As filed with the Securities and Exchange Commission on February 4, 2002
Registration No. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
PHOTRONICS, INC.
(Exact name of registrant as specified in its charter)
CONNECTICUT 06-0854886
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1061 East Indiantown Road
Jupiter, Florida 33477
(561) 745-1222
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
James A. Eder
Vice President, Secretary and General Counsel
1061 East Indiantown Road
Jupiter, Florida 33477
(561) 745-1222
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
COPY TO:
Jonathan Jewett
Shearman & Sterling
599 Lexington Avenue
New York, New York 10022
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Approximate date of commencement of proposed sale to the public: From time
to time after this registration statement becomes effective.
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If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. / /
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities being offered only in connection with dividend or
interest reinvestment plans, check the following box. /X/
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the registration statement number of the earlier effective registration
statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the registration
statement number of the earlier effective registration statement for the same
offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434
under the Securities Act, please check the following box. / /
CALCULATION OF REGISTRATION FEE
======================================== =================== ================== ====================== ===============
Proposed Maximum Proposed Maximum Amount of
Title of Each Class of Securities to Amount to be Offering Price Aggregate Offering Registration
be Registered Registered Per Unit Price Fee
- ---------------------------------------- ------------------- ------------------ ---------------------- ---------------
Debt securities (1) $200,000,000 100% $200,000,000 $18,400
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Common stock, par value $0.01 per
share (2) 5,405,400 shares ----- ----- (3)
======================================== =================== ================== ====================== ===============
(1) Equals the aggregate principal amount of the securities being registered.
(2) Such number represents the number of shares of common stock that are
currently issuable upon conversion of the notes. Under Rule 416 under the
Securities Act, the number of shares of common stock registered includes an
undetermined number of shares of common stock that may be issued in connection
with a stock split, stock dividend, recapitalization or similar event.
(3) Under Rule 457(i), there is no additional filing fee with respect to the
shares of common stock issuable upon conversion of the notes because no
additional consideration will be received in connection with the exercise of the
conversion privilege.
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The registrant hereby amends this registration statement on such date or dates
as may be necessary to delay its effective date until the registrant shall file
a further amendment which specifically states that this registration statement
shall thereafter become effective in accordance with section 8(a) of the
securities act of 1933 or until the registration statement shall become
effective on such date as the commission, acting pursuant to said section 8(a),
may determine.
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Information in this prospectus is not complete and may be changed. We may not
sell these securities until the registration statement filed with the Securities
and Exchange Commission Is effective. This prospectus is not an offer to sell
these securities and it is not soliciting an offer to buy these securities in
any jurisdiction where the offer or sale is not permitted.
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PROSPECTUS
Subject to Completion
Dated February 4, 2002
$200,000,000
Photronics, Inc.
4 3/4% Convertible Subordinated Notes Due 2006
and
Common Stock Issuable Upon Conversion of the Notes
We issued the notes in a private placement in December 2001. This
prospectus will be used by selling security holders to resell their notes and
the common stock issuable upon conversion of their notes.
The notes bear interest at an annual rate of 4 3/4% from December 12, 2001.
We will pay interest on June 15 and December 15 of each year, beginning June 15,
2002, to record holders at the close of business of the preceding June 1 and
December 1, as the case may be.
Beginning December 17, 2004, we may redeem any of the notes at an initial
redemption price of 101.90% of their principal amount plus accrued interest.
Prior to December 17, 2004, we may redeem any of the notes if (1) the closing
price of the common stock has exceeded 150% of the conversion price for at least
20 trading days in any consecutive 30-day trading period and (2) the shelf
registration statement covering resales of the notes and the common stock is
effective.
The notes are subordinated in right of payment to all of our senior
indebtedness and are structurally subordinated to all liabilities (including
trade payables) of our subsidiaries. As of October 31, 2001, we had $58.3
million of senior indebtedness outstanding and our subsidiaries had $283.1
million of liabilities outstanding, excluding liabilities owed to us and
minority interests.
Holders may convert the notes into shares of our common stock at a
conversion rate of 27.027 shares per $1,000 principal amount of notes, subject
to adjustment, before December 15, 2006. Our common stock is quoted on the
Nasdaq National Market under the symbol "PLAB." On February 1, 2002, the last
reported sale price of the common stock on the Nasdaq National Market was $34.13
per share.
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Investing in the notes involves risks. See "Risk Factors" beginning on page 8.
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We will not receive any of the proceeds from the sale of the notes or
shares of common stock by any of the selling security holders. The notes and the
shares of common stock may be offered in negotiated transactions or otherwise,
at market prices prevailing at the time of sale or at negotiated prices. In
addition, our shares of common stock may be offered from time to time through
ordinary brokerage transactions on the Nasdaq National Market. See "Plan of
Distribution." The selling security holders may be deemed to be underwriters as
defined in the Securities Act of 1933, as amended. Any profits realized by the
selling security holders may be deemed to be underwriting commissions. If the
selling security holders use any broker-dealers, any commissions paid to
broker-dealers and, if broker-dealers purchase any notes or common stock as
principals, any profits received by such broker-dealers on the resale of the
notes or common stock, may be deemed to be underwriting discounts or commissions
under the Securities Act.
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NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
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The date of this prospectus __________, 2002.
TABLE OF CONTENTS
Page
----
Where You Can Find More Information ....................................... 3
Summary ................................................................... 5
Risk Factors .............................................................. 8
Special Note Regarding Forward-Looking Statements ......................... 17
Use of Proceeds ........................................................... 18
Ratio of Earnings to Fixed Charges ........................................ 18
Description of Notes ...................................................... 19
Description of Capital Stock .............................................. 34
United States Federal Tax Considerations .................................. 36
Selling Security Holders .................................................. 43
Plan of Distribution ...................................................... 47
Legal Matters ............................................................. 49
Experts ................................................................... 49
You should rely only on the information contained or incorporated by
reference in this prospectus. We have not and selling security holders have not
authorized any other person to provide you with different information. If anyone
provides you with different or inconsistent information, you should not rely on
it. You should assume that the information appearing in this prospectus or any
documents incorporated by reference is accurate only as of the date on the front
cover of the applicable document. Our business, financial condition, results of
operations and prospects may have changed since that date.
2
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and
other information with the Securities and Exchange Commission. You may read and
copy materials that we have filed with the Securities and Exchange Commission at
the following Securities and Exchange Commission public reference rooms:
450 Fifth Street, N.W. 233 Broadway 500 West Madison Street
Room 1024 New York, New York 10279 Suite 1400
Washington, D.C. 20549 Chicago, Illinois 60661
Please call the Securities and Exchange Commission at 1-800-SEC-0330
for further information on the public reference rooms.
Our common stock is quoted on the Nasdaq National Market under the
symbol "PLAB," and our Securities and Exchange Commission filings can also be
read at the following Nasdaq address:
Nasdaq Operations, 1735 K Street, N.W. Washington, D.C. 20006
Our Securities and Exchange Commission filings are also available to
the public on the Securities and Exchange Commission's Internet website at
http://www.sec.gov.
We have filed with the SEC a registration statement on Form S-3 that
registers the securities we are offering by this prospectus. The registration
statement, including the attached exhibits and schedules, contains additional
relevant information about us and the securities offered. The rules and
regulations of the SEC allow us to omit certain information included in the
registration statement from this prospectus.
The SEC allows us to "incorporate by reference" information into this
prospectus that we have filed with it. This means that we can disclose important
information to you by referring you to another document filed separately with
the SEC. The information incorporated by reference is considered to be part of
this prospectus, except for any information that is superseded by information
that is included directly in this document or incorporated by reference in
documents subsequently filed with the SEC.
We incorporate by reference the documents listed below and any future
filings we make with the SEC under Section 13(a), 13(c), 14 or 15(d) of the
Securities Exchange Act of 1934 (i) after the date of the filing of this
registration statement and prior to its effectiveness and (ii) until all of the
notes and common stock to which this prospectus relates have been sold or the
offering is otherwise terminated:
o Our Annual Report on Form 10-K for our fiscal year ended
October 31, 2001.
o Our Report on Form 8-K filed on December 13, 2001.
o The description of our common stock, par value $.01 per share,
contained in our registration statement on Form 8-A filed on
March 3, 1987.
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You may request a copy of these filings, at no cost, by writing to us
at the following address or telephoning us at (203) 775-9000 between the hours
of 9:00 a.m. and 4:00 p.m., Eastern Standard Time:
Photronics, Inc.
Investors Relations Department
15 Secor Road
Brookfield, CT 06804
You should rely only on the information incorporated by reference or
provided in this prospectus or any prospectus supplement. We have not authorized
anyone else to provide you with different or additional information. This
prospectus is an offer to sell or to buy only the securities referred to herein,
but only under circumstances and in jurisdictions where it is lawful to do so.
The information contained in this prospectus is current only as of the date
hereof.
4
SUMMARY
This summary contains basic information about us and this offering.
Because it is a summary, it does not contain all of the information that you
should consider before investing. You should read this entire prospectus
carefully, including the section entitled "Risk Factors" and our financial
statements and the related notes thereto before making an investment decision.
Photronics
We are a leading manufacturer of photomasks, which are used primarily
by the semiconductor industry in the manufacture of integrated circuits. A
photomask is a high precision photographic quartz plate that is used as a master
to transfer microscopic circuit patterns onto semiconductor wafers during the
fabrication of integrated circuits.
We principally operated from 11 facilities at December 31, 2001, five
of which were located in the United States, three in Europe and one in each of
Korea, Singapore and Taiwan. Based upon available market information, we believe
that we have a larger share of the U. S. market for photomasks than any other
photomask manufacturer and are one of the largest photomask manufacturers in the
world.
Photomasks are a key element in the manufacture of semiconductors. They
are used to transfer integrated circuit patterns onto semiconductor wafers
during the fabrication of integrated circuits and, to a lesser extent, other
types of electronic components. Each integrated circuit consists of a series of
separate patterns, each of which is imaged onto a different photomask. The
resulting series of photomasks is then used to successively layer the circuit
patterns onto the semiconductor wafer. Both semiconductor design activity and
increases in the complexity of integrated circuits are driving the demand for
photomasks. As the complexity of integrated circuits has increased, so has the
number and complexity of photomasks used in the manufacture of a single circuit.
Photomasks are manufactured by independent manufacturers like us, and
by captive manufacturers, which are semiconductor manufacturers that produce
photomasks almost exclusively for their own use. Since the mid-1980s, there has
been a trend in the United States and Europe toward the divestiture or closing
of captive photomask operations by semiconductor manufacturers and an increase
in the share of the market served by independent manufacturers.
We sell our products primarily through a direct sales force. At
December 31, 2001, we conducted our sales activities from seven sales locations
in the United States, seven in Europe, and one in each of Singapore, Korea and
Taiwan.
We are a Connecticut corporation, organized in 1969. Our principal
executive offices are located at 1061 East Indiantown Road, Suite 310, Jupiter,
Florida 33477, telephone (561) 745-1222.
5
The Offering
Securities Offered......................... $200,000,000 principal amount of 4 3/4% Convertible Subordinated Notes
due 2006.
Maturity Date.............................. December 15, 2006.
Interest................................... 4 3/4% per annum on the principal amount from December 12, 2001,
payable semi-annually in arrears in cash on June 15 and December 15
of each year, beginning June 15, 2002.
Conversion................................. You may convert the notes into shares of our common stock at a
conversion rate of 27.027 shares per $1,000 principal amount of
notes, subject to adjustment, prior to the final maturity date.
Subordination.............................. The notes are subordinated to all of our existing and future senior
indebtedness and are effectively subordinated to all debt and other
liabilities of our subsidiaries. As of October 31, 2001, we had
$58.3 million of senior indebtedness outstanding and our
subsidiaries had $283.1 million of liabilities outstanding,
excluding liabilities owed to us and minority interests. The notes
rank equally with our existing 6.00% convertible subordinated notes
due 2004. Neither we nor any of our subsidiaries are prohibited from
incurring debt, including senior indebtedness, under the indenture.
Provisional Redemption..................... We may redeem the notes in whole or in part at any time prior to
December 17, 2004 at a redemption price equal to the principal
amount of the notes to be redeemed if:
o the closing price of the common stock has
exceeded 150% of the conversion price for
any 20 trading days in the consecutive 30-day
trading period ending on the day before the
date of the notice of redemption; and
o the shelf registration statement covering
resales of the notes and the common stock is
effective and expected to remain effective for
the 30 days following the redemption date.
If we redeem the notes under these circumstances, we will make an
additional payment equal to the aggregate amount of the interest
otherwise payable on the notes from the last day through which interest
was paid on the notes, or December 12, 2001 if no interest has been
paid, through December 17, 2004.
6
Non-Provisional Redemption................. We may redeem any of the notes beginning December 17, 2004, by
giving you at least 30 days' notice. We may redeem the notes either
in whole or in part at redemption prices declining from 101.90% of
their principal amount to 100% on December 15, 2006, plus accrued
and unpaid interest.
Fundamental Change......................... If a fundamental change (as described under "Description of
Notes--Redemption at Option of the Holder") occurs prior to maturity,
you may require us to purchase all or part of your notes at a
redemption price equal to 100% of their principal amount, plus
accrued and unpaid interest.
Use of Proceeds............................ We will not receive any of the proceeds from the sale by any selling
security holder of the notes or of the shares of common stock
issuable upon conversion of the notes. See "Use of Proceeds."
Trading ................................... The notes issued in the initial private placement are eligible for
trading in the PORTAL system. However, notes sold pursuant to this
prospectus will no longer be eligible for trading in the PORTAL
system. We do not intend to list the notes on any national
securities exchange. Our common stock is quoted on the Nasdaq
National Market under the symbol "PLAB."
7
RISK FACTORS
You should carefully consider the risks described below before making
an investment decision. The risks described below are not the only ones facing
our company. Additional risks not presently known to us or that we currently
deem immaterial may also impair our business operations.
Our business, financial condition or results of operations could be
materially adversely affected by any of these risks. The trading price of the
notes and our common stock could decline due to any of these risks, and you may
lose all or part of your investment.
This prospectus also contains forward-looking statements that involve
risks and uncertainties. Our actual results could differ materially from those
anticipated in these forward-looking statements as a result of risks,
uncertainties and other factors, including the risks faced by us described below
and elsewhere in this prospectus.
Risks Relating to Our Business
We are dependent on the semiconductor industry and the semiconductor
industry as a whole is volatile and is currently experiencing a significant
downturn.
We sell substantially all of our photomasks to semiconductor designers
and manufacturers. We believe that the demand for photomasks primarily depends
on integrated circuit design activity rather than the volume of semiconductor
sales. Consequently, an increase in semiconductor sales does not necessarily
result in a corresponding increase in photomask sales. In addition, the reduced
use of customized integrated circuits, a reduction in design complexity or other
changes in the technology or methods of manufacturing semiconductors or a
slowdown in the introduction of new semiconductor designs could reduce demand
for photomasks even if demand for semiconductors increases. Further, advances in
semiconductor and photomask design and semiconductor production methods could
reduce the demand for photomasks. Historically, the semiconductor industry has
been volatile, with sharp periodic downturns and slowdowns. These downturns have
been characterized by, among other things, diminished product demand, excess
production capacity and accelerated erosion of selling prices. The semiconductor
industry is presently in a downturn, and we expect conditions to remain weak in
fiscal 2002. This downturn is among the worst we have experienced and has had a
significant impact on our net sales and operating results. We cannot assure you
as to when the current downturn will end or that it will not continue to worsen
and to materially and adversely affect our business, financial condition and
operating results in the near term.
Our quarterly operating results fluctuate significantly and may
continue to do so in the future.
We have experienced fluctuations in our quarterly operating results and
we anticipate that such fluctuations will continue and could intensify in the
future. Fluctuations in operating results may result in volatility in the prices
of our common stock and the notes. Operating results may fluctuate as a result
of many factors, including size and timing of orders and shipments, loss of
significant customers, product mix, technological change, fluctuations in
manufacturing yields, competition and general economic conditions. Our customers
generally order our products on an
8
as-needed basis, and substantially all of our net sales in any quarter are
dependent on orders received during that quarter. Since we operate with little
backlog and the rate of new orders may vary significantly from month to month,
our capital expenditures and expense levels are based primarily on sales
forecasts. Consequently, if anticipated sales in any quarter do not occur when
expected, capital expenditures and expense levels could be disproportionately
high, and our operating results would be adversely affected. Due to the
foregoing factors, we believe that period-to-period comparisons of our operating
results are not necessarily meaningful and that these comparisons cannot be
relied upon as indicators of future performance. In addition, in future quarters
our operating results could be below the expectations of public market analysts
and investors, which, in turn, could materially adversely affect the market
prices of our common stock and of the notes.
