<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
--------------
SCHEDULE 13D
(RULE 13d-101)
INFORMATION TO BE INCLUDED IN STATEMENTS FILED PURSUANT TO RULE 13d-1(a)
AND AMENDMENTS THERETO FILED PURSUANT TO 13d-2(a)
UNDER THE SECURITIES EXCHANGE ACT OF 1934(1)
ALIGN-RITE INTERNATIONAL, INC.
-------------------------------------------
(Name of Issuer)
COMMON STOCK, $0.01 PAR VALUE
------------------------------------------------
(Title of Class of Securities)
016251 10 0
-------------------------------------------
(CUSIP Number)
JAMES L. MAC DONALD
C/O ALIGN-RITE INTERNATIONAL, INC.
2428 ONTARIO STREET
BURBANK, CALIFORNIA 91504
(818) 843-7220
with a copy to:
J. JAY HERRON, ESQ.
O'MELVENY & MYERS LLP
610 NEWPORT CENTER DRIVE, SUITE 1700
NEWPORT BEACH, CALIFORNIA 92660
(949)-760-9600
-------------------------------------------------------
(Name, Address and telephone Number of
Person Authorized to Receive Notices and Communication)
SEPTEMBER 15, 1999
-------------------------------------------------------
(Date of Event Which Requires filing of This Statement)
-----------
If the filing person has previously filed a Statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
Schedule because of Rule 13d-1(e), 13d-1(f) or 13d-1(g), check the following
box. [X]
- ----------
(1) The remainder of this cover page shall be filled out for a reporting
person's initial filing on this form with respect to the subject class of
securities, and for any subsequent amendment containing information which would
alter the disclosures provided in a prior cover page.
The information required in the remainder of this cover page shall not be deemed
to be "filed" for the purpose of Section 18 of the Securities Exchange Act of
1934 ("Act") or otherwise subject to the liabilities of that section of the Act
but shall be subject to all other provisions of the Act.
<PAGE> 2
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13D
CUSIP NO. 016251 10 0 PAGE 2 OF 8 PAGES
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================================================================================
1. NAME OF REPORTING PERSON
I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY)
James L. Mac Donald
- --------------------------------------------------------------------------------
2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
(a) [ ]
(b) [X]
- --------------------------------------------------------------------------------
3. SEC USE ONLY
- --------------------------------------------------------------------------------
4. SOURCE OF FUNDS
PF and OO
- --------------------------------------------------------------------------------
5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEM 2(d) or 2(e)
[ ]
- --------------------------------------------------------------------------------
6. CITIZENSHIP OR PLACE OF ORGANIZATION:
United States
- --------------------------------------------------------------------------------
7. SOLE VOTING POWER
NUMBER OF -0- shares
SHARES -------------------------------------------------------
BENEFICIALLY 8. SHARED VOTING POWER
704,558 shares
OWNED BY
-------------------------------------------------------
EACH
9. SOLE DISPOSITIVE POWER
REPORTING 264,558 shares
-------------------------------------------------------
PERSON
10. SHARED DISPOSITIVE POWER
WITH 440,000 shares
- --------------------------------------------------------------------------------
11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
704,558 shares
- --------------------------------------------------------------------------------
12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN
SHARES
[ ]
- --------------------------------------------------------------------------------
13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
14.5 %
- --------------------------------------------------------------------------------
14. TYPE OF REPORTING PERSON
IN
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Page 2 of 8
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13D
CUSIP NO. 016251 10 0 PAGE 3 OF 8 PAGES
- ---------------------- -------------------
================================================================================
1. NAME OF REPORTING PERSON
I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY)
The Mac Donald Family Trust
- --------------------------------------------------------------------------------
2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
(a) [ ]
(b) [X]
- --------------------------------------------------------------------------------
3. SEC USE ONLY
- --------------------------------------------------------------------------------
4. SOURCE OF FUNDS
OO
- --------------------------------------------------------------------------------
5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEM 2(d) or 2(e)
[ ]
- --------------------------------------------------------------------------------
6. CITIZENSHIP OR PLACE OF ORGANIZATION:
United States
- --------------------------------------------------------------------------------
7. SOLE VOTING POWER
NUMBER OF -0-
SHARES -------------------------------------------------------
BENEFICIALLY 8. SHARED VOTING POWER
440,000 shares
OWNED BY
-------------------------------------------------------
EACH
9. SOLE DISPOSITIVE POWER
REPORTING 440,000 shares
-------------------------------------------------------
PERSON
10. SHARED DISPOSITIVE POWER
WITH -0-
- --------------------------------------------------------------------------------
11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
440,000 shares
- --------------------------------------------------------------------------------
12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN
SHARES
[ ]
- --------------------------------------------------------------------------------
13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
9.1 %
- --------------------------------------------------------------------------------
14. TYPE OF REPORTING PERSON
OO
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Page 3 of 8
<PAGE> 4
ITEM 1. SECURITY AND ISSUER:
This statement on Schedule 13D relates to shares of Common Stock, par
value $0.01 per share (the "Common Stock"), of Align-Rite
International, Inc., a California corporation (the "Issuer"). The
principal executive offices of the Issuer are located at 2428 Ontario
Street, Burbank, California 91504.
ITEM 2. IDENTITY AND BACKGROUND:
(a) This Schedule 13D is filed on behalf of James L. Mac Donald, and
amends the Schedule 13G filings made by Mr. Mac Donald, and on
behalf of James L. Mac Donald and Robin A. Mac Donald, as
trustees under the Trust Agreement, dated November 17, 1983, for
the Mac Donald Family Trust (the "Trust" and together with Mr.
Mac Donald, the "Reporting Person").
(b) The business address of the Reporting Person is c/o Align-Rite
International, Inc., 2428 Ontario Street, Burbank, California
91504.
(c) Mr. Mac Donald's present principal occupation is Chairman of the
Board, President and Chief Executive Officer of Align-Rite
International, Inc.
(d) The Reporting Person has not been convicted in a criminal
proceeding (excluding traffic violations or similar misdemeanors)
during the last five years.
(e) The Reporting Person has not been a party to a civil proceeding
of a judicial or administrative body of competent jurisdiction as
a result of which the Reporting Person was or is subject to a
judgment, decree or final order enjoining future violations of,
or prohibiting or mandating activities subject to, federal or
state securities laws, or finding any violation with respect to
such laws during the last five years.
(f) Mr. Mac Donald is a citizen of the United States of America.
ITEM 3. SOURCE OF FUNDS AND AMOUNT OF FUNDS OR OTHER CONSIDERATION:
The Trust acquired all of its shares of common stock of the Issuer by
transfer from Mr. Mac Donald. Mr. Mac Donald acquired his shares with
personal funds and by borrowing approximately $615,000 at the end of
July 1999 from Sanwa Bank of California in order to exercise his
options to purchase 100,000 shares of Common Stock and to pay taxes
that were withheld in connection with such exercise of options. Mr. Mac
Donald purchased such 100,000 shares of Common Stock at the end of July
1999.
Page 4 of 8
<PAGE> 5
ITEM 4. PURPOSE OF TRANSACTION:
On September 15, 1999, the Issuer, Photronics, Inc., a Connecticut
corporation ("Parent"), and AL Acquisition Corp., a California
corporation and a wholly owned subsidiary of Parent ("Merger Sub"),
entered into an Agreement and Plan of Merger (the "Merger Agreement"),
attached hereto as Exhibit 2 and incorporated herein by reference,
where upon consummation of the transactions contemplated therein, the
Issuer will become a wholly owned subsidiary of Parent. Concurrently
with the execution of the Merger Agreement, Mr. Mac Donald, the Trust
and Parent entered into a Voting Agreement (the "JM Voting Agreement"),
attached hereto as Exhibit 3 and incorporated herein by reference. As
inducement for, and in consideration of, Parent's participation in the
Merger Agreement, the Reporting Person agreed to vote its shares in
favor of the Merger Agreement. In addition, the Reporting Person
granted an irrevocable proxy to certain officers of Parent and
appointed such officers as its attorney-in-fact to vote all the shares
beneficially owned by it in accordance with the provisions of the JM
Voting Agreement.
The Merger Agreement provides, among other things, for (a) the merger
of Merger Sub with and into the Issuer; (b) the continued existence of
the Issuer after such merger as the surviving corporation (the
"Surviving Corporation"); (c) the conversion of each share of common
stock, par value $0.01 per share, of Merger Sub into one fully paid and
nonassessable share of common stock, par value $0.01 per share, of the
Surviving Corporation; (d) the cancellation of shares of common stock
of the Issuer owned by Parent, Merger Sub or any other subsidiary of
Parent; and (e) the conversion of each share of Common Stock of the
Issuer outstanding immediately prior to the effective time of the
merger (other than shares to be canceled in accordance with the
preceding clause (d) and Dissenting Shares (as defined in the Merger
Agreement)) into a number of shares of common stock of Parent
determined by dividing $23.09 by the average of the daily average per
share high and low sales price of one share of common stock of Parent
for a 20-day period set forth in the Merger Agreement, subject to
certain limitations.
If the Merger Agreement is consummated as planned, the shares of Common
Stock of the Issuer will be deregistered under the Securities Exchange
Act of 1934, as amended (the "Exchange Act") and will cease to be
listed on the NASDAQ National Market System.
The Merger Agreement also contains certain arrangements with respect to
the charter documents, composition of the Board of Directors and
management of the Surviving Corporation.
Other than as described above and as contemplated by the Merger
Agreement and the JM Voting Agreement, the Reporting Person has no
plans or proposals which relate to, or may result in, any of the
matters listed in Items 4(a)-(j) of Schedule 13D (although he reserves
the right to develop such).
Page 5 of 8
<PAGE> 6
ITEM 5. INTEREST IN SECURITIES OF ISSUER:
(a) The Trust beneficially owns 440,000 shares of the class of
securities identified pursuant to Item 1, equal to approximately 9.1%
of the outstanding securities of such class. Mr. Mac Donald
beneficially owns 704,558 shares (the "Shares") of the class of
securities identified pursuant to Item 1, which amount includes the
440,000 shares owned by the Trust of which Mr. Mac Donald is a trustee.
Mr. Mac Donald's 704,558 shares are equal to approximately 14.5% of the
outstanding securities of the class of securities identified pursuant
to Item 1. Of Mr. Mac Donald's 704,558 shares, 164,558 shares are in
the form of options, all of which are currently exercisable.
(b) Under the terms of the JM Voting Agreement, the Reporting
Person has agreed to vote or cause to be voted all the Shares in favor
of the transactions provided for or contemplated by the Merger
Agreement. Additionally, the Reporting Person has granted an
irrevocable proxy to certain officers of Parent to vote its Shares in
favor of any of the transactions contemplated by the Merger Agreement.
Accordingly, the Reporting Person with respect to matters relating to
the transactions contemplated by the Merger Agreement may be deemed to
have acquired shared voting and dispositive power with respect to the
Shares.
(c) The information provided in Item 3 above is herein
incorporated by reference. During the last 60 days Mr. Mac Donald
exercised options to purchase 100,000 shares of Common Stock of the
Issuer, as described in Item 3 above. Mr. Mac Donald currently owns
these shares. Other than the transaction described in this paragraph
(c) of Item 5 and the transactions described in Item 4 above, the
Reporting Person has not effected any transactions for the securities
identified in this Item 5.
(d) The information provided in Item 4 is herein incorporated by
reference. Other than with respect to the agreements and transactions
described in Item 4 above, no person is known by the Reporting Person
to have the right to receive or the power to direct the receipt of
dividends from, or the proceeds from the sale of, the Issuer's
securities identified in this Item 5.
(e) Not applicable.
ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT
TO SECURITIES OF THE ISSUER:
The information provided in Items 3, 4 and 5 is incorporated herein by
reference. The descriptions herein of the Merger Agreement and the JM
Voting Agreement are qualified in their entirety by reference to such
agreements, copies of which are attached hereto as Exhibits.
Page 6 of 8
<PAGE> 7
ITEM 7. MATERIALS TO BE FILED AS EXHIBITS:
1. Joint Filing Agreement, dated as of September 25, 1999, by and
between James L. Mac Donald and James L. Mac Donald and Robin A. Mac
Donald, as trustees under the Trust Agreement, dated November 17, 1983,
for the Mac Donald Family Trust.
2. Agreement and Plan of Merger, dated as of September 15, 1999, among
Photronics, Inc., a Connecticut corporation, AL Acquisition Corp., a
California corporation and Align-Rite International, Inc., a California
corporation.
3. Voting Agreement, dated as of September 15, 1999, by and between
James L. Mac Donald, James L. Mac Donald and Robin A. Mac Donald, as
trustees under the Trust Agreement, dated November 17, 1983, for the
Mac Donald Family Trust, and Photronics, Inc., a Connecticut
corporation.
Page 7 of 8
<PAGE> 8
SIGNATURE
After reasonable inquiry and to the best of my knowledge and
belief, I certify that the information set forth in this statement is true,
complete and correct.
September 24, 1999
/s/ James L. Mac Donald
----------------------------------------
James L. Mac Donald
/s/ James L. Mac Donald, Jr.
----------------------------------------
James L. Mac Donald, Jr., as trustee
under the Trust Agreement, dated
November 17, 1983, for The Mac Donald
Family Trust
/s/ Robin A. Mac Donald
----------------------------------------
Robin A. Mac Donald, as trustee under
the Trust Agreement, dated November 17,
1983, for The Mac Donald Family Trust
Page 8 of 8
<PAGE> 9
EXHIBIT INDEX
Exhibit
Number Description
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1. Joint Filing Agreement
2. Agreement and Plan of Merger
3. Voting Agreement
<PAGE> 1
EXHIBIT 1
Joint Filing Agreement
In accordance with Rule 13d-1(k) promulgated under the Securities
Exchange Act of 1934, as amended, the persons named below agree to the joint
filing on behalf of each of them of a Statement on Schedule 13D (including
amendments thereto) with respect to the Common Stock of Align-Rite
International, Inc. and further agree that this Joint Filing Agreement be
included as an exhibit to such joint filing. In evidence thereof, the
undersigned hereby execute this Agreement this September 25, 1999. The Schedule
13D may be executed in two or more counterparts, any one of which need not
contain the signatures of more than one party, but all such parts taken together
will constitute a part of this Schedule.
/s/ James L. Mac Donald
----------------------------------------
JAMES L. MAC DONALD
/s/ James L. Mac Donald
----------------------------------------
JAMES L. MAC DONALD, Jr. as Trustee
under the Trust Agreement, dated
November 17, 1983, for the Mac Donald
Family Trust
/s/ Robin A. Mac Donald
----------------------------------------
ROBIN A. MAC DONALD, as Trustee
under the Trust Agreement, dated
November 17, 1983, for the Mac Donald
Family Trust
<PAGE> 1
EXHIBIT 2
AGREEMENT AND PLAN OF MERGER
AMONG
PHOTRONICS, INC.
AL ACQUISITION CORP.
AND
ALIGN-RITE INTERNATIONAL, INC.
DATED AS OF SEPTEMBER 15, 1999
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
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ARTICLE I
THE MERGER
<S> <C> <C>
SECTION 1.1 The Merger.....................................................................................2
SECTION 1.2 Closing........................................................................................2
SECTION 1.3 Effective Time.................................................................................2
SECTION 1.4 Effects of the Merger..........................................................................2
SECTION 1.5 Articles of Incorporation and By Laws of the Surviving Corporation.............................2
SECTION 1.6 Directors......................................................................................2
SECTION 1.7 Officers.......................................................................................2
ARTICLE II
EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE
CONSTITUENT CORPORATIONS; EXCHANGE OF CERTIFICATES
SECTION 2.1 Capital Stock of Merger Sub....................................................................3
SECTION 2.2 Cancellation of Parent Owned Stock.............................................................3
SECTION 2.3 Conversion of Company Common Stock.............................................................3
SECTION 2.4 Exchange of Certificates.......................................................................4
SECTION 2.5 Dissenters' Rights.............................................................................6
SECTION 2.6 Stock Transfer Books...........................................................................7
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
SECTION 3.1 Organization, Qualification, Etc...............................................................7
SECTION 3.2 Capital Stock..................................................................................8
SECTION 3.3 Corporate Authority Relative to this Agreement. No Violation..................................8
SECTION 3.4 Reports and Financial Statements...............................................................9
SECTION 3.5 No Undisclosed Liabilities....................................................................10
SECTION 3.6 No Violation of Law...........................................................................10
SECTION 3.7 Environmental Laws and Regulations............................................................10
SECTION 3.8 Employees; No Undisclosed Employee Benefit Plan Liabilities or Severance
Arrangements..................................................................................11
SECTION 3.9 Absence of Certain Changes or Events..........................................................12
SECTION 3.10 Investigations; Litigation....................................................................12
SECTION 3.11 Joint Proxy Statement; Registration Statement; Other Information..............................12
SECTION 3.12 Accounting and Tax Matters....................................................................13
SECTION 3.13 Taxes.........................................................................................13
SECTION 3.14 Opinion of Financial Advisor..................................................................14
SECTION 3.15 Required Vote of the Company Shareholders.....................................................14
SECTION 3.16 Insurance.....................................................................................14
SECTION 3.17 Property......................................................................................15
SECTION 3.18 Personnel; Labor Relations....................................................................15
</TABLE>
i
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<TABLE>
<S> <C> <C>
SECTION 3.19 Intellectual Property.........................................................................16
SECTION 3.20 Material Contracts............................................................................16
SECTION 3.21 Suppliers and Customers.......................................................................17
SECTION 3.22 Year 2000 Matters.............................................................................17
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
SECTION 4.1 Organization, Qualification, Etc..............................................................17
SECTION 4.2 Capital Stock.................................................................................18
SECTION 4.3 Corporate Authority Relative to this Agreement. No Violation..................................18
SECTION 4.4 Reports and Financial Statements..............................................................19
SECTION 4.5 No Undisclosed Liabilities....................................................................20
SECTION 4.6 No Violation of Law...........................................................................20
SECTION 4.7 Environmental Laws and Regulations............................................................20
SECTION 4.8 No Undisclosed Employee Benefit Plan Liabilities or Severance Arrangements....................20
SECTION 4.9 Absence of Certain Changes or Events..........................................................21
SECTION 4.10 Investigations; Litigation....................................................................21
SECTION 4.11 Joint Proxy Statement; Registration Statement; Other Information..............................21
SECTION 4.12 Accounting and Tax Matters....................................................................21
SECTION 4.13 Tax Matters...................................................................................22
SECTION 4.14 Vote of Parent Shareholders...................................................................22
SECTION 4.15 Opinion of Financial Advisor..................................................................23
SECTION 4.16 Material Contracts............................................................................23
ARTICLE V
COVENANTS
SECTION 5.1 Conduct of Business by the Company or Parent..................................................23
SECTION 5.2 Proxy Material; Registration Statement........................................................26
SECTION 5.3 Shareholders' Meeting.........................................................................26
SECTION 5.4 Approvals and Consents; Cooperation...........................................................26
SECTION 5.5 Access to Information; Confidentiality........................................................27
SECTION 5.6 Affiliates....................................................................................28
SECTION 5.7 Rights Under Stock Plans......................................................................28
SECTION 5.8 Filings; Other Action.........................................................................29
SECTION 5.9 Further Assurances............................................................................29
SECTION 5.10 Company Acquisition Proposals.................................................................29
SECTION 5.11 Director and Officer Liability................................................................30
SECTION 5.12 Accountants' "Comfort" Letters................................................................31
SECTION 5.13 Additional Reports............................................................................31
SECTION 5.14 Tax Treatment; Plan of Reorganization.........................................................32
SECTION 5.15 Public Announcements..........................................................................32
SECTION 5.16 Employee Plans and Benefits...................................................................32
SECTION 5.17 Sale of Shares by Parent......................................................................33
ARTICLE VI
CONDITIONS TO THE MERGER
</TABLE>
ii
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<TABLE>
<S> <C> <C>
SECTION 6.1 Conditions to the Obligations of Each Party...................................................33
SECTION 6.2 Conditions to the Obligations of Parent and Merger Sub........................................34
SECTION 6.3 Conditions to the Obligations of the Company..................................................34
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
SECTION 7.1 Termination...................................................................................35
SECTION 7.2 Effect of Termination.........................................................................36
SECTION 7.3 Amendment.....................................................................................37
SECTION 7.4 Extension; Waiver.............................................................................37
SECTION 7.5 Termination Fee...............................................................................37
ARTICLE VIII
GENERAL PROVISIONS
SECTION 8.1 Nonsurvival of Representations................................................................37
SECTION 8.2 Notices.......................................................................................38
SECTION 8.3 Definitions...................................................................................38
SECTION 8.4 Counterparts..................................................................................41
SECTION 8.5 Entire Agreement, No Third-Party Beneficiaries................................................41
SECTION 8.6 Assignment....................................................................................42
SECTION 8.7 Governing Law.................................................................................42
SECTION 8.8 Enforcement...................................................................................42
SECTION 8.9 Severability..................................................................................42
SECTION 8.10 Interpretation................................................................................42
SECTION 8.11 Finders or Brokers............................................................................42
</TABLE>
iii
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This AGREEMENT AND PLAN OF MERGER, dated as of September 15, 1999, is
entered into by and among PHOTRONICS, INC., a Connecticut corporation
("Parent"), AL ACQUISITION CORP., a California corporation and a wholly owned
subsidiary of Parent ("Merger Sub"), and ALIGN-RITE INTERNATIONAL, INC., a
California corporation (the "Company").
