<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to 240.14a-11(c) or 240.14a-12
ALIGN-RITE INTERNATIONAL, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was
previously paid. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(4) Date Filed:
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<PAGE> 2
ALIGN-RITE INTERNATIONAL, INC.
July 29, 1999
Dear Shareholder:
You are cordially invited to attend the 1999 Annual Meeting of Shareholders
of Align-Rite International, Inc. ("Align-Rite" or the "Company") to be held on
Wednesday, September 1, 1999. We sincerely hope that you will be able to attend
the meeting which will be held at the Burbank Hilton Hotel, 2500 Hollywood Way,
Burbank, California 91505, beginning at 10:30 a.m., local time.
At this meeting you are being asked to elect Alan G. Duncan and William
Elder (collectively, the "Director Nominees") to a two year term as Class I
directors. Mr. Alan Duncan is an Executive Director of Prelude Trust plc and has
served as a director of Align-Rite International since July 1995. Mr. William
Elder is Chairman, President and CEO of Genus Inc. and has served as a director
of Align-Rite International since May 1998.
The members of the Board of Directors and management look forward to
personally greeting as many shareholders as possible at the Annual Meeting.
However, whether or not you plan to attend personally, and regardless of the
number of shares you own, it is important that your shares be represented.
Although you presently may plan to attend the Annual Meeting, please
complete, sign, date and promptly return the enclosed proxy card. If you do
attend the Annual Meeting and wish to vote in person, you may withdraw your
proxy at that time.
Sincerely,
/s/ James L. Mac Donald
James L. Mac Donald
Chairman of the Board, President and
Chief Executive Officer
<PAGE> 3
ALIGN-RITE INTERNATIONAL, INC.
2428 ONTARIO STREET
BURBANK, CALIFORNIA 91504
------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON SEPTEMBER 1, 1999
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of
Align-Rite International, Inc., a California corporation ("Align-Rite" or the
"Company"), will be held at the Burbank Hilton Hotel, 2500 Hollywood Way,
Burbank, California 91505, beginning at 10:30 a.m., local time, on Wednesday,
September 1, 1999, for the following purposes:
(1) To elect two directors for a two year term to expire at the 2001 Annual
Meeting;
(2) To ratify the appointment of PricewaterhouseCoopers LLP to serve as
Align-Rite's independent auditors for the year ended March 31, 2000;
and
(3) To transact such other business as may properly come before the meeting
or at any adjournments thereof.
The Board of Directors has fixed the close of business on July 9, 1999 as
the record date for the determination of shareholders entitled to notice of and
to vote at the meeting. Only shareholders of record at the close of business on
the record date will be entitled to vote at the meeting and at any adjournments
thereof.
Accompanying this notice are a Proxy and Proxy Statement. IF YOU WILL NOT
BE ABLE TO ATTEND THE MEETING TO VOTE IN PERSON PLEASE COMPLETE, SIGN AND DATE
THE ACCOMPANYING PROXY AND RETURN IT PROMPTLY IN THE ENCLOSED POSTAGE PAID
ENVELOPE. The Proxy may be revoked at any time prior to its exercise at the
meeting.
By Order of the Board of Directors
/s/ Petar N. Katurich
Petar N. Katurich
Vice President of Finance,
Chief Financial Officer and Secretary
Burbank, California
July 29th, 1999
YOUR VOTE IS IMPORTANT
NO MATTER HOW MANY SHARES YOU OWNED ON THE RECORD DATE, PLEASE INDICATE
YOUR VOTING INSTRUCTIONS ON THE ENCLOSED PROXY CARD, DATE, SIGN AND RETURN IT IN
THE ENVELOPE PROVIDED, WHICH IS ADDRESSED FOR YOUR CONVENIENCE AND NEEDS NO
POSTAGE IF MAILED IN THE UNITED STATES. IN ORDER TO AVOID THE ADDITIONAL EXPENSE
TO THE COMPANY OF FURTHER SOLICITATION, WE ASK YOUR COOPERATION IN PROMPTLY
MAILING IN YOUR PROXY CARD.
<PAGE> 4
ALIGN-RITE INTERNATIONAL, INC.
2428 ONTARIO STREET
BURBANK, CALIFORNIA 91504
------------------------
PROXY STATEMENT
------------------------
SOLICITATION OF PROXIES
The accompanying proxy is being solicited by the Board of Directors of
Align-Rite International, Inc. ("Align-Rite" or the "Company") for use at the
Company's Annual Meeting of Shareholders to be held on Wednesday, September 1,
1999, at 10:30 a.m. local time, at the Burbank Hilton Hotel, 2500 Hollywood Way,
Burbank, California 91505, and at any adjournment thereof. This Proxy Statement
and the accompanying proxy are first being mailed to shareholders on or about
August 3, 1999.