Our industry is subject to rapid technological change and we might fail
to remain competitive.
The photomask industry has been and is expected to continue to be
characterized by technological change and evolving industry standards. In order
to remain competitive, we will be required to continually anticipate, respond to
and utilize changing technologies. In particular, we believe that as
semiconductor geometries continue to become smaller, we will be required to
manufacture complex optically enhanced reticles, including optical proximity
correction and phase-shift photomasks. In addition, demand for photomasks has
been and could in the future be adversely affected by changes in methods of
semiconductor manufacturing (which could affect the type or quantity of
photomasks utilized) or increased market acceptance of alternative methods of
transferring circuit designs onto semiconductor wafers, which could reduce or
eliminate the need for photomasks. If we are unable, due to resource,
technological or other constraints, to anticipate, respond to or utilize these
or other changing technologies, our business and results of operations could be
materially adversely affected.
We may not be able to obtain a new bank facility.
As of the end of the fourth quarter of fiscal 2001, we were not in
compliance with the covenant in our revolving credit agreement that requires us
to maintain a minimum interest coverage ratio for a trailing four-quarter
period. As a result, on December 12, 2001, we repaid all outstanding loans under
the revolving credit agreement, which totaled $57.7 million, out of the proceeds
of the private placement of the notes and terminated the revolving credit
agreement. We are seeking to replace the revolving credit agreement with a new
bank facility. However, we can give you no assurance that we will be able to
obtain a new bank facility on reasonable terms, if at all. If we are unable to
obtain a replacement bank facility or an alternative short-term liquidity
facility, our operational flexibility and short and intermediate term liquidity
may be materially adversely affected.
Our operations will continue to require significant capital, which we
may not be able to obtain.
The manufacture of photomasks requires a significant investment in
fixed assets. We expect that we will be required to continue to make significant
capital expenditures in connection with our operations. We also must make
capital expenditures in order to maintain technological leadership. Our planned
capital expenditures for fiscal 2002 are $125 million. At October 31, 2001, we
had commitments outstanding for capital expenditures of approximately $81
million.
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There can be no assurance that we will be able to obtain the additional capital
required in connection with our operations on reasonable terms, if at all, or
that any such expenditures will not have a material adverse effect on our
business and results of operations.
We have been dependent on sales to a limited number of large customers;
the loss of any of these customers or any reduction in orders from these
customers could materially affect our sales.
Historically, we have sold a significant proportion of our products and
services to a limited number of fabricators of semiconductor products. During
fiscal 2000 and 2001, no single customer accounted for more than 10% of our
sales, but our five largest customers, in the aggregate, accounted for 36% of
our net sales in 2000 and 32% in 2001. During fiscal 1999, two customers each
accounted for approximately 10% of our net sales. None of our customers has
entered into a long-term agreement requiring it to purchase our products. The
loss of a significant customer or any reduction or delays in orders from any
significant customer, including reductions or delays due to customer departures
from recent buying patterns, or market, economic or competitive conditions in
the semiconductor industry, could adversely affect us. The ongoing consolidation
of semiconductor manufacturers may increase the likelihood and adverse effect of
losing a significant customer.
We depend on a small number of suppliers for equipment and raw
materials and, if our suppliers do not deliver their products to us, we may be
unable to deliver our products to our customers.
We rely on a limited number of photomask equipment manufacturers to
develop and supply the equipment we use. These equipment manufacturers currently
require lead times of approximately 10 to 14 months between the order and the
delivery of certain photomask imaging and inspection equipment. The failure of
such manufacturers to develop or deliver such equipment on a timely basis could
have a material adverse effect on our business and results of operations.
Further, we rely on equipment manufacturers to develop future generations of
manufacturing equipment to meet our requirements. In addition, the manufacturing
equipment necessary to produce advanced photomasks could become prohibitively
expensive.
We use high precision quartz photomask blanks, pellicles (which are
protective transparent cellulose membranes) and electronic grade chemicals in
our manufacturing processes. There are a limited number of suppliers of these
raw materials, and we have no long-term contracts for the supply of these raw
materials. Any delays or quality problems in connection with significant raw
materials, particularly photomask blanks, could cause delays in shipments of
photomasks, which could adversely affect our business and results of operations.
The fluctuation of exchange rates with respect to prices of significant raw
materials used in manufacturing also could have a material adverse effect on our
business and results of operations, although they have not been material to
date.
We face risks associated with manufacturing difficulties.
Our complex manufacturing processes require the use of expensive and
technologically sophisticated equipment and materials and are continuously
modified in an effort to improve manufacturing yields and product quality.
Minute impurities or other difficulties in the manufacturing process can lower
manufacturing yields and make products unmarketable.
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Moreover, manufacturing leading-edge photomasks is more complex and time
consuming than manufacturing less advanced photomasks, and may lead to general
delays in the manufacturing of all levels of photomasks. We have, on occasion,
experienced manufacturing difficulties and capacity limitations that have
delayed our ability to deliver products within the time frames contracted for by
our customers. We cannot assure you that we will not experience these or other
manufacturing difficulties, or be subject to increased costs or production
capacity constraints in the future, any of which could result in a loss of
customers or could otherwise have a material adverse effect on our business and
results of operations.
We are expanding and diversifying our operations, and if we fail to
manage our expanding and more diverse operations successfully, our business and
financial results may be materially and adversely affected.
We have recently experienced rapid expansion of our operations,
primarily due to our acquisitions of existing photomask manufacturing
operations. In particular, in 2000 we completed our merger with Align-Rite
International, Inc. and acquired a majority share of PSMC, a photomask
manufacturer based in Taiwan. In August 2001, we acquired a controlling equity
interest in PKL Co., Ltd., a leading supplier of photomasks in Korea, and we
purchased the photomask manufacturing assets of Conexant Systems, Inc., a
semiconductor manufacturer based in Newport Beach, California. We may make
additional acquisitions in the future.
This expansion has placed, and is expected to continue to place,
significant demands on our administrative, operational and financial personnel
and systems. Managing acquired operations entails numerous operational and
financial risks, including difficulties in the assimilation of acquired
operations, diversion of management's attention to other business concerns,
amortization of acquired intangible assets and potential loss of key employees
of acquired operations. Sales of acquired operations also may decline following
an acquisition, particularly if there is an overlap of customers served by us
and the acquired operation, and these customers transition to another vendor in
order to ensure a second source of supply. Furthermore, in connection with any
future acquisitions, we would be required to utilize our cash reserves and/or
issue new securities, which could have a dilutive effect on our earnings per
share, particularly during the initial integration of the acquired operations
into our operations. In addition, we have experienced in the past, and could
experience in the future, difficulties and delays in ramping up new production
facilities. If we fail to successfully manage our expanding operations, it could
have a material adverse effect on our business and results of operations.
We operate in a highly competitive industry.
The photomask industry is highly competitive, and most of our customers
utilize more than one photomask supplier. In the United States, we compete
primarily with DuPont Photomasks, Inc. and, to a lesser extent, with other
independent photomask suppliers. Internationally, our competitors include
Compugraphics, Dai Nippon Printing, DuPont Photomasks, Hoya, Taiwan Mask Corp.
and Toppan. We also compete with semiconductor manufacturers' captive photomask
manufacturing operations. We expect to face continued competition from these and
other suppliers in the future. Certain competitors have substantially greater
financial, technical, sales, marketing and other resources than we do. We
believe that consistency of product quality and timeliness of delivery are the
principal factors considered by customers in selecting their photomask
suppliers. Our inability to meet these requirements could
11
adversely affect our sales. In the past, competition led to pressure to reduce
prices which, we believe, contributed to the decrease in the number of
independent manufacturers. This pressure to reduce prices may continue in the
future.
Our substantial international operations are subject to additional
risks.
International sales, which exclude export sales, accounted for
approximately 27.5% of our net sales in fiscal 2000 and 36.0% in 2001. We
believe that maintaining significant international operations requires us to
have, among other things, a local presence in the markets in which we operate.
This requires a significant investment of financial, management, operational and
other resources. Since 1996, we have significantly expanded our operations in
international markets by acquiring existing operations in the United Kingdom,
Germany and Switzerland, establishing manufacturing operations in Singapore and
acquiring majority equity interests in photomask manufacturing operations in
Korea and Taiwan. In international markets, existing independent photomask
suppliers, including, in certain markets, DuPont Photomasks, have significant
local presences and market share.
Operations outside the United States are subject to inherent risks,
including fluctuations in exchange rates, political and economic conditions in
various countries, unexpected changes in regulatory requirements, tariffs and
other trade barriers, difficulties in staffing and managing foreign operations,
longer accounts receivable payment cycles and potentially adverse tax
consequences. These factors may have a material adverse effect on our ability to
generate sales outside the United States and, consequently, on our business and
results of operations.
Our operating results are influenced by the performance of Asian
economies.
In recent years, Asian economies have been highly volatile and
recessionary, resulting in significant fluctuations in local currencies and
other instabilities. These instabilities may continue or worsen, which could
have a material adverse impact on our financial position and results of
operations. Approximately 18.9% of our sales in fiscal 2001 were derived from
this region. We expect this percentage to be higher in fiscal 2002. Our exposure
to the business risks presented by Asian economies will increase to the extent
that we continue to expand our operations in that region.
Our business depends on management and technical personnel, who are in
great demand.
Our success, in part, depends upon key managerial, engineering and
technical personnel, as well as our ability to continue to attract and retain
additional personnel. The loss of certain key personnel could have a material
adverse effect upon our business and results of operations. There can be no
assurance that we can retain our key managerial, engineering and technical
employees or that we can attract similar additional employees in the future. We
believe that we provide competitive compensation and incentive packages to our
employees.
We may be unable to enforce or defend our ownership and use of
proprietary technology.
We believe that the success of our business depends more on our
proprietary technology, information and processes and know-how than on patents
or trademarks. Much of our proprietary
12
information and technology relating to manufacturing processes is not patented
and may not be patentable. We cannot assure you that:
o we will be able to adequately protect our technology;
o competitors will not independently develop similar technology;
or
o foreign intellectual property laws will adequately protect our
intellectual property rights.
We may become the subject of infringement claims or legal proceedings
by third parties with respect to current or future products or processes. Any
such claims or litigation, with or without merit, to enforce or protect our
intellectual property rights or to defend our company against claimed
infringement of the rights of others could result in substantial costs,
diversion of resources and product shipment delays or could force us to enter
into royalty or license agreements rather than dispute the merits of these
claims. Any of the foregoing could have a material adverse effect on our
business, results of operations and financial position.
We may be unprepared for changes to environmental laws and regulations
and we may have liabilities arising from environmental matters.
We are subject to numerous environmental laws and regulations that
impose various environmental controls on, among other things, the discharge of
pollutants into the air and water and the handling, use, storage, disposal and
clean-up of solid and hazardous wastes. Changes in these laws and regulations
may have a material adverse effect on our financial position and results of
operations. Any failure by us to adequately comply with these laws and
regulations could subject us to significant future liabilities.
In addition, these laws and regulations may impose clean-up liabilities
on current and former owners and operators of real property without regard to
fault and these liabilities may be joint and several with other parties. In the
past, we have been involved in remediation activities relating to our
properties. We believe, based upon current information, that environmental
liabilities relating to these activities or other matters will not be material
to our financial position or results of operations. However, there can be no
assurances that we will not incur any material environmental liabilities in the
future.
Our production facilities could be damaged or disrupted by a natural
disaster, labor strike, war or political unrest.
A number of our facilities are in seismically active areas. Although we
have obtained property damage and business interruption insurance, a major
catastrophe such as an earthquake or other natural disaster at any of our sites,
or political unrest, war, labor strikes or work stoppages in any of the areas
where we conduct operations, could result in a prolonged interruption of our
business. Any disruption resulting from these events could cause significant
delays in shipments of our products and the loss of sales and customers, and we
do not know whether our insurance would adequately compensate us for any of
these events.
Regional electric shortages may harm our operations.
13
Recently, California experienced an electric power supply shortage that
resulted in the intermittent loss of power in some areas in the form of rolling
blackouts. While we have not experienced any power failures to date, a blackout
could affect our ability to manufacture photomasks and meet scheduled deliveries
at this part of our network. If blackouts were to interrupt our power supply, we
would be temporarily unable to continue operations at one of our facilities. Any
such interruption in our ability to continue operations at our facilities could
damage our reputation, harming our ability to retain existing customers.
Events of September 11, 2001
Fortunately, none of our employees was lost or injured and none of our
properties or records were damaged as a result of the terrorist attacks that
occurred in the United States on September 11, 2001. Although our operations
during that week were hampered by the temporary disruption of the transportation
and communications infrastructure, the impact was not material. However, at this
time, we are unable to predict the long-term impact of these events, or of the
domestic and foreign response, on either our industry as a whole or on our
operations and financial condition in particular.
Risks of Investing in These Notes
The notes are subordinated in right of payment to other indebtedness
and structurally subordinated.
The notes are unsecured and subordinated in right of payment in full to
all our existing and future senior indebtedness. As a result of this
subordination, in the event of our liquidation or insolvency, a payment default
with respect to senior indebtedness, a covenant default with respect to senior
indebtedness or upon acceleration of the notes due to an event of default, our
assets will be available to pay obligations on the notes only after all senior
indebtedness has been paid in full, and there may not be sufficient assets
remaining to pay amounts due on any or all of the notes then outstanding. The
indenture under which the notes have been issued does not restrict our ability
to incur indebtedness constituting senior indebtedness. We conduct our
operations through our subsidiaries. Accordingly, our ability to meet our cash
obligations depends, in part, upon the ability of our subsidiaries to make
distributions to us, which is and will continue to be restricted by, among other
limitations, applicable provisions of law. The indenture does not restrict the
ability of our subsidiaries to enter into contractual restrictions on their
ability to make distributions to us. Our right to participate in the assets of
any subsidiary (and thus the ability of holders of the Notes to benefit
indirectly from these assets) is generally subject to the prior claims of
creditors, including trade creditors, of that subsidiary. The notes, therefore,
are structurally subordinated to the claims of creditors, including trade
creditors, of our subsidiaries. As of October 31, 2001, we had $58.3 million of
senior indebtedness outstanding. As of October 31, 2001, our subsidiaries had
outstanding liabilities of $283.1 million, excluding liabilities owed to us and
minority interests.
We may be unable to redeem the notes if we experience a fundamental
change.
If we experience a fundamental change, you are entitled to redeem all
or a portion of your notes, but we may not have enough funds to pay the
redemption price for all tendered notes. Any future credit agreements or other
agreements relating to our indebtedness may:
14
o contain provisions requiring payment of indebtedness after a
fundamental change; or
o expressly prohibit our repurchase of the notes after a
fundamental change.
If we experience a fundamental change at a time when we are prohibited
from purchasing or redeeming notes, we could seek the consent of our lenders to
redeem the notes or could attempt to refinance such debt. If we should fail to
obtain our lenders' consent or refinance such debt, we could not purchase or
redeem the notes. Our failure to redeem tendered notes would constitute an event
of default under the indenture which, in turn, might constitute a default under
the terms of other indebtedness. If this were to occur, or if a fundamental
change were to constitute an event of default under any senior indebtedness, the
indenture's subordination provisions would restrict us from paying you.
The term "fundamental change" is limited to specified transactions and
may not include other events that might adversely affect our financial
condition. If we were to experience a fundamental change, our obligation to
offer to redeem the notes would not necessarily afford you protection. See
"Description of Notes--Redemption at Option of the Holder."
You may have difficulty selling the notes because no trading market
exists for the notes.