WITNESSETH:
WHEREAS, the respective Boards of Directors of Parent, Merger Sub and the
Company and Parent as the sole shareholder of Merger Sub have approved the
acquisition of the Company by Parent upon the terms and subject to the
conditions set forth in this Agreement and Plan of Merger, including, without
limitation, the exhibits attached hereto (collectively, the "Agreement");
WHEREAS, the respective Boards of Directors of Parent, Merger Sub and the
Company have determined that it is advisable and in the best interests of their
respective shareholders for Merger Sub to merge with and into the Company as set
forth below (the "Merger") upon the terms and subject to the conditions set
forth in this Agreement, whereby each issued and outstanding share of common
stock, par value $.01 per share, of the Company ("Company Common Stock"), other
than Dissenting Shares (as defined in Section 2.5) and shares owned directly or
indirectly by Parent, Merger Sub or by the Company, will be converted into
shares of common stock, par value $.01 per share, of Parent (the "Parent Common
Stock") in accordance with the provisions of Article II of this Agreement;
WHEREAS, as a condition and inducement to Parent's willingness to enter
into this Agreement, concurrently with the execution and delivery of this
Agreement, Parent and certain shareholders of the Company (the "Voting
Shareholders") are entering into a voting agreement dated as of the date of this
Agreement (the "Voting Agreement") pursuant to which such shareholder agrees to
vote his shares of Company Common Stock in favor of the proposal to approve and
adopt the Merger and this Agreement;
WHEREAS, for federal income tax purposes, the Merger is intended to qualify
as a reorganization under the provisions of Section 368(a) of the Code;
WHEREAS, for financial accounting purposes, it is intended that the Merger
shall be accounted for as a "pooling-of-interests;" and
WHEREAS, Parent, Merger Sub and the Company desire to make certain
representations, warranties, covenants and agreements in connection with the
Merger and also to prescribe certain conditions to the Merger.
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements herein contained, and intending to be legally bound hereby,
Parent, Merger Sub and the Company hereby agree as follows:
ARTICLE I.
THE MERGER
SECTION 1.1 The Merger. Upon the terms and subject to the conditions set
forth in this Agreement and the California General Corporation Law (the "CGCL"),
Merger Sub shall be merged with and into the Company at the Effective Time (as
defined in Section 1.3) of the Merger. Following the Merger, the separate
corporate existence of Merger Sub shall cease, and the Company shall continue as
<PAGE> 6
the surviving corporation (the "Surviving Corporation") and shall succeed to and
assume all the rights and obligations of Merger Sub in accordance with the CGCL.
SECTION 1.2 Closing. The closing of the Merger (the "Closing") shall take
place at 10:00 a.m. on a date to be specified by the parties which shall be no
later than the third business day after the satisfaction or waiver of the
conditions set forth in Article VI (other than those conditions that by their
nature are to be satisfied at the Closing, but subject to the fulfillment or
waiver of those conditions) (the "Closing Date") at such place as the parties
may mutually agree.
SECTION 1.3 Effective Time. On the Closing Date, the parties shall execute
and file in the office of the Secretary of State of California this Agreement
and a duly executed officers' certificate by each of the Company and Merger Sub
in accordance with the CGCL and shall make all other filings or recordings, and
take such other and further action as may be required under the CGCL. The Merger
shall become effective upon the filing of this Agreement and such officers'
certificates (such time as the Merger becomes effective is referred to herein as
the "Effective Time").
SECTION 1.4 Effects of the Merger. The Merger shall have the effects set
forth in the CGCL.
SECTION 1.5 Articles of Incorporation and By Laws of the Surviving
Corporation.
(a) The Amended and Restated Articles of Incorporation of the Company
as in effect immediately prior to the Effective Time shall become the Amended
and Restated Articles of Incorporation of the Surviving Corporation after the
Effective Time, and thereafter may be amended as provided therein and as
permitted by law.
(b) The by laws of the Merger Sub as in effect immediately prior to
the Effective Time shall become the by laws of the Surviving Corporation after
the Effective Time, and thereafter may be amended as provided therein and as
permitted by law.
SECTION 1.6 Directors. The directors of the Merger Sub immediately prior to
the Effective Time shall become the directors of the Surviving Corporation,
until the earlier of their resignation or removal or until their respective
successors are duly elected and qualified, as the case may be.
SECTION 1.7 Officers. The officers of the Company immediately prior to the
Effective Time shall become the officers of the Surviving Corporation, until the
earlier of their resignation or removal or until their respective successors are
duly elected and qualified, as the case may be.
ARTICLE II.
EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE
CONSTITUENT CORPORATIONS; EXCHANGE OF CERTIFICATES
SECTION 2.1 Capital Stock of Merger Sub. At the Effective Time, by virtue
of the Merger and without any action on the part of the holder of any shares of
Company Common Stock or any shares of capital stock of 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 and become one
fully paid and nonassessable share of common stock, par value $.01 per share, of
the Surviving Corporation.
2
<PAGE> 7
SECTION 2.2 Cancellation of Parent Owned Stock. At the Effective Time, by
virtue of the Merger and without any action on the part of the holder of any
shares of Company Common Stock or any shares of capital stock of Merger Sub,
each share of Company Common Stock that is owned by Parent, Merger Sub or any
other subsidiary of Parent, shall automatically be canceled and retired and
shall cease to exist, and no consideration shall be delivered in exchange
therefor.
SECTION 2.3 Conversion of Company Common Stock. At the Effective Time, by
virtue of the Merger and without any action on the part of the holder of any
shares of Company Common Stock or any shares of capital stock of Merger Sub,
subject to this Section 2.3 and Section 2.4(f), each share of Company Common
Stock issued and outstanding immediately prior to the Effective Time (other than
shares to be canceled in accordance with Section 2.2 (the "Canceled Shares") and
Dissenting Shares) shall be converted into a number (the "Conversion Number") of
duly authorized, validly issued and nonassessable shares of Parent Common Stock
(the "Merger Consideration") determined by dividing $23.09 by the average of the
daily average per share high and low sales prices of one share of Parent Common
Stock as reported on the Nasdaq National Market (as reported in the New York
City edition of The Wall Street Journal or, if not reported thereby, another
authoritative source) for each of the 20 trading days ending on the third
trading day prior to the Company Meeting (as defined in Section 5.3, so long as
the Closing Date occurs within five business days of the Company Meeting or, if
the Closing Date is more than five business days after the Company Meeting, the
Closing Date) rounded to the nearest cent (the "Average Parent Price"), provided
that (i) if the Average Parent Price is less than $21.00, the Conversion Number
shall be 1.0995; and (ii) if the Average Parent Price is greater than $28.25,
the Conversion Number shall be 0.8173; provided, however, that, in any event, if
between the date of this Agreement and the Effective Time, the outstanding
shares of Parent Common Stock shall have been changed into a different number of
shares or a different class, by reason of any declared or completed stock
dividend, subdivision, reclassification, recapitalization, split, combination or
exchange of shares, the Conversion Number shall be adjusted correspondingly to
the extent appropriate to reflect such stock dividend, subdivision,
reclassification, recapitalization, split, combination or exchange of shares. At
the Effective Time, all such shares of Company Common Stock (other than
Dissenting Shares) shall no longer be outstanding and automatically shall be
canceled and retired and shall cease to exist, and each holder of a certificate
which immediately prior to the Effective Time represented outstanding shares of
Company Common Stock (other than Dissenting Shares) shall cease to have any
rights with respect thereto, except the right to receive the Merger
Consideration.
SECTION 2.4 Exchange of Certificates.
(a) Exchange Agent. Promptly after the Effective Time, Parent shall
deposit, or cause to be deposited, with an exchange agent designated by Parent
and reasonably satisfactory to the Company (the "Exchange Agent"), for the
benefit of the holders of shares of Company Common Stock for exchange in
accordance with this Article II, through the Exchange Agent, certificates
evidencing such number of shares of Parent Common Stock issuable to holders of
Company Common Stock in the Merger pursuant to Section 2.3 and cash in an amount
required to be paid pursuant to Sections 2.4(d) and 2.4(f) (such certificates
for shares of Parent Common Stock, together with any dividends or distributions
with respect thereto and cash, being hereinafter referred to as the "Exchange
Fund"). The Exchange Agent, pursuant to irrevocable instructions, shall deliver,
out of the Exchange Fund, to holders of Company Common Stock the Parent Common
Stock contemplated to be issued pursuant to Section 2.3 (and any dividends or
other distributions to which such holder is entitled pursuant to Section 2.4(d))
and the cash in lieu of fractional shares of Parent Common Stock to which such
holders are entitled to pursuant to Section 2.4(f) hereof out of the Exchange
Fund.
(b) Exchange Procedures. As promptly as practicable after the
Effective Time, Parent shall cause the Exchange Agent to mail to each holder of
record of a certificate or certificates
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(the "Certificates") which immediately prior to the Effective Time represented
outstanding shares of Company Common Stock (other than Canceled Shares and
Dissenting Shares) (i) a letter of transmittal (which shall be in customary form
and shall specify that delivery shall be effected, and risk of loss and title to
the Certificates shall pass, only upon proper delivery of the Certificates to
the Exchange Agent) and (ii) instructions for use in effecting the surrender of
the Certificates in exchange for certificates evidencing shares of Parent Common
Stock, or cash in lieu of fractional shares of Parent Common Stock to which such
holder is entitled pursuant to Section 2.4(f) hereof.
(c) Exchange of Certificates. Upon surrender to the Exchange Agent of
a Certificate for cancellation, together with such letter of transmittal, duly
executed and completed in accordance with the instructions thereto, and such
other documents as may be reasonably required pursuant to such instructions, the
holder of such Certificate shall be entitled to receive in exchange therefor a
certificate representing that number of whole shares of Parent Common Stock
which such holder's shares of Company Common Stock have been converted into
pursuant to this Article II (and any cash in lieu of any fractional shares of
Parent Common Stock to which such holder is entitled pursuant to Section 2.4(f))
and any dividends or other distributions to which such holder is entitled
pursuant to Section 2.4(d)), and the Certificate so surrendered shall forthwith
be canceled. In the event of a transfer of ownership of shares of Company Common
Stock which is not registered in the transfer records of the Company, shares of
Parent Common Stock, cash in lieu of any fractional shares of Parent Common
Stock to which such holder is entitled pursuant to Section 2.4(f) and any
dividends or other distributions to which such holder is entitled pursuant to
Section 2.4(d) may be issued to a transferee if the Certificate representing
such shares of Company Common Stock is presented to the Exchange Agent,
accompanied by all documents required to evidence and effect such transfer and
by evidence that any applicable stock transfer taxes have been paid. Until
surrendered as contemplated by this Section 2.4, each Certificate shall be
deemed at all times after the Effective Time to represent only the right to
receive upon such surrender the number of whole shares of Parent Common Stock
into which the shares of Company Common Stock formerly represented thereby have
been converted, cash in lieu of any fractional shares of Parent Common Stock to
which such holder is entitled pursuant to Section 2.4(f) and any dividends or
other distributions to which such holder is entitled pursuant to Section 2.4(d).
(d) Distributions with Respect to Unexchanged Shares of Parent
Common Stock. No dividends or other distributions declared or made after the
Effective Time with respect to Parent Common Stock with a record date after the
Effective Time shall be paid to the holder of any unsurrendered Certificate with
respect to the shares of Parent Common Stock represented thereby, and no cash
payment in lieu of any fractional shares shall be paid to any such holder
pursuant to Section 2.4(f), until the holder of such Certificate shall surrender
such Certificate. Subject to the effect of escheat, tax or other applicable
laws, following surrender of any such Certificate, there shall be paid to the
holder of the certificates representing whole shares of Parent Common Stock
issued in exchange therefor, without interest, (i) promptly, the amount of any
cash payable with respect to a fractional share of Parent Common Stock to which
such holder is entitled pursuant to Section 2.4(f) and the amount of dividends
or other distributions with a record date after the Effective Time and
theretofore paid with respect to such whole shares of Parent Common Stock, and
(ii) at the appropriate payment date, the amount of dividends or other
distributions, with a record date after the Effective Time but prior to
surrender and a payment date occurring after surrender, payable with respect to
such whole shares of Parent Common Stock.
(e) No Further Rights in Company Common Stock. All shares of Parent
Common Stock issued upon conversion of the shares of Company Common Stock in
accordance with the terms hereof (including any cash paid pursuant to Section
2.4(d) or (f)) shall be deemed to have been issued in full satisfaction of all
rights pertaining to such shares of Company Common Stock.
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(f) No Fractional Shares.
(i) No certificates or scrip representing fractional shares
of Parent Common Stock shall be issued upon the surrender for exchange
of Certificates, no dividend or distribution of Parent shall relate to
such fractional share interests and such fractional share interests
will not entitle the owner thereof to vote or to any rights of a
stockholder of Parent.
(ii) In lieu of the issuance of fractional shares, each
holder of Company Common Stock shall be entitled to receive an amount
in cash equal to the product obtained by multiplying (A) the
fractional share interest to which such holder (after taking into
account all shares of Company Common Stock held at the Effective Time
by shareholder) would otherwise be entitled by (B) the last sale price
for a share of Parent Common Stock on the Nasdaq National Market (as
reported in The Wall Street Journal or, if not reported thereby, any
other authoritative source) on the last trading day prior to the
Closing Date.
(g) Termination of Exchange Fund. Any portion of the Exchange Fund
(including any shares of Parent Common Stock) which remains undistributed to the
holders of Company Common Stock for 180 days after the Effective Time shall be
delivered to Parent, upon demand, and any holders of Company Common Stock who
have not theretofore complied with this Article II shall thereafter look only to
Parent for, and Parent shall deliver, the applicable Merger Consideration, any
cash in lieu of fractional shares of Parent Common Stock to which they are
entitled pursuant to Section 2.4(f) and any dividends or other distributions
with respect to the Parent Common Stock to which they are entitled pursuant to
Section 2.4(d), upon due surrender of their shares of Company Stock (or
affidavits of loss in lieu thereof), in each case, without any interest thereon.
Any portion of the Exchange Fund remaining unclaimed by holders of shares of
Company Common Stock as of a date which is immediately prior to such time as
such amounts would otherwise escheat to or become property of any government
entity, to the extent permitted by applicable law, shall become the property of
Parent, free and clear of any claims or interest of any person previously
entitled thereto.
(h) No Liability. None of the Exchange Agent, Parent nor the
Surviving Corporation shall be liable to any holder of shares of Company Common
Stock for any such shares of Parent Common Stock (or dividends or distributions
with respect thereto) or cash delivered to a public official pursuant to any
abandoned property, escheat or similar law.
(i) Withholding Rights. Each of the Surviving Corporation and the
Exchange Agent shall be entitled to deduct and withhold from the consideration
otherwise payable pursuant to this Agreement to any holder of shares of Company
Common Stock such amounts as it is required to deduct and withhold with respect
to the making of such payment under the Code, or any provision of state, local
or foreign tax law. To the extent that amounts are so withheld by the Surviving
Corporation or the Exchange Agent, as the case may be, such withheld amounts
shall be treated for all purposes of this Agreement as having been paid to the
holder of the shares of Company Common Stock in respect of which such deduction
and withholding was made by the Surviving Corporation or the Exchange Agent, as
the case may be.
(j) Lost, Stolen or Destroyed Certificates. If any Certificate shall
have been lost, stolen or destroyed, upon the making of an affidavit of that
fact by the person claiming such Certificate to be lost, stolen or destroyed
and, if required by the Surviving Corporation, the posting by such person of a
bond, in such reasonable amount as the Surviving Corporation may direct, as
indemnity against any claim that may be made against it with respect to such
Certificate, the Exchange Agent or the Parent, as
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the case may be, will issue in exchange for such lost, stolen or destroyed
Certificate the applicable Merger Consideration, and any cash in lieu of
fractional shares of Parent Common Stock to which the holders thereof are
entitled pursuant to Section 2.4(f) and any dividends or other distributions to
which the holders thereof are entitled pursuant to Section 2(d).
(k) Further Assurances. If, at any time after the Effective Time, the
Surviving Corporation shall consider or be advised that any deeds, bills of
sale, assignments, assurances or any other actions or things are necessary or
desirable to vest, perfect or confirm of record or otherwise in the Surviving
Corporation its right, title or interest in, to or under any of the rights,
properties or assets of either of the Merger Sub or the Company acquired or to
be acquired by the Surviving Corporation as a result of, or in connection with,
the Merger or otherwise to carry out this Agreement, the officers of the
Surviving Corporation shall be authorized to execute and deliver, in the name
and on behalf of each of the Merger Sub and the Company or otherwise, all such
deeds, bills of sale, assignments and assurances and to take and do, in such
names and on such behalves or otherwise, all such other actions and things as
may be necessary or desirable to vest, perfect or confirm any and all right,
title and interest in, to and under such rights, properties or assets in the
Surviving Corporation or otherwise to carry out the purposes of this Agreement.