The expense of soliciting proxies will be borne by the Company. Proxies
will be solicited principally through the use of the mail, but directors,
officers and regular employees of the Company may solicit proxies personally or
by telephone or special letter without any additional compensation. The Company
also will reimburse banks, brokerage houses and other custodians, nominees and
fiduciaries for any reasonable expenses in forwarding proxy materials to
beneficial owners.
OUTSTANDING SHARES AND VOTING RIGHTS
On July 9, 1999, the record date with respect to this solicitation for
determining shareholders entitled to notice of and to vote at the Annual
Meeting, 4,547,279 shares of the Company's Common Stock were outstanding. No
shares of any other class of stock were outstanding. Only shareholders of record
on such date are entitled to notice of and to vote at the Annual Meeting and at
any adjournment thereof. Each shareholder of record is entitled to one vote for
each share held on all matters to come before the Annual Meeting and at any
adjournment thereof.
All shares represented by each properly executed unrevoked proxy received
in time for the Annual Meeting will be voted in the manner specified therein. An
executed proxy may be revoked at any time before its exercise by filing with the
Secretary of the Company, at 2428 Ontario Street, Burbank, California 91504, the
principal executive office of the Company, a written notice of revocation or a
duly executed proxy bearing a later date. The execution of the enclosed proxy
will not affect a shareholder's right to vote in person should such shareholder
choose to attend the Annual Meeting and desire to vote in person.
Votes cast by proxy or in person at the Annual Meeting will be counted by
the person appointed by the Company to act as election inspector for the
meeting. The election inspector will treat shares represented by proxies that
reflect abstentions as shares that are present and entitled to vote for purposes
of determining the presence of a quorum and for purposes of determining the
outcome of any matter submitted to the shareholders for a vote. Abstentions,
however, do not constitute a vote "for" or "against" any matter and thus will be
disregarded in the calculation of a plurality or of "votes cast."
The election inspector will treat shares referred to as "broker non-votes"
(i.e., shares held by brokers or nominees over which the broker or nominee lacks
discretionary power to vote and for which the broker or nominee has not received
specific voting instructions from the beneficial owner) as shares that are
present and entitled to vote for purposes of determining the presence of a
quorum. However, for purposes of determining the outcome of any matter as to
which the broker has indicated on the proxy that it does not have discretionary
authority to vote, those shares will be treated as not present and not entitled
to vote with respect to that matter (even though those shares are considered
entitled to vote for quorum purposes and may be entitled to vote on other
matters).
<PAGE> 5
ELECTION OF ALIGN-RITE CLASS I DIRECTORS
The Company's Bylaws provide that the authorized number of directors of the
Company shall not be less than five nor more than nine, with the exact number of
directors to be determined from time to time solely by resolution adopted by the
affirmative vote of a majority of the directors then in office. The exact number
of directors of the Company is currently set at six. Currently there are five
directors with one vacancy caused by the resignation of Mr. Jeff Lee. The
directors are divided into two classes, as nearly equal as possible, and each
class has a staggered two year term. Currently, the terms of office of directors
in Class I and II end following the annual meetings of shareholders in 1999 and
2000, respectively. Although three Class I directors are authorized, at the 1999
Annual Meeting, shareholders will be asked to elect two Class I directors to
hold office until the 2001 Annual Meeting, subject to the provisions of the
Company's Amended and Restated Articles of Association, as amended. The Company
is in the process of identifying an additional qualified candidate to serve on
the Board. Proxies cannot be voted for a greater number of persons than the
number of nominees named in the Proxy Statement.
The Company's Board has recommended two nominees for election as directors
of Align-Rite. The accompanying proxy solicited by the Board of Directors will
be voted for the election of the two nominees named below, unless the proxy card
is marked to withhold authority to vote. Each nominee is presently a member of
the Board of Directors.
The nominees for election are:
ALAN G. DUNCAN
WILLIAM ELDER
If any of the nominees should become unavailable for election to the Board
of Directors, the persons named in the proxy or their substitutes shall be
entitled to vote for a substitute to be designated by the Board of Directors.
Alternatively, the Board of Directors may reduce the number of directors. The
Board of Directors has no reason to believe that it will be necessary to
designate a substitute nominee or reduce the number of directors.
REQUIRED VOTE
In the election of directors, shares present but not voting will be
disregarded (except for quorum purposes). Each shareholder is entitled to one
vote for each director to be elected for each share owned. Assuming the presence
of a quorum, the nominees receiving the highest number of votes will be elected.
On all other matters, each share is entitled to one vote. Votes cast
against a candidate or votes withheld will have no legal effect. Any unmarked
proxies, including those submitted by brokers or nominees, will be voted as
indicated on the accompanying proxy card.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ELECTION OF EACH OF THE
NOMINEES LISTED ABOVE.
