (as such term is defined in the Merger
Agreement) or (ii) any termination of the Merger Agreement in accordance with
the terms thereof; provided that no such termination shall relieve any party of
liability for a willful breach hereof prior to termination.
Section 4. Specific Performance. The parties hereto agree that irreparable
damage would occur in the event any provision of this Agreement was not
performed in accordance with the terms hereof and that the parties shall be
entitled to specific performance of the terms hereof, in addition to any other
remedy at law or in equity.
Section 5. Fiduciary Duties. Each Stockholder is signing this Agreement
solely in such Stockholder's capacity as an owner of his respective Shares, and
nothing herein shall prohibit, prevent or preclude such Stockholder from taking
or not taking any action in his capacity as an officer or director of the
Parent, to the extent permitted by the Merger Agreement.
Section 6. Miscellaneous.
(a) This Agreement constitutes the entire agreement between the parties
hereto with respect to the subject matter hereof and supersedes all prior
agreements and understandings, both written and oral, between the parties with
respect thereto. This Agreement may not be amended, modified or rescinded except
by an instrument in writing signed by each of the parties hereto.
(b) If any term or other provision of this Agreement is invalid, illegal or
incapable of being enforced by any rule of law, or public policy, all other
conditions and provisions of this Agreement shall nevertheless remain in full
force and effect. Upon such determination that any term or other provision is
invalid, illegal or incapable of being enforced, the parties hereto shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible to the fullest extent permitted by
applicable law in a mutually acceptable manner in order that the terms of this
Agreement remain as originally contemplated to the fullest extent possible.
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<PAGE> 167
(c) Whenever the context may require, any pronouns used in this Agreement
shall include the corresponding masculine, feminine or neuter forms, and the
singular form of nouns and pronouns shall include the plural, and vice versa.
(d) This Agreement shall be governed by and construed in accordance with
the laws of the State of Delaware without regard to the principles of conflicts
of law thereof.
(e) This Agreement may be executed in counterparts, each of which shall be
deemed an original and all of which together shall constitute one and the same
instrument.
[Signature Page to follow]
C-2-3
<PAGE> 168
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to
be signed individually or by its respective duly authorized officer as of the
date first written above.
APPLIED SCIENCE AND TECHNOLOGY, INC.
By: /s/ RICHARD S. POST
------------------------------------
Name: Richard S. Post
Title: Chairman and CEO
MKS INSTRUMENTS, INC.
By: /s/ JOHN R. BERTUCCI
------------------------------------
Name: John R. Bertucci
Title: Chairman and CEO
STOCKHOLDERS:
/s/ JOHN R. BERTUCCI
--------------------------------------
John R. Bertucci
/s/ CLAIRE R. BERTUCCI
--------------------------------------
Claire R. Bertucci
Each of the following individuals is
executing this Agreement in his or her
capacity as a Trustee of those trusts
listed on Schedule I hereto of which
such person serves as a Trustee:
/s/ JOHN R. BERTUCCI
--------------------------------------
John R. Bertucci
/s/ CLAIRE R. BERTUCCI
--------------------------------------
Claire R. Bertucci
/s/ RICHARD S. CHUTE
--------------------------------------
Richard S. Chute
/s/ THOMAS K BELKNAP
--------------------------------------
Thomas K. Belknap
[Signature Page to Parent Stockholder Agreement]
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<PAGE> 169
SCHEDULE I
<TABLE>
<CAPTION>
NUMBER
NAME OF SHARES
---- ---------
<S> <C>
John R. Bertucci............................................ 5,825,694
Claire R. Bertucci.......................................... 5,959,851
Claire R. Bertucci & Richard S. Chute as Trustees of the
John R. Bertucci 2nd Family Trust of 12/15/86............. 739,028
FBO Carol B. Bertucci
Claire R. Bertucci as Trustee, John R. Bertucci JCB Retained
Annuity Trust of 1998..................................... 156,079
Claire R. Bertucci & Richard S. Chute as Trustees of the.... 739,028
John R. Bertucci 2nd Family Trust of 12/15/86 FBO Janet C.