SECTION 2.5 Dissenters' Rights. Notwithstanding anything in this Agreement
to the contrary, shares of Company Common Stock outstanding immediately prior to
the Effective Time and constituting "dissenting shares" (as defined in Section
1300 of the CGCL) ("Dissenting Shares"), shall not be converted into the right
to receive the Merger Consideration, as provided in Section 2.3 hereof, unless
and until such holder fails to perfect or effectively withdraws or otherwise
loses his or her right to appraisal and payment under the CGCL. If, after the
Effective Time, any such holder fails to perfect or effectively withdraws or
loses his or her right to appraisal, such Dissenting Shares thereupon shall be
treated as if they had been converted as of the Effective Time into the right to
receive the Merger Consideration to which such holder is entitled, without
interest thereon. The Company shall give Parent (i) prompt written notice of any
demands received by the Company for appraisal of any shares of Company Common
Stock, attempted withdrawals of such demands and any other instruments served,
pursuant to applicable law received by the Company relating to dissenters'
rights and (ii) the opportunity to direct all negotiations with respect to
dissenters under the CGCL. The Company shall not, without the prior written
consent of Parent, voluntarily make any payment with respect to Dissenting
Shares, offer to settle or settle any such demands or approve any withdrawal of
such demands.
SECTION 2.6 Stock Transfer Books. At the Effective Time, the stock transfer
books of the Company shall be closed and there shall be no further registration
of transfers of shares of Company Common Stock thereafter on the records of the
Company. From and after the Effective Time, the holders of Certificates
representing shares of Company Common Stock outstanding immediately prior to the
Effective Time shall cease to have any rights with respect to such shares of
Company Common Stock, except as otherwise provided herein or by law. On or after
the Effective Time, any Certificates presented to the Exchange Agent (or Parent
for any reason) shall be converted into shares of Parent Common Stock, any cash
in lieu of fractional shares of Parent Common Stock to which the holders thereof
are entitled pursuant to Section 2.4(f) and any dividends or other distributions
to which the holders thereof are entitled pursuant to Section 2.4(d).
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ARTICLE III.
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to Parent and Merger Sub that,
except as set forth in the corresponding sections or subsections of the
disclosure letter delivered by the Company to Parent and Merger Sub on the date
hereof (the "Company Disclosure Letter"):
SECTION 3.1 Organization, Qualification, Etc. The Company is a corporation
duly organized, validly existing and in good standing under the laws of the
State of California and has all requisite corporate power and authority to own
its properties and assets and to carry on its business as it is now being
conducted and is duly qualified to do business and is in good standing in each
jurisdiction in which the ownership of its properties or the conduct of its
business requires such qualification, except for such jurisdictions in which
such failure to be so qualified or to be in good standing in the aggregate,
would not have a Material Adverse Effect on the Company. The Company Disclosure
Letter lists the locations of all offices of the Company or any of its
Subsidiaries. The copies of the Company's Restated and Amended Articles of
Incorporation and by laws which have been made available to Parent are complete
and correct and in full force and effect on the date hereof. Each of the
Company's Subsidiaries is a corporation duly organized, validly existing and in
good standing under the laws of its jurisdiction of incorporation or
organization, has all requisite corporate power and authority to own its
properties and to carry on its business as it is now being conducted, and is
duly qualified to do business and is in good standing in each jurisdiction in
which the ownership of its property or the conduct of its business requires such
qualification, except for such jurisdictions in which such failure to be so
qualified or to be in good standing would not have a Material Adverse Effect on
the Company. All the outstanding shares of capital stock of, or other ownership
interests in, the Company's Subsidiaries are validly issued, fully paid and
non-assessable and are owned by the Company, directly or indirectly, free and
clear of all liens, claims, charges or encumbrances. There are no existing
options, rights of first refusal, preemptive rights, calls or commitments of any
character relating to the issued or unissued capital stock or other securities
of, or other ownership interests in, any Subsidiary of the Company. The Company
has made available to Parent a complete and correct copy of the charter and by
laws or other organizational documents of each of the Subsidiaries, each as
amended to the date hereof and each such document is in full force and effect.
As used in this Agreement, "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 one or more of its respective Subsidiaries.
SECTION 3.2 Capital Stock. The authorized capital stock of the Company
consists of 35,000,000 shares of the Company Common Stock. As of September 10,
1999, 4,677,869 shares of the Company Common Stock were issued and outstanding.
All the outstanding shares of the Company Common Stock have been validly issued
and are fully paid and non-assessable. There are no outstanding subscriptions,
options, warrants, rights or other arrangements or commitments obligating the
Company to issue any shares of its stock other than options and other rights to
receive or acquire an aggregate of 509,652 shares of the Company Common Stock
pursuant to the 1987 Employee Share Option Scheme and the 1995 Stock Option Plan
(together, the "Company Stock Plans") and the right to purchase up to 20,000
shares of the Company Common Stock pursuant to the Company's Employee Stock
Purchase Plan (the "Stock Purchase Plan").
Except for the issuance of shares of the Company Common Stock pursuant to
the options and other rights referred to in this Section 3.2, since March 31,
1999, no shares of the Company
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Common Stock have been issued. The Company Disclosure Letter contains a list,
which is complete and accurate, of each outstanding option or other right to
purchase or acquire shares of the Company Common Stock under each of the Company
Stock Plans and the Stock Purchase Plan, identifying the plan, the holder, date
of grant, exercise or purchase price and number of shares of Company Common
Stock subject thereto.
SECTION 3.3 Corporate Authority Relative to this Agreement. No Violation.
(a) The Company has full corporate power and authority to enter into
this Agreement and, subject to receipt of the Company Shareholder Approval (as
defined in Section 5.3), to carry out its obligations hereunder. The execution
and delivery of this Agreement and the consummation of the transactions
contemplated hereby have been duly and validly authorized by the Board of
Directors of the Company and, except for the Company Shareholder Approval, no
other corporate proceedings on the part of the Company are necessary to
authorize this Agreement and the transactions contemplated hereby. The Board of
Directors of the Company has determined that the transactions contemplated by
this Agreement are advisable and in the best interest of its shareholders and,
subject to Section 5.10 hereof, to recommend to such shareholders that they vote
in favor thereof. This Agreement has been duly and validly executed and
delivered by the Company and, assuming this Agreement has been duly and validly
executed and delivered by the other parties hereto and subject to obtaining
Company Shareholder Approval, this Agreement constitutes the valid and binding
agreement of the Company, enforceable against the Company in accordance with its
terms (except insofar as enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting creditors'
rights generally, or by principles governing the availability of equitable
remedies). Other than in connection with or in compliance with the provisions of
the CGCL, the Securities Act of 1933, as amended (the "Securities Act"), the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR
Act"), any non-United States competition, antitrust and investment laws and the
securities or blue sky laws of the various states and other jurisdictions, and,
other than the filing of this Agreement and a duly executed officers'
certificate by each of the Company and the Merger Sub with the California
Secretary of State and any necessary state filings to maintain the good standing
or qualification of the Surviving Corporation (collectively, the "Company
Required Approvals"), no authorization, consent or approval of, or filing with,
any governmental body or authority is necessary on the part of the Company for
the consummation by the Company of the transactions contemplated by this
Agreement, except for such authorizations, consents, approvals or filings, the
failure to obtain or make would not in the aggregate have a Material Adverse
Effect on the Company; provided that the Company makes no representation with
respect to such of the foregoing as are required by reason of facts specifically
pertaining to Parent or any of its Subsidiaries.
(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 (i) a breach
or violation of, or a default under, the Amended and Restated Articles of
Incorporation or by laws of the Company or the comparable governing instruments
of any of its Subsidiaries, (ii) 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 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,
any law, ordinance, regulation, decree or order of any governmental body or
authority to which the Company or any of its Subsidiaries is subject, any
governmental or non-governmental permit or license to which the Company or any
of its Subsidiaries is subject or (iii) any change in the rights or obligations
of any party under any of the Contracts, except, in the case of clause (ii) or
(iii) above, for any breach, violation, default, acceleration, creation or
change
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that, in the aggregate, would not have a Material Adverse Effect on the Company.
The Company Disclosure Letter sets forth, a list of Contracts pursuant to which
consents or waivers are or may be required prior to consummation of the
transactions contemplated by this Agreement, except for such consents or waivers
the failure to obtain would not have in the aggregate a Material Adverse Effect
on the Company.
SECTION 3.4 Reports and Financial Statements. The Company has delivered or
made available to Parent true and complete copies of each registration
statement, report, proxy statement or information statement prepared by it since
April 1, 1997, including:
(a) the Company's Annual Report on Form 10-K filed with the
Securities and Exchange Commission (the "SEC") for the years ended March 31,
1998 and 1999;
(b) the Company's Quarterly Report on Form 10-Q filed with the SEC
for the quarter ended June 30, 1999;
(c) each definitive proxy statement filed by the Company with the SEC
since April 1, 1997;
(d) each final prospectus filed by the Company with the SEC since
April 1, 1997; and
(e) all Current Reports on Form 8-K filed by the Company with the SEC
since April 1, 1997.
As of their respective dates, such reports, proxy statements, and
prospectuses filed on or prior to the date hereof (collectively, the "Company
SEC Reports") (i) complied as to form in all material respects with the
applicable requirements of the Securities Act, the Exchange Act and the rules
and regulations promulgated thereunder and (ii) did not contain any untrue
statement of a material fact or omit to state a 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; provided, that the
foregoing clause (ii) shall not apply to the financial statements included in
the Company SEC Reports (which are covered by the immediately following
sentence). The audited consolidated financial statements and unaudited
consolidated interim financial statements included in the Company SEC Reports
(including any related notes and schedules) fairly present in all material
respects the financial position of the Company and its consolidated Subsidiaries
as of the dates thereof and their results of operations and cash flows for the
periods or as of the dates then ended (subject, where appropriate, to normal
year-end adjustments), in each case in accordance with past practice and
generally accepted accounting principles in the United States ("GAAP")
consistently applied during the periods involved (except as otherwise disclosed
in the notes thereto and except that the unaudited financial statements therein
do not contain all of the footnote disclosures required by GAAP). Since April 1,
1997, the Company has timely filed all reports, registration statements and
other filings required to be filed by it with the SEC under the rules and
regulations of the SEC.
SECTION 3.5 No Undisclosed Liabilities. As of the date of this Agreement,
neither the Company nor any of its Subsidiaries has any liabilities or
obligations of any nature, whether or not accrued, contingent or otherwise, and
there is no existing condition, situation or set of circumstances which
reasonably could be expected to result in such a liability or obligation except
(i) liabilities or obligations reflected in any of the Company SEC Reports and
(ii) liabilities or obligations which would not in the aggregate have a Material
Adverse Effect on the Company.
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SECTION 3.6 No Violation of Law. The businesses of the Company and its
Subsidiaries are not being conducted in violation of any law, ordinance,
regulation, decree or order of any governmental body or authority except (a) as
described in any of the Company SEC Reports and (b) for violations or possible
violations which would not in the aggregate have a Material Adverse Effect on
the Company. The Company and its Subsidiaries have all permits, licenses and
governmental authorizations necessary or appropriate for ownership or occupancy
of their respective properties and assets and the carrying on of their
respective businesses, except for such permits, licenses and governmental
authorizations the failure of which to have would not have, in the aggregate, a
Material Adverse Effect on the Company.
SECTION 3.7 Environmental Laws and Regulations. Except as described in any
of the Company SEC Reports, (a) the Company and each of its Subsidiaries is in
compliance with all applicable federal, state, local and foreign laws and
regulations relating to pollution or protection of human health or the
environment (including, without limitation, ambient air, surface water, ground
water, land surface or subsurface strata) (collectively, "Environmental Laws"),
except for non-compliance which would not in the aggregate have a Material
Adverse Effect on the Company, which compliance includes, but is not limited to,
the possession by the Company and its Subsidiaries of permits and other
governmental authorizations required under applicable Environmental Laws, and
compliance with the terms and conditions thereof, (b) neither the Company nor
any of its Subsidiaries (i) has received written notice of, or, to the Knowledge
of the Company, is the subject of, any actions, causes of action, claims,
investigations, demands or notices by any Person alleging liability under or
non-compliance with any Environmental Law or that the Company or any Subsidiary
is a potentially responsible party at any Superfund site or state equivalent
site ("Environmental Claims") which would in the aggregate have a Material
Adverse Effect on the Company, (c) to the Knowledge of the Company, there are no
circumstances that are likely to prevent or interfere with such compliance in
the future, (d) the Company and its Subsidiaries have not disposed of or
released hazardous materials (at a concentration or level which requires
remedial action under any Environmental Law) at any real property currently
owned or leased by the Company or any Subsidiary or at any other real property,
except for such disposals or releases as would not have in the aggregate a
Material Adverse Effect on the Company, and (e) neither the Company nor its
Subsidiaries have agreed to indemnify any predecessor or other party with
respect to any environmental liability.
SECTION 3.8 Employees; No Undisclosed Employee Benefit Plan Liabilities or
Severance Arrangements. The Company Disclosure Letter includes a correct and
complete list of all "employee benefit plans," as defined in Section 3(3) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA") (including
any multi-employer plan as defined in Section 3(37) of ERISA), currently or
within the six year period ending on the Closing Date, maintained or contributed
to by the Company or its Subsidiaries and, except as described in the Company's
SEC Reports, such plans have been, during the six year period ending on the
Closing Date, in compliance with all applicable provisions of ERISA, the Code
and any other applicable laws except for violations that would not in the
aggregate have a Material Adverse Effect on the Company. None of the Company nor
its Subsidiaries with respect to such plans has engaged in a "prohibited
transaction" within the meaning of Section 4975 of the Code or Title 1, Part 4
of ERISA except for transactions (a) which are exempt under applicable law,
regulations and administrative exemptions or (b) which in the aggregate would
not have a Material Adverse Effect on the Company. The Company and its
Subsidiaries do not have any liabilities or obligations with respect to any such
employee benefit plans, whether or not accrued, contingent (including any
potential material withdrawal liability with respect to any such multi-employer
plans) or otherwise, except (a) as described in any of the Company SEC Reports
or previously disclosed in writing to Parent and (b) for liabilities or
obligations that would not in the aggregate have a Material Adverse Effect on
the Company. No employee of the Company will be entitled to any additional
benefits or any acceleration of the time of payment or vesting of any benefits
under any employee incentive or benefit plan, program or arrangement as a result
of the transactions contemplated by this Agreement. The
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Company has previously made available to Parent a true and correct copy of the
Company's 401(k) plan as currently in effect, the three most recent Forms 5500,
the related audit reports with respect to the 401(k) plan and the most recent
401(k) summary plan description. The Company, its Subsidiaries and any entity
required to be aggregated with the Company or any of its Subsidiaries under Code
Section 414(b), (c), or (m) do not maintain or contribute to, and have not
within the six-year period ending on the Closing Date, maintained or contributed
to, any employee benefit pension plan which is subject to Section 302 or Title
IV of ERISA. The Company's 401(k) plan is the only plan maintained or
contributed to by the Company or its Subsidiaries that is intended to be
qualified under Section 401(a) of the Code. The Company received a favorable
determination letter from the Internal Revenue Service that the 401(k) plan, as
in effect on October 11, 1995, satisfied the requirements of Section 401(a) of
the Code and, to the Knowledge of the Company, nothing has occurred subsequent
to such date or otherwise with respect to the operation of such plan which could
cause the loss of such qualification or exemption or the imposition of any lien,
penalty, or tax under ERISA or the Code which would in the aggregate have a
Material Adverse Effect on the Company. The Company and its Subsidiaries have
not received any notice from the Internal Revenue Service, the Department of
Labor or the Pension Benefit Guaranty Corporation ("PBGC") within the four years
preceding the date of this Agreement that the 401(k) plan is not so qualified.
None of the Company nor any Subsidiary has incurred any outstanding liability
under Section 4062 of ERISA to the PBGC, to a trust established under Section
4041 or 4042 of ERISA, or to a trustee appointed under Section 4042 of ERISA.
None of the Company's employee benefit plans contain any provisions which would
prohibit the transactions contemplated by this Agreement. Neither the Company
nor any of its Subsidiaries provide (or have made any commitment to provide)
benefits to any employee following termination of employment under any "employee
welfare benefit plan" as such term is defined in ERISA Section 3(1), other than
continuation coverage required by ERISA Section 601. No such employee welfare
benefit plan is funded through a "welfare benefit fund," as such term is defined
in Code Section 419(e), or other funding mechanism, and each such plan may be
amended or terminated without material liability to the Company at any time
after the Closing Date.
SECTION 3.9 Absence of Certain Changes or Events. Other than as disclosed
in the Company SEC Reports since March 31, 1999, the businesses of the Company
and its Subsidiaries have been conducted in all material respects in the
ordinary course and there has not been any event, occurrence, development or
state of circumstances or facts that has had a Material Adverse Effect on the
Company. Since March 31, 1999, no dividends or distributions have been declared
or paid on or made with respect to the shares of capital stock or other equity
interests of the Company or its Subsidiaries nor have any such shares been
repurchased or redeemed, other than dividends or distributions paid to the
Company or a Subsidiary.
SECTION 3.10 Investigations; Litigation. Except as disclosed in any of the
Company SEC Reports:
(a) no investigation or review by any Governmental Entity with
respect to the Company or any of its Subsidiaries which would in the aggregate
have a Material Adverse Effect on the Company is pending nor, to the Knowledge
of the Company or any of its Subsidiaries, has any Governmental Entity notified
the Company or any of its Subsidiaries of an intention to conduct the same; and
(b) the Company Disclosure Letter lists all of the pending litigation
of the Company and its Subsidiaries, as of the date of this Agreement, and there
are no actions, suits or proceedings pending or, to the Company's Knowledge,
threatened against or affecting the Company or its Subsidiaries, or any of their
respective properties or before any federal, state, local or foreign
governmental body or authority, which could have in the aggregate a Material
Adverse Effect on the Company.
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SECTION 3.11 Joint Proxy Statement; Registration Statement; Other
Information. None of the information with respect to the Company or its
Subsidiaries to be included in the Joint Proxy Statement (as defined in Section
5.2) or the Registration Statement (as defined in Section 5.2) will, in the case
of the Joint Proxy Statement or any amendments thereof or supplements thereto,
at the time of the mailing of the Joint Proxy Statement or any amendments or
supplements thereto, and at the time of the Company Meeting (as defined in
Section 5.3), or, in the case of the Registration Statement, at the time it
becomes effective or at the time of any post-effective amendment, 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, except
that no representation is made by the Company with respect to information
supplied in writing by Parent or any affiliate of Parent specifically for
inclusion in the Joint Proxy Statement. The Joint Proxy Statement will comply as
to form in all material respects with the provisions of the Exchange Act and the
rules and regulations promulgated thereunder.
SECTION 3.12 Accounting and Tax Matters. Neither the Company nor any of its
Affiliates has taken or agreed to take any action, nor does the Company have any
Knowledge of any fact or circumstance, 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 and the other transactions
contemplated by this Agreement from qualifying as a "reorganization" within the
meaning of Section 368(a) of the Code. Company has received written confirmation
from PricewaterhouseCoopers LLP, a copy of which has been provided to Parent,
that (a) PricewaterhouseCoopers LLP has undertaken a review of the Company and
based upon the work undertaken to the date of such confirmation, and subject to
the qualifications set forth therein, it is not aware of any items or
transactions that would preclude the Company from accounting for the Merger as a
pooling of interests and (b) attaching a draft of the letter (the "Company
Pooling Opinion") that PricewaterhouseCoopers LLP would issue upon consummation
of the Merger.
SECTION 3.13 Taxes.