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<PAGE> 6
DIRECTOR NOMINEES
The following table provides information regarding the nominees for
election as directors of the Company. The ages shown are as of July 1, 1999.
<TABLE>
<CAPTION>
DIRECTOR
NAME AND AGE BUSINESS EXPERIENCE AND DIRECTORSHIPS SINCE
------------ ------------------------------------- --------
<S> <C> <C>
Alan G. Duncan (51)....... Director of a subsidiary of the Company since 1986 and a 1995
Director of the Company since 1995. From November 1996
to present, Mr. Duncan has served as an Executive
Director of Prelude Trust plc, a venture capital fund
quoted on the London Stock Exchange.
William Elder (60)........ Director of the Company since May 1998. Mr. Elder is 1998
currently Chairman of the Board, President and Chief
Executive Officer of Genus, Inc. (GGNS), and has served
in different capacities of Genus since his founding the
Company in November 1981.
</TABLE>
CONTINUING DIRECTORS
The following table provides information regarding the Class II directors.
The ages shown are as of July 1, 1999.
<TABLE>
<CAPTION>
DIRECTOR
NAME AND AGE BUSINESS EXPERIENCE AND DIRECTORSHIPS SINCE
------------ ------------------------------------- --------
<S> <C> <C>
James L. Mac Donald Chairman of the Board, President and Chief Executive 1995
(52).................... Officer of the Company and its predecessors since 1970,
when he founded the Company. Mr. Mac Donald is also a
Director of the British American Chamber of Commerce and
a Fellow of the Institute of Directors.
Petar N. Katurich (36).... Vice President of Finance since April 1997 and Chief 1995
Financial Officer and Secretary since 1992 and a
Director of the Company since 1995. From 1991 to 1992,
Mr. Katurich was employed by a division of Cooke Media
Group. From 1985 to 1990, Mr. Katurich was employed at
Coopers & Lybrand L.L.P. Mr. Katurich is a Certified
Public Accountant.
George Wells (63)......... Director of the Company since 1996. Mr. Wells is 1996
currently retired and most recently served as President
and Chief Executive Officer of Exar Corporation, from
March 1992 to October 1996, a California based
semiconductor manufacturer. Mr. Wells is currently a
Director of Q-Logic.
</TABLE>
DIRECTORS' FEES
Directors who also are employees of the Company are reimbursed for expenses
incurred in attending meetings of the Board of Directors but do not otherwise
receive compensation for serving as directors of the Company. Each director who
is not an employee of the Company is entitled to receive an annual fee of $5,000
for his services as a director, a fee of $1,500 for each Board meeting attended,
$750 for each committee meeting attended and reimbursement for his expenses
incurred in attending Board meetings. In addition, each director who is not an
employee receives an annual grant of options to purchase 3,000 shares of the
Company's Common Stock with an exercise price equal to the fair market value of
a share of Common Stock on the date of grant. Moreover, directors who are also
directors of any of the Company's subsidiaries receive an additional grant of
options to purchase 1,000 shares of the Company's Common Stock for each
subsidiary's Board on which they sit. Options granted under the non-employee
director provisions of the Company's 1995 Stock Option Plan vest in three equal
annual installments and are exercisable for ten years after the date of grant.
COMMITTEES AND MEETINGS OF THE BOARD OF DIRECTORS
The Committees of the Board of Directors consist of an Audit Committee and
a Compensation Committee, each of which is comprised solely of outside
directors. During the fiscal year ended March 31,
3
<PAGE> 7
1999, the Board of Directors held 2 meetings. All directors attended all
director and committee meetings, on which they were a member with the exception
of Alan Duncan who was absent from one meeting of the Board of Directors.
Audit Committee. The Audit Committee is comprised of Messrs. Duncan, Wells
and Elder and held one meeting during the fiscal year ended March 31, 1999. Its
functions include recommending to the Board of Directors the engagement of the
Company's independent certified public accountants, reviewing with such
accountants the audit plan and results of their examination of the Consolidated
Financial Statements and determining the independence of such accountants.
Compensation Committee. The Compensation Committee is comprised of Messrs.
Wells and Elder and held two meetings during the fiscal year ended March 31,
1999. Its functions include reviewing and making recommendations with respect to
compensation of officers and key employees, including the grant of options or
other awards under the Company's 1995 Stock Option Plan.
SECURITY OWNERSHIP OF PRINCIPAL SHAREHOLDERS AND MANAGEMENT
The following table sets forth information as of July 9, 1999 with respect
to the beneficial ownership of the Company's Common Stock by each person who is
known by the Company to beneficially own more than 5% of the Company's Common
Stock, each director or nominee of the Company, each executive officer listed in
the Summary Compensation Table below and all directors and officers as a group.