Currently, there is no existing trading market for the notes, and we
cannot assure you that a trading market will develop or that any trading market
that develops will continue or allow you to sell your notes quickly. We also
cannot assure you of the price at which you will be able to sell your notes if
you are able to sell them at all. The initial purchasers of the notes have
advised us that they intend to make a market in the notes, but they are not
obligated to do so, and their market making may be interrupted or discontinued
without notice.
Our notes may not be rated or may receive a lower rating than
anticipated.
We believe it is likely that one or more rating agencies may rate the
notes. However, our notes may not be rated by all rating agencies. If one or
more rating agencies assigns the notes a rating lower than that expected by
investors, the market price of the notes and our common stock could be
materially and adversely affected.
Our stock price may continue to experience large short-term
fluctuations that may significantly affect the trading price of the notes.
In recent years, the price of our common stock has fluctuated greatly.
Fluctuations in the trading price of our common stock will affect the trading
price of the notes. These price fluctuations have been rapid and severe and have
left investors little time to react. The price of our common stock may continue
to fluctuate greatly in the future due to a variety of factors, including:
o quarter to quarter variations in our operating results;
o shortfalls in our sales or earnings from levels expected by
securities analysts;
15
o announcements of technological innovations or new products by
us or other companies; and
o slowdowns or downturns in the semiconductor industry.
Future public sales of our common stock may decrease the market price
of our common stock.
In connection with our acquisition of a controlling interest in PKL
Co., Ltd., our Korean subsidiary, we have granted the holders of 1,000,000
shares of PKL common stock the option to require us to purchase these PKL shares
for an aggregate option exercise price equal to the cash value of 1,410,000
shares of our common stock determined at the time of exercise or such other
consideration as the parties may agree to. This option may be exercised during
the period from February 2002 to August 2005. If we issue these shares, we must
register the shares for resale in the public market. Sales of these shares, or
the perception that sales will occur, may decrease the market price of our
common stock.
16
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Statements contained in this prospectus, including the documents that
are incorporated by reference as set forth in "Where You Can Find More
Information", that are not historical facts are "forward-looking statements"
within the meaning of Section 27A of the Securities Act of 1933. Forward looking
statements are based on management's beliefs, as well as assumptions made by and
information currently available to management. These statements involve known
and unknown risks, uncertainties, and other factors that may cause our or our
industry's results, levels of activity, performance, or achievements to be
materially different from any future results, levels of activity, performance,
or achievements expressed or implied by such forward-looking statements. Such
factors include, among others, those listed under "Risk Factors" and elsewhere
in this prospectus or the accompanying prospectus supplement. In some cases, you
can identify forward-looking statements by terminology such as "may," "will,"
"should," "intend," "expect," "plan," "anticipate," "believe," "estimate,"
"predict," "potential," or "continue" or the negative of such terms or other
comparable terminology.
Although we believe that the expectations reflected in the
forward-looking statements are reasonable, we cannot guarantee future results,
events, levels of activity, performance, or achievements. We do not assume
responsibility for the accuracy and completeness of the forward-looking
statements. We do not intend to update any of the forward-looking statements
after the date of this prospectus to conform them to actual results.
17
USE OF PROCEEDS
We will not receive any proceeds from the sale by the selling holders
of the notes and the common stock into which the notes are convertible.
RATIO OF EARNINGS TO FIXED CHARGES
Year Ended
----------------------------------------------------------------------------------------
Pro forma
November 2, November 1, October 31, October 31, October 31, October 31,
1997 1998 1999 2000 2001 2001 (1)
----------- ----------- ----------- ----------- ----------- -----------
Dollars in thousands
Ratio....................... 19.4 7.4 4.0 2.2 -- --
Deficiency of earnings
available to cover
fixed charges............ -- -- -- -- $(3,027) $(6,902)
- -------------
(1) Calculated as if the proceeds from the issuance of the debt securities had
occurred at the beginning of the year.
For purposes of computing the ratio of earnings to fixed charges, earnings
consists of the sum of our pretax income from continuing operations and fixed
charges less capitalized interest. Fixed charges consist of interest expense,
amortization of debt discount, premium and expense, capitalized interest and a
portion of lease payments considered to represent an interest factor.
18
DESCRIPTION OF NOTES
The notes were issued under an indenture dated as of December 12, 2001,
between Photronics and The Bank of Nova Scotia Trust Company of New York,
trustee. The notes are covered by a registration rights agreement dated December
12, 2001 among us and the initial purchasers listed in that agreement.
The following description is a summary of the material provisions of
the notes and the indenture. It does not purport to be complete. This summary is
subject to and is qualified by reference to all the provisions of the indenture,
including the definitions of certain terms used in the indenture. Wherever
particular provisions or defined terms of the indenture or form of note are
referred to, these provisions or defined terms are incorporated in this
prospectus by reference.
As used in this "Description of Notes" section, references to
"Photronics," "we," "our" or "us" refer solely to Photronics and not to our
subsidiaries.
General
In December 2001, we issued $200,000,000 aggregate principal amount of
the notes in a private placement. The notes were issued only in denominations of
$1,000 and multiples of $1,000. The notes will mature on December 15, 2006
unless earlier converted, redeemed at our option or redeemed at your option upon
a fundamental change.
The notes are general unsecured obligations of Photronics. Our payment
obligations under the notes are subordinated to our senior indebtedness as
described under "Subordination of Notes." The notes are convertible into common
stock as described under "Conversion of Notes."
Neither we nor any of our subsidiaries are subject to any financial
covenants under the indenture. In addition, neither we nor any of our
subsidiaries are restricted under the indenture from paying dividends, incurring
debt, or issuing or repurchasing our securities.
You are not afforded protection under the indenture in the event of a
highly leveraged transaction or a change in control of us except to the extent
described below under "Redemption at Option of the Holder."
The notes bear interest at an annual rate of 4 3/4% from December 12,
2001. We will pay interest on June 15 and December 15 of each year, beginning
June 15, 2002, to record holders at the close of business on the preceding June
1 and December 1, as the case may be.
We pay interest either:
o by check mailed to your address as it appears in the note
register, provided that if you are a holder with an aggregate
principal amount in excess of $2.0 million, you will be paid,
at your written election, by wire transfer in immediately
available funds; or
o by transfer to an account maintained by you in the United
States.
19
However, payments to The Depository Trust Company, New York, New York, which we
refer to as DTC, will be made by wire transfer of immediately available funds to
the account of DTC or its nominee. Interest will be computed on the basis of a
360-day year composed of twelve 30-day months.
We will maintain an office in the Borough of Manhattan, The City of New
York, where we will pay the principal and premium, if any, on the notes and you
may present the notes for conversion, registration of transfer and exchange for
other denominations. This office will initially be an office or agency of the
trustee.
Conversion of Notes
You may convert your notes, in whole or in part, into common stock
prior to the final maturity date of the notes, subject to prior redemption of
the notes. If we call notes for redemption, you may convert the notes only until
the close of business on the business day prior to the redemption date unless we
fail to pay the redemption price. If you have submitted your notes for
redemption upon a fundamental change, you may convert your notes only if you
withdraw your redemption election. You may convert your notes in part so long as
this part is $1,000 principal amount or an integral multiple of $1,000.
The initial conversion rate for the notes is 27.027 shares of common
stock per $1,000 principal amount of notes, subject to adjustment as described
below. If any note is converted during the period from, but excluding, a record
date for an interest payment date, to that interest payment date, then unless
that note has been called for redemption on a redemption date that occurs during
such period (in which case we will not be required to pay interest on such
interest payment date with respect to such note), the notes must be accompanied
by funds equal to the interest payable on that interest payment date on the
principal amount so converted; provided that no such payment need be made to the
extent any overdue interest exists at the time of conversion with respect to
such note.
To convert your note into common stock you must:
o complete and manually sign the conversion notice on the back
of the note or facsimile of the conversion notice and deliver
this notice to the conversion agent;
o surrender the note to the conversion agent;
o if required, furnish appropriate endorsements and transfer
documents;
o if required, pay all transfer or similar taxes; and
o if required, pay funds equal to interest payable on the next
interest payment date.
The date you comply with these requirements is the conversion date
under the indenture.
We will adjust the conversion rate if any of the following events
occurs:
1. we issue common stock as a dividend or distribution on our common
stock;
20
2. we issue to all holders of common stock rights or warrants to purchase
our common stock at a price per share less than the current market
price of our common stock;
3. we subdivide or combine our common stock;
4. we distribute to all holders of our common stock, shares of our
capital stock, evidences of indebtedness or assets, including
securities but excluding:
o rights or warrants listed in (2) above;
o dividends or distributions listed in (1) above; and
o cash distributions;
5. we distribute cash, excluding any dividend or distribution in
connection with our liquidation, dissolution or winding up or any
quarterly cash dividend on our common stock to the extent that the
aggregate cash dividend per share of common stock in any quarter does
not exceed the greater of:
o the amount per share of common stock of the next preceding
quarterly cash dividend on the common stock to the extent that
the preceding quarterly dividend did not require an adjustment of
the conversion rate pursuant to this clause (5), as adjusted to
reflect subdivisions or combinations of the common stock; and
o 3.75% of the average of the last reported sale price of the
common stock during the ten trading days immediately prior to the
declaration date of the dividend.
If an adjustment is required to be made under this clause (5) as
a result of a distribution that is a quarterly dividend, the
adjustment would be based upon the amount by which the
distribution exceeds the amount of the quarterly cash dividend
permitted to be excluded pursuant to this clause (5). If an
adjustment is required to be made under this clause (5) as a
result of a distribution that is not a quarterly dividend, the
adjustment would be based upon the full amount of the
distribution;
6. we or one of our subsidiaries makes a payment in respect of a tender
offer or exchange offer for our common stock to the extent that the
cash and value of any other consideration included in the payment per
share of common stock exceeds the current market price per share of
common stock on the trading day next succeeding the last date on which
tenders or exchanges may be made pursuant to such tender or exchange
offer; and
7. someone other than us or one of our subsidiaries makes a payment in
respect of a tender offer or exchange offer in which, as of the
closing date of the offer, our board of directors is not recommending
rejection of the offer. The adjustment referred to in this clause (7)
will only be made if:
21
o the tender offer or exchange offer is for an amount that
increases the offeror's ownership of common stock to more than
25% of the total shares of common stock outstanding; and
o the cash and value of any other consideration included in the
payment per share of common stock exceeds the current market
price per share of common stock on the business day next
succeeding the last date on which tenders or exchanges may be
made pursuant to the tender or exchange offer.
However, the adjustment referred to in this clause (7) will
generally not be made if as of the closing of the offer, the
offering documents disclose a plan or an intention to cause us to
engage in a consolidation or merger or a sale of all or
substantially all of our assets.
To the extent that we have a rights plan in effect upon conversion of the
notes into common stock, you will receive, in addition to the common stock, the
rights under the rights plan whether or not the rights have separated from the
common stock at the time of conversion, subject to limited exceptions.
In the event of:
o any reclassification of our common stock;
o a consolidation, merger or combination involving us; or
o a sale or conveyance to another person or entity of all or
substantially all of our property and assets;
in which holders of our common stock would be entitled to receive stock, other
securities, other property, assets or cash for their common stock, upon
conversion of your notes you will be entitled to receive the same type of
consideration which you would have been entitled to receive if you had converted
the notes into our common stock immediately prior to any of these events.
You may in certain situations be deemed to have received a distribution
subject to United States federal income tax as a dividend in the event of any
taxable distribution to holders of common stock or in certain other situations
requiring a conversion rate adjustment. See "United States Federal Tax
Considerations."
We may, from time to time, increase the conversion rate for a period of at
least 20 days if our board of directors has made a determination that this
increase would be in our best interests. Any such determination by our board
will be conclusive. We would give holders at least 15 days' notice of any
increase in the conversion rate. In addition, we may increase the conversion
rate if our board of directors deems it advisable to avoid or diminish any
income tax to holders of common stock resulting from any stock or rights
distribution. See "United States Federal Tax Considerations."
We will not be required to make an adjustment in the conversion rate unless
the adjustment would require a change of at least 1% in the conversion rate.
However, we will carry
22
forward any adjustments that are less than 1% of the conversion rate. Except as
described above in this section, we will not adjust the conversion rate for any
issuance of our common stock or convertible or exchangeable securities or rights
to purchase our common stock or convertible or exchangeable securities.
Optional Redemption by Photronics
We may not optionally redeem the notes if we have failed to pay any
interest on the notes and such failure to pay is continuing. We will issue a
press release if we redeem the notes.
Provisional Redemption
We may redeem the notes in whole or in part at any time prior to December
17, 2004 at a redemption price equal to the principal amount of the notes to be
redeemed plus accrued and unpaid interest to the redemption date if:
o the closing price of the common stock has exceeded 150% of the
conversion price for 20 trading days in the consecutive 30-day trading
period ending on the trading day before the date of the notice of
redemption; and
o the shelf registration statement covering resales of the notes and the
common stock is effective and expected to remain effective for the 30
days following the redemption date and the redemption date would occur
before December 12, 2003.
If the redemption date is an interest payment date, then the interest
payable on such date will be paid to the holder of record on the applicable
record date.
If we redeem the notes under these circumstances, we will make an
additional payment equal to the aggregate amount of the interest otherwise
payable on the notes from the last day through which interest was paid on the
notes, or December 12, 2001 if no interest has been paid, through December 17,
2004. We must make these payments on all notes called for redemption, including
notes converted after the date we mailed the notice.
Non-Provisional Redemption
Beginning December 17, 2004, we may redeem the notes in whole or in part at
the following prices expressed as a percentage of the principal amount, together
with accrued interest to, but excluding the date fixed for redemption:
Redemption Period Redemption Price
----------------- ----------------
Beginning on December 17, 2004 and ending on
December 14, 2005...................................... 101.90%
12-month period beginning December 15, 2005............ 100.95
and 100% if redeemed on December 15, 2006; provided that if the redemption date
is an interest payment date, then the interest payable to such date will be paid
to the holder of record of the notes on the applicable record date. We are
required to give notice of redemption by mail to holders not more than 60 but
not less than 30 days prior to the redemption date.
23
If less than all of the outstanding notes are to be redeemed, the trustee
will select the notes to be redeemed in principal amounts of $1,000 or multiples
of $1,000 by lot, pro rata or by another method the trustee considers fair and
appropriate. If a portion of your notes is selected for partial redemption and
you convert a portion of your notes, the converted portion will be deemed to be
of the portion selected for redemption.
Redemption at Option of the Holder
If a fundamental change of Photronics occurs at any time prior to the
maturity of the notes, you may require us to redeem your notes, in whole or in
part, on a repurchase date that is 30 days after the date of our notice of the
fundamental change. The notes will be redeemable in integral multiples of $1,000
principal amount.
We will redeem the notes at a price equal to 100% of the principal amount
to be redeemed, plus accrued interest to, but excluding, the repurchase date. If
the repurchase date is an interest payment date, we will pay interest to the
record holder on the applicable record date.
We will mail to all record holders a notice of a fundamental change of
Photronics within 10 days after it has occurred. We are also required to deliver
to the trustee a copy of the fundamental change notice. If you elect to redeem
your notes, you must deliver to us or our designated agent, on or before the
30th day after the date of our fundamental change notice, your redemption notice
and any notes to be redeemed, duly endorsed for transfer. We will promptly pay
the redemption price for notes surrendered for redemption following the
repurchase date.
A "fundamental change" of Photronics is any transaction or event (whether
by means of an exchange offer, liquidation, tender offer, consolidation, merger,
combination, reclassification, recapitalization or otherwise) in connection with
which all or substantially all of our common stock is exchanged for, converted
into, acquired for or constitutes solely the right to receive, consideration
which is not all or substantially all common stock that:
o is listed on, or immediately after the transaction or event will be
listed on, a United States national securities exchange, or
o is approved, or immediately after the transaction or event will be
approved, for quotation on the NASDAQ National Market or any similar
United States system of automated dissemination of quotations of
securities prices.
We will comply with any applicable provisions of Rule 13e-4 and any other
tender offer rules under the Exchange Act in the event of a fundamental change.