(a) All federal, state, local and foreign Tax Returns required to be
filed by or on behalf of the Company, each of its Subsidiaries, and each
affiliated, combined, consolidated or unitary group of which the Company or any
of its Subsidiaries is a member (a "Company Group") have been timely filed or
requests for extensions to file such returns or reports have been timely filed
and granted and have not yet expired, and all Tax Returns filed were complete
and accurate except to the extent any failure to file or any inaccuracies in
filed returns would not, in the aggregate, have a Material Adverse Effect on the
Company; all Taxes due and owing by the Company, any Subsidiary of the Company
or any Company Group have been paid, or adequately reserved for, except to the
extent any failure to pay or reserve would not in the aggregate, have a Material
Adverse Effect on the Company; none of the Company, any Subsidiary of the
Company or any Company Group currently is the beneficiary of any extension of
time within which to file any Tax Return; there is no audit examination,
deficiency, refund litigation, proposed adjustment or matter in controversy with
respect to any Taxes due and payable by the Company, any Subsidiary of the
Company or any Company Group nor has the Company or any Subsidiary filed any
waiver of the statute of limitations applicable to the assessment or collection
of any Tax, in each case, which would, individually or in the aggregate, have a
Material Adverse Effect on the Company; all assessments for Taxes due and
payable by the Company, any Subsidiary of the Company or any Company Group with
respect to completed and settled examinations or concluded litigation have been
paid; neither the Company nor any Subsidiary of the Company (i) has been a
member of an affiliated group of corporations within the meaning of Section
1504, other than the affiliated group of which the Company is the common parent
or (ii) has any liability for the Taxes of any Person (other than the Company
and its Subsidiaries) under Treasury Regulation Section 1.1502-6 promulgated
under the Code (or any similar provision of state, local, or foreign law), as a
transferee or successor, by contract, or
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otherwise; neither the Company nor any Subsidiary is a party to any tax
indemnity agreement, tax sharing agreement or other agreement under which the
Company or any Subsidiary could become liable to another Person as a result of
the imposition of a Tax upon any Person, or the assessment or collection of a
Tax, except for such agreements as would not have a Material Adverse Effect on
the Company; and the Company and each of its Subsidiaries has complied with all
rules and regulations relating to the withholding of Taxes, except to the extent
any such failure to comply would not, in the aggregate, have a Material Adverse
Effect on the Company. The Company has provided Parent with written schedules of
(i) the taxable years of the Company for which the statutes of limitations with
respect to federal income Taxes have not expired, and (ii) with respect to
federal income Taxes, those years for which examinations have been completed,
those years for which examinations are presently being conducted, and those
years for which examinations have not yet been initiated.
(b) Neither the Company nor any Subsidiary of the Company has
distributed the stock of any corporation in a distribution of stock qualifying
for Tax-free treatment under Section 355 of the Code.
(c) No claim has been made in writing by a Tax authority in a
jurisdiction where neither the Company nor any Subsidiary of the Company files
Tax Returns that the Company or any Subsidiary of the Company is or may be
subject to taxation in that jurisdiction. Neither the Company nor any Subsidiary
of the Company is a party to any contract, agreement or other arrangement which
provides for the payment of any amount which would not be deductible by reason
of Section 162(m) or Section 280G of the Code.
(d) The Company and each of its Subsidiaries are not currently and
have not been within the last five years a "United States real property holding
corporation" within the meaning of Section 897(c) of the Code. Neither the
Company nor any Subsidiary of the Company has filed a consent under Section
341(f) of the Code concerning collapsible corporations.
SECTION 3.14 Opinion of Financial Advisor. The Board of Directors of the
Company has received the opinion of CIBC World Markets Corp. dated the date of
this Agreement, to the effect that, as of such date, the Exchange Ratio (as
defined therein) is fair to the Company's shareholders from a financial point of
view. A copy of the written opinion of CIBC World Markets Corp. will be
delivered to Parent as soon as practicable after the date of this Agreement.
SECTION 3.15 Required Vote of the Company Shareholders. The affirmative
vote of the holders of a majority of the outstanding shares of the Company
Common Stock is required to approve the Merger. No other vote of the
shareholders of the Company is required by law or the Amended and Restated
Articles of Incorporation or by laws of the Company in order for the Company to
consummate the Merger and the transactions contemplated hereby.
SECTION 3.16 Insurance. The Company Disclosure Letter sets forth a true and
complete list of the insurance policies or binders insuring the property, assets
or liabilities of Company and its Subsidiaries as of the date of this Agreement.
All such policies or binders are in full force and effect and no premiums due
and payable thereon are delinquent. There are no pending claims against such
insurance by the Company or any of its Subsidiaries as to which the insurers
have denied liability. The Company and its Subsidiaries have complied with the
provisions of such policies, there exist no claims under such insurance policies
or binders with respect to any of the assets of the Company or its Subsidiaries
that have not been properly and timely submitted by the Company or its
Subsidiaries to their respective insurers, and there is no inaccuracy in any
application for such policies or binders which would render such policies or
binders invalid or unenforceable.
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SECTION 3.17 Property.
(a) The Company Disclosure Letter sets forth a correct and complete
list of all real property owned by the Company or any of its Subsidiaries (the
"Real Property"). Except as set forth in the Company Disclosure Schedule, the
Company or its Subsidiaries has good and marketable title to the Real Property,
free and clear of all liens, claims, restrictions and encumbrances
("Encumbrances"), other than Encumbrances that do not and would not have a
Material Adverse Effect.
(b) The Company Disclosure Letter sets forth a correct and complete
list (including the amount of rents called for and a description of the leased
property) of all leases under which the Company or any Subsidiary is a lessee.
The Company and each of its Subsidiaries enjoys peaceful and undisturbed
possession under all such leases, all of such leases are valid and subsisting
and none of them is in default in any material respect.
(c) The Company Disclosure Letter sets forth a correct and complete
list (including the location of each) as of the date of this Agreement of all
capital equipment used or leased by the Company or any Subsidiary with book
value exceeding $200,000.
SECTION 3.18 Personnel; Labor Relations.
(a) The Company Disclosure Letter contains a correct and complete
list, as of the date of this Agreement, of: (i) all employees, including for
each his or her employee identification number or the last four digits of his or
her social security number, such Person's title and the amount and nature of all
compensation and benefits payable by the Company or any of its Subsidiaries to
such Person; (ii) all employment, severance, bonus, profit sharing, incentive
compensation and pension or retirement plans; stock purchase and stock option
plans; all contracts or agreements with present or former directors, officers or
employees; all consulting agreements, to which the Company or any of its
Subsidiaries is a party or by which they are bound as of the date of this
Agreement; (iii) all group insurance programs in effect for employees of the
Company and its Subsidiaries; and (iv) all accrued but unused vacation, holiday
and sick-time on the account of each employee of the Company and its
Subsidiaries. All material government filings, participant disclosure documents,
contracts and operative plan documents related to the above obligations
previously have been provided to Parent. Neither the Company nor any of its
Subsidiaries is in default with respect to any of its obligations listed above.
(b) The Company has made available to Parent all labor or collective
bargaining agreements in effect as of the date of this Agreement which pertain
to the employees of the Company and its Subsidiaries. The Company Disclosure
Letter contains a correct and complete list of all pending complaints, charges
or claims against the Company or any of its Subsidiaries filed as of the date of
this Agreement with any public or Governmental Entity, arbitrator or courts, (x)
based upon the employment or termination by the Company of any individual, (y)
asserting that the Company or any of its Subsidiaries has committed an unfair
labor practice (within the meaning of the National Labor Relations Act or
comparable state law) or (z) seeking to compel the Company or any of its
Subsidiaries to bargain with any labor organization as to wages or conditions of
employment (collectively "Company Labor Matters"). There is not any strike or
other labor dispute involving the Company or any Subsidiary pending or, to the
Knowledge of the Company, threatened nor, to the Knowledge of the Company, is
there any activity involving any of their respective employees seeking to
certify a collective bargaining unit or engaging in any other organization
activity.
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SECTION 3.19 Intellectual Property.
(a) The Company and/or each of its Subsidiaries owns, or is licensed
or otherwise possesses legally enforceable rights to use all patents,
trademarks, trade names, service marks, 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 currently conducted, except for
any such failures to own, be licensed or possess that would not have in the
aggregate a Material Adverse Effect on the Company, and to the Knowledge of the
Company, all patents, trademarks, trade names, service marks and copyrights held
by the Company and/or its Subsidiaries are valid and subsisting.
(b) Except as disclosed in Company SEC Reports filed prior to the
date hereof or as would not have, in the aggregate, a Material Adverse Effect on
the Company:
(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 or any of its Subsidiaries is
a party and pursuant to which the Company is authorized to use any
third-party patents, trademarks, service marks, and copyrights
("Third-Party Intellectual Property Rights");
(ii) no claims with respect to (I) the patents, registered and
material unregistered trademarks and service marks, registered
copyrights, trade names, and any applications therefor owned by the
Company or any of its Subsidiaries (the "Company Intellectual Property
Rights"); (II) any trade secret material to the Company or any of its
Subsidiaries; or (III) Third-Party Intellectual Property Rights, as of
the date of this Agreement, are pending or, to the Knowledge of the
Company, are threatened by any Person;
(iii) the Company does not Know of any valid grounds for any bona
fide claims (I) to the effect that the sale, licensing or use of any
product as now used, sold or licensed or proposed for use, sale or
license by the Company or any of its Subsidiaries, infringes on any
copyright, patent, trademark, service mark or trade secret; (II)
against the use by the Company or any of its Subsidiaries, of any
trademarks, trade names, trade secrets, copyrights, patents,
technology, know-how or computer software programs and applications
used in the business of the Company or any of its Subsidiaries as
currently conducted or as proposed to be conducted; (III) challenging
the ownership, validity or effectiveness of any of the Company
Intellectual Property Rights or other trade secret material to the
Company; or (IV) 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 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.
SECTION 3.20 Material Contracts. All of the material Contracts of the
Company and its Subsidiaries that are required to be described in the Company
SEC Reports or to be filed as exhibits thereto are described in the Company SEC
Reports or filed as exhibits thereto and are in full force and effect. True and
complete copies of all such material Contracts have been delivered or have been
made available by the Company to Parent. Neither the Company nor any of its
Subsidiaries nor, to the Knowledge of the Company, any other party is in breach
of or in default under any such contract, except for such breaches and defaults
as in the aggregate have not had and will not have a Material Adverse Effect on
the Company. Neither the Company nor any of its Subsidiaries is party to any
agreement
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containing any provision or covenant limiting in any material respect the
ability of the Company or any of its Subsidiaries to (A) sell any products or
services of or to any other person, (B) engage in any line of business or (C)
compete with or to obtain products or services from any person or limiting the
ability of any person to provide products or services to the Company or any of
its Subsidiaries. The Company Disclosure Letter contains a correct and complete
list of each agreement or commitment providing for the expenditure by the
Company or any of its Subsidiaries pursuant thereto of more than $200,000.
SECTION 3.21 Suppliers and Customers. Since April 1, 1998, no material
licensor, vendor, supplier or customer of the Company or any of its Subsidiaries
has canceled or otherwise modified its relationship with the Company or its
Subsidiaries and, to the Knowledge of the Company, no such Person has any
intention to do so. The Company has not received written notice from any such
material licensor, vendor, supplier or customer that consummation of the
transactions contemplated hereby will adversely affect such relationships.
SECTION 3.22 Year 2000 Matters. Any reprogramming required to permit the
proper functioning in and following the year 2000 of computer systems and other
equipment containing embedded microchips, in either case owned or operated by
Company or any of its Subsidiaries or used or relied upon in the conduct of
their respective businesses (including any such systems and other equipment
supplied by others or with which the computer systems of Company or any of its
Subsidiaries interface) has been completed. The testing of all such systems and
other equipment as so reprogrammed has been completed. The costs to Company and
its Subsidiaries that have not been recognized as of or by June 30, 1999 for
such reprogramming and testing and for other reasonably foreseeable consequences
to them of any improper functioning of other computer systems and equipment
containing embedded microchips due to the occurrence of the year 2000 will not
have a Material Adverse Effect.
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
Parent and Merger Sub hereby jointly and severally represent and warrant to
the Company, that except as set forth in the corresponding sections or
subsections of the Parent Disclosure Letter delivered to the Company on the date
hereof:
SECTION 4.1 Organization, Qualification, Etc. Each of Parent and Merger Sub
is a corporation duly organized, validly existing and in good standing under the
laws of its jurisdiction of organization and has all requisite corporate power
and authority to own its properties and assets and to carry on its business as
it is now being conducted and is duly qualified to do business and is in good
standing in each jurisdiction in which the ownership of its properties or the
conduct of its business requires such qualification, except for such
jurisdictions in which the failure to be so qualified or to be in good standing
would not in the aggregate have a Material Adverse Effect on Parent or Merger
Sub. The copies of Parent's certificate of incorporation, as amended, and by
laws, as amended, and Merger Sub's certificate of incorporation and by laws
which have been made available to the Company are complete and correct and in
full force and effect on the date hereof. Each of Parent's Subsidiaries is duly
organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation or organization, has all requisite corporate power
and authority to own its properties and to carry on its business as it is now
being conducted, and is duly qualified to do business and is in good standing in
each jurisdiction in which the ownership of its property or the conduct of its
business requires such qualification, except for jurisdictions in which such
failure to be so qualified or to be in good standing would not in the aggregate
have a Material Adverse Effect on Parent or Merger Sub. All the outstanding
shares of capital stock of, or other ownership interests in, Parent's
Subsidiaries and Merger Sub are validly issued, fully paid and non-assessable
and are owned by Parent, directly or indirectly, free and
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clear of all liens, claims, charges or encumbrances, except as set forth in the
Parent Disclosure Letter. Except as disclosed in the Parent SEC Reports, there
are no existing options (except for those set forth in Section 4.2 below),
rights of first refusal, preemptive rights, calls or commitments of any
character relating to the issued or unissued capital stock or other securities
of, or other ownership interests in, any Subsidiary of Parent or Merger Sub.
SECTION 4.2 Capital Stock. The authorized capital stock of Parent consists
of 75,000,000 shares of Parent Common Stock, and 2,000,000 shares of Preferred
Stock, par value $.01 per share. The shares of Parent Common Stock to be issued
in the Merger or upon the exercise of the Company stock options, warrants,
conversion rights or other rights or upon vesting or payment of other Company
equity-based awards will, when issued, be validly issued fully paid and
non-assessable. As of August 1, 1999, 23,907,120 shares of Parent Common Stock
and no shares of Parent Preferred Stock were issued and outstanding. All the
outstanding shares of Parent Common Stock have been validly issued and are fully
paid and non-assessable. As of August 1, 1999, there were no outstanding
subscriptions, options, warrants, rights or other arrangements or commitments
obligating Parent to issue any shares of its capital stock other than options
and other rights to receive or acquire shares of Parent Common Stock pursuant
to:
(a) employee stock purchase or option plans of Parent;
(b) various other restricted stock awards to officers or employees of
the Parent or the Parent's Subsidiaries; and
(c) Parent's 6.00% Convertible Subordinated Notes due 2004,
convertible into Parent Common Stock.
SECTION 4.3 Corporate Authority Relative to this Agreement. No Violation.
(a) Each of Parent and Merger Sub has full corporate power and
authority to enter into this Agreement and, subject to receipt of Parent
Shareholder Approval (as defined in Section 5.3), to carry out its obligations
hereunder. The execution and delivery of this Agreement and the consummation of
the transactions contemplated hereby have been duly and validly authorized by
the Boards of Directors of Parent and Merger Sub and by Parent as sole
stockholder of Merger Sub and, except for Parent Shareholder Approval, no other
corporate or stockholder proceedings on the part of Parent or Merger Sub are
necessary to authorize this Agreement, the issuance of the Parent Common Stock
and the other transactions contemplated hereby. This Agreement has been duly and
validly executed and delivered by Parent and Merger Sub and, assuming this
Agreement has been duly and validly executed and delivered by the other parties
hereto, and subject to the Parent Shareholder Approval, this Agreement
constitutes the valid and binding agreements of Parent and Merger Sub,
enforceable against each of them in accordance with its terms (except insofar as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting creditors' rights
generally, or by principles governing the availability of equitable remedies).
Other than in connection with or in compliance with the provisions of the CGCL,
the Securities Act, the Exchange Act, the HSR Act, any non-United States
competition, antitrust and investments laws and the securities or blue sky laws
of the various states and other jurisdictions, and, other than the filing of
this Agreement and a duly executed officers' certificate by each of the Company
and the Merger Sub with the California Secretary of State and any necessary
state filings to maintain the good standing or qualification of the Surviving
Corporation (collectively, the "Parent Required Approvals"), no authorization,
consent or approval of, or filing with, any governmental body or authority is
necessary on the part of Parent or Merger Sub for the consummation by Parent or
Merger Sub of the transactions contemplated by this Agreement, except for such
authorizations, consents, approvals or filings, the failure to obtain or make
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which would not in the aggregate have a Material Adverse Effect on Parent or
Merger Sub; provided that Parent makes no representation with respect to such of
the foregoing as are required by reason or facts specifically pertaining to
Company or any of its Subsidiaries.
(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 (i) a breach or violation of, or a default under, the charter or by
laws of Parent and Merger Sub or the comparable governing instruments of any of
Parent's Subsidiaries, (ii) 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, ordinance,
regulation, decree or order of any governmental body or authority to which
Parent or any of its Subsidiaries is subject or governmental or non-governmental
permit or license to which Parent or any of its Subsidiaries is subject or (iii)
any change in the rights or obligations of any party under any of the Contracts,
except, in the case of clause (ii) or (iii) above, for any breach, violation,
default, acceleration, creation or change that, individually or in the
aggregate, would not have a Material Adverse Effect on Parent or prevent,
materially delay or materially impair the ability of Parent or Merger Sub to
consummate the transactions contemplated by this Agreement.
SECTION 4.4 Reports and Financial Statements. Parent has delivered or made
available to the Company true and complete copies of:
(a) Parent's Annual Reports on Form 10-K filed with the SEC for each
of the years ended November 2, 1997 and November 1, 1998;
(b) Parent's Quarterly Reports on Form 10-Q filed with the SEC for
the quarters ended January 31, 1999, May 2, 1999 and August 1, 1999;
(c) each definitive proxy statement filed by Parent with the SEC
since November 2, 1997;
(d) each final prospectus filed by Parent with the SEC since November
2, 1997; and
(e) all Current Reports on Form 8-K filed by Parent with the SEC
since November 2, 1997.
As of their respective dates, such reports, proxy statements and
prospectuses filed on or prior to the date hereof (collectively, "Parent SEC
Reports") (i) complied as to form in all material respects with the applicable
requirements of the Securities Act, the Exchange Act, and the rules and
regulations promulgated thereunder and (ii) did not contain any untrue statement
of a material fact or omit to state a 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; provided, that the
foregoing clause (ii) shall not apply to the financial statements included in
the Parent SEC Reports (which are covered by the following sentence). The
audited consolidated financial statements and unaudited consolidated interim
financial statements included in the Parent SEC Reports (including any related
notes and schedules) fairly present in all material respects the financial
position of Parent and its consolidated Subsidiaries as of the dates thereof and
the results of their operations and their cash flows for the periods or as of
the dates then ended (subject, where appropriate, to normal year-end
adjustments), in each case in accordance with GAAP consistently applied during
the periods involved (except as otherwise disclosed in the notes thereto and
except that the unaudited financial statements
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therein do not contain all of the footnote disclosures required by GAAP). Since
November 2, 1997, Parent has timely filed all material reports, registration
statements and other filings required to be filed by it with the SEC under the
rules and regulations of the SEC.
SECTION 4.5 No Undisclosed Liabilities. As of the date of this Agreement,
neither Parent nor any of its Subsidiaries has any liabilities or obligations of
any nature, whether or not accrued, contingent or otherwise, and there is no
existing condition, situation or set of circumstances which reasonably could be
expected to result in such a liability except (a) liabilities or obligations
reflected in any of the Parent SEC Reports and (b) liabilities or obligations
which would not in the aggregate have a Material Adverse Effect on Parent.