The mailing address for all directors and executive officers of the Company is
c/o Align-Rite International, Inc., 2428 Ontario Street, Burbank, CA 91504.
Except as otherwise indicated, beneficial ownership includes both voting and
investment power with respect to the shares shown.
SECURITY OWNERSHIP TABLE
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF
BENEFICIAL PERCENT OF
NAME OF BENEFICIAL OWNER OWNERSHIP CLASS
------------------------ ---------- ----------
<S> <C> <C>
Fidelity Management(1)...................................... 448,000 9.86%
Brinson Partners, Inc.(2)................................... 405,772 8.93%
Heartland Advisors, Inc.(3)................................. 300,000 6.60%
Kennedy Capital Management, Inc.(4)......................... 265,100 5.83%
James L. Mac Donald(5)...................................... 708,618 14.65%
Petar N. Katurich(6)........................................ 25,467 *
Alan G. Duncan(7)........................................... 20,667 *
George Wells(8)............................................. 7,667 *
William Elder(9)............................................ 1,334 *
All directors and executive officers as a group (5
persons)(10).............................................. 759,693 15.61%
</TABLE>
- ---------------
* Less than 1%.
(1) Reflects ownership as reported on a Schedule 13G by Fidelity Management
("Fidelity"), dated as of February 10, 1999, filed with the Securities and
Exchange Commission.
(2) Reflects ownership as reported on a Schedule 13G by Brinson Partners, Inc.
("Brinson"), dated as of February 11, 1999, filed with the Securities and
Exchange Commission.
(3) Reflects ownership as reported on a Schedule 13G by Heartland Advisors,
Inc. ("Heartland"), dated as of February 2, 1999, filed with the Securities
and Exchange Commission.
(4) Reflects ownership as reported on a Schedule 13G by Kennedy Capital
Management, Inc. ("Kennedy"), dated as of February 9, 1999, filed with the
Securities and Exchange Commission.
(5) Includes 264,958 shares subject to options that are currently exercisable
or will become exercisable before September 9, 1999.
4
<PAGE> 8
(6) Includes 25,467 shares subject to options that are currently exercisable or
will become exercisable before September 9, 1999.
(7) Includes 20,667 shares subject to options that are currently exercisable or
will become exercisable before September 9, 1999.
(8) Includes 7,667 shares subject to options that are currently exercisable or
will become exercisable before September 9, 1999.
(9) Includes 1,334 shares subject to options that are currently exercisable or
will become exercisable before September 9, 1999.
(10) Includes 319,693 shares subject to options that are currently exercisable
or will become exercisable before September 9, 1999. See Notes 5 through 9.
EXECUTIVE COMPENSATION AND OTHER INFORMATION
SUMMARY OF EXECUTIVE COMPENSATION
The following table sets forth all compensation for the fiscal years ended
March 31, 1999, 1998 and 1997 for the two executive officers of the Company (the
"Named Executive Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM(1)
COMPENSATION
ANNUAL COMPENSATION ------------
--------------------------------- SECURITIES
OTHER ANNUAL UNDERLYING ALL OTHER
SALARY BONUS COMPENSATION OPTIONS COMPENSATION
NAME AND PRINCIPAL POSITION YEAR ($) ($) ($)(2) GRANTED(#) ($)
- --------------------------- ---- ------- ------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
James L. Mac Donald........ 1999 250,000 25,000 29,639(3) -- 38,187(4)
Chairman of the Board, 1998 235,000 117,500 -- -- 37,666(5)
President and Chief 1997 224,000 82,280 -- -- 32,123(6)
Executive Officer
Petar N. Katurich.......... 1999 110,400 10,000 -- -- 12,173(7)
Vice President of 1998 100,000 18,362 -- -- 11,805(7)
Finance, Chief Financial 1997 80,400 17,500 -- -- 10,575(7)
Officer
</TABLE>
- ---------------
(1) The Company has not issued stock appreciation rights or restricted stock
awards.
(2) Except as noted below, all Other Annual Compensation did not exceed the
lesser of $50,000 or 10% of the total salary and bonus reported for the
named executive officer.
(3) $29,639 represents amounts reimbursed for the payment of taxes in connection
with life insurance premiums paid by the Company on behalf of Mr. Mac
Donald.
(4) $35,931 of this amount represents life insurance premiums paid by the
Company on behalf of Mr. Mac Donald, and $2,256 of this amount represents
the annual contribution by the Company to the Company's 401(k) Plan in the
name of Mr. Mac Donald.
(5) $35,163 of this amount represents life insurance premiums paid by the
Company on behalf of Mr. Mac Donald, and $2,503 of this amount represents
the annual contribution by the Company to the Company's 401(k) Plan in the
name of Mr. Mac Donald.