These fundamental change redemption rights could discourage a potential acquiror
of Photronics. However, this fundamental change redemption feature is not the
result of management's knowledge of any specific effort to obtain control of
Photronics by means of a merger, tender offer or solicitation, or part of a plan
by management to adopt a series of anti-takeover provisions. The term
"fundamental change" is limited to specified transactions and may not include
other events that might adversely affect our financial condition or business
operations. Our obligation to offer to redeem the notes upon a fundamental
change would not necessarily afford you protection in the event of a highly
leveraged transaction, reorganization, merger or similar transaction involving
Photronics.
24
We may be unable to redeem the notes in the event of a fundamental change.
If a fundamental change were to occur, we may not have enough funds to pay the
redemption price for all tendered notes. Any future credit agreements or other
agreements relating to our indebtedness may contain provisions prohibiting
redemption of the notes under certain circumstances, or expressly prohibit our
repurchase of the notes upon a fundamental change or may provide that a
fundamental change constitutes an event of default under that agreement. If a
fundamental change occurs at a time when we are prohibited from purchasing or
redeeming notes, we could seek the consent of our lenders to redeem the notes or
attempt to refinance this debt. If we do not obtain consent, we would not be
permitted to purchase or redeem the notes. Our failure to redeem tendered notes
would constitute an event of default under the indenture, which might constitute
a default under the terms of our other indebtedness. In these circumstances, or
if a fundamental change would constitute an event of default under our senior
indebtedness, the subordination provisions of the indenture would restrict
payments to the holders of notes.
Subordination of Notes
Payment on the notes will, to the extent provided in the indenture, be
subordinated in right of payment to the prior payment in full of all of our
senior indebtedness. The notes also are effectively subordinated to all debt and
other liabilities, including trade payables and lease obligations, if any, of
our subsidiaries.
Upon any acceleration of the principal due on the notes or payment or
distribution of our assets to creditors upon any dissolution, winding up,
liquidation or reorganization, whether voluntary or involuntary, or in
bankruptcy, insolvency, receivership or other similar proceedings, all
principal, premium, if any, and interest or other amounts due on all senior
indebtedness must be paid in full before the holders of the notes are entitled
to receive any payment.
We may not make any payment on the notes if there has occurred (i) a
default in the payment of principal, premium, if any, or interest on (including
a default under any repurchase or redemption obligation with respect to) any
senior indebtedness (ii) any other event of default with respect to any senior
indebtedness, permitting the holders thereof to accelerate the maturity thereof,
and such event of default has not been cured or waived or ceased to exist after
written notice of such event of default has been given to us and the trustee by
any holder of senior indebtedness. In the event that, notwithstanding the
foregoing, we make any payment to the trustee or any holder of notes prohibited
by the foregoing provisions and this fact has been made actually known, at or
prior to the time of payment, to the trustee or the holder, as the case may be,
such payment must be paid over forthwith to us or our trustee in bankruptcy, as
the case may be.
We may resume payments and distributions on the notes upon the date on
which such default is cured or waived or ceases to exist.
Because of the subordination provisions discussed above, in the event of
our bankruptcy, dissolution or reorganization, holders of senior indebtedness
may receive more, ratably, and holders of the notes may receive less, ratably,
than our other creditors. This subordination will not prevent the occurrence of
any event of default under the indenture.
25
The notes are exclusively obligations of Photronics. A substantial portion
of our operations is conducted through our subsidiaries. As a result, our cash
flow and our ability to service our debt, including the notes, is dependent upon
the earnings of our subsidiaries. In addition, we are dependent on the
distribution of earnings, loans or other payments from our subsidiaries. Any
payment of dividends, distributions, loans or advances by our subsidiaries to us
could be subject to statutory or contractual restrictions. Payments to us by our
subsidiaries will also be contingent upon our subsidiaries' earnings and
business considerations.
Our right to receive any assets of any of our subsidiaries upon their
liquidation or reorganization, and therefore the right of the holders to
participate in those assets, will be effectively subordinated to the claims of
that subsidiary's creditors, including trade creditors. In addition, even if we
were a creditor to any of our subsidiaries, our rights as a creditor would be
subordinate to any security interest in the assets of our subsidiaries and any
indebtedness of our subsidiaries senior to that held by us.
The term "senior indebtedness" is defined in the indenture to mean the
principal of (and premium, if any) and interest (including all interest accruing
subsequent to the commencement of any bankruptcy or similar proceeding, whether
or not a claim for post-petition interest is allowable as a claim in any such
proceeding) on, and all fees and other amounts payable in connection with, the
following, whether absolute or contingent, secured or unsecured, due or to
become due, outstanding on the date of the indenture or thereafter created,
incurred or assumed:
(a) our indebtedness to banks, insurance companies and other financial
institutions evidenced by credit or loan agreements, notes or other
written obligations,
(b) all of our other indebtedness (including indebtedness of others
guaranteed by us) other than the notes, which is (i) for money
borrowed or (ii) evidenced by a note, security, debenture, bond or
similar instrument,
(c) our obligations as lessee under leases required to be capitalized on
the balance sheet of the lessee under generally accepted accounting
principles,
(d) our obligations under interest rate and currency swaps, caps, floors,
collars or similar agreements or arrangements,
(e) obligations of Photronics issued or assumed as the deferred purchase
price of property,
(f) obligations of Photronics for the reimbursement of letters of credit
to the extent such obligations are senior indebtedness under clauses
(a) through (c) of this paragraph, and
(g) renewals, extensions, amendments, modifications, restatements and
refundings of, or any indebtedness or obligation issued in exchange
for, any such indebtedness or obligation described in clauses (a)
through (f) of this paragraph;
provided, however, that senior indebtedness does not include any such
indebtedness or obligation if the terms of such indebtedness or obligation (or
the terms of the instrument under which, or pursuant to which, it is issued)
expressly provide that such indebtedness or obligation is not
26
senior in right of payment to the notes, or expressly provide that such
indebtedness or obligation is pari passu with or junior to the notes. The term
does not include our 6.00% convertible subordinated notes due 2004, with which
the notes will rank pari passu.
As of October 31, 2001, we had $58.3 million of senior indebtedness
outstanding and our subsidiaries had $283.1 million of liabilities outstanding,
excluding liabilities owed to us and minority interests. Neither we nor our
subsidiaries are prohibited from incurring debt, including senior indebtedness,
under the indenture. We may from time to time incur additional debt, including
senior indebtedness. Our subsidiaries may also from time to time incur
additional debt and liabilities.
We are obligated to pay reasonable compensation to the trustee and to
indemnify the trustee against certain losses, liabilities or expenses incurred
by the trustee in connection with its duties relating to the notes. The
trustee's claims for these payments will generally be senior to those of
noteholders in respect of all funds collected or held by the trustee.
Merger and Sale of Assets by Photronics
The indenture provides that Photronics may not consolidate with or merge
with or into any other person or convey, transfer or lease its properties and
assets substantially as an entirety to another person, unless among other items:
o Photronics is the surviving person, or the resulting, surviving or
transferee person, if other than Photronics, is organized and existing
under the laws of the United States, any state thereof or the District
of Columbia, or any other country if the merger, consolidation or
other transaction would not impair the rights of holders; and
o the successor person assumes all obligations of Photronics under the
notes and the indenture.
When such a person assumes Photronics' obligations in such circumstances,
subject to certain exceptions, Photronics will be discharged from all
obligations under the notes and the indenture.
Events of Default; Notice and Waiver
The following are events of default under the indenture:
o we fail to pay principal or premium, if any, when due upon redemption
or otherwise on the notes, whether or not the payment is prohibited by
subordination provisions;
o we fail to pay any interest and liquidated damages, if any, on the
notes, when due and such failure continues for a period of 30 days,
whether or not the payment is prohibited by subordination provisions
of the indenture;
o we fail to perform or observe any of the covenants in the indenture
for 60 days after notice;
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o we fail to pay any indebtedness for money borrowed by us in an
aggregate principal amount in excess of $15 million at final maturity
or upon acceleration thereof and such default in payment or
acceleration is not cured or rescinded within 30 days after written
notice as provided in the indenture; or
o certain events involving our bankruptcy, insolvency or reorganization.
The trustee may withhold notice to the holders of the notes of any default,
except defaults in payment of principal, premium, interest or liquidated
damages, if any, on the notes. However, the trustee must consider it to be in
the interest of the holders of the notes to withhold this notice.
If an event of default occurs and continues, the trustee or the holders of
at least 25% in principal amount of the outstanding notes may declare the
principal, premium, if any, and accrued interest and liquidated damages, if any,
on the outstanding notes to be immediately due and payable. In case of certain
events of bankruptcy or insolvency involving us, the principal, premium, if any,
and accrued interest and liquidated damages, if any, on the notes will
automatically become due and payable. However, if we cure all defaults, except
the nonpayment of principal, premium, if any, interest or liquidated damages, if
any, that became due as a result of the acceleration, and meet certain other
conditions, with certain exceptions, this declaration may be cancelled and the
holders of a majority of the principal amount of outstanding notes may waive
these past defaults.
Payments of principal, premium, if any, or interest on the notes that are
not made when due will accrue interest at the annual rate of 4 3/4% from the
required payment date.
The holders of a majority of outstanding notes will have the right to
direct the time, method and place of any proceedings for any remedy available to
the trustee, subject to limitations specified in the indenture.
No holder of the notes may pursue any remedy under the indenture, except in
the case of a default in the payment of principal, premium, if any, or interest
on the notes, unless:
o the holder has given the trustee written notice of an event of
default;
o the holders of at least 25% in principal amount of outstanding notes
make a written request, and offer reasonable indemnity, to the trustee
to pursue the remedy;
o the trustee does not receive an inconsistent direction from the
holders of a majority in principal amount of the notes; and
o the trustee fails to comply with the request within 60 days after
receipt.
Modification and Waiver
The consent of the holders of a majority in principal amount of the
outstanding notes is required to modify or amend the indenture. However, a
modification or amendment requires the consent of the holder of each outstanding
note if it would:
o extend the fixed maturity of any note;
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o reduce the rate or extend the time for payment of interest of any
note;
o reduce the principal amount or premium of any note;
o reduce any amount payable upon redemption or repurchase of any note;
o adversely change our obligation to redeem any note upon a fundamental
change;
o impair the right of a holder to institute suit for payment on any
note;
o change the currency in which any note is payable;
o impair the right of a holder to convert any note;
o adversely modify, in any material respect, the subordination
provisions of the indenture;
o reduce the quorum or voting requirements under the indenture;
o change any obligation of Photronics to maintain an office or agency in
the places and for the purposes specified in the indenture;
o subject to specified exceptions, modify certain of the provisions of
the indenture relating to modification or waiver of provisions of the
indenture; or
o reduce the percentage of notes required for consent to any
modification of the indenture.
We are permitted to modify certain provisions of the indenture without the
consent of the holders of the notes.
Form, Denomination and Registration
We issued the notes in in fully registered form, without interest coupons,
and in denominations of $1,000 principal amount and integral multiples of
$1,000.
Global Note, Book-Entry Form
Notes that were sold to "qualified institutional buyers" as defined in Rule
144A under the Securities Act, whom we refer to as QIBs, were evidenced by
global notes which were deposited with, or on behalf of, DTC and registered in
the name of Cede & Co. as DTC's nominee. Except as set forth below, a global
note may be transferred, in whole or in part, only to another nominee of DTC or
to a successor of DTC or its nominee.
You may hold your interests in a global note directly through DTC if you
are a participant in DTC, or indirectly through organizations that are
participants in DTC (called "participants"). Transfers between participants will
be effected in the ordinary way in accordance with DTC rules and will be settled
in clearing house funds. The laws of some states require that
29
certain persons take physical delivery of securities in definitive form. As a
result, the ability to transfer beneficial interests in the global note to such
persons may be limited.
If you are not a participant, you may beneficially own interests in a
global note held by DTC only through participants, or certain banks, brokers,
dealers, trust companies and other parties that clear through or maintain a
custodial relationship with a participant, either directly or indirectly (called
"indirect participants"). So long as Cede & Co., as the nominee of DTC, is the
registered owner of a global note, Cede & Co. for all purposes will be
considered the sole holder of such global note. Except as provided below, owners
of beneficial interests in a global note will:
o not be entitled to have certificates registered in their names;
o not receive physical delivery of certificates in definitive registered
form; and
o not be considered holders of the global note.
We will pay interest on and the redemption price of a global note to Cede &
Co., as the registered owner of the global note, by wire transfer of immediately
available funds on each interest payment date or the redemption or repurchase
date, as the case may be. Neither we, the trustee nor any paying agent will be
responsible or liable:
o for the records relating to, or payments made on account of,
beneficial ownership interests in a global note; or
o for maintaining, supervising or reviewing any records relating to the
beneficial ownership interests.
We have been informed that DTC's practice is to credit participants'
accounts on that payment date with payments in amounts proportionate to their
respective beneficial interests in the principal amount represented by a global
note as shown in the records of DTC, unless DTC has reason to believe that it
will not receive payment on that payment date. Payments by participants to
owners of beneficial interests in the principal amount represented by a global
note held through participants will be the responsibility of the participants,
as is now the case with securities held for the accounts of customers registered
in "street name."
Because DTC can only act on behalf of participants, who in turn act on
behalf of indirect participants, the ability of a person having a beneficial
interest in the principal amount represented by the global note to pledge such
interest to persons or entities that do not participate in the DTC system, or
otherwise take actions in respect of such interest, may be affected by the lack
of a physical certificate evidencing its interest.
Neither we, the trustee, registrar, paying agent nor conversion agent will
have any responsibility for the performance by DTC or its participants or
indirect participants of their respective obligations under the rules and
procedures governing their operations. DTC has advised us that it will take any
action permitted to be taken by a holder of notes, including the presentation of
notes for exchange, only at the direction of one or more participants to whose
account with DTC interests in the global note are credited, and only in respect
of the principal
30
amount of the notes represented by the global note as to which the participant
or participants has or have given such direction.
DTC has advised us that it is:
o a limited purpose trust company organized under the laws of the State
of New York, and a member of the Federal Reserve System;
o a "clearing corporation" within the meaning of the Uniform Commercial
Code; and
o a "clearing agency" registered pursuant to the provisions of Section
17A of the Exchange Act.
DTC was created to hold securities for its participants and to facilitate
the clearance and settlement of securities transactions between participants
through electronic book-entry changes to the accounts of its participants.
Participants include securities brokers, dealers, banks, trust companies and
clearing corporations and other organizations. Some of the participants or their
representatives, together with other entities, own DTC. Indirect access to the
DTC system is available to others such as banks, brokers, dealers and trust
companies that clear through or maintain a custodial relationship with a
participant, either directly or indirectly.
DTC has agreed to the foregoing procedures to facilitate transfers of
interests in a global note among participants. However, DTC is under no
obligation to perform or continue to perform these procedures, and may
discontinue these procedures at any time. If DTC is at any time unwilling or
unable to continue as depositary and a successor depositary is not appointed by
us within 90 days, we will issue notes in certificated form in exchange for
global notes.
Certificated Notes
QIBs may request that certificated notes be issued in exchange for notes
represented by a global note.
Registration Rights of the Noteholders
We entered into a registration rights agreement with the initial purchasers
under which we are required to use our reasonable best efforts to keep the shelf
registration statement of which this prospectus is a part effective until the
earlier of:
o the time when all of the registrable securities have been sold
pursuant to the shelf registration statement; or
o the expiration of the holding period under Rule 144(k) under the
Securities Act, or any successor provision.
When we use the term "registrable securities" in this section, we are
referring to the notes and the common stock issuable upon conversion of the
notes until the earliest of:
o the effective registration under the Securities Act and the resale of
the securities in accordance with the registration statement;
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o the expiration of the holding period under Rule 144(k) under the
Securities Act; and
o the sale to the public pursuant to Rule 144 under the Securities Act,
or any similar provision then in force, but not Rule 144A.
We may suspend the use of this prospectus under certain circumstances
relating to pending corporate developments, public filings with the SEC and
similar events. Any suspension period may not:
o exceed 30 days in any three-month period; or
o an aggregate of 90 days for all periods in any 12-month period.
Notwithstanding the foregoing, we will be permitted to suspend the use of
this prospectus for up to 60 days in any three-month period under certain
circumstances, relating to possible acquisitions, financings or other similar
transactions.