SECTION 4.6 No Violation of Law. The businesses of Parent and its
Subsidiaries are not being conducted in violation of any law, ordinance,
regulation, decree or order of any governmental body or authority except (a) as
described in any of the Parent SEC Reports and (b) for violations or possible
violations which would not in the aggregate have a Material Adverse Effect on
Parent.
SECTION 4.7 Environmental Laws and Regulations. Except as described in any
of the Parent SEC Reports, (a) Parent and each of its Subsidiaries is in
compliance with all applicable Environmental Laws, except for non-compliance
which would not in the aggregate have a Material Adverse Effect on Parent, which
compliance includes, but is not limited to, the possession by Parent and its
Subsidiaries of permits and other governmental authorizations required under
applicable Environmental Laws, and compliance with the terms and conditions
thereof, (b) neither Parent nor any of its Subsidiaries has received written
notice of, or, to the Knowledge of Parent, is the subject of, any Environmental
Claims which, in the aggregate, would have a Material Adverse Effect on Parent;
(c) to the Knowledge of Parent, there are no circumstances that are likely to
prevent or interfere with such material compliance in the future; and (d) the
Parent and its Subsidiaries have not disposed of or released hazardous materials
(at a concentration level which requires remedial action under any Environmental
Law) at any real property currently owned or leased by Parent or any Subsidiary
or at any other real property, except for such disposals which, in the
aggregate, would not have a Material Adverse Effect on Parent.
SECTION 4.8 No Undisclosed Employee Benefit Plan Liabilities or Severance
Arrangements. Except as described in any of the Parent SEC Reports, all
"employee benefit plans" as defined in Section 3(3) of ERISA, maintained or
contributed to by Parent or its Subsidiaries are in material compliance with all
applicable provisions of ERISA and the Code, and Parent and its Subsidiaries do
not have any liabilities or obligations with respect to any such employee
benefit plans, whether or not accrued, contingent or otherwise, except (a) as
described in any of the Parent SEC Reports and (b) for instances of
noncompliance or liabilities or obligations that would not in the aggregate have
a Material Adverse Effect on Parent. No employee of Parent will be entitled to
any additional benefits or any acceleration of the time of payment or vesting of
any benefits under any employee incentive or benefit plan, program or
arrangement as a result of the transactions contemplated by this Agreement.
SECTION 4.9 Absence of Certain Changes or Events. Other than as disclosed
in the Parent SEC Reports, since November 1, 1998, the businesses of Parent and
its Subsidiaries have been conducted in all material respects in the ordinary
course and there has not been any event, occurrence, development or state of
circumstances or facts that has had a Material Adverse Effect on Parent.
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SECTION 4.10 Investigations; Litigation. Except as disclosed in any of the
Parent SEC Reports:
(a) no investigation or review by any governmental body or authority
with respect to Parent or any of its Subsidiaries which would in the
aggregate have a Material Adverse Effect on Parent is pending, nor to the
Knowledge of Parent, has any governmental body or authority notified Parent
of an intention to conduct the same; and
(b) there are no actions, suits or proceedings pending (or, to
Parent's Knowledge, threatened) against or affecting Parent or its
Subsidiaries, or any of their respective properties or before any federal,
state, local or foreign governmental body or authority which would in the
aggregate have a Material Adverse Effect on Parent.
SECTION 4.11 Joint Proxy Statement; Registration Statement; Other
Information. None of the information with respect to Parent or its Subsidiaries
included in the Joint Proxy Statement (as defined in Section 5.2) or the
Registration Statement (as defined in Section 5.2) will, in the case of the
Joint Proxy Statement or any amendments thereof or supplements thereto, at the
time of the mailing of the Joint Proxy Statement or any amendments or
supplements thereto, and at the time of the Parent Meeting, or, in the case of
the Registration Statement, at the time it becomes effective or at the time of
any post-effective amendment, 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, with respect to the Joint Proxy Statement
in light of the circumstances under which they were made, not misleading, except
that no representation is made by Parent with respect to information supplied in
writing by the Company or any affiliate of the Company specifically for
inclusion in the Joint Proxy Statement or the Registration Statement. Each of
the Joint Proxy Statement and the Registration Statement will comply as to form
in all material respects with the provisions of the Exchange Act and the
Securities Act and the rules and regulations promulgated thereunder.
SECTION 4.12 Accounting and Tax Matters. Neither Parent nor any of its
Subsidiaries has taken or agreed to take any action, nor, except as set forth in
the Parent Disclosure Letter, does Parent have any Knowledge of any fact or
circumstance, 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 and the other transactions contemplated by the Agreement from
qualifying as a "Reorganization" within the meaning of Section 368(a) of the
Code. Parent has received written confirmation from Deloitte & Touche LLP that
it has substantially completed its work, and that, based on the results of its
procedures, subject to the assumptions and qualifications set forth therein,
upon consummation of the Merger, Deloitte & Touche LLP would issue its report
that nothing would preclude the Company from accounting for the Merger as a
pooling-of-interests (the "Parent Pooling Opinion").
SECTION 4.13 Tax Matters.
(a) Except as disclosed in the Parent Disclosure Letter, all federal,
state, local and foreign Tax Returns required to be filed by or on behalf of
Parent, each of its Subsidiaries, and each affiliated, combined, consolidated or
unitary group of which Parent or any of its Subsidiaries is a member (a "Parent
Group") have been timely filed or requests for extensions to file such returns
or reports have been timely filed and granted and have not yet expired, and all
Tax Returns were complete and accurate except to the extent any failure to file
or any inaccuracies in filed returns would not, in the aggregate, have a
Material Adverse Effect on Parent; all Taxes due and payable by Parent, any
Subsidiary of Parent or any Parent Group have been paid, or adequately reserved
for, except to the extent any failure to pay or reserve would not, in the
aggregate, have a Material Adverse Effect on Parent; there is no audit
examination, deficiency, refund litigation, proposed adjustment or matter in
controversy with
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respect to any Taxes due and payable by Parent, any Subsidiary of Parent or any
Parent Group which would, individually or in the aggregate, have a Material
Adverse Effect on Parent; all assessments for Taxes due and payable by Parent,
any Subsidiary of Parent or any Parent Group with respect to completed and
settled examinations or concluded litigation have been paid; and neither the
Parent nor any Subsidiary of the Parent (i) has been a member of an affiliated
group of corporations within the meaning of Section 1504, other than the
affiliated group of which the Parent is the common parent or (ii) has any
liability for the Taxes of any person (other than the Parent and its
Subsidiaries) under Treasury Regulation Section 1.1502-6 (or any similar
provision of state, local, or foreign law), as a transferee or successor, by
contract, or otherwise. Parent has provided the Company with written schedules
of (i) the taxable years of Parent for which the statutes of limitations with
respect to federal income Taxes have not expired, and (ii) with respect to
federal income Taxes, those years for which examinations have been completed,
those years for which examinations are presently being conducted, and those
years for which examinations have not yet been initiated.
(b) Each of the Parent, its Subsidiaries and any Parent Group have
withheld and paid Taxes required to have been withheld and paid in connection
with amounts paid or owing to any employee, independent contractor, creditor,
stockholder or other third party, except to the extent any failure to so
withhold would not, in the aggregate, have a Material Adverse Effect.
(c) No claim has been made in writing by a Tax authority in a
jurisdiction where neither the Parent nor any Subsidiary of the Parent files Tax
Returns that the Parent or any Subsidiary of the Parent is or may be subject to
taxation in that jurisdiction.
(d) The Parent and each of its Subsidiaries are not currently, have
not been within the last five years, and do not anticipate becoming a "United
States real property holding corporation" within the meaning of Section 897(c)
of the Code. Neither the Parent nor any Subsidiary of the Parent has filed a
consent under Section 341(f) of the Code concerning collapsible corporations.
SECTION 4.14 Vote of Parent Shareholders. The affirmative vote of the
holders of a majority of the outstanding shares of Parent Common Stock actually
present and voting at the Parent Meeting (provided that at least 50% of the
outstanding shares of Parent Common Stock are actually voted) is required to
approve the issuance of Parent Common Stock in the Merger.
SECTION 4.15 Opinion of Financial Advisor. The Board of Directors of Parent
has received the opinion of Banc of America Securities LLC dated the date of
this Agreement to the effect that, as of such date, the Exchange Ratio (as
defined therein) is fair from a financial point of view to Parent. A copy of the
written opinion of Banc of America Securities LLC will be delivered to the
Company as soon as practicable after the date of this Agreement.
SECTION 4.16 Material Contracts. All of the material Contracts of Parent
and its Subsidiaries that are required to described in the Parent SEC Reports or
to be filed as exhibits thereto are in the Parent SEC Reports or filed as
exhibits thereto and are in full force and effect. Neither Parent nor any of its
Subsidiaries nor, to the Knowledge of Parent, any other party is in breach of or
in default under any such Contract except for breaches and defaults as in the
aggregate that have not had and will not have a Material Adverse Effect on
Parent.
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ARTICLE V.
COVENANTS
SECTION 5.1 Conduct of Business by the Company or Parent. Except as
contemplated by this Agreement and in the Company Disclosure Letter or the
Parent Disclosure Letter, or as necessary or appropriate to satisfy the
obligations hereunder, prior to the Effective Time or the date, if any, on which
this Agreement is earlier terminated pursuant to Section 7.1, and except as may
be agreed to by the other parties hereto or as may be permitted pursuant to this
Agreement:
(a) The Company:
(i) shall, and shall cause each of its Subsidiaries to, conduct
its operations according to their ordinary and usual course of
business;
(ii) shall, and shall cause each of its Subsidiaries to,
consistent with past practice, (A) preserve intact its business
organizations and goodwill, (B) keep available the services of its
officers and employees as a group, subject to changes in the ordinary
course, and (C) maintain its existing relationships with suppliers,
distributors, customers and others having business relationships with
them;
(iii) shall notify Parent promptly of (A) any complaints,
investigations or hearings (or communications indicating that the same
may be contemplated) of any governmental body or authority; (B) any
actions, suits or proceeding initiated or threatened against or
affecting the Company or any of its Subsidiaries or any of their
respective properties or before any federal, state, local or foreign
Governmental Entity which could have in the aggregate a Material
Adverse Effect on the Company; (C) any complaint, charge or claim
against the Company or any of its Subsidiaries filed with any public
or governmental authority, arbitrator or courts with respect to
Company Labor Matters or (D) any claims with respect to Company
Intellectual Property Rights, any trade secret material to the Company
or any of its Subsidiaries or Third Party Intellectual Property Rights
which could have in the aggregate a Material Adverse Effect on the
Company;
(iv) shall not authorize or pay any dividends on or make any
distribution with respect to its outstanding shares of capital stock;
(v) shall not, and shall not permit any of its Subsidiaries to,
enter into any severance or similar agreements or arrangements
(including by amendment of any existing agreement or arrangement)
which would be triggered by the transactions contemplated hereby;
(vi) shall not, other than in the ordinary course of business
consistent with past practice, enter into any new written employment,
consulting or salary continuation agreements with any officers or
directors or any employees, or, other than increases in the ordinary
course of business, grant any increases in the compensation or
benefits to officers, directors, and employees;
(vii) subject to Section 5.10, shall not, and shall not permit
any of its Subsidiaries to, authorize, propose or announce an
intention to authorize or propose, or enter into an agreement with
respect to, any merger, consolidation or business combination, any
acquisition of a material amount of assets or securities, any
disposition of assets or securities
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or any release or relinquishment of any material contract rights not
in the ordinary course of business;
(viii) shall not propose or adopt any amendments to its Amended
and Restated Articles of Incorporation or by laws;
(ix) shall not, and shall not permit any of its Subsidiaries to,
(A) issue any shares of their capital stock, except upon exercise of
rights outstanding at the date hereof under the Company Stock Plans or
the Stock Purchase Plan or (B) effect any stock split or (C) otherwise
change the capitalization of the Company as it existed on June 30,
1999 except as specifically provided herein;
(x) shall not, and shall not permit any of its Subsidiaries to,
grant, confer or award any additional, or amend or modify any
existing, options, warrants, conversion rights or other rights, to
acquire any shares of its capital stock;
(xi) shall not, and shall not permit any of its Subsidiaries to,
purchase or redeem any shares of its capital stock;
(xii) shall not, and shall not permit any of its Subsidiaries to,
amend the terms of their respective employee benefit plans, programs
or arrangements in existence on the date hereof, or adopt any new
employee benefit plans, programs or arrangements except as required by
law or to maintain tax qualified status or as requested by the
Internal Revenue Service in order to receive a determination letter
for such employee benefit plan;
(xiii) shall not, and shall not permit any of its Subsidiaries to
(A) incur or assume any long-term debt, or, except in the ordinary
course of business, incur or assume any short-term indebtedness in
amounts not consistent with past practice; (B) amend any existing loan
agreement or enter into any new loan agreement; (C) assume, guarantee,
endorse or otherwise become liable or responsible (whether directly,
contingently or otherwise) for the obligations of any other Person or
(D) make any loans, advances or capital contributions in any other
Person;
(xiv) shall not, and shall not permit any of its Subsidiaries to,
except with respect to agreements contemplated by or permitted
pursuant to this Agreement, enter into any agreement, commitment or
transaction (including, but not limited to, with respect to capital
expenditures or purchase, sale or lease of assets or real estate) with
aggregate consideration exceeding $250,000;
(xv) shall not, and shall not permit any of its Subsidiaries, to
enter into an agreement with any Affiliate of the Company, any family
member of any Affiliate of the Company or any shareholder who owns
more than 5% of the outstanding capital stock of the Company;
(xvi) shall not, and shall not permit any of its Subsidiaries to,
(A) make any material Tax election or settle or compromise any
material Tax liability or (B) make any significant change in any Tax
as accounting methods or system of internal accounting controls,
except as may be appropriate to conform to changes in Tax laws or
GAAP;
(xvii) shall not, and shall not permit any of its Subsidiaries
to, enter into, amend, or extend any collective bargaining or other
labor agreement, except as required by law;
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(xviii) shall not, and shall not permit any of its Subsidiaries
to, buy, sell or trade any equity security of Parent including,
without limitation, entering into any put, call, option, swap, collar
or any other derivative transaction which has a similar economic
effect; and
(xix) shall not agree, or permit any of its Subsidiaries to
agree, in writing or otherwise, to take any of the foregoing actions
described in clauses (iv) through (xviii) or take any action which
would make any representation or warranty in Article III hereof untrue
or incorrect.
(b) The Parent:
(i) shall, and shall cause each of its Subsidiaries to, conduct
its operations according to their ordinary and usual course of
business; provided, however, that nothing contained in this proviso
shall limit Parent's ability to authorize or propose, or enter into,
agreements with respect to any acquisition, incur indebtedness or to
issue any debt or equity securities;
(ii) shall take all action necessary to cause Merger Sub to
perform its obligations under this Agreement and to consummate the
Merger on the terms and conditions set forth in this Agreement;
(iii) shall not agree, or permit any of its Subsidiaries to
agree, in writing or otherwise, to take any of the foregoing actions
described in clauses (i) and (ii) or take any action which would make
any representation or warranty in Article IV hereof untrue or
incorrect.
SECTION 5.2 Proxy Material; Registration Statement.
(a) The Company and the Parent will as promptly as practicable
following the date of this Agreement, prepare and file with the SEC, will use
reasonable efforts to have cleared by the SEC and thereafter mail to their
respective shareholders as promptly as practicable, a joint proxy statement that
will be the same proxy statement/prospectus contained in the Registration
Statement (as hereinafter defined) and a form of proxy, in connection with the
vote of each of the Company's and the Parent's shareholders with respect to the
matters contemplated hereby (such proxy statement/prospectus, together with any
amendments thereof or supplements thereto, in each case in the form or forms
mailed to the Company's and the Parent's shareholders, is herein called the
"Joint Proxy Statement").
(b) Parent will as promptly as practicable following the date of this
Agreement, prepare and file with the SEC a registration statement of the Parent
on Form S-4 (such registration statement together with all and any amendments
and supplements thereto, being herein referred to as the "Registration
Statement"). Such Registration Statement shall be used for the purposes of
registering with the SEC the issuance of Parent Common Stock to holders of
Company Common Stock in connection with the Merger. In addition, each of Parent
and the Company will upon reasonable advance notice provide the other with all
information and other data as may be reasonably requested by Parent or the
Company, as the case may be, in connection with the preparation and filing of
the Registration Statement and the Joint Proxy Statement.
(c) The Parent shall use its best efforts to cause the Registration
Statement to become effective under the Securities Act and to comply with
applicable state securities laws at the earliest practicable date and to remain
effective until the Effective Time.
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SECTION 5.3 Shareholders' Meeting. Each of the Company and the Parent
shall, in accordance with applicable law and their respective articles of
incorporation and by laws, duly call, give notice of, convene and hold a meeting
(which, as may be duly adjourned, shall be referred to as the "Company Meeting"
or the "Parent Meeting," as the case may be, and together as the "Meetings") of
its respective shareholders as soon as practicable for the purpose of, approving
by the holders of a majority of the outstanding shares of Company Common Stock
this Agreement and the Merger (the "Company Shareholder Approval") and in the
case of Parent, a majority of the outstanding shares of Parent Common Stock
actually present and voting (the "Parent Shareholder Approval"). The Company and
Parent agree to use their reasonable best efforts to cause the Meetings to occur
within forty-five (45) days after the date on which the Registration Statement
becomes effective. Each of the Company and Parent shall include in the Joint
Proxy Statement the recommendation of its Board of Directors that shareholders
vote in favor of the Company Shareholder Approval or the Parent Shareholder
Approval, as the case may be; in each case subject to the duties of the
respective Boards of Directors to make any further disclosure to the
shareholders (which shall not, unless expressly stated, constitute a withdrawal
or adverse modification of such recommendation) and, in the case of the Company,
to the right to change such recommendation or terminate this Agreement following
receipt of a Superior Proposal (as defined in Section 5.10).
SECTION 5.4 Approvals and Consents; Cooperation.
(a) The Company and Parent shall together, or pursuant to an
allocation of responsibility to be agreed upon between them:
(i) as soon as is reasonably practicable take all such action as
may be required under state blue sky or securities laws in connection
with the transactions contemplated by this Agreement;
(ii) promptly prepare and file with the Nasdaq National Market
such listing applications or other notices covering the shares of
Parent Common Stock issuable in the Merger or upon exercise of the
Company stock options, warrants, conversion rights or other rights or
vesting or payment of other Company equity-based awards and use its
reasonable best efforts to obtain, prior to the Effective Time,
approval for the listing of such Parent Common Stock;
(iii) cooperate with one another in order to lift any injunctions
or remove any other impediment to the consummation of the transactions
contemplated herein; and
(iv) cooperate with one another in obtaining the opinions
described in Section 6.1(e) of this Agreement.
(b) Subject to the limitations contained herein, the Company and
Parent shall each furnish to one another and to one another's counsel all such
information as may be required in order to effect the foregoing actions.
SECTION 5.5 Access to Information; Confidentiality.