(6) $30,123 of this amount represents life insurance premiums paid by the
Company on behalf of Mr. Mac Donald, $2,000 of this amount represents the
annual contribution by the Company to the Company's 401(k) Plan in the name
of Mr. Mac Donald.
(7) These amounts represent auto allowance, life insurance premiums paid by the
Company on behalf of Mr. Katurich and annual contributions by the Company to
the Company's 401(k) Plan in the name of Mr. Katurich.
5
<PAGE> 9
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
PERCENT OF POTENTIAL
NUMBER OF TOTAL REALIZABLE VALUE AT
SECURITIES OPTIONS ASSUMED ANNUAL
UNDERLYING GRANTED TO RATES OF STOCK PRICE
OPTIONS GRANTED TO EMPLOYEES EXERCISE OF APPRECIATION FOR
EMPLOYEES IN IN FISCAL BASE PRICE EXPIRATION OPTION TERM
NAME FISCAL YEAR YEAR ($/SH) DATE 5% 10%
---- ------------------ ---------- ----------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
James L. Mac Donald............ -- -- $ -- -- $ -- $ --
Petar N. Katurich.............. 3,600 4.0% 14.50 5/13/08 32,828 83,193
4,200 4.7% 11.625 1/04/09 30,705 77,814
</TABLE>
SUMMARY OF OPTIONS EXERCISED
The following table provides information with respect to the exercise of
stock options during the most recently completed fiscal year by the Named
Executive Officers of the Company together with the fiscal year-end value of
unexercised options.
OPTION EXERCISES AND YEAR-END VALUE TABLE
AGGREGATED OPTIONS EXERCISED IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION VALUE
<TABLE>
<CAPTION>
VALUE OF
NUMBER OF UNEXERCISED
SECURITIES UNDERLYING IN-THE MONEY
SHARES UNEXERCISED OPTIONS AT OPTIONS AT
ACQUIRED FISCAL YEAR END FISCAL YEAR END
ON VALUE(1) (#) ($)
EXERCISE REALIZED EXERCISABLE/ EXERCISABLE/
NAME # ($) UNEXERCISABLE UNEXERCISABLE
---- -------- -------- ---------------------- -------------------
<S> <C> <C> <C> <C>
James L. Mac Donald........... -0- -0- 264,558(2)/76,838 $2,422,232/$534,662
Petar N. Katurich............. -0- -0- 25,467 /18,333 $ 84,841/N/A
</TABLE>
- ---------------
(1) Market value of the securities underlying the options at exercise date or
year-end, as the case may be, minus the exercise or base price of
"in-the-money" options. Options are "in-the-money" if the fair value of the
underlying securities exceeds the exercise price of the options.
(2) Includes an option to purchase 115,000 shares of Common Stock of the Company
granted in exchange for warrants to purchase 115,000 ordinary shares of ARI
at an exercise price of $2.59 per share. This exchange was effected in
connection with the Company's initial public offering and became effective
as of July 21, 1995.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Company's Compensation Committee consists of Messrs. George Wells and
William Elder. No member of the Compensation Committee is either an officer or
employee of the Company.
REPORT OF THE COMPENSATION COMMITTEE
To: The Board of Directors
As members of the Compensation Committee, it is our duty to administer the
Company's overall compensation program for its senior management. The
Compensation Committee oversees the administration of the Align-Rite
International, Inc. 1995 Stock Option Plan. In addition, the Compensation
Committee establishes the compensation of the Chief Executive Officer and
certain other members of senior management and evaluates the performance of such
individuals. The Compensation Committee is comprised entirely of non-employee
directors.
The primary philosophy of the Company regarding compensation is to offer a
program which rewards each of the members of senior management commensurately
with the Company's overall growth and financial
6
<PAGE> 10
performance, including each person's individual performance during the previous
fiscal year. The Company's compensation program for senior management is
designed to attract and retain individuals who are capable of leading the
Company in achieving its business objectives in an industry characterized by
competitiveness, growth and change.
The Company believes a substantial portion of the annual compensation of
each member of senior management should relate to, and should be contingent
upon, the financial success of the Company, as well as the individual
contribution of each particular person to that success. As a result, a
significant portion of the total compensation package consists of variable,
performance-based components, such as bonuses and stock awards, which can
increase or decrease to reflect changes in corporate and individual performance.
The Compensation Committee evaluates the total compensation for the
Company's Chief Executive Officer, Mr. James L. Mac Donald, and certain other
members of senior management in light of information collected by the
Compensation Committee regarding the compensation practices of similar
companies. The Compensation Committee considers various indicators of success on
both a corporate and an individual level in determining the overall compensation
package for Mr. Mac Donald and the other members of senior management. The
Compensation Committee also considers such corporate performance measures as
revenue, operating income and earnings per share in its calculation.