Bertucci
Claire R. Bertucci as Trustee, John R. Bertucci CBS Retained
Annuity Trust of 1998..................................... 156,079
Claire R. Bertucci as Trustee, John R. Bertucci Family
Retained Annuity Trust of 1998............................ 156,079
Claire R. Bertucci & Richard S. Chute, Trustees, John R.
Bertucci Family Retained Annuity Trust UA 08/19/99........ 95,145
Clair R. Bertucci & Richard S. Chute Trustees, John R.
Bertucci CBS Retained Annuity Trustee UA 08/19/99......... 95,145
John R. Bertucci & Thomas H. Belknap as Trustees of the
Claire R. Bertucci 2nd Family Trust of 12/15/86 FBO Carol
B. Bertucci............................................... 739,028
John R. Bertucci as Trustee, Claire R. Bertucci CBS Retained
Annuity Trust of 1998..................................... 156,079
John R. Bertucci & Thomas H. Belknap, Trustees, Claire R.
Bertucci JCB Retained Annuity Trust UA 08/19/99........... 95,145
Claire R. Bertucci & Richard S. Chute as Trustees, John R.
Bertucci JCB Retained Annuity Trustee of 08/19/99......... 95,145
John R. Bertucci & Thomas H. Belknap, Trustees, of the
Claire R. Bertucci 2nd Family Trust of 12/15/86 FBO Janet
C. Bertucci............................................... 739,028
John R. Bertucci, Trustee, Claire R. Bertucci JCB Retained
Annuity Trust of 1998..................................... 156,079
John R. Bertucci & Thomas H. Belknap, Trustees, Claire R.
Bertucci CBS Retained Annuity Trust UA 08/19/99........... 95,145
</TABLE>
C-2-5
<PAGE> 170
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Registrant is a Massachusetts corporation. Reference is made to Chapter
156B, Section 13 of the Massachusetts Business Corporation Law (the "MBCL"),
which enables a corporation in its original articles of organization or an
amendment thereto to eliminate or limit the personal liability of a director for
monetary damages for violations of the director's fiduciary duty, except (i) for
any breach of the director's duty of loyalty to the corporation or its
stockholders, (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) pursuant to Sections
61 and 62 of the MBCL (providing for liability of directors for authorizing
illegal distributions and for making loans to directors, officers and certain
stockholders) or (iv) for any transaction from which a director derived an
improper personal benefit.
Reference also is made to Chapter 156B, Section 67 of the MBCL, which
provides that a corporation may indemnify directors, officers, employees and
other agents and persons who serve at its request as directors, officers,
employees or other agents of another organization or who serve at its request in
any capacity with respect to any employee benefit plan, to the extent specified
or authorized by the articles of organization, a by-law adopted by the
stockholders or a vote adopted by the holders of a majority of the shares of
stock entitled to vote on the election of directors. Such indemnification may
include payment by the corporation of expenses incurred in defending a civil or
criminal action or proceeding in advance of the final disposition of such action
or proceeding, upon receipt of an undertaking by the person indemnified to repay
such payment if he shall be adjudicated to be not entitled to indemnification
under Section 67, which undertaking may be accepted without reference to the
financial ability of such person to make repayment. Any such indemnification may
be provided although the person to be indemnified is no longer an officer,
director, employee or agent of the corporation or of such other organization or
no longer serves with respect to any such employee benefit plan. No
indemnification shall be provided, however, for any person with respect to any
matter as to which he shall have been adjudicated in any proceeding not to have
acted in good faith in the reasonable belief that his action was in the best
interest of the corporation or to the extent that such matter relates to service
with respect to any employee benefit plan, in the best interests of the
participants or beneficiaries of such employee benefit plan.