We will pay predetermined liquidated damages if the shelf registration
statement is not timely made effective or if this prospectus is unavailable for
periods in excess of those permitted above:
o on the notes at an annual rate equal to 0.5% of the aggregate
principal amount of the notes outstanding until the registration
statement is filed or made effective or during the additional period
this prospectus is unavailable; and
o on the common stock that has been converted, at an annual rate equal
to 0.5% of an amount equal to $1,000 divided by the conversion rate
during such periods.
A holder who elects to sell registrable securities pursuant to the shelf
registration statement will be required to:
o be named as a selling security holder in the related prospectus;
o deliver a prospectus to purchasers; and
o be subject to the provisions of the registration rights agreement,
including indemnification provisions.
Under the registration rights agreement, we will:
o pay all expenses of the shelf registration statement;
o provide each registered holder copies of the prospectus;
o notify holders when the shelf registration statement has become
effective; and
o take other reasonable actions as are required to permit unrestricted
resales of the registrable securities in accordance with the terms and
conditions of the registration rights agreement.
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In order to sell your registrable securities, you must complete the
questionnaire that was attached to the offering memorandum for the private
placement of the notes, and deliver it to us prior to your intended
distribution. In order to be named as a selling security holder in the
prospectus at the time of effectiveness of the shelf registration statement, you
must complete and deliver the questionnaire to us on or prior to the tenth
business day before the effectiveness of the registration statement. Upon
receipt of a completed questionnaire after that time, together with any other
information we may reasonably request following the effectiveness, we will file
any amendments to the shelf registration statement or supplements to the related
prospectus as are necessary to permit you to deliver your prospectus to
purchasers of registrable securities, subject to our right to suspend the use of
the prospectus. We will pay the predetermined liquidated damages described above
to the holder if we fail to make the filing in the time required or, if such
filing is a post-effective amendment to the shelf registration statement
required to be declared effective under the Securities Act, if such amendment is
not declared effective within 45 days of the filing. If you do not complete and
deliver a questionnaire or provide the other information we may request, you
will not be named as a selling security holder in the prospectus and will not be
permitted to sell your registrable securities pursuant to the shelf registration
statement. This summary of the registration rights agreement is not complete.
This summary is subject to, and is qualified in its entirety by reference to,
all the provisions of the registration rights agreement.
Rule 144A Information Request
We will furnish to the holders or beneficial holders of the notes or the
underlying common stock and prospective purchasers, upon their request, the
information required under Rule 144A(d)(4) under the Securities Act until such
time as such securities are no longer "restricted securities" within the meaning
of Rule 144 under the Securities Act, assuming these securities have not been
owned by an affiliate of Photronics.
Information Concerning the Trustee
We have appointed The Bank of Nova Scotia Trust Company of New York, the
trustee under the indenture, as paying agent, conversion agent and note
registrar for the notes. The trustee or its affiliates may in the future provide
banking and other services to us in the ordinary course of their business.
The indenture contains certain limitations on the rights of the trustee, if
it or any of its affiliates is then our creditor, to obtain payment of claims in
certain cases or to realize on certain property received on any claim as
security or otherwise. The trustee and its affiliates will be permitted to
engage in other transactions with us. However, if the trustee or any affiliate
continues to have any conflicting interest and a default occurs with respect to
the notes, the trustee must eliminate such conflict or resign.
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DESCRIPTION OF CAPITAL STOCK
General
Our authorized capital stock consists of 2,000,000 shares of preferred
stock, $.01 par value, of which no shares are issued and outstanding, and
75,000,000 shares of common stock, $.01 par value per share, of which 30,315,494
shares were issued and outstanding as of December 31, 2001.
Common Stock
The holders of shares of common stock are entitled to one vote per share on
all matters to be voted upon by shareholders. At a meeting of shareholders at
which a quorum is present, a majority of the votes cast decides all questions,
unless the matter is one upon which, by express provision of the certificate of
incorporation, the bylaws or statute, a different vote is required. There is no
cumulative voting with respect to the election of directors, which means that
the holders of a majority of the shares can elect all the directors if they
choose to do so, and in such event, the holders of the remaining shares would
not be able to elect any directors.
The holders of common stock have no preemptive rights, nor are there any
redemption rights provisions with respect to common stock. The shares offered
hereby, when issued and paid for, will be fully paid and nonassessable and not
subject to further call or assessment by us.
The holders of common stock are entitled to such dividends, if any, as may
be declared by our board of directors in its discretion out of funds legally
available for that purpose. In the event of our liquidation, dissolution or
winding up, the holders of our common stock are entitled to share ratably in all
assets remaining after payment of liabilities, subject to the priority of
preferred stock, if any, then outstanding.
At December 31, 2001, we had reserved 3,128,571 shares of common stock for
issuance under our stock option plans, 151,546 shares of common stock for
issuance under our employee stock purchase plan and 3,693,243 shares of common
stock issuable upon conversion of our 6.00% convertible subordinated notes due
June 1, 2004, up to 1,410,000 shares that may be issued to increase our equity
interest in PKL Co., Ltd. and 5,405,400 shares of common stock issuable upon
conversion of the notes offered hereby.
Preferred Stock
Our board of directors has the authority by resolution to issue up to
2,000,000 shares of preferred stock in one or more series and to fix the number
of shares constituting any such series, the voting powers, designations,
preferences and relative, participating, optional or other special rights and
qualifications, limitations or restrictions thereof, including the dividend
rights, dividend rate, terms of redemption (including sinking fund provisions),
redemption price or prices, conversion rights and liquidation preferences of the
shares constituting any series, without any further vote or action by the
shareholders. For example, our board of directors is authorized to issue a
series of preferred stock that would have the right to vote separately or with
any other series of preferred stock on any proposed amendment to our certificate
of incorporation or any other proposed corporate action including business
combinations and other transactions.
34
However, our board of directors currently does not contemplate the issuance of
any preferred stock.
Certain Effects of Authorized but Unissued Stock
At December 31, 2001, there were 30,895,746 shares of common stock that
were not outstanding or reserved for issuance and 2,000,000 shares of unissued
and undesignated Preferred Stock. These additional shares may be utilized for a
variety of proper corporate purposes, including future public offerings to raise
additional capital or facilitate corporate acquisitions. We do not currently
have any plan to issue additional shares of common stock or preferred stock,
other than shares of common stock issuable under our employee stock purchase
plan or upon the exercise of options issued under our stock option plans or,
reserved for issuance upon conversion of our 6.00% convertible subordinated
notes due 2004 or the notes offered hereby.
One of the effects of the existence of unissued and unreserved common stock
and undesignated preferred stock may be to enable our board of directors to
issue shares to persons friendly to current management, which could render more
difficult or discourage an attempt to obtain control of us by means of a merger,
tender offer, proxy contest or otherwise, and thereby protect the continuity of
our management. Our board of directors can issue the preferred stock without
shareholders approval, with voting and conversion rights that could adversely
affect the voting rights of the common shareholders.
Transfer Agent
The transfer agent and registrar for the common stock is Registrar &
Transfer Company, Cranford, New Jersey.
Listing
The common stock is quoted on The Nasdaq National Market under the symbol
"PLAB."
35
UNITED STATES FEDERAL TAX CONSIDERATIONS
The following is a summary of the material U.S. federal income tax
considerations relating to the purchase, ownership and disposition of the notes
and common stock into which the notes may be converted, but does not purport to
be a complete analysis of all the potential tax considerations relating thereto.
This summary is generally limited to holders who will hold the notes and the
shares of common stock as capital assets and does not deal with special
situations including those that may apply to particular holders such as
tax-exempt organizations, holders subject to the U.S. federal alternative
minimum tax, dealers in securities, traders in securities who elect to apply a
mark-to-market method of accounting, financial institutions, banks, insurance
companies, regulated investment companies, certain former citizens or former
long-term residents of the United States, partnerships or other pass-through
entities, holders whose "functional currency" is not the U.S. dollar and persons
who hold the notes or shares of common stock in connection with a "straddle,"
"hedging," "conversion" or other risk reduction transaction. This discussion
does not address the tax consequences to non-U.S. holders of notes or our common
stock that are engaged in a trade or business within the United States and does
not discuss the tax consequences under any state, local or foreign law. In
addition, this summary does not consider the effect of the U.S. federal estate
or gift tax laws.
The U. S. federal income tax considerations set forth below are based upon
the Internal Revenue Code of 1986, as amended (the "Code"), Treasury regulations
promulgated thereunder, court decisions, and rulings and pronouncements of the
Internal Revenue Service, referred to as the "IRS", now in effect, all of which
are subject to change. Prospective investors should particularly note that any
such change could have retroactive application so as to result in U.S. federal
income tax consequences different from those discussed below. We have not sought
any ruling from the IRS with respect to statements made and conclusions reached
in this discussion and there can be no assurance that the IRS will agree with
such statements and conclusions. This summary also assumes that the IRS will
respect the classification of the notes as indebtedness for federal income tax
purposes.
As used herein, the term "U.S. holder" means a beneficial owner of a note
(or our common stock acquired upon conversion of a note) that is for U.S.
federal income tax purposes:
o an individual who is a citizen or resident of the United States;
o a corporation, or other entity taxable as a corporation for U. S.
federal income tax purposes, created or organized in or under the laws
of the United States, any state thereof or the District of Columbia;
o an estate the income of which is subject to U.S. federal income
taxation regardless of its source; or
o a trust, if a court within the United States is able to exercise
primary jurisdiction over its administration and one or more U.S.
persons have authority to control all it its substantial decisions, or
if the trust has a valid election in effect under applicable Treasury
regulations to be treated as a U.S. person.
36
As used herein, a "non-U.S. holder" means a holder that is not a U.S.
holder and that is not engaged in a U.S. trade or business. Non-U.S. holders are
subject to special U.S. federal income tax provisions, some of which are
discussed below.
If a partnership (including for this purpose any entity treated as a
partnership for U.S. tax purposes) is a beneficial owner of the notes or common
stock into which the notes may be converted, the U.S. tax treatment of a partner
in the partnership will generally depend on the status of the partner and the
activities of the partnership. A holder of the notes or common stock into which
the notes may be converted that is a partnership and partners in such
partnership should consult their individual tax advisors about the U.S. federal
income tax consequences of holding and disposing of the notes and the common
stock into which the notes may be converted.
U.S. Holders
Taxation of Interest
Interest paid on the notes will be included in the income of a U.S. holder
as ordinary income at the time it is treated as received or accrued, in
accordance with such holder's regular method of accounting for U.S. federal
income tax purposes.
Market Discount
A purchaser that acquires a note for an amount that is less than its stated
principal amount, plus accrued interest, may be subject to the market discount
rules. For this purpose, the market discount on a note generally will be equal
to the amount, if any, by which the stated principal amount of the note
immediately after its acquisition exceeds the U.S. holder's adjusted tax basis
in the note. Subject to a de minimis exception, these provisions generally
require a U.S. holder who acquires a note at a market discount to treat as
ordinary income any gain recognized on the disposition of the note to the extent
of the "accrued market discount" on the note at the time of disposition, unless
the U.S. holder elects to include accrued market discount in income currently.
This election to include market discount in income currently, once made, applies
to all market discount obligations acquired on or after the first day of the
first taxable year to which the election applies and may not be revoked without
the consent of the IRS. In general, market discount will be treated as accruing
on a straight-line basis over the remaining term of the note at the time of
acquisition, or, at the election of the U.S. holder, under a constant yield
method. A U.S. holder who acquires a note at a market discount and who does not
elect to include accrued market discount in income currently, may be required to
defer the deduction of a portion of the interest on any indebtedness incurred or
maintained to purchase or carry the note until the note is disposed of in a
taxable transaction. If a U.S. holder acquires a note with market discount and
receives common stock upon conversion of the note, the amount of accrued market
discount not previously included in income with respect to the converted note
through the date of conversion will be treated as ordinary income upon the
disposition of the common stock.
Amortizable Premium
Subject to special rules for bonds callable before maturity, a U.S. holder
who purchases a note at a premium over its stated principal amount, plus accrued
interest, generally may elect to amortize such premium, referred to as "Section
171 premium," from the purchase date to the note's maturity date under a
constant yield method that reflects semiannual compounding based
37
on the note's payment period. Amortizable premium, however, will not include any
premium attributable to a note's conversion feature. The premium attributable to
any conversion feature is the excess, if any, of the purchase price for the
notes over its fair market value without a conversion feature. Amortized Section
171 premium is treated as an offset to interest income on a note and not as a
separate deduction. A U.S. holder who elects to amortize premium must reduce his
tax basis in the note as described below under "-- Sale, Redemption or
Repurchase for Cash." Bond premium on a note held by a U.S. holder that does not
make the election to amortize will decrease the gain or increase the loss
otherwise recognized upon a taxable disposition of the note. The election to
amortize premium on a constant yield method, once made, applies to all debt
obligations held or subsequently acquired by the electing U.S. holder on or
after the first day of the first taxable year to which the election applies and
may not be revoked without the consent of the IRS.
Constructive Dividends
Holders of convertible debt instruments such as the notes may, in some
circumstances, be deemed to have received distributions of stock if the
conversion price of such instruments is adjusted to the extent the adjustment
results in an increase in the holder's proportionate interest in the earnings
and profits or assets of Photronics. However, adjustments to the conversion
price made pursuant to a bona fide, reasonable adjustment formula which has the
effect of preventing the dilution of the interest of the holders of the debt
instruments will generally not be considered to result in a constructive
distribution of stock. Some of the possible adjustments provided in the notes
(including, without limitation, adjustments in respect of taxable dividends to
our stockholders or adjustments at our discretion) will not qualify as being
pursuant to a bona fide reasonable adjustment formula. If such adjustments are
made, U.S. holders of notes will be deemed to have received constructive
distributions taxable as dividends to the extent of our current and accumulated
earnings and profits even though they have not received any cash or property as
a result of such adjustments. A holder's tax basis in a note, however, generally
will be increased by the amount of any constructive dividend included in taxable
income. In addition, in some circumstances, an adjustment or the failure to
provide for an adjustment may result in taxable dividend income to the holders
of common stock. The consequences of distributions on common stock are described
below under "U.S. Holders--Distributions on Common Stock."
Conversion of the Notes for Common Stock
A U.S. holder generally will not recognize any income, gain or loss upon
conversion of a note into common stock except with respect to cash received in
lieu of a fractional share of common stock or common stock that is attributable
to accrued interest not previously included in income. Cash received in lieu of
a fractional share of common stock upon conversion will be treated as a payment
in exchange for the fractional share of common stock. Accordingly, the receipt
of cash in lieu of a fractional share of common stock generally will result in
capital gain or loss (measured by the difference between the cash received for
the fractional share and the holder's adjusted tax basis in the fractional
share). Common stock received upon conversion that is attributable to accrued
interest not previously included in income will be subject to the rules
described above with respect to taxation of interest. See "U.S.
Holders--Taxation of Interest" above.
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A U.S. holder's tax basis in the common stock received on conversion of a
note will be the same as such holder's adjusted tax basis in the note at the
time of conversion (reduced by any basis allocable to a fractional share
interest), and the holding period for the common stock received on conversion
will generally include the holding period of the note converted. However, a U.S.
holder's tax basis in shares of common stock considered attributable to accrued
interest not previously included in income (or to cash tendered with notes
converted after a record date for a particular interest payment date and prior
to such interest payment date) generally will equal the amount of such accrued
interest (and/or cash), and the holding period for such shares shall begin on
the date of conversion.
Distributions on Common Stock
If, contrary to our current dividend policy, distributions are made on the
common stock after a conversion, such distributions generally will be included
in the income of a U.S. holder as ordinary dividend income to the extent of our
current or accumulated earnings and profits as determined under U.S. federal
income tax principles. A dividend distribution to a corporate U.S. holder may
qualify for a dividends-received deduction; however, certain holding period
requirements, taxable income and other limitations may apply. Distributions in
excess of our current and accumulated earnings and profits will be treated as a
non-taxable return of capital that reduces the U.S. holder's basis in the common
stock dollar-for-dollar until the basis has been reduced to zero, and thereafter
as capital gain.
