AGREEMENT AND PLAN OF REORGANIZATION
BY AND AMONG
TENCOR INSTRUMENTS
TIGER ACQUISITION CORP.
AND
KLA INSTRUMENTS CORPORATION
Dated as of January 14, 1997
TABLE OF CONTENTS
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ARTICLE I THE MERGER................................................................2
1.1 The Merger........................................................2
1.2 Effective Time; Closing...........................................2
1.3 Effect of the Merger..............................................2
1.4 Articles of Incorporation; Bylaws.................................2
1.5 Directors and Officers............................................3
1.6 Effect on Capital Stock...........................................3
1.7 Dissenting Shares.................................................4
1.8 Surrender of Certificates.........................................5
1.9 No Further Ownership Rights in Tencor Common Stock................6
1.10 Lost, Stolen or Destroyed Certificates............................6
1.11 Tax and Accounting Consequences...................................6
1.12 Taking of Necessary Action; Further Action........................7
ARTICLE II REPRESENTATIONS AND WARRANTIES OF TENCOR.................................7
2.1 Organization of Tencor............................................7
2.2 Tencor Capital Structure..........................................8
2.3 Obligations With Respect to Capital Stock.........................8
2.4 Authority.........................................................9
2.5 SEC Filings; Tencor Financial Statements.........................10
2.6 Absence of Certain Changes or Events.............................11
2.7 Tax..............................................................11
2.8 Intellectual Property............................................12
2.9 Compliance; Permits; Restrictions................................13
2.10 Litigation.......................................................13
2.11 Brokers' and Finders' Fees.......................................14
2.12 Employee Benefit Plans...........................................14
2.13 Absence of Liens and Encumbrances................................14
2.14 Environmental Matters............................................14
2.15 Labor Matters....................................................15
2.16 Agreements, Contracts and Commitments............................15
2.17 Pooling of Interests.............................................16
2.18 Change of Control Payments.......................................16
2.19 Statements; Proxy Statement/Prospectus...........................16
2.20 Board Approval...................................................17
2.21 Fairness Opinion.................................................17
ARTICLE III REPRESENTATIONS AND WARRANTIES OF KLA AND MERGER SUB...................17
3.1 Organization of KLA..............................................17
3.2 KLA and Merger Sub Capital Structure.............................18
3.3 Obligations With Respect to Capital Stock........................19
3.4 Authority........................................................19
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TABLE OF CONTENTS
(continued)
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3.5 Section 203 of the Delaware General Corporation Law Not Applicable.....................21
3.6 SEC Filings; KLA Financial Statements..................................................21
3.7 Absence of Certain Changes or Events...................................................22
3.8 Tax....................................................................................22
3.9 Intellectual Property..................................................................23
3.10 Compliance; Permits; Restrictions......................................................24
3.11 Litigation.............................................................................24
3.12 Brokers' and Finders' Fees.............................................................24
3.13 Employee Benefit Plans.................................................................25
3.14 Absence of Liens and Encumbrances......................................................25
3.15 Environmental Matters..................................................................25
3.16 Labor Matters..........................................................................26
3.17 Agreements, Contracts and Commitments..................................................26
3.18 Pooling of Interests...................................................................27
3.19 Change of Control Payments.............................................................27
3.20 Statements; Proxy Statement/Prospectus.................................................27
3.21 Board Approval.........................................................................27
3.22 Fairness Opinion.......................................................................28
ARTICLE IV CONDUCT PRIOR TO THE EFFECTIVE TIME...........................................................28
4.1 Conduct of Business....................................................................28
ARTICLE V ADDITIONAL AGREEMENTS..........................................................................30
5.1 Proxy Statement/Prospectus; Registration Statement; Other Filings; Board
Recommendations........................................................................30
5.2 Meetings of Shareholders and Stockholders..............................................31
5.3 Confidentiality........................................................................32
5.4 No Solicitation........................................................................32
5.5 Public Disclosure......................................................................35
5.6 Legal Requirements.....................................................................35
5.7 Third Party Consents...................................................................35