In its Amended and Restated Articles of Organization (the "Articles of
Organization"), the Registrant has elected to commit to provide indemnification
to its directors and officers in specified circumstances. Generally, Article 6
of the Registrant's Articles of Organization provides that the Registrant shall
indemnify directors and officers of the Registrant against liabilities and
expenses arising out of legal proceedings brought against them by reason of
their status as directors or officers or by reason of their agreeing to serve,
at the request of the Registrant, as a director or officer with another
organization. Under this provision, a director or officer of the Registrant
shall be indemnified by the Registrant for all costs and expenses (including
attorneys' fees), judgments, liabilities and amounts paid in settlement of such
proceedings, even if he is not successful on the merits, if he acted in good
faith in the reasonable belief that his action was in the best interests of the
Registrant. The board of directors may authorize advancing litigation expenses
to a director or officer at his request upon receipt of an undertaking by any
such director or officer to repay such expenses if it is ultimately determined
that he is not entitled to indemnification for such expenses.
Article 6 of the Registrant's Articles of Organization eliminates the
personal liability of the Registrant's directors to the Registrant or its
stockholders for monetary damages for breach of a director's fiduciary duty,
except to the extent Chapter 156B of the Massachusetts General Laws prohibits
the elimination or limitation of such liability.
The Registrant has obtained directors and officers liability insurance for
the benefit of its directors and certain of its officers.
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<PAGE> 171
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
<TABLE>
<CAPTION>
EXHIBIT
NO. TITLE
------- -----
<C> <S>
+2.1 Agreement and Plan of Merger dated as of September 30, 2000
by and among the Registrant, Mango Subsidiary Corp., and
Applied Science and Technology, Inc. (filed as Annex A to
this joint proxy statement/prospectus, constituting a part
of this Registration Statement)
+3.1 Restated Articles of Organization
+3.2(1) Amended and Restated By-Laws
+4.1(1) Specimen certificate representing the common stock
+4.2 Stockholder Agreement, dated as of October 2, 2000 among the
Registrant, Richard Post and John M. Tarrh (filed as Annex
C-1 to this joint proxy statement/prospectus, constituting a
part of this Registration Statement)
+5.1 Opinion of Hale and Dorr LLP
+8.1 Opinion of Hale and Dorr LLP regarding tax matters
+8.2 Opinion of Mintz, Levin, Cohn, Ferris, Glovsky and Popeo,
P.C. regarding tax matters
+10.1(1) Amended and Restated 1995 Stock Incentive Plan
+10.2(1) 1996 Amended and Restated 1996 Director Stock Option Plan
10.3(1) 1997 Director Stock Option Plan
+10.4(1) 1999 Employee Stock Purchase Plan
+10.5(1) Amended and Restated Employment Agreement dated as of
December 15, 1995 between Leo Berlinghieri and the
Registrant
+10.6(1) Amended and Restated Employment Agreement dated as of
December 15, 1995 between John J. Sullivan and the
Registrant
+10.7(1) Amended and Restated Employment Agreement dated as of
December 15, 1995 between Ronald C. Weigner and the
Registrant
+10.8(1) Amended and Restated Employment Agreement dated as of
December 15, 1995 between William D. Stewart and the
Registrant
+10.9(1) Loan Agreement dated as of October 31, 1995 by and between
the First National Bank of Boston and the Registrant
+10.10(1) Lease Agreement dated as of October 12, 1989, as extended
November 1, 1998, by and between Aspen Industrial Park
Partnership and the Registrant
+10.11(1) Loan Agreement dated as of November 1, 1993 between the
First National Bank of Boston and the Registrant
+10.12(1) Lease dated as of September 21, 1995 by and between General
American Life Insurance Company and the Registrant
+10.13(1) Revolving Credit Note ($8,000,000) dated February 23, 1996
between Chemical Bank, The First National Bank of Boston and
the Registrant
+10.14(1) Revolving Credit Note ($12,000,000) dated February 23, 1996
between Chemical Bank, The First National Bank of Boston and
the Registrant
+10.15(1)** Comprehensive Supplier Agreement #982812 dated October 23,
1998 by and between Applied Materials, Inc. and the
Registrant
+10.16(1)** Management Incentive Program
+10.17(1) Lease dated as of January 1, 1996 between MiFuji Kanzai Co.