Sale, Redemption or Repurchase for Cash
U.S. holders generally will recognize capital gain or loss upon the sale,
redemption, including a repurchase by us for cash pursuant to the redemption
rights or upon a fundamental change, or other taxable disposition of the notes
or common stock in an amount equal to the difference between the sum of the cash
plus the fair market value of any property received for such disposition (other
than amounts attributable to accrued but unpaid interest on the notes not
previously included in income, which will be treated as interest for U.S.
federal income tax purposes) and the U.S. holder's adjusted tax basis in the
notes or common stock (as the case may be). A U.S. holder's adjusted tax basis
in a note generally will equal the cost of the note to such U.S. holder,
increased by market discount previously included in income by the U.S. holder
and reduced by any amortized premium. (For a discussion of the holder's basis in
shares of our common stock, see "--Conversion of the Notes for Common Stock"
above).
Prospective investors should consult their tax advisers regarding the
treatment of capital gains (which may be taxed at lower rates than ordinary
income for taxpayers who are individuals, trusts or estates and have held their
notes or common stock for more than one year) and losses (the deductibility of
which is subject to limitations).
Backup Withholding and Information Reporting
Certain noncorporate U.S. holders may be subject to IRS information
reporting and backup withholding on payments of interest on the notes, dividends
on common stock and proceeds from the sale or other disposition of the notes or
common stock. Backup withholding of U.S. federal income tax will apply to
payments made pursuant to the terms of a note or common stock (including
proceeds received upon the sale, exchange, redemption, retirement or other
disposition of the notes or common stock) to a U.S. holder that is not an
"exempt recipient" and
39
that fails to provide required identifying information (such as the holder's
U.S. taxpayer identification number, or "TIN") in the manner required. Payments
made in respect of a note or common stock (including proceeds received upon the
sale, exchange, redemption, retirement or other disposition of the notes or
common stock) must be reported to the IRS, unless the U.S. holder is an exempt
recipient or otherwise establishes an exemption. Any amounts withheld from a
payment to a U.S. holder under the backup withholding rules is allowable as a
refund or credit against the holder's U.S. federal income tax, provided that the
required information is furnished to the IRS in a timely manner.
Non-U.S. Holders
In general, subject to the discussion below concerning backup withholding:
Taxation of Interest
Payments of interest on the notes by us or any paying agent to a beneficial
owner of a note that is a non-U.S. holder generally will not be subject to U.S.
withholding tax, provided that (1) such non-U.S. holder does not own, actually
or constructively pursuant to the conversion feature of the notes or otherwise,
10 percent or more of the total combined voting power of all classes of our
stock entitled to vote (2) such non-U.S. holder is not a "controlled foreign
corporation" related to us through stock ownership and (3) the IRS certification
requirements summarized below are satisfied.
To satisfy the certification requirements referred to above either (1) the
beneficial owner of a note must certify, under penalties of perjury, to us or
our paying agent, as the case may be, that such owner is a non-U.S. holder and
must provide such owner's name and address, and TIN, if any, on Form W-8BEN (or
a suitable substitute form) or (2) a securities clearing organization, bank or
other financial institution that holds customers' securities in the ordinary
course of its trade or business (a "Financial Institution") and holds the note
on behalf of the beneficial owner thereof must certify, under penalties of
perjury, to us or our paying agent, as the case may be, that a Form W-8BEN(or a
suitable substitute form) has been received from the beneficial owner or a
qualifying intermediary and must furnish the payor with a copy thereof.
Interest on notes not excluded from U.S. withholding tax as described above
and not effectively connected with a United States trade or business generally
will be subject to U.S. withholding tax at a 30 percent rate, except where a
non-U.S. holder can claim the benefits of an applicable U.S. income tax treaty
providing for the reduction or elimination of such withholding tax and
demonstrate such eligibility to the IRS.
Sale, Exchange or Redemption of the Notes or Common Stock
A non-U.S. holder of a note or common stock will not be subject to U.S.
federal income tax on gains realized on the sale, exchange or redemption of such
note or common stock unless (1) such non-U.S. holder is an individual who is
present in the United States for 183 days or more in the taxable year of sale,
exchange or other disposition, and other required conditions are met, or, (2) in
certain circumstances, if we are, or have been at any time within the shorter of
the five-year period preceding such sale or other disposition or the period such
non- U.S. holder held the common stock or note, a U.S. real property holding
corporation (a "USRPHC") within the meaning of Section 897(c)(2) of the Code for
U.S. federal income tax purposes.
40
We believe that we are not a USRPHC for U.S. federal income tax purposes.
Although we consider it unlikely based in our current business plans and
operations, we may become a USRPHC in the future. If we were to become a USRPHC,
a non-U.S. holder might be subject to U.S. federal income tax with respect to
gain realized on the disposition of notes or shares of common stock. However, in
the case of a sale of our common stock or notes, such gain would not be subject
to U.S. federal income or withholding tax if (1) our common stock is regularly
traded on an established securities market and (2) the non-U.S. holder disposing
of our common stock or notes did not own, actually or constructively (through
exercise of the conversion feature in the case of the notes), at any time during
the five-year period preceding the disposition, more than 5% of our common
stock.
Constructive Dividends
The conversion price of the notes is subject to adjustment in certain
circumstances. Certain such adjustments would give rise to a deemed distribution
to non-U.S. holders of the notes. See "U.S. Holders--Constructive Dividends"
above. In such case, the deemed distribution would be subject to the rules above
regarding withholding of U.S. federal tax on dividends in respect of common
stock. See "--Distributions on Common Stock" below.
Conversion of the Notes
A non-U.S. holder generally should not be subject to U.S. federal income
tax on the conversion of a note into common stock. To the extent a non-U.S.
holder receives cash in lieu of a fractional share of common stock upon
conversion, such cash may give rise to gain that would be subject to the rules
described above with respect to the sale, exchange or redemption of a note or
common stock. See "Non-U.S. holders--Sale, Exchange or Redemption of the Notes
or Common Stock" above. To the extent a non-U.S. holder receives upon conversion
common stock that is attributable to accrued interest not previously included in
income, such stock may give rise to income that would be subject to the rules
described above with respect to the taxation of interest. See "Non- U.S.
Holders--Taxation of Interest" above.
Distributions on Common Stock
If, contrary to our current dividend policy, distributions are made on
common stock after conversion these distributions will constitute a dividend for
U.S. federal income tax purposes to the extent of our current or accumulated
earnings and profits as determined under U.S. federal income tax principles.
Dividends paid on common stock held by a non-U.S. holder generally will be
subject to U.S. withholding tax at a 30 percent rate, except where an applicable
U.S. income tax treaty provides for the reduction or elimination of such
withholding tax. A non-U.S. holder generally will be required to satisfy certain
IRS certification requirements in order to claim a reduction of or exemption
from withholding under a tax treaty by filing IRS Form W-8 BEN upon which the
non-U.S. holder certifies, under penalties of perjury, its status as a non-U.S.
person and its entitlement to the lower treaty rate with respect to such
payments.
Distributions in excess of our current and accumulated earnings and profits
as determined under U.S. federal income tax principles will be treated as a
non-taxable return of capital that reduces the non-U.S. holder's basis in the
common stock dollar-for-dollar until the basis has been reduced to zero, and
thereafter as capital gain. Such capital gain will generally not be
41
taxable to a non-U.S. holder except under the circumstances described above
under "Non-U.S. Holders--Sale, Exchange or Redemption of the Notes or Common
Stock."
Backup Withholding and Information Reporting
A non-U.S. holder may have to comply with specific certification procedures
to establish that he is not a U.S. person in order to avoid information
reporting and backup withholding tax requirements with respect to our payments
of principal and interest on the notes. In addition, we must report annually to
the IRS and to each non- U.S. holder the amount of any dividends paid to, and
the tax withheld with respect to, such holder, regardless of whether any tax was
actually withheld. Copies of these information returns may also be made
available under the provisions of a specific treaty or agreement to the tax
authorities of the country in which the non-U.S. holder resides.
The payment of the proceeds from the sale or other disposition of the notes
or common stock to or through a foreign office of a broker generally will not be
subject to information reporting or backup withholding. However, a sale or
disposition of the notes or common stock will be subject to information
reporting if it is to or through a foreign office of a broker that is a "U.S.
related broker" unless the broker does not have actual knowledge or reason to
know that the holder is a U.S. person and the documentation requirements
described above are met or the holder otherwise establishes an exemption. Backup
withholding will apply if the sale or disposition is subject to information
reporting and the broker has actual knowledge that you are a U.S. person. Under
applicable Treasury regulations, a broker is a "U.S. related broker" if it is
(1) a U.S. person, (2) a controlled foreign corporation for U.S. federal income
tax purposes, (3) a foreign person 50% or more of whose gross income is
effectively connected with the conduct of a U.S. trade or business for a
specified three-year period, or (4) a foreign partnership, if at any time during
its tax year one or more of its partners are U.S. persons, as defined in
Treasury regulations, who in the aggregate hold more than 50% of the income or
capital interest in the partnership, or such foreign partnership is engaged in
the conduct of a U.S. trade or business.
Any amounts withheld under the backup withholding rules from a payment to a
non-U.S. holder will be allowed as a credit against such holder's U.S. federal
income tax liability, if any, or will otherwise be refundable, provided that the
prerequisite procedures are followed and the proper information is filed with
the IRS on a timely basis. Non-U.S. holders of the notes or common stock should
consult their own tax advisors regarding their qualification for exemption from
backup withholding and the procedure for obtaining such an exemption, if
applicable.
THE PRECEDING DISCUSSION OF THE MATERIAL U.S. FEDERAL INCOME TAX
CONSIDERATIONS IS FOR GENERAL INFORMATION ONLY. EACH PROSPECTIVE INVESTOR SHOULD
CONSULT ITS TAX ADVISOR AS TO THE PARTICULAR U.S. FEDERAL, STATE, AND LOCAL TAX
CONSEQUENCES OF PURCHASING, HOLDING AND DISPOSING OF THE NOTES AND OUR COMMON
STOCK. TAX ADVISORS SHOULD ALSO BE CONSULTED AS TO THE U.S. ESTATE AND GIFT TAX
CONSEQUENCES AND THE FOREIGN TAX CONSEQUENCES OF PURCHASING, HOLDING AND
DISPOSING OF THE NOTES AND OUR COMMON STOCK, AS WELL AS THE CONSEQUENCES OF ANY
PROPOSED CHANGE IN APPLICABLE LAWS.
42
SELLING SECURITY HOLDERS
We originally issued the notes in a private placement in December 2001. The
notes were resold by the initial purchasers of the notes to qualified
institutional buyers under Rule 144A under the Securities Act. Selling security
holders may offer and sell the notes and the underlying common stock pursuant to
this prospectus.
The following table sets forth information we have received as of January
__, 2002 about the principal amount of notes and the underlying common stock
beneficially owned by each selling security holder that may be offered using
this prospectus.
Principal amount
of notes Number of shares
beneficially of common stock Percentage of
owned that may be Percentage of that may be sold common stock
Name sold notes outstanding (1)(4) outstanding (2)
---- ----------------- ----------------- ---------------- ---------------
Advent Convertible Master Cayman L.P. $ 2,935,000 1.47% 79,324 *
Allentown City Firefighters Pension Plan 29,000 * 783 *
Allentown City Officers & Employees
Pension Fund 11,000 * 297 *
Allentown City Police Pension Plan 54,000 * 1,459 *
American Motorist Insurance Company 507,000 * 13,702 *
Arapahoe County Colorado 49,000 * 1,324 *
Arkansas Teachers Retirement System 3,506,000 1.75 94,756 *
Baptist Health of South Florida 505,000 * 13,648 *
Black Diamond Offshore Ltd. 565,000 * 15,270 *
British Virgin Islands Social Security
Board 38,000 * 1,027 *
CALAMOS(R)Investment Trust (6) 10,500,000 5.25 283,783 *
City of New Orleans 203,000 * 5,486 *
City University of New York 122,000 * 3,297 *
Consulting Group Capital Markets Funds 250,000 * 6,756 *
43
DeAm Convertible Arbitrage 3,300,000 1.65 89,189 *
Double Black Diamond Offshore LDC 2,935,000 1.47 79,324 *
Engineers Joint Pension Fund 468,000 * 12,648 *
Fidelity Financial Trust: Fidelity
Convertible Securities Fund (7) 11,680,000 5.84 315,675 1.03%
Grady Hospital Foundation 107,000 * 2,891 *
HFR Convertible Arbitrage Account 190,000 * 5,135 *
HFR Master Fund, LTD. 50,000 * 1,351 *
Independence Blue Cross 64,000 * 1,729 *
Lipper Convertibles, L.P. 1,500,000 * 40,540 *
Lipper Offshore Convertibles, L.P. 1,500,000 * 40,540 *
Lumbermans 491,000 * 13,270 *
Minnesota Power and Light 125,000 * 3,378 *
Motion Pictures Industry 545,000 * 14,729 *
Municipal Employees 183,000 * 4,945 *
New Orleans Firefighters Pension /
Relief Fund 110,000 * 2,972 *
Nicholas Applegate Convertible Fund 1,395,000 * 37,702 *
1976 Distribution Trust FBO A.R. Lauder
Zinterhofer 7,000 * 189 *
1976 Distribution Trust FBO Jane A.
Lauder 13,000 * 351 *
Occidental Petroleum Corporation 118,000 * 3,189 *
Palladin Securities LLC 1,200,000 * 32,432 *
Physician Life 183,000 * 4,945 *
Policemen and Firemen Retirement System
of the City of Detroit 503,000 * 13,594 *
Pro-mutual 603,000 * 16,297 *
Raytheon Master Pension Trust 200,000 * 5,405 *
44
Robertson Stephens 5,000,000 2.50 135,135 *
San Diego City Retirement 1,097,000 * 29,648 *
San Diego County Convertible 1,654,000 * 44,702 *
Screen Actors Guild Pension Convertible 500,000 * 13,513 *
Shell Pension Trust 320,000 * 8,648 *
State of Maryland Retirement Agency 2,575,000 1.29 69,594 *
The Grable Foundation 95,000 * 2,567 *
Trustmark Insurance Company 280,000 * 7,567 *
2000 Revocable Trust FBO A.R. Lauder /
Zinterhofer 6,000 * 162 *
Wake Forest University 686,000 * 18,540 *
Writers Guild Industry Health Fund 293,000 * 7,918 *
Wyoming State Treasurer 971,000 * 26,243 *
Any other holder of notes or future
transferee, pledgee, donee or successor
of any holder (3) 139,779,000 69.89 3,777,808 11.08
------------ ------ --------- -----
Total $200,000,000 100.00% 5,405,400(5) 15.13%
============ ====== ========= =====
- ---------
* Less than 1%.
(1) Assumes conversion of all of the holder's notes at a conversion
rate of 27.027 shares of common stock per $1,000 principal amount of
notes. However, this conversion rate will be subject to adjustment as
described under "Description of Notes--Conversion Rights." As a result,
the amount of common stock issuable upon conversion of the notes may
increase or decrease in the future.
(2) Calculated based on 30,315,494 shares of common stock outstanding
as of December 31, 2001. In calculating this amount for each selling
security holder, we treated as outstanding that number of shares of
common stock issuable upon conversion of all of that holder's notes.
However, we did not assume the conversion of any other holder's notes,
except in calculating the percentage for all selling security holders
as a group
(3) Information about other selling security holders will be set forth
in prospectus supplements, if required.
(4) Assumes that the holders of notes, or any future transferees,
pledgees, donees or successors of or from any such holder of notes, do
not beneficially own any common stock other than the common stock
issuable upon conversion of the notes at the initial conversion rate.
45
(5) Column does not add up correctly because the fractional shares to
which the holders would be entitled have been disregarded.
(6) Pursuant to an investment management agreement, CALAMOS(R)
Investment Fund is acting solely as an investment manager for
CALAMOS(R) Market Neutral Fund.
(7) The entity is either an investment company or a portfolio of an
investment company registered under Section 8 of the Investment Company
Act of 1940, as amended, or a private investment account advised by
Fidelity Management and Research Company ("FMR Co."). FMR Co. is a
Massachusetts corporation and an investment advisor registered under
Section 203 of the Investment Advisers Act of 1940, as amended, and
provides investment advisory services to each of such Fidelity entities
identified above, and to other registered investment companies and to
certain other funds which are generally offered to a limited group of
investors. FMR Co. is a wholly owned subsidiary of FMR Corp. ("FMR"), a
Massachusetts corporation. The holdings are as of January 23, 2002.