The Company's annual compensation package for Mr. Mac Donald and the other
members of senior management typically consists of: (a) salary, (b) annual cash
incentive or bonus and (c) long-term incentive or non-cash awards, primarily
stock options.
Mr. Mac Donald's base salary for the 1999 fiscal year was based on his
employment agreement with the Company, which expires in March 2002, subject to
renewal by the Company (the "Employment Agreement"), pursuant to which he serves
as Chairman of the Board, President and Chief Executive Officer. In June 1999,
the Company, at the recommendation of the Compensation Committee and Mr. Mac
Donald exercised the option to extend the term of his employment agreement from
March 2000 to March 2002. The Employment Agreement established Mr. Mac Donald's
minimum annual base salary at not less than $208,000 per year, subject to annual
increases at the discretion of the Board of Directors of not less than the
annual increase in the consumer price index. In recognition of the Company's
growth and performance under Mr. Mac Donald's leadership, the Compensation
Committee determined that an increase in base salary from $250,000 in fiscal
1999 to $260,000 in fiscal 2000, a 4% increase, was appropriate. The Company
uses a similar analysis to determine the salaries of other members of senior
management.
Pursuant to Mr. Mac Donald's Employment Agreement, he is also entitled to
receive, subject to satisfaction of certain performance-based goals, a cash
bonus equal to 8% of any annual increase in the income from operations of the
Company, subject to a cap of 50% of his base salary (the "Annual Incentive
Bonus"). The Compensation Committee did not award Mr. Mac Donald an Annual
Incentive Bonus during the 1999 fiscal year. The Compensation Committee did
however award a discretionary bonus of $25,000 to Mr. Mac Donald in recognition
of his contributions to the Company's performance relative to its competitors
during a downturn in the global semiconductor industry.
The Company also provides compensation to certain members of its management
under the Company's 1995 Stock Option Plan (the "Plan"). The Plan provides the
Company with the ability to periodically reward key employees with options to
purchase shares of the Company's Common Stock. These long-term incentives are
designed to couple the interests of key employees with those of the shareholders
of the Company. Stock option grants provide an incentive that focuses the
individual's attention on managing the Company from the perspective of an owner,
with an equity stake in the business. The value of stock options is tied to the
future performance of the Company's Common Stock and provides value to the
recipient only when the price of the Company's Common Stock increases above the
option grant price. Stock options reward management for long-term strategic
planning through the resulting enhancement of share price. The Company believes
that a compensation structure which includes the periodic granting of long-term
incentives such as stock options helps to attract and retain senior managers
with long-term management perspectives. As a result of the leadership and
performance that Mr. Mac Donald and the Company have exhibited and due the fact
that no
7
<PAGE> 11
options have been granted to Mr. Mac Donald since July of 1995 (the initial
public offering) the Compensation Committee granted 15,000 options in April of
1999.
The Compensation Committee has considered the anticipated tax treatment to
the Company regarding the compensation and benefits paid to the executive
officers of the Company in light of the enactment of Section 162(m) of the
Internal Revenue Code of 1986, as amended. The basic philosophy of the
Compensation Committee is to strive to provide the executive officers of the
Company with a compensation package which will preserve the deductibility of
such payments for the Company. However, certain types of compensation payments
and their deductibility (e.g., the spread on exercise of non-qualified options)
depend upon the timing of an executive officer's vesting or exercise of
previously granted rights. Moreover, interpretations of and changes in the tax
laws and other factors beyond the Compensation Committee's control may affect
the deductibility of certain compensation payments. The Compensation Committee
will consider various alternatives to preserving the deductibility of
compensation payments and benefits to the extent reasonably practicable and to
the extent consistent with its other compensation objectives.
THE COMPENSATION COMMITTEE
OF THE BOARD OF DIRECTORS
George Wells (Chairman)
William Elder
8
<PAGE> 12
PERFORMANCE GRAPH
The following graph shows a comparison of cumulative total returns(1) of
(i) the Company's Common Stock, (ii) the Nasdaq Stock Market -- US Index and
(iii) the S&P Electronics (Semiconductors) Index.
<TABLE>
<CAPTION>
NASDQ STOCK S&P ELEC
ALIGN-RITE INTL INC MARKET-US (SEMICONDUCTORS)
------------------- ----------- ----------------
<S> <C> <C> <C>
'7/21/95' 100 100 100
'3/96' 77 119 79
'3/97' 90 132 168
'3/98' 117 200 184
'3/99' 86 269 278
</TABLE>
- ---------------
(1) Total returns assumes reinvestment of dividends.
(2) Assumes $100 invested on July 21, 1995 (the date on which the Company
consummated its initial public offering and was registered under Section 12
of the Securities Exchange Act of 1934, as amended) in the Common Stock of
the Company and on June 30, 1995 in each Index.