(a) From the date hereof to the Effective Time, the Company and
Parent each shall (and shall cause its Subsidiaries to), upon reasonable notice
to an executive officer (as defined in the Confidentiality Agreements (which
such term is defined in this Section 5.5)) of the other, afford to the other,
and the other's officers, employees, accountants, counsel, financial advisors
and other representatives, reasonable access during normal business hours, in a
manner so as not to interfere with
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its normal operations or of its Subsidiaries, to all its personnel, properties,
books, contracts, commitments and records and of its Subsidiaries; provided that
Company shall not be required to provide customer specific pricing information
(other than any commitment for specific pricing for more than 360 days) and
performance data.
(b) During such period, the Company shall furnish promptly to the
Parent (i) a copy of each report, schedule, registration statement and other
document filed by it or its Subsidiaries pursuant to the requirements of
applicable federal or state securities laws, (ii) a copy of all internally
prepared interim financial statements, reports or memoranda and (iii) all other
information concerning Company's business, financial results and conditions,
properties and personnel as the Parent may reasonably request.
(c) No investigation or information furnished pursuant to this
Section 5.5 shall affect any representations or warranties made by the Company
or the Parent herein or the conditions to the obligations of the Parent or the
Company to consummate the Merger.
(d) Parent and Company will keep all such information provided to it
confidential in accordance with the terms of each of the Confidentiality
Agreements, dated July 16, 1999, between the Parent and the Company (the
"Confidentiality Agreements") the terms of which are incorporated herein by
reference, as if such information were Evaluation Material (as such term is
defined in each of the Confidentiality Agreements).
SECTION 5.6 Affiliates. At least 45 days prior to the Effective Time, the
Company shall deliver to Parent a list, setting forth the names and addresses of
all persons who are, at the time of the Company Meeting, in the Company's
reasonable judgment, "affiliates" of the Company for purposes of Rule 145 under
the Securities Act and for purposes of applicable interpretations regarding the
pooling-of-interests method of accounting. The Company shall exercise its best
efforts to deliver or cause to be delivered to Parent, at least 30 days prior to
the Effective Time, from each affiliate of the Company identified in the
foregoing list, a letter in the form attached as Exhibit A-1. The certificates
representing Parent Common Stock received by such affiliates shall bear a
customary legend. The Company shall furnish such information and documents as
Parent may reasonably request for the purpose of reviewing such list.
SECTION 5.7 Rights Under Stock Plans.
(a) Stock Options. Each outstanding option to purchase shares of
Company Common Stock ("Option") granted under the Company's Stock Plans shall be
assumed by Parent and deemed to constitute an option to acquire, on the same
terms and conditions (including, without limitation, adjustments for any stock
dividend, subdivision, reclassification, recapitalization, split, combination,
exchange of shares or similar transaction), as were applicable under such Option
prior to the Effective Time, the number of shares of Parent Common Stock as the
holder of such Option would have been entitled to receive pursuant to the Merger
had such holder exercised such Option in full immediately prior to the Effective
Time (not taking into account whether or not such Option was in fact
exercisable) at a price per share equal to (x) the aggregate exercise price for
Company Common Stock purchasable pursuant to such Option divided by (y) the
number of shares of Parent Common Stock deemed purchasable pursuant to such
assumed Option, provided that the number of shares of Parent Common Stock that
may be purchased upon exercise of any such assumed Option shall not include any
fractional share and, upon exercise of such assumed Option, a cash payment shall
be made for any fractional share based upon the last sale price per share of
Parent Common Stock on the trading day immediately preceding the date of
exercise. From and after the Effective Time, Parent and the Surviving
Corporation shall comply with the terms of the Company Stock Plans and the Stock
Purchase Plan, as in
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effect immediately prior to the Effective Time, with respect to Options
outstanding at the Effective Time. The adjustments provided herein with respect
to any Options that are "incentive stock options" (as defined in Section 422 of
the Code) or granted pursuant to the Stock Purchase Plan shall be in a manner
consistent with Sections 422, 423 and 424 of the Code, as applicable.
(b) Reservation and Registration of Shares. Parent shall cause to be
taken all corporate action necessary to reserve for issuance a sufficient number
of shares of Parent Common Stock for delivery upon exercise of Options in
accordance with this Section 5.7. As soon as practicable, but in any event
within ten Business Days after the Effective Time, Parent shall file a
registration statement on Form S-8 (or any successor or other appropriate forms)
or shall cause such Options to be deemed to be issued pursuant to a Parent stock
option plan for which shares of Parent Common Stock previously have been
registered, and shall use its best efforts to cause the effectiveness of such
registration statement (and the current status of the prospectus or prospectuses
contained therein) to be maintained for so long as such Options remain
outstanding.
SECTION 5.8 Filings; Other Action.
(a) Subject to the terms and conditions herein provided, the Company
and Parent shall (i) promptly make their respective filings and thereafter make
any other required submissions under the HSR Act, (ii) use reasonable efforts to
cooperate with one another in (A) determining whether any filings are required
to be made with, or consents, permits, authorizations or approvals are required
to be obtained from, any third party, the United States government or any
agencies, departments or instrumentalities thereof or other governmental or
regulatory bodies or authorities of federal, state, local and foreign
jurisdictions in connection with the execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby and (B) timely
making all such filings and timely seeking all such consents, permits,
authorizations or approvals, and (iii) take, or cause to be taken, all other
actions and do, or cause to be done, all other things necessary, proper or
advisable to consummate and make effective the transactions contemplated hereby,
including, without limitation, taking or undertaking all such further action as
may be necessary to resolve such objections, if any, as the Federal Trade
Commission, the Antitrust Division of the Department of Justice, state antitrust
enforcement authorities or competition authorities of any other nation or other
jurisdiction or any other person may assert under relevant antitrust,
competition or communications laws with respect to the transactions contemplated
hereby.
(b) Without limiting the generality of the undertakings pursuant to
Section 5.8 (a): (i) each of Parent and the Company shall provide promptly to
the Governmental Entities with regulatory jurisdiction over enforcement of any
applicable antitrust laws ("Government Antitrust Entity") information and
documents requested by such Government Antitrust Entity or necessary, proper or
advisable to permit consummation of the transactions contemplated by this
Agreement; (ii) without in any way limiting the provisions of Section 5.8 (a)
(i) above, each of Parent and the Company shall file any Notification and Report
Form and related material required under the HSR Act as soon as practicable
after the date hereof, and thereafter use its best efforts to certify as soon as
practicable its substantial compliance with any requests for additional
information or documentary material that may be made under the HSR Act; (iii)
each of the Company and Parent will keep the other informed of any material
communication, and provide to the other copies of all correspondence, between it
(or its advisors) and any Government Antitrust Entity relating to this Agreement
or any of the matters described in this Section 5.8 (b); and (iv) each of the
Company and Parent shall permit the other to review any material communication
to be given by it to, and shall consult with each other in advance of any
telephonic calls, meeting or conference with, any Government Antitrust Entity
and, to the extent permitted, give the other party the opportunity to attend and
participate in such telephonic calls, meetings and conferences.
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SECTION 5.9 Further Assurances. In case at any time after the
Effective Time any further action is necessary or desirable to carry out the
purposes of this Agreement, the proper officers of the Company and Parent shall
take all such necessary action.
SECTION 5.10 Company Acquisition Proposals. In light of the
consideration given by the Board of Directors of the Company prior to the
execution of this Agreement and in light of the Company's representations
contained in Section 3.14, the Company agrees that it shall not, nor shall it
permit any of its Subsidiaries to, nor shall it authorize or permit any officer,
director or employee of, or any investment banker, attorney or other advisor or
representative of, the Company or any of its Subsidiaries to, directly or
indirectly, solicit or initiate, or encourage the submission of, any Acquisition
Proposal, or participate in any negotiations regarding, or furnish to any person
any information with respect to, or take any other action to facilitate any
inquiries or the making of any proposal that constitutes, or may reasonably be
expected to lead to, any Acquisition Proposal; provided, however, that nothing
contained in this Agreement shall prevent the Board of Directors from, at any
time prior to the Company Shareholder Approval, (A) providing information in
response to a request therefor by a Person who has made an unsolicited bona fide
written Acquisition Proposal if the Board of Directors receives from the Person
so requesting such information an executed confidentiality agreement the terms
of which are (without regard to the terms of the Acquisition Proposal) (x) no
less favorable to the Company and (y) no less restrictive on the Person
requesting such information than those contained in the Confidentiality
Agreement from the Company to Parent; (B) engaging in any negotiations or
discussions with any Person who has made an unsolicited bona fide written
Acquisition Proposal; or (C) recommending such an Acquisition Proposal to the
shareholders of the Company, if and only to the extent that, (i) in each such
case referred to in clause (A), (B) or (C) above, the Board of Directors of the
Company determines in good faith after consultation with outside legal counsel
that failure to take such action would create a reasonable possibility of a
breach of their respective fiduciary duties under applicable law and (ii) in
each case referred to in clause (B) or (C) above, the Board of Directors of the
Company determines in good faith (after consultation with its financial advisor)
that such Acquisition Proposal, if accepted, is likely to be consummated, taking
into account all legal, financial and regulatory aspects of the proposal and the
Person making the proposal and would, if consummated, result in a transaction
more favorable to the Company's shareholders from a financial point of view than
the transaction contemplated by this Agreement (any such more favorable
Acquisition Proposal being referred to in this Agreement as a "Superior
Proposal"), provided further that prior to initially furnishing such information
to, or entering into discussions or negotiations with, such Person, the Company
shall provide two (2) business days' advance written notice to Parent to the
effect that it is furnishing information to, or entering into negotiations with,
a Person. The Company shall notify Parent orally and in writing of the fact that
it received inquiries, offers or proposals with respect to an Acquisition
Proposal, within 24 hours after the Company obtains Knowledge of the receipt
thereof, and shall give Parent five (5) business days' advance notice (which
notice shall include the terms and conditions of such proposal) of the Company's
intent to enter into a definitive agreement with respect to a Superior Proposal.
Nothing contained herein shall prohibit the Company from disclosing to its
shareholders the statement required by Rule 14e-2(a) under the Exchange Act with
respect to an Acquisition Proposal by means of a tender offer. The Company will
immediately cease and cause to be terminated any existing activities,
discussions or negotiations with any other person that have been conducted
heretofore with respect to a potential Acquisition Proposal. Except in
connection with a Superior Proposal, the Company agrees to enforce and not to
waive or release any confidentiality agreements which any persons have entered
into with the Company.
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SECTION 5.11 Director and Officer Liability.
(a) Parent, Merger Sub and the Company agree that all rights to
indemnification and all limitations on liability existing in favor of any
Indemnitee (as defined below) as provided in the Company Amended and Restated
Articles of Incorporation or by laws shall survive the Merger and continue in
full force and effect.
(b) For a period of six (6) years after the Effective Time, Parent
shall, or shall cause the Surviving Corporation to, maintain officers' and
directors' liability insurance and fiduciary liability insurance covering the
Indemnitees who, at the Effective Date, are covered by the Company's officers'
and directors' or fiduciary liability insurance policies on terms no less
advantageous to such indemnified parties than such existing insurance; provided,
however, that neither Parent nor the Surviving Corporation will be required in
order to maintain such policies to pay an annual premium in excess of 200% of
the last annual premium paid by the Company prior to the date of this Agreement
(the "Cap") and provided, further, that, if equivalent coverage cannot be
obtained, or can be obtained only by paying an annual premium in excess of the
Cap, then Parent shall, or shall cause the Surviving Corporation to, maintain
policies that, in Parent's good faith judgment, provide the maximum coverage
available at an annual premium equal to the Cap.
(c) In addition to the other rights provided for in this Section 5.11
and not in limitation thereof, for six years from and after the Effective Time,
Parent shall, and shall cause the Surviving Corporation to, to the fullest
extent permitted by applicable law, (i) indemnify and hold harmless the
individuals who on or prior to the Effective Time were officers, directors or
employees of the Company or any of its Subsidiaries, and the heirs, executors,
trustees, fiduciaries and administrators of such officers, directors or
employees (collectively, the "Indemnitees") against all losses, expenses
(including reasonable attorneys' fees), claims, damages, liabilities, judgments,
or amounts paid in settlement (collectively, "Costs") in respect to any
threatened, pending or completed claim, action, suit or proceeding, whether
criminal, civil, administrative or investigative based on, or arising out of or
relating to the fact that such person is or was a director, officer or employee
of the Company or any of its Subsidiaries and arising out of acts or omissions
occurring on or prior to the Effective Time (including, without limitation, in
respect of acts or omissions in connection with this Agreement and the
transactions contemplated hereby) (an "Indemnifiable Claim") and (ii) advance to
such Indemnitees all expenses incurred in connection with any Indemnifiable
Claim promptly after receipt of reasonably detailed statements therefor;
provided, that the person to whom expenses are to be advanced provides an
undertaking to repay such advances if it is ultimately determined that such
person is not entitled to indemnification from Parent or the Surviving
Corporation; provided, however, that Parent shall not be liable for any
settlement effected without its written consent.
(d) Notwithstanding any other provisions hereof, the obligations of
the Company, the Surviving Corporation and Parent contained in this Section 5.11
shall be binding upon the successors and assigns of Parent and the Surviving
Corporation. In the event the Company or the Surviving Corporation or any of
their respective successors or assigns (i) consolidates with or merges into any
other Person or (ii) transfers all or substantially all of its properties or
assets to any Person, then, and in each case, proper provision shall be made so
that successors and assigns of the Company or the Surviving Corporation, as the
case may be, honor the indemnification obligations set forth in this Section
5.11.
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SECTION 5.12 Accountants' "Comfort" Letters. The Company and Parent will
each use reasonable best efforts to cause to be delivered to each other letters
from their respective independent accountants, dated a date within two business
days before the effective date of the Registration Statement, in form reasonably
satisfactory to the recipient and customary in scope for comfort letters
delivered by independent accountants in connection with registration statements
on Form S-4 under the Securities Act.
SECTION 5.13 Additional Reports. The Company and Parent shall each furnish
to the other copies of any reports of the type referred to in Sections 3.4 and
4.4 which it files with the SEC on or after the date hereof, and the Company and
Parent, as the case may be, represents and warrants that as of the respective
dates thereof, such reports will not contain any untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary
to make the statement therein, in light of the circumstances under which they
were made, not misleading; provided, that the foregoing shall not apply to the
financial statements contained therein (which are covered by the following
sentence). Any consolidated financial statements included in such reports
(including any related notes and schedules) will fairly present, in all material
respects, the financial position of the Company and its consolidated
Subsidiaries or Parent and its consolidated Subsidiaries, as the case may be, as
of the dates thereof and their results of operations and changes in financial
position or other information included therein for the periods or as of the date
then ended (subject, where appropriate, to normal year-end adjustments), in each
case in accordance with GAAP consistently applied during the periods involved
(except as otherwise disclosed in the notes thereto and except that such
financial statements will not include all of the notes required by GAAP).
SECTION 5.14 Tax Treatment; Plan of Reorganization. Parent and the Company
agree to treat the Merger as a reorganization within the meaning of Section
368(a) of the Code. This Agreement is intended to constitute a "plan of
reorganization" within the meaning of Section 1.368-2(g) of the income tax
regulations promulgated under the Code. During the period from the date of this
Agreement through the Effective Time, unless the parties shall otherwise agree
in writing, none of Parent, the Company or any of their respective Subsidiaries
shall knowingly take or fail to take any action which action or failure to act
would jeopardize qualification of the Merger as a reorganization within the
meaning of Section 368(a) of the Code. Parent and the Company shall use their
respective reasonable efforts to cause one or more of their responsible officers
to execute and deliver certificates to confirm the accuracy of certain relevant
facts as may be reasonably requested by counsel in connection with the
preparation and delivery of the tax opinions described in Sections 6.2(f) and
6.3(d) hereof.
SECTION 5.15 Public Announcements. The initial press release relating to
this Agreement shall be a joint press release mutually agreed upon by Parent and
the Company. Unless otherwise required by applicable law or the requirements of
any listing agreement with the Nasdaq Stock Market, Parent and the Company shall
each use their reasonable efforts to consult with each other before issuing any
press release or otherwise making any public statements with respect to this
Agreement or any transaction contemplated by this Agreement and shall not issue
any such press release or make any such public statement prior to such
consultation.
SECTION 5.16 Employee Plans and Benefits.
(a) From and after the Effective Time, the Surviving Corporation and
its Subsidiaries will honor in accordance with their terms all existing
employment, severance, consulting and salary continuation agreements between the
Company or any of its Subsidiaries and any current or former officer, director,
employee or consultant of the Company or any of its Subsidiaries or group of
such officers, directors, employees or consultants.
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<PAGE> 35
(b) On or after the Effective Time, the Surviving Corporation and its
Subsidiaries shall provide benefits, plans and programs to its employees which
are no less favorable in the aggregate than those generally available to
similarly situated employees in the same jurisdiction of Parent and its
Subsidiaries. Nothing in this Agreement shall be construed as restricting the
ability of Parent, the Surviving Corporation and Parent's Subsidiaries to
establish such types and levels of compensation as they or any of them determine
to be appropriate from time to time.
(c) To the extent permitted under applicable law, each employee of
the Company or its Subsidiaries shall be given credit for all service with the
Company or its Subsidiaries (or service credited by the Company or its
Subsidiaries) under all employee benefit plans, programs, policies and
arrangements maintained by the Surviving Corporation in which they participate
or in which they become participants for purposes of eligibility and vesting
including, without limitation, for purposes of determining (i) short-term and
long-term disability benefits; (ii) severance benefits; (iii) vacation benefits;
and (iv) benefits under any retirement plan.
SECTION 5.17 Sale of Shares by Parent. Parent, prior to the Effective Date,
will sell shares of Parent Common Stock acquired by it within the two years
preceding the Effective Date so that the accounting by the Parent of the
business combination to be effected by the Merger as a "pooling of interests"
will not be adversely affected.
ARTICLE VI.
CONDITIONS TO THE MERGER
SECTION 6.1 Conditions to the Obligations of Each Party. The obligations of
the Company, Parent and Merger Sub to consummate the Merger are subject to the
satisfaction or waiver on or prior to the Closing Date of the following
conditions:
(a) The Registration Statement shall have become effective under the
Securities Act, no stop order suspending the effectiveness of the
Registration Statement shall have been issued by the SEC and no proceeding
for that purpose shall have been initiated by the SEC;
(b) The Company Shareholder Approval and the Parent Shareholder
Approval shall have been obtained;
(c) No statute, rule, regulation, executive order, decree,
preliminary or permanent injunction or restraining order shall have been
enacted, entered, promulgated or enforced by any Governmental Entity which
prohibits the consummation of the transactions contemplated hereby. No
action or proceeding by any Governmental Entity shall have been commenced
(and be pending), or, to the Knowledge of the parties hereto, threatened,
against the Company or Parent or any of their respective affiliates,
associates, officers or directors seeking to prevent or delay the
transactions contemplated hereby or challenging any of the terms of
provisions of this Agreement or seeking material damages in connection
therewith;
(d) Any waiting period (and any extension thereof) applicable to the
consummation of the Merger under the HSR Act shall have expired or been
terminated. All other consents and approvals (including any other consent
or approval required pursuant to or in connection with the Antitrust Laws)
of Governmental Entities necessary for consummation of the transactions
contemplated hereby shall have been obtained, other than those which, if
not obtained, would not in the aggregate have a Material Adverse Effect;
and
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(e) The shares of Parent Common Stock to be issued pursuant to this
Agreement and pursuant to the Company Stock Plans shall have been
authorized for trading in the NASDAQ National Market.