5.8 FIRPTA.................................................................................35
5.9 Notification of Certain Matters........................................................35
5.10 Best Efforts and Further Assurances....................................................36
5.11 Stock Options and Employee Benefits....................................................36
5.12 Form S-8...............................................................................37
5.13 Indemnification and Insurance..........................................................37
5.14 NMS Listing............................................................................38
5.15 KLA Affiliate Agreement................................................................38
5.16 Tencor Affiliate Agreement.............................................................38
5.17 Regulatory Filings; Reasonable Efforts.................................................39
5.18 Board of Directors of the Combined Company.............................................39
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TABLE OF CONTENTS
(continued)
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5.19 Committees of the Board of Directors of KLA..........................39
5.20 Officers of Combined Company; Executive Committee...................39
5.21 Change of Name; Increase in Authorized Shares........................40
ARTICLE VI CONDITIONS TO THE MERGER....................................................40
6.1 Conditions to Obligations of Each Party to Effect the Merger.........40
6.2 Additional Conditions to Obligations of Tencor.......................41
6.3 Additional Conditions to the Obligations of KLA and Merger Sub.......42
ARTICLE VII TERMINATION, AMENDMENT AND WAIVER..........................................42
7.1 Termination..........................................................42
7.2 Notice of Termination; Effect of Termination.........................43
7.3 Fees and Expenses....................................................44
7.4 Amendment............................................................45
7.5 Extension; Waiver....................................................45
ARTICLE VIII GENERAL PROVISIONS........................................................46
8.1 Non-Survival of Representations and Warranties.......................46
8.2 Notices..............................................................46
8.3 Interpretation; Knowledge............................................47
8.4 Counterparts.........................................................47
8.5 Entire Agreement; Third Party Beneficiaries..........................47
8.6 Severability.........................................................48
8.7 Other Remedies; Specific Performance.................................48
8.8 Governing Law........................................................48
8.9 Rules of Construction................................................48
8.10 Assignment...........................................................48
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AGREEMENT AND PLAN OF REORGANIZATION
This AGREEMENT AND PLAN OF REORGANIZATION is made and entered into as
of January 14, 1997 among KLA Instruments Corporation, a Delaware corporation
("KLA"), Tiger Acquisition Corp., a California corporation and a wholly-owned
subsidiary of KLA ("MERGER SUB"), and Tencor Instruments, a California
corporation ("TENCOR").
RECITALS
A. Upon the terms and subject to the conditions of this Agreement (as
defined in Section 1.2 below) and in accordance with the California General
Corporation Law ("CALIFORNIA LAW"), KLA and Tencor intend to enter into a
business combination transaction to pursue their long-term business strategies.
B. The combined company following the Merger (as defined in Section
1.1) will be called KLA-Tencor Corporation. In addition, immediately upon the
effectiveness of the Merger, the Board of Directors of the combined company
would consist of 12 members, with designees of Tencor to hold five of such seats
and designees of KLA to hold seven of such seats. It is also contemplated that
the senior management of the combined company would consist of senior management
from both Tencor and KLA.
C. The Board of Directors of Tencor (i) has determined that the Merger
is consistent with and in furtherance of the long-term business strategy of
Tencor and fair to, and in the best interests of, Tencor and its shareholders,
(ii) has approved this Agreement, the Merger and the other transactions
contemplated by this Agreement and (iii) has determined to recommend that the
shareholders of Tencor adopt and approve this Agreement and approve the Merger.
D. The Board of Directors of KLA (i) has determined that the Merger is
consistent with and in furtherance of the long-term business strategy of KLA and
fair to, and in the best interests of, KLA and its stockholders, (ii) has
approved this Agreement, the Merger and the other transactions contemplated by
this Agreement and (iii) has determined to recommend that the stockholders of
KLA vote to approve the issuance of shares of KLA Common Stock (as defined
below) to the shareholders of Tencor pursuant to the terms of the Merger.
E. Concurrently with the execution of this Agreement, and as a
condition and inducement to Tencor's and KLA's willingness to enter into this
Agreement, KLA shall execute and deliver a Stock Option Agreement in favor of
Tencor in substantially the form attached hereto as Exhibit A (the "KLA STOCK
OPTION AGREEMENT") and Tencor shall execute and deliver a Stock Option Agreement
in favor of KLA in substantially the form attached hereto as Exhibit B (the
"TENCOR STOCK OPTION AGREEMENT" and, together with the KLA Stock Option
Agreement, the "STOCK OPTION AGREEMENTS"). The Board of Directors of KLA and
Tencor have each approved the Stock Option Agreements.
F. The parties intend, by executing this Agreement, to adopt a plan of
reorganization within the meaning of Section 368 of the Internal Revenue Code of
1986, as amended (the "CODE").