We prepared this table based on the information supplied to us as of
January __, 2002 by the selling security holders named in the table. The selling
security holders listed in the above table may have sold or transferred, in
transactions exempt from the registration requirements of the Securities Act,
some or all of their notes since the date on which the information is presented
in the above table. Information about the selling security holders may change
over time. Any changed information supplied to us will be set forth in future
prospectus supplements.
None of the selling security holders listed above has, or within the
past three years has had, any position, office or other material relationship or
any of its predecessors or affiliates.
Because the selling security holders may offer all or some of their
notes or the underlying common stock from time to time, we cannot estimate the
amount of the notes or the underlying common stock that will be held by the
selling security holders upon the termination of any particular offering. See
"Plan of Distribution."
46
PLAN OF DISTRIBUTION
We will not receive any of the proceeds of the sale of the notes and
the underlying common stock offered by this prospectus. The notes and the
underlying common stock may be sold from time to time to purchasers:
o directly by the selling security holders; or
o through underwriters, broker-dealers or agents who may receive
compensation in the form of discounts, concessions or
commissions from the selling security holders or the
purchasers of the notes and the underlying common stock.
The selling security holders and any such broker-dealers or agents who
participate in the distribution of the notes and the underlying common stock may
be deemed to be underwriters. As a result, any profits on the sale of the
underlying common stock by selling security holders and any discounts,
commissions or concessions received by any such broker-dealers or agents may be
deemed to be underwriting discounts and commissions under the Securities Act. If
the selling security holders were deemed to be underwriters, the selling
security holders may be subject to statutory liabilities including, but not
limited to, those of Sections 11, 12 and 17 of the Securities Act and Rule 10b-5
under the Exchange Act.
If the notes and the underlying common stock are sold through
underwriters or broker-dealers, the selling security holders will be responsible
for underwriting discounts or commissions or agent's commissions.
The notes and the underlying common stock may be sold in one or more
transactions at:
o fixed prices;
o prevailing market prices at the time of sale;
o varying prices determined at the time of sale; or
o negotiated prices.
These sales may be effected in transactions:
o on any national securities exchange or quotation service on
which the notes or underlying common stock may be listed or
quoted at the time of the sale, including the Nasdaq National
Market in the case of the common stock;
o in the over-the-counter market;
o in transactions otherwise than on such exchanges or services
or in the over-the-counter market; or
o through the writing of options.
47
These transactions may include block transactions or crosses. Crosses
are transactions in which the same broker acts as an agent on both sides of the
transaction.
In connection with the sales of the notes or the underlying common
stock or otherwise, the selling security holders may enter into hedging
transactions with broker-dealers. These broker-dealers may in turn engage in
short sales of the notes or the underlying common stock in the course of hedging
their positions. The selling security holders may also sell the notes or the
underlying common stock short and deliver notes or the underlying common stock
to close out short positions, or loan or pledge notes or the underlying common
stock to broker-dealers that, in turn, may sell the notes or the underlying
common stock.
To our knowledge, there are currently no plans, arrangements or
understandings between any selling security holders and any underwriter,
broker-dealer or agent regarding the sale of the notes or the underlying common
stock by the selling security holders. Selling security holders may decide not
to sell all or a portion of the notes or the underlying common stock offered by
them pursuant to this prospectus or may decide not to sell notes or the
underlying common stock under this prospectus. In addition, any selling security
holder may transfer, devise or give the notes or the underlying common stock by
other means not described in this prospectus. Any notes or underlying common
stock covered by this prospectus that qualify for sale pursuant to Rule 144 or
Rule 144A of the Securities Act may be sold under Rule 144 or Rule 144A rather
than pursuant to this prospectus.
Our common stock is quoted on the Nasdaq National Market under the
symbol "PLAB." We do not intend to apply for listing of the notes on any
securities exchange. Accordingly, no assurance can be given as to the
development of liquidity or any trading market for the notes.
The selling security holders and any other persons participating in the
distribution of the notes or underlying common stock will be subject to the
Exchange Act. The Exchange Act rules include, without limitation, Regulation M,
which may limit the timing of purchases and sales of any of the notes and the
underlying common stock by the selling security holders and any such other
person. In addition, Regulation M of the Exchange Act may restrict the ability
of any person engaged in the distribution of the notes and the underlying common
stock being distributed for a period of up to five business days prior to the
commencement of such distribution. This may affect the marketability of the
notes and the underlying common stock and the ability to engage in market-making
activities with respect to the notes and the underlying common stock.
Under the registration rights agreement that has been filed as an
exhibit to the registration statement of which this prospectus is a part, we and
the selling security holders will each indemnify the other against certain
liabilities, including certain liabilities under the Securities Act, or will be
entitled to contribution in connection with these liabilities.
We have agreed to pay substantially all of the expenses incidental to
the registration, offering and sale of the notes and the underlying common stock
to the public other than commissions, fees and discounts of underwriters,
brokers, dealers and agents.
48
LEGAL MATTERS
The validity of the notes offered hereby has been passed upon for us by
Shearman & Sterling, New York, New York. The validity of the shares of common
stock issuable upon conversion of the notes has been passed upon for us by James
A. Eder, our Vice President, Secretary and General Counsel. Mr. Eder
beneficially owns certain of our securities.
EXPERTS
The consolidated financial statements incorporated in this prospectus
by reference from the Photronics, Inc. Annual Report on Form 10-K for the year
ended October 31, 2001 have been audited by Deloitte & Touche LLP, independent
auditors, as stated in their report, which is incorporated herein by reference,
and have been so incorporated in reliance upon the report of such firm given
upon their authority as experts in accounting and auditing.
49
================================================================================
Photronics, Inc.
4 3/4% Convertible Notes Due 2006
and
Common Stock Issuable Upon
Conversion of the Notes
Prospectus
__________, 2002
================================================================================
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the costs and expenses, payable by us
in connection with the distribution of the securities being registered. All of
the amounts shown are estimates, except the Securities and Exchange Commission
registration fee.
Securities and Exchange Commission registration fee ... $18,400
Nasdaq listing fee .................................... *
Printing and engraving fees ........................... *
Accountant's fees and expenses ........................ *
Legal fees and expenses ............................... *
Trustee fees and expenses ............................. *
Miscellaneous expenses ................................ *
-------
-------
Total ........................................ $ *
=======
- ----------
* To be completed by amendment.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Under applicable Connecticut law, the Company shall provide for
indemnification of its directors, officers, employees and agents. Applicable
Connecticut law requires the Company to indemnify a director against judgments
and other expenses of litigation when he is sued by reason of his being a
director in any proceeding brought, other than on behalf of the corporation, if
a director is successful on the merits in defense, or acted in good faith and in
a manner reasonably believed to be in the best interests of the corporation, and
in all other cases that his conduct was at least not opposed to the best
interests of the corporation, or in a criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. In a proceeding brought on
behalf of a corporation (a derivative action), a director is entitled to be
indemnified by the corporation for reasonable expenses of litigation, if the
director is finally adjudged not to have breached his duty to the corporation.
In addition, a director is entitled to indemnification for both derivative and
non-derivative actions, if a court determines, upon application, that the
director is fairly and reasonably entitled to be indemnified. Finally, the
Company maintains director and officer liability insurance which provides
insurance for the Company's directors and officers in connection with claims
brought against them in their capacity as such with the Company.
Article Ninth of the Company's Certificate of Incorporation limits
directors' monetary liability for actions or omissions made in good faith, which
are later determined to be a breach of their duty as directors of the Company.
Article Ninth does not eliminate or limit a director's liability for breaches of
fiduciary duty for actions or omissions which (i) involved a knowing and
culpable violation of law; (ii) enabled a director or an associate (as defined
in the Act) to receive an improper personal economic gain; (iii) showed a lack
of good faith and conscious disregard for his duty as a director under
circumstances where the director was aware that his actions created an
unjustifiable risk of serious injury to the Company; (iv) constituted a
sustained and
II-1
unexcused pattern of inattention that amounted to an abdication of his duty; or
(v) involved the improper distribution of Company assets to its shareholders or
an improper loan to an officer, director or 5% shareholder. Article Ninth also
does not preclude suits for equitable relief, such as an injunction, nor would
it shield directors from liability for violations of the federal securities
laws. Moreover, Article Ninth does not limit the liability of directors for any
act or omission that occurred prior to the date the Article became effective and
does not limit the potential liability of officer-directors in their capacity as
officers.
ITEM 16. EXHIBITS
Exhibit
- -------
4.1 Indenture dated as of December 12, 2001 between Photronics, Inc. and
The Bank of Nova Scotia Trust Company of New York, Trustee
(incorporated by reference to Exhibit 4.2 of Photronic, Inc.'s Annual
Report on Form 10-K for the fiscal year ended October 31, 2001)
4.2 Registration Rights Agreement dated December 12, 2001 between
Photronics, Inc., Morgan Stanley & Co. Incorporated and Merrill Lynch &
Co. (incorporated by reference to Exhibit 4.3 of Photronic, Inc.'s
Annual Report on Form 10-K for the fiscal year ended October 31, 2001)
4.3 Certificate of Incorporation of Photronics, Inc. (Filed as an exhibit
to the Company's Registration Statement on Form S-1, File Number
33-11694, which was declared effective by the Commission on March 10,
1987, and incorporated herein by reference.)
4.4 Amended By-laws of Photronics, Inc. (Filed as an exhibit to the
Company's Registration Statement on Form S-1, File Number 33-11694,
which was declared effective by the Commission on March 10, 1987, and
incorporated herein by reference).
4.5 Amendment to Certificate of Incorporation, dated March 16, 1990 (Filed
as an exhibit to the Company's Registration Statement on Form S-2, File
Number 33-34772 which was declared effective by the Commission on June
22, 1990, and incorporated herein by reference).
4.6 Amendment to Certificate of Incorporation, dated March 16, 1995 (Filed
as an exhibit to the Company's Current Report on Form 8-K, dated March
24, 1995, and incorporated herein by reference).
4.7 Amendment to Certificate of Incorporation, dated November 13, 1997
(Filed as an exhibit to the Company's Annual Report on Form 10-K for
the fiscal year ended November 2, 1997, and incorporated herein by
reference).
4.8 Form of 4 3/4Convertible Subordinated Note due 2006 (Contained in the
Indenture filed as Exhibit 4.2 to the Company's Annual Report of Form
10-K for the fiscal year ended October 31, 2001).
4.9 Form of Common Stock Certificate (Filed as an exhibit to the Company's
Registration Statement on Form S-1, File Number 33-1694, which was
declared effective by the Commission on March 10, 1987, and
incorporated herein by reference)
*5.1 Opinion of James A. Eder
II-2
*5.2 Opinion of Shearman & Sterling
*8 Opinion of Shearman & Sterling as to Certain United States Federal
Income Tax Matters
*12 Statement Regarding Computation of Ratio of Earnings to Fixed Charges
*23.1 Consent of Deloitte & Touche LLP, Independent Auditors
23.2 Consent of James A. Eder (included in Exhibit 5.1)
23.3 Consent of Shearman & Sterling (included in Exhibit 5.2 and
Exhibit 8)
24 Powers of Attorney (included on signature pages)
*25 Statement of eligibility of Trustee on form T-1
- ------
* Filed herewith
ITEM 17. UNDERTAKINGS
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) to include any prospectus required by section 10(a)(3) of the
Securities Act of 1933; (ii) to reflect in the prospectus any
facts or events arising after the effective date of the
registration statement (or the most recent post-effective
amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
registration statement; notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the
estimated maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule 424(b) if,
in the aggregate, the changes in volume and price represent no
more than a 20% change in the maximum aggregate offering price set
forth in the Calculation of Registration Fee table in the
effective registration statement; and (iii) to include any
material information with respect to the plan of distribution not
previously disclosed in the registration statement or any material
change to such information in the registration statement;
provided, however, that paragraphs (1)(i) and (1)(ii) do not apply
if the registration statement is on Form S-3 or Form S-8, and the
information required to be included in a post-effective amendment
by those paragraphs is contained in periodic reports filed with or
furnished to the Commission by the registrant pursuant to section
13 or section 15(d) of the Securities Exchange Act of 1934 that
are incorporated by reference in the registration statement;
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall
be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at
that time shall be deemed to be the initial bona fide offering
thereof; and
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
II-3
The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered herein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
The undersigned registrant hereby undertakes that (i) for purposes of
determining any liability under the Securities Act of 1933, the information
omitted from the form of prospectus filed as part of this registration statement
in reliance upon Rule 430A and contained in a form of prospectus filed by the
registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act
shall be deemed to be part of this registration statement as of the time it was
declared effective and (ii) for the purpose of determining any liability under
the Securities Act of 1933, each post-effective amendment that contains a form
of prospectus shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the provisions set forth in Item 15, or otherwise,
the registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
II-4
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the Town of Brookfield, State of Connecticut, on February 4,
2002.
PHOTRONICS, INC.
By: /s/ Robert J. Bollo
-------------------------------------
Robert J. Bollo
SENIOR VICE PRESIDENT AND
CHIEF FINANCIAL OFFICER
POWER OF ATTORNEY
Each person signing below also hereby appoints Robert J. Bollo and
James A. Eder, and each of them singly, his or her lawful attorney-in-fact with
power of substitution and resubstitution to sign in his or her name, place and
stead, in any and all capacities, to do any and all things and execute any and
all instruments as such attorney-in-fact may deem appropriate to enable
Photronics, Inc. to comply with the provisions of the Securities Act of 1933
(the "Securities Act"), and any rules, regulations and requirements of the
Securities and Exchange Commission (the "Commission") in connection with the
registration under the Securities Act of the securities of the registrant,
including specifically, but without limiting the generality of the foregoing,
the power and authority so sign his or her name in his or her respective
capacity as a member of the Board of Directors or officer of the registrant,
this registration statement and/or such other form or forms as may be
appropriate to be filed with the Commission as any of them may deem appropriate
in respect to the securities of the registrant, to any and all amendments
thereto (including post-effective amendments) to this registration statement, to
any related rule 462(b) registration statement and to any other documents filed
with the Commission, as fully for all intents and purposes as he might or could
do in person, and hereby ratifies and confirms all said attorneys-in-fact and
agents, each acting alone, and his substitute or substitutes, may lawfully do or
cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this registration statement has been signed by the following persons in the
capacities and on the dates indicated.
II-5
Signature Title Date
--------- ----- ----
/s/ Constantine S. Macricostas
______________________________ Chairman of the Board and Chief February 4, 2002
Constantine S. Macricostas Executive Officer
/s/ Robert J. Bollo
______________________________ Senior Vice President and Chief February 4, 2002
Robert J. Bollo Financial Officer
/s/ Sean T. Smith
______________________________ Vice President-- Controller February 4, 2002
Sean T. Smith (Principal Accounting Officer)
/s/ Walter M. Fiederowicz
______________________________ Director February 4, 2002
Walter M. Fiederowicz
/s/ Joseph A. Fiorita, Jr.
______________________________ Director February 4, 2002
Joseph A. Fiorita, Jr.
/s/ Willem D. Maris
______________________________ Director February 4, 2002
Willem D. Maris
/s/ Michael J. Yomazzo
______________________________ Director February 4, 2002
Michael J. Yomazzo
II-6
EXHIBIT 5.1
[Photronics, Inc. Letterhead]
February 4, 2002
Photronics, Inc.
15 Secor Road
Brookfield, CT 06804
Photronics, Inc.
$200,000,000
4 3/4% Convertible Subordinated Notes due 2006
----------------------------------------------
Ladies and Gentlemen:
I am the Vice-President, Secretary and General Counsel of
Photronics, Inc., a Connecticut corporation (the "Company") and have acted as
such in connection with a registration statement on Form S-3 (the "Registration
Statement"), filed by the Company with the Securities and Exchange Commission
(the "Commission") under the Securities Act of 1933, as amended, for the
registration of $200,000,000 aggregate principal amount of the Company's 4 3/4%
Convertible Subordinated Notes due 2006 (the "Notes"), and 5,405,400 shares of
common stock, par value $0.01 per share (the "Shares"), based upon the initial
conversion rate of 27.027 Shares per $1,000 principal amount of the Notes and
issuable upon conversion of the Notes. The Notes and the Shares are being
registered on behalf of the holders of the Notes.