SECTION 6.2 Conditions to the Obligations of Parent and Merger Sub. The
obligations of Parent and Merger Sub to consummate the Merger are subject to the
satisfaction or waiver by Parent on or prior to the Closing Date of the
following further conditions:
(a) The representations and warranties of the Company contained
herein shall be true and correct in all respects as of the Effective Time
with the same effect as though made as of the Effective Time (except (i)
for changes specifically permitted by the terms of this Agreement and (ii)
that the accuracy of representations and warranties that by their terms
speak as of the date of this Agreement or some other date will be
determined as of such date) and there shall not be any Material Adverse
Change with respect to the Company which is not primarily the result of
facts, circumstances or events affecting the photomask industry generally;
(b) The Company shall have performed all obligations and complied
with all agreements and covenants required by this Agreement to be
performed or complied with by it prior to the Effective Time in all
material respects;
(c) The Company shall have delivered to Parent a certificate, dated
the Effective Time and signed by its Chief Executive Officer, Chief
Financial Officer or a Senior Vice President, certifying to the effects set
forth in subsections (a) and (b) above;
(d) Parent shall have received, dated as of the Closing Date, the
Company Pooling Opinion from PricewaterhouseCoopers LLP and the Company
Pooling Opinion from Deloitte & Touche LLP;
(e) Effective demands for payment of dissenters' rights by
shareholders of the Company shall not equal or exceed five percent of the
outstanding shares of the Company Common Stock; and
(f) Parent shall have received a written opinion of its tax counsel,
Paul, Hastings, Janofsky & Walker LLP, reasonably acceptable to Parent and
dated the Closing Date, to the effect that, on the basis of the facts,
representations and assumptions set forth in such opinion which are
consistent with the state of facts existing at the Closing Date, the Merger
will qualify for federal income tax purposes as a reorganization within the
meaning of Section 368(a) of the Code.
SECTION 6.3 Conditions to the Obligations of the Company. The obligations
of the Company to consummate the Merger are subject to the satisfaction or
waiver by the Company on or prior to the Closing Date of the following further
conditions:
(a) The representations and warranties of Parent and Merger Sub
contained herein shall be true and correct in all respects as of the
Effective Time with the same effect as though made as of the Effective Time
except (i) for changes specifically permitted by the terms of this
Agreement and (ii) that the accuracy of representations and warranties that
by their terms speak as of the date of this Agreement or some other date
will be determined as of such date;
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<PAGE> 37
(b) Parent shall have performed all obligations and complied with all
agreements and covenants required by this Agreement to be performed or
complied with by it prior to the Effective Time in all material respects;
(c) Parent shall have delivered to the Company a certificate, dated
the Effective Time and signed by its President, any member of the office of
Chief Executive Officer, Chief Financial Officer or an Executive Vice
President, certifying to the effects set forth in subsections (a) and (b)
above; and
(d) The Company shall have received a written opinion of its tax
counsel, O'Melveny & Myers LLP, reasonably acceptable to the Company and
dated the Closing Date, to the effect that, on the basis of the facts,
representations and assumptions set forth in such opinions which are
consistent with the state of facts existing at the Closing Date, the Merger
will qualify for federal income tax purposes as a reorganization within the
meaning of Section 368(a) of the Code and that the exchange in the Merger
of the Parent Common Stock for Company Common Stock will not give rise to
gain or loss to the shareholders of the Company with respect to such
exchange (except to the extent of any cash paid in lieu of fractional
shares or Dissenting Shares).
ARTICLE VII.
TERMINATION, AMENDMENT AND WAIVER
SECTION 7.1 Termination. This Agreement may be terminated at any time prior
to the Effective Time, whether before or after approval by the shareholders of
the Company or of Parent:
(a) by mutual written consent of Parent and the Company;
(b) by Parent (provided that Parent is not then in material breach of
any representation, warranty, covenant or other agreement contained
herein), upon a breach of any representation, warranty, covenant or
agreement on the part of the Company set forth in this Agreement, or if any
representation or warranty of the Company shall have become untrue, in
either case continuing ten (10) days following notice to the Company of
such breach or untruth and of a nature such that the conditions set forth
in Section 6.2(a) or Section 6.2(b), as the case may be, would be incapable
of being satisfied by February 25, 2000;
(c) by the Company (provided that the Company is not then in material
breach of any representation, warranty, covenant or other agreement
contained herein), upon a breach of any representation, warranty, covenant
or agreement on the part of Parent or Merger Sub set forth in this
Agreement, or if any representation or warranty of Parent or Merger Sub
shall have become untrue, in either case continuing ten (10) days following
notice to Parent of such breach or untruth and of a nature such that the
conditions set forth in Section 6.3(a) or Section 6.3(b), as the case may
be, would be incapable of being satisfied by February 25, 2000;
(d) by either Parent or the Company (provided that the party seeking
to so terminate this Agreement is not then in material breach of Section
5.4 (a) (iii) or 5.8) if any Governmental Entity shall have issued an
order, decree or ruling or taken any other action permanently enjoining,
restraining or otherwise prohibiting the consummation of the Merger and
such order, decree or filing or other action shall have become final and
nonappealable;
33
<PAGE> 38
(e) by either Parent or the Company, if the Merger shall not have
occurred by February 25, 2000, unless the failure to consummate the Merger
is the result of a breach of covenant set forth in this Agreement or breach
of any representation or warranty set forth in this Agreement by the party
seeking to terminate this Agreement;
(f) by either Parent or the Company (provided that if the terminating
party is the Company, the Company shall not be in material breach of any of
its obligations hereunder) if any approval of the shareholders of the
Company required for the consummation of the Merger shall not have been
obtained by reason of the failure to obtain the required vote at the
Company Meeting or at any adjournment or postponement thereof;
(g) by either Parent or the Company (provided that if the terminating
party is Parent, Parent shall not be in material breach of any of its
obligations hereunder) if any approval of the shareholders of Parent
required for the consummation of the merger shall not have been obtained by
reason of the failure to obtain the required vote at the Parent Meeting or
at any adjournment or postponement thereof;
(h) by the Company, if, prior to approval of the Merger by its
shareholders, a Superior Proposal has been made; provided, however, that
before the Company may terminate this Agreement pursuant to this subsection
7.1 (h), the Company shall give notice to Parent of the proposed
termination under subsection 7.1 (h) (which notice may be the notice
provided under Section 5.10) and Parent, within five (5) business days of
receipt of such notice, shall have the right, in its sole discretion, to
offer to amend this Agreement to provide for terms substantially similar to
those of the Superior Proposal and the Company shall negotiate in good
faith with Parent with respect to such proposed amendment; provided,
further, that if Parent and the Company are unable to reach an agreement
with respect to the Parent's proposed amendment within such five (5)
business day period, the Company may terminate this Agreement pursuant to
this subsection 7.1 (h);
(i) by Parent, if the Board of Directors of the Company (i) withdraws
or modifies adversely its recommendation of the Merger, (ii) recommends an
Acquisition Proposal to Company shareholders or (iii) fails to call or hold
the Company Meeting by reason of the receipt by the Company of an
Acquisition Proposal; provided, that the parties agree that disclosure made
by the Company regarding an Acquisition Proposal shall not, unless
expressly stated, be treated as or deemed to be a withdrawal or adverse
modification of any favorable recommendation of the Merger by the Board of
Directors of the Company; or
(j) by the Company if the Average Parent Price is less than $16.00.
SECTION 7.2 Effect of Termination. In the event of termination of this
Agreement by either the Company or Parent as provided in Section 7.1, this
Agreement shall forthwith become void and have no effect, without any liability
or obligation on the part of Parent, Merger Sub or the Company or their
respective officers or directors, except as set forth in Section 5.5(d), Section
7.5 and Article VIII which shall survive termination and except to the extent
that such termination results from the breach by a party of any of its
representations, warranties, covenants or agreements set forth in this
Agreement.
SECTION 7.3 Amendment. This Agreement may be amended by the parties at any
time before or after approval hereof by the shareholders of the Company or
Parent; provided, however, that after such shareholder approval there shall not
be made any amendment that by law requires approval by the shareholders of the
Company or Parent without the approval of such shareholders. This Agreement may
not be amended except by an instrument in writing signed on behalf of each of
the parties.
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SECTION 7.4 Extension; Waiver. At any time prior to the Effective Time, the
parties may (a) extend the time for the performance of any of the obligations or
other acts of the other parties, (b) waive any inaccuracies in the
representations and warranties contained in this Agreement or in any document
delivered pursuant to this Agreement or (c) subject to the provision of Section
7.3, waive compliance with any of the agreements or conditions contained in this
Agreement. Any agreement on the part of a party to any such extension or waiver
shall be valid only if set forth in an instrument in writing, signed on behalf
of such party. The failure of any party to this Agreement to assert any of its
rights under this Agreement or otherwise shall not constitute a waiver of those
rights.
SECTION 7.5 Termination Fee.
(a) In the event (i) the Company terminates this Agreement pursuant
to Section 7.1(h) or (ii) Parent terminates this Agreement pursuant to Section
7.1(b) or (i), then the Company shall pay Parent an amount equal to $3,640,000
(the "Termination Fee") by wire transfer of immediately available funds upon the
occurrence of such event, and as a condition to termination in the case of
termination pursuant to Section 7.1(h). The Termination Fee shall be the sole
remedy of Parent for any breach of any representation, warranty, covenant or
agreement on the part of the Company set forth in this Agreement or of any
representation or warranty of the Company that shall have become untrue.
(b) In the event (i) Company Shareholder Approval is not received,
(ii) prior to the Company Meeting there shall have been an Acquisition Proposal
made and (iii) within six (6) months from the termination of the Agreement, the
Company shall have entered into an agreement for, and within eighteen (18)
months from such termination shall have consummated, a transaction substantially
in the form proposed in such Acquisition Proposal with the party that made such
Acquisition Proposal, then the Company shall pay Parent an amount equal to the
Termination Fee by wire transfer of immediately available funds, payable upon
consummation of such transaction.
(c) The Company agrees that the agreements contained in this Section
7.5 are an integral part of the transactions contemplated by this Agreement.
ARTICLE VIII.
GENERAL PROVISIONS
SECTION 8.1 Nonsurvival of Representations. None of the representations and
warranties in this Agreement or in any instrument delivered pursuant to this
Agreement shall survive the Effective Time. This Section 8.1 shall not limit any
covenant or agreement of the parties which by its terms contemplates performance
after the Effective Time.
SECTION 8.2 Notices. All notices, requests, claims, demands and other
communications under this Agreement shall be in writing and shall be deemed
given if delivered personally or sent by facsimile transmission or overnight
courier (providing proof of delivery) to the parties at the following addresses
(or at such address for a party as shall be specified by like notice):
(a) if to the Company, to:
Align-Rite International Holdings, Inc.
2428 Ontario Street
Burbank, California 91504
Attention: Mr. James L. McDonald
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with a copy to:
O'Melveny & Myers LLP
400 South Hope Street
Los Angeles, California 90071
Attention: Richard A. Boehmer, Esq.
(b) if to Parent or Merger Sub, to:
PHOTRONICS, INC.
1061 East Indiantown Road
Jupiter, Florida 33477
Attention: Mr. Jeffrey P. Moonan
with a copy to:
Paul, Hastings, Janofsky & Walker LLP
399 Park Avenue
New York, New York 10022
Attention: Steven L. Wasserman, Esq.
SECTION 8.3 Definitions. For purposes of this Agreement:
(a) "Acquisition Proposal" means any proposal (whether or not in
writing and whether or not delivered to the Company's shareholders generally)
for a merger, consolidation, liquidation, reorganization, tender offer or other
business combination involving the Company or any proposal or offer to acquire
in any manner, directly or indirectly, at least 50% of the voting securities of,
or all or substantially all of the assets of, the Company or any of its
Subsidiaries, other than the transactions contemplated by this Agreement.
(b) "Affiliate" of any person means another person that directly or
indirectly, through one or more intermediaries controls, is controlled by, or is
under common control with, such first person.
(c) "Antitrust Laws" mean and include the Sherman Act, as amended,
the Clayton Act, as amended, the HSR Act, the Federal Trade Commission Act, as
amended, and all other federal, state or foreign statutes, rules, regulations,
orders, decrees, administrative and judicial doctrines and other laws that are
designed or intended to prohibit, restrict or regulate actions having the
purpose or effect of monopolization or restraint of trade.
(d) "Code" means the Internal Revenue Code of 1986, as amended.
(e) "Control" (including the terms "controlled by" and "under common
control with") means the possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of a person,
whether through the ownership of voting securities, by contract or otherwise.
(f) "Governmental Entity" means any government or any agency, bureau,
board, commission, court, department, official, political subdivision, tribunal
or other instrumentality of any government, whether federal, state or local,
domestic or foreign.
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(g) "Knowledge", "Know" or "Known" means, with respect to the matter
in question, if any of the executive officers of the Company or its Subsidiaries
listed on the Company Disclosure Letter, with respect to the Company and its
Subsidiaries, or the executive officers of the Parent listed on the Parent
Disclosure Letter, with respect to Parent and its Subsidiaries, has actual
knowledge of such matter.
(h) "Material Adverse Change" or "Material Adverse Effect" means, (i)
any adverse change in or effect on the business, financial condition or results
of operations of the Company or Parent, as the case may be, or its respective
Subsidiaries that is material to the Company or Parent, as the case may be, and
its respective Subsidiaries taken as a whole or (ii) any change or effect that
has a material adverse effect on the ability of the Company, Merger Sub or
Parent, as the case may be, to perform its obligations under this Agreement or
to consummate the Merger or the other transactions contemplated by this
Agreement.
(i) "Person" means any natural person, firm, individual, business
trust, trust, association, corporation, partnership, joint venture, company,
unincorporated entity or Governmental Entity.
(j) "Tax" means any and all federal, state, local, foreign or other
tax of any kind (together with any and all interest, penalties, additions to tax
and additional amounts imposed with respect thereto) imposed by any taxing
authority, including, without limitation, tax or other charges on or with
respect to income, franchises, windfall or other profits, gross receipts, real
property, personal property, sales, use, transfer, capital stock, payroll,
employment, social security, workers' compensation, unemployment compensation,
or net worth, and taxes or other charges in the nature of excise, withholding,
alternative or add-on minimum, ad valorem or value added.
(k) "Tax Return" means any return, report or similar statement
(including the attached schedules) required to be filed with respect to any Tax,
including, without limitation, any information return, claim for refund, amended
return or declaration of estimated Tax.
(l) The following additional terms are all defined in the following
sections of this Agreement.
<TABLE>
<CAPTION>
SECTION
-------
<S> <C>
Agreement...................................................................Recitals
Average Parent Price.............................................................2.3
Canceled Shares..................................................................2.3
Cap..........................................................................5.11(b)
Certificate of Merger............................................................1.3
Certificates..................................................................2.4(b)
CGCL.............................................................................1.1
Closing..........................................................................1.2
Closing Date.....................................................................1.2
Company.....................................................................Recitals
Company Common Stock........................................................Recitals
Company Disclosure Letter................................................Article III
Company Group................................................................3.13(a)
Company Intellectual Property Rights.....................................3.19(a)(ii)
Company Labor Matters........................................................3.18(b)
Company Pooling Opinion.........................................................3.12
</TABLE>
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<TABLE>
<S> <C>
Company Required Approvals....................................................3.3(a)
Company SEC Reports..............................................................3.4
Company Shareholder Approval.....................................................5.3
Company Stock Plans..............................................................3.2
Company Meeting..................................................................5.3
Confidentiality Agreements.......................................................5.5
Contracts.....................................................................3.3(b)
Conversion Number................................................................2.3
Conveyance Taxes................................................................5.15
Costs........................................................................5.11(c)
Dissenting Shares................................................................2.5
Effective Time...................................................................1.3
Encumbrances.................................................................3.17(a)
Environmental Claims.............................................................3.7
Environmental Laws...............................................................3.7
ERISA............................................................................3.8
Exchange Act..................................................................3.3(a)
Exchange Agent................................................................2.4(a)
Exchange Fund.................................................................2.4(a)
GAAP.............................................................................3.4
Government Antitrust Entity...................................................5.8(b)
HSR Act.......................................................................3.3(a)
Indemnifiable Claim..........................................................5.11(c)
Indemnitees..................................................................5.11(c)
Joint Proxy Statement.........................................................5.2(a)
Meetings ........................................................................5.3
Merger......................................................................Recitals
Merger Consideration.............................................................2.3
Merger Sub..................................................................Recitals
Option........................................................................5.7(a)
Parent......................................................................Recitals
Parent Common Stock.........................................................Recitals
Parent Disclosure Letter..................................................Article IV
Parent Group.................................................................4.13(a)
Parent Meeting...................................................................5.3
Parent Pooling Opinion..........................................................4.12
Parent Required Approvals.....................................................4.3(a)
Parent SEC Reports...............................................................4.4
Parent Shareholder Approval.....................................................4.12
PBGC.............................................................................3.8
Person........................................................................8.3(j)
Real Property................................................................3.17(a)
Registration Statement........................................................5.2(b)
SEC...........................................................................3.4(a)
Securities Act................................................................3.3(a)
Stock Purchase Plan..............................................................3.2
Subsidiary.......................................................................3.1
Superior Proposal...............................................................5.10
Surviving Corporation............................................................1.1
Termination Fee...............................................................7.5(a)
Third-Party Intellectual Property Rights..................................3.19(b)(i)
</TABLE>
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<TABLE>
<S> <C>
Voting Agreement............................................................Recitals
Voting Shareholders.........................................................Recitals
</TABLE>
SECTION 8.4 Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other parties, it being understood that all
parties need not sign the same counterpart.
SECTION 8.5 Entire Agreement, No Third-Party Beneficiaries. This Agreement
constitutes the entire agreement, and supersedes all prior agreements and
understandings, both written and oral, among the parties with respect to the
subject matter of this Agreement (provided, however, that the provisions of the
Confidentiality Agreements shall remain valid and in effect) and, except for the
provisions of Article II and Sections 5.7, 5.11 and 5.16, is not intended to
confer upon any person other than the parties any rights or remedies hereunder.
SECTION 8.6 Assignment. Neither this Agreement nor any of the rights,
interests or obligations under this Agreement shall be assigned, in whole or in
part, by operation of law or otherwise by any of the parties hereto without the
prior written consent of the other parties, except that Merger Sub may assign,
in its sole discretion, any or all of its rights, interests and obligations
under this Agreement to Parent or to any direct or indirect wholly owned
subsidiary of Parent, but no such assignment shall relieve Merger Sub of any of
its obligations under this Agreement. Subject to the preceding sentence,
this Agreement will be binding upon, inure to the benefit of, and be enforceable
by, the parties and their respective successors and assigns.
SECTION 8.7 Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of California, without
regard to any applicable conflicts of law.
SECTION 8.8 Enforcement. The parties agree that irreparable damage would
occur in the event that any of the provisions of this Agreement were not
performed in accordance with their specific terms or were otherwise breached. It
is accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions of this Agreement in any court of the United States
located in Los Angeles County in the State of California or in Los Angeles
County in California state court, this being in addition to any other remedy to
which they are entitled at law or in equity. In addition, each of the parties
hereto (a) consents to submit itself to the personal jurisdiction of any such
federal court or state court in the event any dispute arises out of this
Agreement or any of the transactions contemplated by this Agreement, (b) agrees
that it will not attempt to deny or defeat such personal jurisdiction by motion
or other request for leave from any such court and (c) agrees that it will not
bring any action relating to this Agreement or any of the transactions
contemplated by this Agreement in any court other than such federal or state
courts.