Ltd. and the Registrant (covering Floor 5)
+10.18(1) Lease dated as of April 21, 1997 between MiFuji Kanzai Co.
Ltd. and the Registrant (covering Floors 1 and 2)
+10.19(1) Split-Dollar Agreement dated as of September 12, 1991
between the Registrant, John R. Bertucci and Claire R.
Bertucci and Richard S. Chute, Trustees of the John R.
Bertucci Insurance Trust of January 10, 1986
+10.20(1) Split-Dollar Agreement dated as of September 12, 1991
between the Registrant, John R. Bertucci and John R.
Bertucci and Thomas H. Belknap, Trustees of the Claire R.
Bertucci Insurance Trust of January 10, 1986
+10.21(1) Form of Tax Indemnification and S Corporation Distribution
Agreement
</TABLE>
II-2
<PAGE> 172
<TABLE>
<CAPTION>
EXHIBIT
NO. TITLE
------- -----
<C> <S>
+10.22(1) Employment Agreement dated March 7, 1997 between Joseph
Maher and the Registrant
+10.23(1) Form of Contribution Agreement
+10.24(2) MKS Instruments, Inc. International Employee Stock Purchase
Plan
+10.25(3) First Amended and Restated Loan Agreement dated as of
January 1, 2000 between BankBoston, N.A., The Chase
Manhattan Bank, and the Registrant
+10.26(3) Employment Agreement dated as of May 17, 1999 between Peter
Younger and the Registrant
+10.27(3) Employment Agreement dated as of December 6, 1999 between
Robert L. Klimm and the Registrant
+10.28 Employment Agreement dated as of March 10, 2000 between the
Registrant and Donald Smith
+10.29 Employment Agreement dated October 18, 2000 between the
Registrant and F. Thomas McNabb
+10.30 Lease dated as of August 9, 2000 between Aspen Industrial
Partnership, LLP and the Registrant
+10.31 Letter Agreement dated as of October 13, 2000 by and between
the Registrant and Applied Materials, Inc. amending
Comprehensive Supplier Agreement #982812 dated October 23,
1998
+10.32 First Amendment dated as of September 1, 2000 to First
Amended and Restated Loan Agreement dated as of January 1,
2000 among BankBoston, N.A., The Chase Manhattan Bank and
the Registrant
+10.33(3) Fifth Amendment dated as of January 1, 2000 to Loan
Agreement dated as of October 31, 1995 between The First
National Bank of Boston and the Registrant
+10.34(3) Tenth Amendment dated as of January 1, 2000 to Loan
Agreement dated as of November 1, 1993 between The First
National Bank of Boston and the Registrant
+10.35 Sixth Amendment dated as of September 1, 2000 to Loan
Agreement dated as of October 31, 1995 between The First
National Bank of Boston and the Registrant
+10.36 Eleventh Amendment dated as of September 1, 2000 to Loan
Agreement dated as of November 1, 1993 between The First
National Bank of Boston and the Registrant
+21.1 Subsidiaries of the Registrant
+23.1 Consent of Hale and Dorr LLP (included in Exhibit 5.1)
+23.2 Consent of Hale and Dorr LLP (included in Exhibit 8.1)
+23.3 Consent of Mintz, Levin, Cohn, Ferris, Glovsky and Popeo,
P.C.
23.4 Consent of PricewaterhouseCoopers LLP regarding the
financial statements of the Registrant
23.5 Consent of KPMG LLP regarding the financial statements of
Applied Science and Technology, Inc.
+24.1 Power of Attorney
99.1 Form of proxy card of the Registrant
99.2 Form of proxy card of Applied Science and Technology, Inc.
+99.3 Consent of Merrill Lynch, Pierce, Fenner & Smith
Incorporated
+99.4 Consent of CIBC World Markets Corp.