G. It is also intended by the parties hereto that the Merger shall
qualify for accounting treatment as a pooling of interests.
NOW, THEREFORE, in consideration of the covenants, promises and
representations set forth herein, and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties agree
as follows:
ARTICLE I
THE MERGER
1.1 The Merger. At the Effective Time (as defined in Section 1.2) and
subject to and upon the terms and conditions of this Agreement and the
applicable provisions of California Law, Merger Sub shall be merged with and
into Tencor (the "MERGER"), the separate corporate existence of Merger Sub shall
cease and Tencor shall continue as the surviving corporation. Tencor as the
surviving corporation after the Merger is hereinafter sometimes referred to as
the "SURVIVING CORPORATION."
1.2 Effective Time; Closing. Subject to the provisions of this
Agreement, the parties hereto shall cause the Merger to be consummated by filing
an Agreement of Merger, substantially in the form of Exhibit C hereto (the
"AGREEMENT OF MERGER"), with the Secretary of State of the State of California
in accordance with the relevant provisions of California Law (the time of such
filing (or such later time as may be agreed in writing by the parties and
specified in the Agreement of Merger) being the "EFFECTIVE TIME") as soon as
practicable on or after the Closing Date (as herein defined). Unless the context
otherwise requires, the term "AGREEMENT" as used herein refers collectively to
this Agreement and Plan of Reorganization and the Agreement of Merger. The
closing of the Merger (the "CLOSING") shall take place at the offices of Wilson,
Sonsini, Goodrich & Rosati, Professional Corporation at a time and date to be
specified by the parties, which shall be no later than the second business day
after the satisfaction or waiver of the conditions set forth in Article VI, or
at such other time, date and location as the parties hereto agree in writing
(the "CLOSING DATE").
1.3 Effect of the Merger. At the Effective Time, the effect of the
Merger shall be as provided in this Agreement and the applicable provisions of
California Law. Without limiting the generality of the foregoing, and subject
thereto, at the Effective Time all the property, rights, privileges, powers and
franchises of Tencor and Merger Sub shall vest in the Surviving Corporation, and
all debts, liabilities and duties of Tencor and Merger Sub shall become the
debts, liabilities and duties of the Surviving Corporation.
1.4 Articles of Incorporation; Bylaws.
(a) At the Effective Time, the Articles of Incorporation of
Merger Sub, as in effect immediately prior to the Effective Time, shall be the
Articles of Incorporation of the Surviving Corporation until thereafter amended
as provided by law and such Articles of Incorporation of the Surviving
Corporation; provided, however, that at the Effective Time the Articles of
Incorporation of the Surviving Corporation shall be amended so that the name of
the Surviving Corporation shall be Tencor Instruments.
(b) The Bylaws of Merger Sub, as in effect immediately prior
to the Effective Time, shall be, at the Effective Time, the Bylaws of the
Surviving Corporation until thereafter amended.
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1.5 Directors and Officers. The initial directors of the Surviving
Corporation shall be the directors of Merger Sub immediately prior to the
Effective Time, until their respective successors are duly elected or appointed
and qualified. The initial officers of the Surviving Corporation shall be the
officers of Merger Sub immediately prior to the Effective Time, until their
respective successors are duly appointed.
1.6 Effect on Capital Stock. At the Effective Time, by virtue of the
Merger and without any action on the part of Merger Sub, Tencor or the holders
of any of the following securities:
(a) Conversion of Tencor Common Stock. Each share of Common
Stock, no par value, of Tencor (the "TENCOR COMMON STOCK") issued and
outstanding immediately prior to the Effective Time, (other than any shares of
Tencor Common Stock to be canceled pursuant to Section 1.6(b) and any Dissenting
Shares (as defined in and to the extent provided in Section 1.7(a)) will be
canceled and extinguished and automatically converted (subject to Sections
1.6(e) and (f)) into the right to receive one (1) (the "EXCHANGE RATIO") share
of Common Stock, par value $0.001 per share, of KLA (the "KLA COMMON STOCK")
upon surrender of the certificate representing such share of Tencor Common Stock
in the manner provided in Section 1.8 (or in the case of a lost, stolen or
destroyed certificate, upon delivery of an affidavit (and bond, if required) in
the manner provided in Section 1.10), including, with respect to each whole
share of KLA Common Stock to be received, the associated Rights (as defined in
that certain Amended and Restated Rights Agreement (the "KLA RIGHTS PLAN") dated
as of April 25, 1996, between KLA and First National Bank of Boston, as Rights
Agent).