SECTION 8.9 Severability. Any term or provision of this Agreement which is
invalid or unenforceable shall be ineffective to the extent of such invalidity
or unenforceability without rendering invalid or unenforceable the remaining
terms and provisions of this Agreement. If any provision of this Agreement is so
broad as to be unenforceable, such provision shall be interpreted to be only so
broad as is enforceable.
39
<PAGE> 44
SECTION 8.10 Interpretation. Headings of the Articles and Sections of this
Agreement are for convenience of the parties only, and shall be given no
substantive or interpretive effect whatsoever. The disclosure of any matter in
any section of a Disclosure Letter hereto shall not be deemed to constitute an
admission by any party or to otherwise imply that any such matter is material or
may have a Material Adverse Effect for purposes of this Agreement.
SECTION 8.11 Finders or Brokers. Except for CIBC World Markets Corp., with
respect to the Company, and Banc of America Securities LLC, with respect to
Parent, a copy of whose engagement agreements have been provided by the Company
and Parent to the other, neither the Company nor Parent nor any of their
respective Subsidiaries has employed any investment banker, broker, finder or
intermediary in connection with the transactions contemplated hereby who might
be entitled to any fee or any commission in connection with or upon consummation
of the Merger.
40
<PAGE> 45
IN WITNESS WHEREOF, Parent, Merger Sub and the Company have caused this
Agreement to be signed by their respective officers thereunto duly authorized,
all as of the date first written above.
PHOTRONICS, INC.
By: /s/ MICHAEL J. YOMAZZO
-----------------------------------
Name: Michael J. Yomazzo
Title: Vice Chairman
By: /s/ JEFFREY P. MOONAN
-----------------------------------
Name: Jeffrey P. Moonan
Title: Executive Vice President
Finance and Administration
AL ACQUISITION CORP.
By: /s/ MICHAEL J. YOMAZZO
-----------------------------------
Name: Michael J. Yomazzo
Title: President
By: /s/ JEFFREY P. MOONAN
-----------------------------------
Name: Jeffrey P. Moonan
Title: Vice President
ALIGN-RIGHT INTERNATIONAL, INC.
By: /s/ JAMES L. Mac DONALD
-----------------------------------
Name: James L. McDonald
Title: Chairman of the Board,
Chief Executive Officer
and President
By: /s/ PETER N. KATURICH
-----------------------------------
Name: Peter N. Katurich
Title: Vice President of Finance,
Chief Financial Officer
41
<PAGE> 1
EXHIBIT 3
VOTING AGREEMENT
This VOTING AGREEMENT (the "Agreement"), dated as of September 15, 1999, is
entered into by and between Photronics, Inc., a Connecticut corporation
("Parent"), and the other party listed on the signature page hereof (the
"Shareholder").
WHEREAS, Parent, AL Acquisition Corp. ("Merger Sub") and Align-Rite
International, Inc. (the "Company"), have entered into an Agreement and Plan of
Merger of even date herewith (the "Merger Agreement"), pursuant to which the
parties thereto have agreed, upon the terms and subject to the conditions set
forth therein, to merge Merger Sub with and into the Company (the "Merger");
WHEREAS, as of the date hereof, the Shareholder is the beneficial owner of
the number of shares (the "Shares") of common stock, par value $.01 per share,
of the Company (the "Company Common Stock") set forth opposite such
Shareholder's name on Schedule I attached hereto; and
WHEREAS, as a condition to its willingness to enter into the Merger
Agreement, Parent has required that the Shareholder agree, and the Shareholder
is willing to agree, to the matters set forth herein. Except as specified
herein, terms defined in the Merger Agreement are used herein as defined
therein.
NOW, THEREFORE, in consideration of the foregoing and the agreements set
forth below, the parties hereto agree as follows:
1. Voting of Shares.
1.1. Voting Agreement. The Shareholder hereby agrees to vote (or cause to
be voted) all of the Shares (and any and all securities issued or issuable in
respect thereof) which such Shareholder is entitled to vote (or to provide his
written consent thereto), at any annual, special or other meeting of the
shareholders of the Company, and at any adjournment or adjournments thereof, or
pursuant to any consent in lieu of a meeting or otherwise:
(i) in favor of the Merger and the approval and adoption of the terms
contemplated by the Merger Agreement and any actions required in
furtherance thereof;
(ii) against any action or agreement that could result in a breach of
any covenant, representation or warranty or any other obligation of the
Company under this Agreement or the Merger Agreement; and
<PAGE> 2
(iii) against (except as specifically requested or agreed to in
writing by Parent in advance) (A) any extraordinary corporate transaction,
including, without limitation, a merger, consolidation, rights offering,
reorganization, recapitalization or liquidation involving the Company or
any of its Subsidiaries other than the Merger, (B) a sale or transfer of a
material amount of assets of the Company or any of its Subsidiaries or the
issuance of any securities of the Company or any Subsidiary, (C) any change
in the Board of Directors of the Company; (D) any change in the present
capitalization of the Company or any amendment of the Company's articles of
incorporation or by laws; (E) any other material change in the Company's
corporate structure or business; or (F) any action that could impede,
interfere with, delay, postpone or adversely affect in any respect the
Merger and the transactions contemplated by the Merger Agreement.
1.2 Grant of Irrevocable Proxy; Appointment of Proxy. (a)The
Shareholder hereby irrevocably grants to, and appoints, Michael J. Yomazzo and
Jeffrey P. Moonan, in their respective capacities as officers of Parent, any
individual who hereafter shall succeed to any such office of Parent, and each of
them individually, the Shareholder's proxy and attorney-in-fact (with full power
of substitution), for and in the name, place and stead of the Shareholder, to
vote the Shares, or grant a consent or approval in respect of such Shares, in
accordance with Shareholder's covenants in Section 1.1 hereof.
(b) The Shareholder represents that any proxies heretofore given in
respect of the Shares are not irrevocable, and that all such proxies are hereby
revoked.
(c) The Shareholder hereby affirms that the irrevocable proxy set
forth in this Section 1.2 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 the Shareholder under this Agreement. The
Shareholder hereby further affirms that the irrevocable proxy is coupled with an
interest and may under no circumstances be revoked. The Shareholder hereby
ratifies and confirms all that such irrevocable proxy may lawfully do or cause
to be done by virtue hereof.
2. Representations and Warranties of Shareholder. The Shareholder
represents and warrants to Parent as follows:
2.1. Binding Agreement. The Shareholder has the capacity to execute
and deliver this Agreement and to consummate the transactions contemplated
hereby. The Shareholder has duly and validly executed and delivered this
Agreement and this Agreement constitutes a legal, valid and binding obligation
of the Shareholder, enforceable against the Shareholder in accordance with its
terms, except as such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization or
-2-
<PAGE> 3
other similar laws affecting creditors' rights generally and by general
equitable principles (regardless of whether enforceability is considered in a
proceeding in equity or at law).
2.2. No Conflict. Neither the execution and delivery of this Agreement
nor the compliance with any of the provisions hereof by the Shareholder (a)
requires any consent, approval, authorization or permit of registration,
declaration or filing (except for filings under the Securities Exchange Act of
1934, as amended (the "Exchange Act")) with, or notification to, any
governmental entity, (b) results in a default (or an event which, with notice or
lapse of time or both, would become a default) or gives rise to any right of
termination by any third party, cancellation, amendment or acceleration under
any contract, agreement, instrument, commitment, arrangement or understanding,
or results in the creation of a security interest, lien, charge, encumbrance,
equity or claim with respect to any of the Shares, (c) requires any consent,
authorization or approval of any person other than a governmental entity which
has not been obtained, or (d) violates or conflicts with any order, writ,
injunction, decree or law applicable to the Shareholder or the Shares.
2.3. Ownership of Shares. The Shareholder is the record and beneficial
owner of the Shares free and clear of any security interests, liens, charges,
encumbrances, options, proxies, voting trusts or agreements or other
understandings, arrangements or other restrictions on the right to vote the
Shares. The Shareholder holds exclusive power to vote the Shares. The Shares
represent all of the shares of capital stock of the Company beneficially owned
by Shareholder entitling Shareholder to vote or give consent with respect to the
matters set forth in Section 1 hereof. For purposes of this Agreement,
"beneficially own" or "beneficially ownership" with respect to any securities
shall mean having "beneficial ownership" of such securities as determined
pursuant to Rule 13d-3 under the Exchange Act and shall include securities
beneficially owned by all other persons with whom Shareholder would constitute a
"group" as discussed in Section 13(d)(3) of the Exchange Act.
3. Representations and Warranties of Parent. Parent represents and
warrants to the Shareholder as follows:
3.1. Binding Agreement. Parent is a corporation duly incorporated,
validly existing and in good standing under the laws of the State of Connecticut
and has full corporate power and authority to execute and deliver this Agreement
and to consummate the transactions contemplated hereby. The execution and
delivery of this Agreement and the Merger Agreement by Parent and the
consummation of the transactions contemplated hereby and thereby have been duly
and validly authorized by the Board of Directors of Parent, and, no other
corporate proceedings on the part of Parent are necessary to authorize the
execution, delivery and performance of this Agreement and the Merger Agreement
by Parent and the consummation of the transactions contemplated thereby. Parent
has duly and validly executed this Agreement
-3-
<PAGE> 4
and this Agreement constitutes a legal, valid and binding obligation of Parent,
enforceable against Parent in accordance with its terms, except as such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization or other similar laws affecting creditors' rights generally and
by general equitable principles (regardless of whether enforceability is
considered in a proceeding in equity or at law).
3.2. No Conflict. Neither the execution and delivery of this
Agreement, the consummation by Parent of the transactions contemplated hereby,
nor the compliance by Parent with any of the provisions hereof will (a) conflict
with or result in a breach of any provision of its articles of incorporation or
by-laws, (b) require any consent, approval, authorization or permit of,
registration, declaration or filing (except for filings under the Exchange Act)
with, or notification to, any governmental entity, (c) result in a default (or
an event which, with notice or lapse of time or both, would become a default) or
give rise to any right of termination by any third party, cancellation,
amendment or acceleration under any contract, agreement, instrument, commitment,
arrangement or understanding, (d) require any consent, authorization or approval
of any person other than a governmental entity, or (e) violate or conflict with
any order, writ, injunction, decree or law applicable to Parent.
4. Covenants of the Shareholder.
4.1. Certain Prohibited Transfers. The Shareholder agrees not to:
(a) sell, transfer, tender, assign, encumber, pledge or otherwise
dispose of, or enter into any contract, option or other arrangement or
understanding with respect to the sale, transfer, tender, assignment,
encumbrance, pledge or other disposition of, the Shares or any interest
therein;
(b) grant any proxies or power of attorney or enter into a voting
agreement or other arrangement with respect to the Shares, other than and
pursuant to this Agreement;
(c) deposit the Shares into a voting trust; or
(d) buy, sell or trade any equity security of Parent including,
without limitation, entering into any put, call, option, swap, collar or
any other derivative transaction which has a similar economic effect.
4.2. Additional Shares. In the event (i) of any stock dividend, stock
split, recapitalization, reclassification, combination or exchange of shares of
capital stock of the Company on, of or affecting the Shares or (ii) the
Shareholder shall become the beneficial owner of any additional shares of
Company Common Stock or other securities entitling the holder thereof to vote or
give consent with respect to the matters set forth in
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<PAGE> 5
Section 1 hereof, then the terms of this Agreement shall apply to, and all
references to Shares herein shall include, the shares of capital stock or other
securities of the Company held by the Shareholder immediately following the
effectiveness of the events described in clause (i) or the Shareholder becoming
the beneficial owner thereof, as described in clause (ii), as though they were
Shares hereunder. The Shareholder hereby agrees, while this Agreement is in
effect, to promptly notify Parent of the number of any new shares of Company
Common Stock acquired by the Shareholder, if any, after the date hereof.
4.3. No Solicitation. Prior to the termination of this Agreement
pursuant to Section 7 hereof, Shareholder shall not (directly or indirectly
through advisors, agents or other intermediaries), solicit or initiate inquiries
or encourage the submission of any Acquisition Proposal. If Shareholder receives
any such inquiry or proposal, then Shareholder promptly shall inform Parent of
the terms and conditions, if any, of such inquiry or proposal and the identity
of the person making it. Shareholder immediately will cease and cause his
advisors, agents and other intermediaries to cease any and all existing
activities, discussions or negotiations with any parties conducted heretofore
with respect to any of the foregoing.
4.4. Stop Transfer. Shareholder agrees with, and covenants to Parent
that it shall not request that the Company register the transfer of any
certificate or uncertificated interest representing any of the Shares.
4.5. Waiver of Appraisal and Dissenter's Rights. Shareholder hereby
waives any rights of appraisal or rights to dissent that Shareholder may have.
5. Third Party Business Combination. If (a) the Merger Agreement is
terminated in accordance with Section 7.1(h) or Section 7.1(i) of the Merger
Agreement, (b) within six months from the termination of the Merger Agreement
the Company shall have entered into an agreement for, and within eighteen (18)
months from such consummation shall have consummated, a merger, consolidation,
liquidation, reorganization, tender offer or other business combination
involving the Company or any acquisition, directly or indirectly, of at least
50% of the voting securities of, or all or substantially all of the assets of,
the Company ("Third Party Business Combination") and (c) Shareholder receives
from any Person (other than Parent, or any of its affiliates) any cash or
non-cash consideration in an amount per share greater than $23.09 (the "Third
Party Consideration") in respect of any sale or disposition of all or any
portion of the Shares in connection with and as part of a Third Party Business
Combination, then Shareholder within two (2) Business Days of receipt thereof
shall pay to Parent or its designee an aggregate amount equal to (A) the excess
of the Third Party Consideration over $23.09 multiplied by (B) the number of
Shares with respect to which such Third Party Business Consideration was
received, up to $360,000; provided that, (x) if the consideration received by
Shareholder shall be securities listed on a national securities exchange or
traded on the NASDAQ National Market ("NASDAQ"), the per share value
-5-
<PAGE> 6
of such consideration shall be equal to the closing price per share listed on
such national securities exchange or NASDAQ National Market on the date such
transaction is consummated, (y) if the consideration received by Shareholder
shall be in a form other than such listed securities, the per share value shall
be determined by the agreement of the parties as of the date such transaction is
consummated and (z) Shareholder will pay Parent or its designee in kind and on a
pro rata basis (i.e., if the Third Party Consideration includes cash, listed
securities and/or other consideration, Parent or its designee will receive its
pro rata portion of each such item).
6. Specific Enforcement. The parties agree that irreparable damage would
occur in the event that any of the provisions of this Agreement were not
performed in accordance with the terms hereof or were otherwise breached and
that each party shall be entitled to seek specific performance of the terms
hereof, in addition to any other remedy which may be available at law or in
equity.
7. Termination. This Agreement shall terminate on the earlier of (i) the
termination of the Merger Agreement, (ii) the agreement of the parties hereto to
terminate this Agreement, and (iii) consummation of the Merger.
8. Notices. All notices and other communications hereunder shall be in
writing and shall be deemed given upon (a) transmitter's confirmation of a
receipt of a facsimile transmission, (b) confirmed delivery by a standard
overnight carrier or when delivered by hand or (c) the expiration of five
business days after the day when mailed by certified or registered mail, postage
prepaid, addressed at the following addresses (or at such other address for a
party as shall be specified by like notice):
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<PAGE> 7
If to Parent, to:
Photronics, Inc.
1061 East Indiantown Road
Jupiter, Florida 33477
Attention: Jeffrey P. Moonan
Telephone No: 561-745-1222
Facsimile No: 561-747-1432
with a copy to:
Paul, Hastings, Janofsky & Walker LLP
399 Park Avenue
New York, New York 10022
Attention: Steven L. Wasserman, Esq.
Telephone No: (212) 318-6462
Facsimile No.: (212) 319-4090
If to Shareholder, to the Shareholder at:
10234 Candleberry Land
Northridge, California 91324
with a copy to:
O'Melveny & Myers LLP
400 South Hope Street
Los Angeles, California 90071
Attention: Richard A. Boehmer, Esq.
9. Entire Agreement. This Agreement (including the documents and
instruments referred to herein) constitutes the entire agreement and supersedes
all other prior agreements and understandings, both written and oral, between
the parties, with respect to the subject matter hereof.
10. Consideration. This Agreement is granted in consideration of the
execution and delivery of the Merger Agreement by Parent.
11. Amendment. This Agreement may not be modified, amended, altered or
supplemented except upon the execution and delivery of a written agreement by
the parties hereto.
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<PAGE> 8
12. Successors and Assigns. This Agreement shall not be assigned by
operation of law or otherwise without the prior written consent of the other
parties hereto. This Agreement will be binding upon, inure to the benefit of and
be enforceable by each party and such party's respective heirs, beneficiaries,
executors, representatives and permitted assigns; provided, that Parent may
assign, in its sole discretion, its rights and obligations hereunder to any
affiliate of Parent, but no such assignment shall relieve Parent of its
obligations hereunder if such assignee does not perform such obligations.
13. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same instrument.
14. Governing Law. This Agreement shall be governed in all respects,
including validity, interpretation and effect, by the laws of the State of
California (without giving effect to the provisions thereof relating to
conflicts of law).
15. Public Announcements. Shareholder shall not issue any press release or
other statement with respect to the transactions contemplated by this Agreement
and the Merger Agreement without the prior written consent of Parent.
16. Severability. Any term or provision of this Agreement which is invalid
or unenforceable in any jurisdiction shall, as to that jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms of
provisions of this Agreement in any other jurisdiction. If any provision of this
Agreement is so broad as to be unenforceable, the provision shall be interpreted
to be only so broad as is enforceable.
17. Headings. The headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement.
18. Shareholder Capacity. Shareholder makes no agreement or understanding
herein in his capacity as a director or officer of the Company. The Shareholder
signs solely in his capacity as the record holder and beneficial owner of the
Shares and nothing herein shall restrict Shareholder in the exercise of his
fiduciary duties as a director or officer of the Company.
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<PAGE> 9
IN WITNESS WHEREOF, this Agreement has been duly executed and delivered by
the Shareholder and a duly authorized officer of Parent on the day and year
first written above.
Photronics, Inc.
By: /s/ MICHAEL J. YOMAZZO
------------------------------------
Michael J. Yomazzo,
Vice Chairman
/s/ JAMES L. MACDONALD
----------------------------------------
James L. MacDonald
/s/ JAMES L. MACDONALD, JR.
----------------------------------------
James L. MacDonald, Jr. as Trustee
under the Trust Agreement, dated
November 17, 1983, for the MacDonald
Family Trust
/s/ ROBIN A. MACDONALD
----------------------------------------
Robin A. MacDonald as Trustee
under the Trust Agreement, dated
November 17, 1983, for the MacDonald
Family Trust
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<PAGE> 10
Acknowledgment and Agreement of Spouse
The undersigned, being the spouse of Shareholder, acknowledges that she has
read and understands the terms of this Agreement and hereby agrees to be bound
by the terms hereof to the extent she has a community property or other interest
in the Shares.
/s/ ROBIN A. MACDONALD
----------------------------------------
Robin A. MacDonald
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<PAGE> 11
SCHEDULE I
<TABLE>
<CAPTION>
Shares of Common Options to Acquire Shares
Name Stock Owned of Common Stock
- ---- ---------------- -------------------------
<S> <C> <C>
James L. MacDonald 100,000 241,396, of which 164,558
are vested
James L. MacDonald 440,000
and Robin A.
MacDonald as Trustees
under the Trust
Agreement, dated
November 17, 1983,
of the MacDonald
Family Trust
</TABLE>
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