</TABLE>
---------------
(1) Incorporated by reference to the Registration Statement on Form S-1 (file
No. 333-71363) originally filed with the Securities and Exchange Commission
on January 28, 1999, as amended.
(2) Incorporated by reference to the Registration Statement on Form S-8 (file
No. 333-31224) filed with the Securities and Exchange Commission on February
28, 2000.
(3) Incorporated by reference to the Registrant's Annual Report on Form 10-K for
the fiscal year ended December 31, 1999.
** Confidential materials omitted and filed separately with the Securities and
Exchange Commission.
+ Previously filed.
II-3
<PAGE> 173
All schedules for which provision is made in the applicable accounting
regulations of the Securities and Exchange Commission are not required under the
related instructions or are not applicable, and, therefore, have been omitted.
ITEM 22. UNDERTAKINGS.
A. The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represents a fundamental change in the information set forth
in the Registration Statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than 20 percent change in
the maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement;
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the Registration Statement
or any material change to such information in the Registration
Statement.
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment 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.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
B. The Registration hereby undertakes that, for purposes of determining any
liability under the Securities Act of 1933, as amended (the "Securities Act"),
each filing of the Registrant's annual report pursuant to Section 13(a) or
Section 15(d) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act") (and, where applicable, each filing of an employee benefit plan's annual
report pursuant to Section 15(d) of the Exchange Act), that is incorporated by
reference in this Registration Statement shall be deemed to be a new
registration statement relating to the securities offered herein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
C. The Registrant hereby undertakes as follows:
(1) That prior to any public reoffering of the securities registered
hereunder through use of a prospectus which is a part of this Registration
Statement, by any person or party who is deemed to be an underwriter within
the meaning of Rule 145(c), the Registrant undertakes that such reoffering
prospectus will contain the information called for by the applicable
registration form with respect to reofferings by persons who may be deemed
underwriters, in addition to the information called for by the other Items
of the applicable form.
(2) That every prospectus (i) that is filed pursuant to paragraph (1)
immediately preceding, or (ii) that purports to meet the requirements of
Section 10(a)(3) of the Securities Act and is used in connection with an
offering of securities subject to Rule 415, will be filed as a part of an
amendment to this Registration Statement and will not be used until such
amendment is effective, and that, for purposes of determining any liability
under the Securities Act, each such post-effective amendment shall be
II-4
<PAGE> 174
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.
D. Insofar as indemnification for liabilities arising under the Securities
Act 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 Securities 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 Securities Act and will be governed by the final
adjudication of such issue.
E. The Registrant hereby undertakes to respond to requests for information
that is incorporated by reference into the prospectus pursuant to Items 4,
10(b), 11, or 13 of this Form, within one business day of receipt of such
request, and to send the incorporated documents by first class mail or other
equally prompt means. This includes information contained in documents filed
subsequent to the effective date of this Registration Statement through the date
of responding to the request.
F. The Registrant hereby undertakes to supply by means of a post-effective
amendment all information concerning a transaction, and the company being
acquired involved therein, that was not the subject of and included in the
Registration Statement when it became effective.
II-5
<PAGE> 175
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has duly
caused this Amendment No. 1 to registration statement to be signed on its behalf
by the undersigned, thereunto duly authorized, in the city of Andover,
Commonwealth of Massachusetts, on the 7th day of December, 2000.
MKS INSTRUMENTS, INC.