IT SHOULD BE NOTED THAT THIS GRAPH REPRESENTS HISTORICAL STOCK PRICE
PERFORMANCE AND IS NOT NECESSARILY INDICATIVE OF ANY FUTURE STOCK PRICE
PERFORMANCE.
THE FOREGOING REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF
DIRECTORS REGARDING COMPENSATION AND THE PERFORMANCE GRAPH THAT APPEARS
IMMEDIATELY AFTER SUCH REPORT SHALL NOT BE DEEMED TO BE SOLICITING MATERIAL OR
TO BE FILED WITH THE SECURITIES AND EXCHANGE COMMISSION UNDER THE SECURITIES ACT
OF 1933, AS AMENDED, OR THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, OR
INCORPORATED BY REFERENCE IN ANY DOCUMENT SO FILED.
9
<PAGE> 13
EMPLOYMENT AND SEVERANCE AGREEMENTS
The Company has employment agreements with the following executive
officers:
James L. Mac Donald. Pursuant to his employment agreement, Mr. Mac Donald
serves as Chairman of the Board, President and Chief Executive Officer of the
Company. In June 1999, the Company, at the recommendation of the Compensation
Committee, and Mr. Mac Donald exercised the option to extend the employment
agreement from March 31, 2000 to March 31, 2002. Mr. Mac Donald receives an
annual salary of not less than $208,000, subject to annual increases at the
discretion of the Board of Directors of not less than the annual increase in the
consumer price index. He is also entitled to receive a bonus equal to 8% of any
annual increase in the income from operations of the Company, subject to a cap
of 50% of his base salary. The Company is required to maintain a life insurance
policy of $3.0 million for the benefit of Mr. Mac Donald and Mr. Mac Donald is
entitled to participate in other benefit programs of the Company generally
available to its executive officers. In addition, Mr. Mac Donald is entitled to
receive an automobile allowance and reimbursement of business expenses. If the
Company terminates Mr. Mac Donald's employment without cause, Mr. Mac Donald is
entitled to a lump sum severance payment equal to one month's then current base
salary, including benefits, for each year of his employment with the Company or
any of its subsidiaries, subject to a maximum of 24 months' base pay. In
addition, if there should occur a change in control of the Company, then Mr. Mac
Donald may elect to terminate his employment agreement. In such event, Mr. Mac
Donald will be entitled to receive all lump sum severance payments. Mr. Mac
Donald has been employed by the Company, its predecessors and its subsidiaries
for 29 years.
Petar N. Katurich. Pursuant to his employment agreement, Mr. Katurich
serves as Executive Vice President of Finance and Chief Financial Officer of the
Company. In June 1999, the Company, at the recommendation of the Compensation
Committee, and Mr. Katurich exercised the option to extend the employment
agreement from March 31, 2000 to March 31, 2002. Mr. Katurich receives an annual
salary of not less than $100,000, subject to annual increases at the discretion
of the Board of Directors of not less than the annual increase in the consumer
price index. He also is entitled to receive a bonus equal to 1.25% of any annual
increase in the income from operations of the Company, subject to a cap of 50%
of his base salary. The Company is required to maintain a life insurance policy
of $250,000 for the benefit of Mr. Katurich and Mr. Katurich is entitled to
participate in other benefit programs of the Company available to its executive
officers. In addition, Mr. Katurich is entitled to receive an automobile
allowance and reimbursement of business expenses. If the Company terminates Mr.
Katurich's employment without cause, Mr. Katurich is entitled to a lump sum
severance payment of approximately 1 year's salary. Mr. Katurich has been
employed by the Company and its subsidiaries for 7 years.
PROPOSAL 2
RATIFICATION OF APPOINTMENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Subject to ratification by the shareholders at the Annual Meeting, the
Board of Directors has appointed PricewaterhouseCoopers LLP to serve as the
independent certified public accountants for the Company for its 2000 fiscal
year end. Prior to its merger with PricewaterhouseCoopers LLP, Coopers & Lybrand
LLP has served as the Company's independent certified public accountants since
1990. Representatives of PricewaterhouseCoopers LLP are expected to be present
at the Annual Meeting, will have the opportunity to make a statement, if they
desire to do so, and will be available to respond to appropriate questions.
The affirmative vote to the majority of the votes cast by the holders of
the Company's Common Stock on this proposal shall constitute ratification of the
appointment of PricewaterhouseCoopers LLP.
If the shareholders by the affirmative vote of a majority of the Common
Stock represented at the Annual Meeting do not ratify the appointment of
PricewaterhouseCoopers LLP, the selection of independent certified public
accountants will be reconsidered by the Board of Directors.
The Board of Directors recommends a vote FOR this proposal.