In connection with the foregoing, I have examined originals,
or copies certified or otherwise identified to my satisfaction, of such
documents and corporate and public records as I have deemed necessary as a basis
for the opinion hereinafter expressed. In my examination, I have assumed the
genuineness of all signatures, the authenticity of all documents submitted to me
as originals and the conformity with the originals of all documents submitted to
me as copies.
I am admitted to practice law in the states of Connecticut and
New York and my opinions set forth below are limited to the laws of those states
and the federal laws of the United States, and I do not express any opinion
concerning any other laws.
February 4, 2002
Page 2
Based upon and subject to the foregoing, I am of the opinion
that the Shares, when issued upon conversion of the Notes and in accordance with
provisions of the Indenture, will be duly authorized, validly issued and fully
paid and non-assessable.
I hereby consent to the filing of this opinion as Exhibit 5.1
to the Registration Statement and to the use of my name under the caption "Legal
Matters" contained in the prospectus.
Very truly yours,
/s/ James A. Eder
James A. Eder
Vice President, Secretary and
General Counsel
EXHIBIT 5.2
February 4, 2002
Photronics, Inc.
15 Secor Road
Brookfield, CT 06804
Photronics, Inc.
$200,000,000
4 3/4% Convertible Subordinated Notes due 2006
----------------------------------------------
Ladies and Gentlemen:
We have acted as counsel for Photronics, Inc., a Connecticut
corporation (the "Company"), in connection with the filing by the Company with
the Securities and Exchange Commission (the "Commission") of a registration
statement on Form S-3 (the "Registration Statement"), covering the registration
under the Securities Act of 1933, as amended (the "Act"), of $200,000,000
aggregate principal amount of the Company's 4 3/4% Convertible Subordinated
Notes due 2006 (the "Notes"), and 5,405,400 shares of the Company's common
stock, par value $0.01 per share, based upon the initial conversion rate of
27.027 shares per $1,000 principal amount of the Notes and issuable upon
conversion of the Notes. The Notes and the shares of common stock are being
registered on behalf of the holders of the Notes.
In connection with the foregoing, we have examined originals,
or copies certified or otherwise identified to our satisfaction, of such
documents and corporate and public records as we have deemed necessary as a
basis for the opinion hereinafter expressed. In our examination, we have assumed
the genuineness of all signatures, the authenticity of all documents presented
to us as originals and the conformity to the originals of all documents
presented to us as copies. In rendering our opinion, we have relied as to
factual matters upon certificates and representations of officers of the
Company.
We are not admitted to practice in the State of Connecticut
and, insofar as the following opinion relates to matters governed by the laws of
the State of Connecticut, we have relied on the opinion of James A. Eder, Vice
President, Secretary and General Counsel of the Company.
Based upon the foregoing and having regard for such legal
considerations as we deem relevant, we are of the opinion that the Notes have
been duly authorized and executed by the Company and, assuming they have been
duly authenticated by the trustee, constitute valid
2
and binding obligations of the Company, enforceable against the Company in
accordance with their terms, except as enforcement thereof may be limited by any
applicable bankruptcy, insolvency (including, without limitation, all laws
relating to fraudulent transfers), reorganization, moratorium or other similar
laws affecting enforcement of creditors' rights generally and except as
enforcement thereof is subject to general principles of equity (regardless of
whether enforcement is considered in a proceeding in equity or at law).
We hereby consent to the use of this opinion as Exhibit 5.2 to
the Registration Statement and to the use of our name under the caption "Legal
Matters" in the prospectus included in the Registration Statement.
Very truly yours,
/s/ Shearman & Sterling
JJ/CU
EXHIBIT 8
---------
February 4, 2002
Photronics, Inc.
15 Secor Road
Brookfield, CT 06804
Photronics, Inc.
4 3/4% Convertible Subordinated Notes due 2006
----------------------------------------------
Ladies and Gentlemen:
This opinion is furnished to you in connection with a
registration statement on Form S-3 (the "Registration Statement") and the
related Prospectus (the "Prospectus"), filed by Photronics, Inc., a Connecticut
corporation (the "Company") with the Securities and Exchange Commission under
the Securities Act of 1933, as amended, for the registration of $200,000,000
aggregate principal amount of the Company's 4 3/4% Convertible Subordinated
Notes due 2006 (the "Notes") and the shares of the Company common stock (the
"Shares") issuable upon conversion of the Notes. The Notes and the Shares are
being registered on behalf of the holders of the Notes.
We have acted as special United States federal income tax
counsel for the Company in connection with the preparation and filing of the
Registration Statement and the Prospectus. In this capacity, we have examined
and relied upon the information set forth in the Prospectus and such other
documents, agreements and instruments as we have deemed necessary as a basis for
the opinion hereinafter expressed. In our examinations, we have assumed the
genuineness of all signatures, the authenticity of all documents submitted to us
as originals and the conformity with the originals of all documents submitted to
us as copies.
Based upon the foregoing and after consideration of applicable
current law, we are of the opinion that, subject to the limitations set forth
therein, the discussion under the caption "United States Federal Tax
Considerations" in the Prospectus accurately describes the material United
States federal income tax consequences of the purchase, ownership and
disposition of the Notes and the Shares acquired upon conversion of the Notes.
Our opinion is based upon the Internal Revenue Code of 1986,
as amended, Treasury Regulations (including proposed Regulations and temporary
Regulations) promulgated thereunder, rulings, official pronouncements and
judicial decisions, all as in effect on the date hereof and all of which are
subject to change, possibly with retroactive effect, or to different
interpretations.
Very truly yours,
/s/ Shearman & Sterling
LMB/BKB
Exhibit 12.1
Photronics, Inc.
Computation of Ratio of Earnings to Fixed Charges
For the five years ended October 31, 2001
Pro Forma
2001
1997 1998 1999 2000 2001 (1)
---- ---- ---- ---- ---- --
Income before income taxes $49,817 $42,870 $22,802 $15,464 $(2,321) $(6,196)
------- ------- ------- ------- -------- --------
Interest expense 2,706 6,703 7,731 11,091 11,966 15841
------- ------- ------- ------ -------- -----
Numerator 52,523 49,573 30,533 26,555 9,645 9,645
Denominator 2,706 6,703 7,731 12,291 12,672 16,547
------- ------- ------- ------ ------- --------
Ratio: 19.4 7.4 4.0 2.2 0.8 0.6
======= ======= ======= ====== ======= ========
(1) Calculated as if the net proceeds of debt securities had been received at
the beginning of the year.
Exhibit 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Registration Statement of
Photronics, Inc. on Form S-3 of our report dated December 7, 2001 (December 12,
2001 as to Note 17), appearing in the Annual Report on Form 10-K of Photronics,
Inc. for the year ended October 31, 2001 and to the reference to us under the
heading "Experts" in the Prospectus, which is part of this Registration
Statement.
/s/ DELOITTE & TOUCHE LLP
Hartford, Connecticut
February 1, 2002
EXHIBIT 25.1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM T-1
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE
ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305 (B) (2)
THE BANK OF NOVA SCOTIA TRUST COMPANY OF NEW YORK
(Exact name of trustee as specified in its charter)
New York 13-5691211
(State of Incorporation (I.R.S. employer
If not a U.S. national bank) Identification number)
One Liberty Plaza
New York, N.Y. 10006
(Address of principal (Zip code)
Executive office)
PHOTRONICS, INC.
(Exact name of obligor as specified in its charter)
CONNECTICUT
(State or other jurisdiction of incorporation or organization)
06-0854886
(I.R.S. employer identification no.)
1061 East Indiantown Road
Jupiter, FL 33477
(Address of principal executive offices) (Postal Code)
CONVERTIBLE SUBORDINATED NOTES
(Title of the indenture securities)
-2-
Item 1. General Information
-------------------
Furnish the following information as to the trustee:
(a) Name and address of each examining or supervising authority
to which it is subject.
Federal Reserve Bank of New York
33 Liberty Street
New York, N. Y. 10045
State of New York Banking Department
State House, Albany, N.Y.
(b) Whether it is authorized to exercise corporate trust powers.
The Trustee is authorized to exercise corporate trust powers.
Item 2. Affiliation with the Obligor.
-----------------------------
If the obligor is an affiliate of the trustee, describe each
such affiliation. The obligor is not an affiliate of the
Trustee.
Item 16. List of Exhibits.
-----------------
List below all exhibits filed as part of this statement of
eligibility.
Exhibit 1 - Copy of the Organization Certificate of the
Trustee as now in effect. (Exhibit 1 to T-1 to
Registration Statement No. 333-6688).
Exhibit 2 - Copy of the Certificate of Authority of the
Trustee to commerce business. (Exhibit 2 to T-1 to
Registration Statement No. 333-6688).
Exhibit 3 - None; authorization to exercise corporate trust
powers is contained in the documents identified
above as Exhibit 1 and 2.
Exhibit 4 - Copy of the existing By-Laws of the Trustee.
(Exhibit 4 to T-1 to Registration Statement
No. 333-6688).
Exhibit 5 - No Indenture referred to in Item 4.
Exhibit 6 - The consent of the Trustee required by
Section 321 (b) of the Trust Indenture Act of
1939.(Exhibit 6 to T-1 to Registration
Statement No. 333-27685).
Exhibit 7 - Copy of the latest Report of Condition of the Trustee
as of September 30, 2001
SIGNATURE
Pursuant to the requirements of the Trust Indenture
Act of 1939, the Trustee, The Bank of Nova Scotia Trust Company of New York, a
corporation organized and existing under the laws of the State of New York, has
duly caused this statement of eligibility to be signed on its behalf by the
undersigned, thereunto duly authorized, all in the City of New York, and State
of New York, on the 4th day of February, 2002.
THE BANK OF NOVA SCOTIA TRUST
COMPANY OF NEW YORK
By: /S/ Warren A. Goshine
--------------------------
Warren A. Goshine
Secretary
_ _
| |
FFIEC 041
THE BANK OF NOVA SCOTIA Page RC-1
TRUST COMPANY OF NEW YORK ----
- ---------------------------------------- 10
Legal Title of Bank ----
NEW YORK
- ----------------------------------------
City
N.Y. 10006
- ----------------------------------------
State Zip Code
|_ _|
FDIC Certificate Number | | | | | |
________________
Consolidated Report of Condition for Insured Commerial
and State-Chartered Savings Banks for September 30, 2001
All schedules are to be reported in thousands of dollars. Unless otherwise
indicated, report the amount outstanding as of the last business day of the
quarter.
Schedule RC--Balance Sheet
Dollar Amounts in Thousands RCON Bil Mil Thou
- -------------------------------------------------------------------------------------------------------------
ASSETS
1. Cash and balances due from depository institutions (from Schedule RC-A):
a. Noninterest-bearing balances and currency and coin(1).................... 0081 461 1.a.
b. Interest-bearing balances(2)............................................. 0071 16 494 1.b.
2. Securities:
a. Held-to-maturity securities (from schedule RC-B, column A)............... 1754 1 220 2.a.
b. Available-for-sale securities (from Schedule RC-B, column D)............. 1773 0 2.b.
3. Federal funds sold and securities purchased under agreements to resell...... 1350 13 000 3.
4. Loan and lease financing receivables (from Schedule RC-C):
a. Loans and leases held for sale........................................... 5369 0 4.a.
--------------------
b. Loans and leases, net of unearned income............ | B528 | | | 4.b.
--------------------
c. LESS: Allowance for loan and lease losses........... | 3123 | | | 4.c
--------------------
d. Loans and leases, net of unearned income and
allowance (item 4.b minus 4.c)......................................... 8529 0 4.d.
5. Trading assets (from Schedule RC-D)......................................... 3545 0 5.
6. Premises and fixed assets (including capitalized leases).................... 2145 1 6.
7. Other real estate owned (from Schedule RC-M)................................ 2150 0 7.
8. Investments in unconsolidated subsidiaries and associated companies
(from Schedule RC-M)...................................................... 2130 0 8.
9. Customers' liability to this bank on acceptances outstanding................ 2165 0 9.
10. Intangible assets:
a. Goodwill................................................................. 3163 0 10.a.
b. Other intangible assets (from Schedule RC-M)............................. 0426 0 10.b.
11. Other assets (from Schedule RC-F)........................................... 2160 87 11.
12. Total assets (sum of items 1 through 11).................................... 2170 31 263 12.
-------------------------------
- ------
(1) Includes cash items in process of collection and unposted debits.
(2) Includes time certificates of deposit not held for trading.
FFIEC041
Page RC-2
----
11
----
Schedule RC--Continued
Dollar Amounts in Thousands---- ---- ---- ----
RCON Bil Mil Thou
- -----------------------------------------------------------------------------------------------------------------------------
LIABILITIES
13. Deposits:
a. In domestic offices (sum of totals of columns A and C from Schedule RC-E). ---- ---- ---- ----
2200 17 853 13.a.
---- ---- ---- ----
---- ---- ---- ----
(1) Noninterest-bearing(1)................................................ 6631 17 792 13.a.(1)
---- ---- ---- ---
(2) Interest-bearing...................................................... 6636 61 13.a.(2)
---- ---- ---- ----
b. Not applicable
---- ---- ---- ----
14. Federal funds purchased and securities sold under agreements to repurchase.......................... 2800 0 14.
15. Trading liabilities (from Schedule RC-D)............................................................ 3548 15.
16. Other borrowed money (includes mortgage indebtedness and obligations under
capitalized leases) (from Schedule RC-M)............................................................ 3190 0 16.
17. Not applicable
18. Bank's liability on acceptance executed and outstanding............................................. 2920 0 18.
19. Subordinated notes and debentures(2)................................................................ 3200 0 19.
20. Other liabilities (from Schedule RC-G).............................................................. 2930 190 20.
21. Total liabilities (sum of items 13 through 20)...................................................... 2948 18 043 21.
22. Minority interest in consolidated subsidiaries...................................................... 3000 0 22.
EQUITY CAPITAL
23. Perpetual preferred stock and related surplus....................................................... 3833 0 23.
24. Common stock........................................................................................ 3230 1 000 24.
25. Surplus (exclude all surplus related to preferred stock)............................................ 3839 10 030 25.
26. a. Retained earnings................................................................................ 3632 2 190 26.a.
b. Accumulated other comprehensive income(2)........................................................ 8530 0 26.b.
27. Other equity capital components(4).................................................................. A130 0 27.
28. Total equity capital (sum of items 23 through 27)................................................... 3210 13 220 28.
29. Total liabilities, minority interest, and equity capital (sum of items 21, 22, and 28).............. 3300 31 263 29.
---- ---- ---- ----
Memorandum
To be reported with the March Report of Condition.
1. Indicate in the box at the right the number of the statement below that best describes the ------------
most comprehensive level of auditing work performed for the bank by independent external RCON Number
auditors as of any date during 2000................................................................. -------------
6724 M.1.
-------------
1 = Independent audit of the bank conducted in accordance with
generally accepted auditing standards by a certified public
accounting firm which submits a report on the bank
2 = Independent audit of the bank's parent holding company
conducted in accordance with generally accepted auditing standards
by a certified public accounting firm which submits a report on the
consolidated holding company (but not on the bank separately)
3 = Attestation on bank management's assertion on the effectiveness
of the bank's internal control over financial reporting by a
certified public accounting firm
4 = Directors' examination of the bank conducted in accordance with
generally accepted auditing standards by a certified public
accounting firm (may be required by state chartering authority)
5 = Directors' examination of the bank performed by other external
auditors (may be required by state chartering authority)
6 = Review of the bank's financial statements by external auditors
7 = Compilation of the bank's financial statements by external
auditors
8 = Other audit procedures (excluding tax preparation work)
9 = No external audit work
- --------
(1) Includes total demand deposits and noninterest-bearing time and savings
deposits.
(2) Includes limited-life preferred stock and related surplus.
(3) Includes net unrealized holding gains (losses) on available-for-sale
securities, accumulated net gains (losses) on cash flow
hedges, and minimum pension liability adjustments.
(4) Includes treasury stock and unearned Employee Stock Ownership Plan shares.