By /s/ JOHN R. BERTUCCI
------------------------------------
John R. Bertucci
Chairman of the Board of Directors
and Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, as amended,
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>
/s/ JOHN R. BERTUCCI Chairman of the Board and December 7, 2000
--------------------------------------------------- Chief Executive Officer
John R. Bertucci (Principal Executive
Officer)
* Vice President and Chief December 7, 2000
--------------------------------------------------- Financial Officer
Ronald C. Weigner (Principal Financial and
Accounting Officer)
* Director December 7, 2000
---------------------------------------------------
Richard S. Chute
* Director December 7, 2000
---------------------------------------------------
Owen W. Robbins
* Director December 7, 2000
---------------------------------------------------
Robert J. Therrien
* Director December 7, 2000
---------------------------------------------------
Louis P. Valente
</TABLE>
* /s/ JOHN R. BERTUCCI
------------------------------------
John R. Bertucci, as
attorney-in-fact
II-6
<PAGE> 176
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NO. TITLE
------- -----
<C> <S>
+2.1 Agreement and Plan of Merger dated as of September 30, 2000
by and among the Registrant, Mango Subsidiary Corp., and
Applied Science and Technology, Inc. (filed as Annex A to
this joint proxy statement/prospectus, constituting a part
of this Registration Statement)
+3.1 Restated Articles of Organization
+3.2(1) Amended and Restated By-Laws
+4.1(1) Specimen certificate representing the common stock
+4.2 Stockholder Agreement, dated as of October 2, 2000 among the
Registrant, Richard Post and John M. Tarrh (filed as Annex
C-1 to this joint proxy statement/prospectus, constituting a
part of this Registration Statement)
+5.1 Opinion of Hale and Dorr LLP
+8.1 Opinion of Hale and Dorr LLP regarding tax matters
+8.2 Opinion of Mintz, Levin, Cohn, Ferris, Glovsky and Popeo,
P.C. regarding tax matters
+10.1(1) Amended and Restated 1995 Stock Incentive Plan
+10.2(1) 1996 Amended and Restated 1996 Director Stock Option Plan
+10.3(1) 1997 Director Stock Option Plan
+10.4(1) 1999 Employee Stock Purchase Plan
+10.5(1) Amended and Restated Employment Agreement dated as of
December 15, 1995 between Leo Berlinghieri and the
Registrant
+10.6(1) Amended and Restated Employment Agreement dated as of
December 15, 1995 between John J. Sullivan and the
Registrant
+10.7(1) Amended and Restated Employment Agreement dated as of
December 15, 1995 between Ronald C. Weigner and the
Registrant
+10.8(1) Amended and Restated Employment Agreement dated as of
December 15, 1995 between William D. Stewart and the
Registrant
+10.9(1) Loan Agreement dated as of October 31, 1995 by and between
the First National Bank of Boston and the Registrant
+10.10(1) Lease Agreement dated as of October 12, 1989, as extended
November 1, 1998, by and between Aspen Industrial Park
Partnership and the Registrant
+10.11(1) Loan Agreement dated as of November 1, 1993 between the
First National Bank of Boston and the Registrant
+10.12(1) Lease dated as of September 21, 1995 by and between General
American Life Insurance Company and the Registrant
+10.13(1) Revolving Credit Note ($8,000,000) dated February 23, 1996
between Chemical Bank, The First National Bank of Boston and
the Registrant
+10.14(1) Revolving Credit Note ($12,000,000) dated February 23, 1996
between Chemical Bank, The First National Bank of Boston and
the Registrant
+10.15(1)** Comprehensive Supplier Agreement #982812 dated October 23,
1998 by and between Applied Materials, Inc. and the
Registrant
+10.16(1)** Management Incentive Program
+10.17(1) Lease dated as of January 1, 1996 between MiFuji Kanzai Co.
Ltd. and the Registrant (covering Floor 5)
</TABLE>
<PAGE> 177
<TABLE>
<CAPTION>
EXHIBIT
NO. TITLE
------- -----
<C> <S>
+10.18(1) Lease dated as of April 21, 1997 between MiFuji Kanzai Co.
Ltd. and the Registrant (covering Floors 1 and 2)
+10.19(1) Split-Dollar Agreement dated as of September 12, 1991
between the Registrant, John R. Bertucci and Claire R.
Bertucci and Richard S. Chute, Trustees of the John R.