10
<PAGE> 14
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act ("Section 16(a)") requires the Company's
directors and officers, and persons who own more than 10% of a registered class
of the Company's equity securities, to file reports of ownership and changes in
ownership with the Securities and Exchange Commission and the National
Association of Securities Dealers, Inc. Directors, officers, and greater than
10% shareholders are required by the Securities and Exchange Commission to
furnish the Company with copies of the reports they file. According to the
Company's records, all filings required under Section 16(a) during the 1999
fiscal year were made on a timely basis.
ANNUAL REPORT
A copy of the Company's annual report, which contains the Company's Form
10-K for the year ended March 31, 1999, but excludes exhibits, is available
without charge to shareholders of the Company upon request. Copies of exhibits
to the Form 10-K are available, but a reasonable fee per page will be charged to
the requesting shareholder. Shareholders may make requests in writing to Petar
N. Katurich, Vice President of Finance, Chief Financial Officer and Secretary,
Align-Rite International, Inc., 2428 Ontario Street, Burbank, California 91504.
PROPOSALS OF SHAREHOLDERS
For shareholder proposals to be considered for inclusion in the proxy
materials for the Company's 2000 Annual Meeting of Shareholders, they must be
received by the Secretary of the Company no later than April 2, 2000. For other
shareholder proposals, the proposal must be received by the Secretary of Company
on or before May 17, 2000. For proposals submitted after this deadline, the
proxyholders may exercise discretionary voting authority with respect to such
proposal without including information regarding such proposal in its proxy
materials.
OTHER MATTERS
At the time of the preparation of this Proxy Statement, the Board of
Directors knows of no other matters which will be acted upon at the Annual
Meeting. If any other matters are presented for action at the Annual Meeting or
at any adjournment thereof, it is intended that the proxies will be voted with
respect thereto in accordance with the best judgment and in the discretion of
the proxy holders.
By Order of the Board of Directors
/s/ Petar N. Katurich
Petar N. Katurich,
Vice President of Finance,
Chief Financial Officer and Secretary
Burbank, California
July 29, 1999
IT IS IMPORTANT THAT PROXIES BE RETURNED PROMPTLY. THEREFORE, SHAREHOLDERS
ARE URGED TO COMPLETE, SIGN, DATE AND RETURN THE ACCOMPANYING PROXY IN THE
ENCLOSED ENVELOPE.
11
<PAGE> 15
ALIGN-RITE INTERNATIONAL, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned appoints James L. Mac Donald and Petar N. Katurich, and each
of them, proxies with full power of substitution, to vote all shares of Common
Stock of Align-Rite International, Inc. (the "Company") held of record by the
undersigned as of July 9, 1999, the record date with respect to this
solicitation, at the Annual Meeting of Stockholders of the Company to be held at
the Burbank Hilton Hotel, 2500 Hollywood Way, Burbank, California 91505,
beginning at 10:30 a.m., local time, on Wednesday, September 1, 1999, and at any
adjournment thereof, upon the following matters:
(1) ELECTION OF DIRECTORS
<TABLE>
<S> <C>
[ ]FOR the nominees listed below [ ]WITHHOLD AUTHORITY
(except as noted to contrary below) to vote for the nominee listed below
</TABLE>
<TABLE>
<S> <C>
Alan G. Duncan William Elder
</TABLE>
(Instructions: to withhold authority to vote for any individual nominee, circle
that nominee's name above.)
(Continued and to be signed on the reverse side)
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(2) RATIFICATION OF APPOINTMENT OF PRICEWATERHOUSE COOPERS LLP AS INDEPENDENT
CERTIFIED PUBLIC ACCOUNTANTS
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(3) UPON SUCH OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE COMPANY'S ANNUAL
MEETING OR ANY ADJOURNMENT OR POSTPONEMENTS THEREOF.
<PAGE> 16
THIS PROXY WILL BE VOTED AS DIRECTED, OR IF NO DIRECTION IS INDICATED, WILL BE
VOTED FOR THE ELECTION OF THE DIRECTORS NAMED ON THE REVERSE SIDE OF THIS PROXY,
FOR PROPOSAL 2, AND AS SAID PROXIES DEEM ADVISABLE ON SUCH OTHER MATTERS AS MAY
COME BEFORE THE MEETING, INCLUDING, AMONG OTHER THINGS, CONSIDERATION OF ANY
MOTION MADE FOR ADJOURNMENT OF THE MEETING.
The undersigned shareholder may revoke this proxy at any time before it is voted
by filing with the Secretary of Align-Rite International, Inc. either an
instrument revoking the proxy or a duly executed proxy bearing a later date, or
by attending the Company's annual Meeting and voting in person.
Dated , 1999
-------------------------
Signature(s) of
shareholder(s)
(Your signature(s) should
conform to your name(s)
as printed hereon.
Co-owners should all
sign.)