Bertucci Insurance Trust of January 10, 1986
+10.20(1) Split-Dollar Agreement dated as of September 12, 1991
between the Registrant, John R. Bertucci and John R.
Bertucci and Thomas H. Belknap, Trustees of the Claire R.
Bertucci Insurance Trust of January 10, 1986
+10.21(1) Form of Tax Indemnification and S Corporation Distribution
Agreement
+10.22(1) Employment Agreement dated March 7, 1997 between Joseph
Maher and the Registrant
+10.23(1) Form of Contribution Agreement
+10.24(2) MKS Instruments, Inc. International Employee Stock Purchase
Plan
+10.25(3) First Amended and Restated Loan Agreement dated as of
January 1, 2000 between BankBoston, N.A., The Chase
Manhattan Bank, and the Registrant
+10.26(3) Employment Agreement dated as of May 17, 1999 between Peter
Younger and the Registrant
+10.27(3) Employment Agreement dated as of December 6, 1999 between
Robert L. Klimm and the Registrant
+10.28 Employment Agreement dated as of March 10, 2000 between the
Registrant and Donald Smith
+10.29 Employment Agreement dated October 18, 2000 between the
Registrant and F. Thomas McNabb
+10.30 Lease dated as of August 9, 2000 between Aspen Industrial
Partnership, LLP and the Registrant
+10.31 Letter Agreement dated as of October 13, 2000 by and between
the Registrant and Applied Materials, Inc. amending
Comprehensive Supplier Agreement #982812 dated October 23,
1998
+10.32 First Amendment dated as of September 1, 2000 to First
Amended and Restated Loan Agreement dated as of January 1,
2000 among BankBoston, N.A., The Chase Manhattan Bank and
the Registrant
+10.33(3) Fifth Amendment dated as of January 1, 2000 to Loan
Agreement dated as of October 31, 1995 between The First
National Bank of Boston and the Registrant
+10.34(3) Tenth Amendment dated as of January 1, 2000 to Loan
Agreement dated as of November 1, 1993 between The First
National Bank of Boston and the Registrant
+10.35 Sixth Amendment dated as of September 1, 2000 to Loan
Agreement dated as of October 31, 1995 between The First
National Bank of Boston and the Registrant
+10.36 Eleventh Amendment dated as of September 1, 2000 to Loan
Agreement dated as of November 1, 1993 between The First
National Bank of Boston and the Registrant
+21.1 Subsidiaries of the Registrant
+23.1 Consent of Hale and Dorr LLP (included in Exhibit 5.1)
+23.2 Consent of Hale and Dorr LLP (included in Exhibit 8.1)
23.3 Consent of Mintz, Levin, Cohn, Ferris, Glovsky and Popeo,
P.C.
23.4 Consent of PricewaterhouseCoopers LLP regarding the
financial statements of the Registrant
</TABLE>
<PAGE> 178
<TABLE>
<CAPTION>
EXHIBIT
NO. TITLE
------- -----
<C> <S>
23.5 Consent of KPMG LLP regarding the financial statements of
Applied Science and Technology, Inc.
+24.1 Power of Attorney
99.1 Form of proxy card of the Registrant
99.2 Form of proxy card of Applied Science and Technology, Inc.
+99.3 Consent of Merrill Lynch, Pierce, Fenner & Smith
Incorporated
+99.4 Consent of CIBC World Markets Corp.
</TABLE>
---------------
(1) Incorporated by reference to the Registration Statement on Form S-1 (file
No. 333-71363) originally filed with the Securities and Exchange Commission
on January 28, 1999, as amended.
(2) Incorporated by reference to the Registration Statement on Form S-8 (file
No. 333-31224) filed with the Securities and Exchange Commission on February
28, 2000.
(3) Incorporated by reference to the Registrant's Annual Report on Form 10-K for
the fiscal year ended December 31, 1999.
** Confidential materials omitted and filed separately with the Securities and
Exchange Commission.
+ Previously filed