(b) Cancellation of KLA-Owned Stock. Each share of Tencor
Common Stock held by Tencor or owned by Merger Sub, KLA or any direct or
indirect wholly owned subsidiary of Tencor or of KLA immediately prior to the
Effective Time shall be canceled and extinguished without any conversion
thereof.
(c) Stock Options; Employee Stock Purchase Plans. At the
Effective Time, all options to purchase Tencor Common Stock then outstanding
under Tencor's Second Amended and Restated 1984 Stock Option Plan, the Prometrix
1983 Employee Incentive Stock Option Plan, as amended, the Prometrix 1993
Employee Incentive Stock Option Plan, Tencor's 1993 Equity Incentive Plan and
Tencor's 1993 Non-Employee Director Stock Plan (collectively, the "TENCOR STOCK
OPTION PLANS") shall be assumed by KLA in accordance with Section 5.11 hereof.
At the Effective Time, in accordance with the terms of Tencor's 1993 Employee
Stock Purchase Plan and 1993 Foreign Employee Stock Purchase Plan (the "TENCOR
EMPLOYEE STOCK PURCHASE PLANS"), the option periods then in progress shall be
shortened by setting a new purchase date which shall be the trading day
immediately preceding the Effective Time (the "NEW PURCHASE DATE"). The Tencor
Employee Stock Purchase Plans shall terminate immediately following the purchase
of shares on the New Purchase Date.
(d) Capital Stock of Merger Sub. Each share of Common Stock,
no par value, of Merger Sub (the "MERGER SUB COMMON STOCK") issued and
outstanding immediately prior to the Effective Time shall be converted into one
validly issued, fully paid and nonassessable share of Common Stock, no par
value, of the Surviving Corporation. Each certificate evidencing ownership
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of shares of Merger Sub Common Stock shall continue to evidence ownership of
such shares of capital stock of the Surviving Corporation.
(e) Adjustments to Exchange Ratio. The Exchange Ratio shall be
adjusted to reflect appropriately the effect of any stock split, reverse stock
split, stock dividend (including any dividend or distribution of securities
convertible into KLA Common Stock or Tencor Common Stock), reorganization,
recapitalization or other like change with respect to KLA Common Stock or Tencor
Common Stock occurring on or after the date hereof and prior to the Effective
Time.
(f) Fractional Shares. No fraction of a share of KLA Common
Stock will be issued by virtue of the Merger, but in lieu thereof each holder of
shares of Tencor Common Stock who would otherwise be entitled to a fraction of a
share of KLA Common Stock (after aggregating all fractional shares of KLA Common
Stock to be received by such holder) shall receive from KLA an amount of cash
(rounded to the nearest whole cent) equal to the product of (i) such fraction,
multiplied by (ii) the average closing price of one share of KLA Common Stock
for the ten most recent days that KLA Common Stock has traded ending on the
trading day immediately prior to the Effective Time, as reported on the Nasdaq
National Market.
1.7 Dissenting Shares.
(a) Notwithstanding any provision of this Agreement to the
contrary, the shares of any holder of Tencor Common Stock who has demanded and
perfected appraisal rights for such shares in accordance with California Law and
who, as of the Effective Time, has not effectively withdrawn or lost such
appraisal rights ("DISSENTING SHARES"), shall not be converted into or represent
a right to receive KLA Common Stock pursuant to Section 1.6, but the holder
thereof shall only be entitled to such rights as are granted by California Law.
(b) Notwithstanding the foregoing, if any holder of shares of
Tencor Common Stock who demands appraisal of such shares under California Law
shall effectively withdraw or lose (through failure to perfect or otherwise) the
right to appraisal, then, as of the later of the Effective Time or the
occurrence of such event, such holder's shares shall automatically be converted
into and represent only the right to receive KLA Common Stock and cash in lieu
of fractional shares of KLA Common Stock in accordance with Section 1.6 hereof,
without interest thereon, upon surrender of the certificate representing such
shares of Tencor Common Stock in the manner provided in Section 1.8 (or in the
case of a lost, stolen or destroyed certificate, upon delivery of an affidavit
(and bond, if required) in the manner provided in Section 1.10), including, with
respect to each whole share of KLA Common Stock to be received, the associated
Right under the KLA Rights Plan).
(c) Tencor shall give KLA (i) prompt notice of any written
demands for appraisal of any shares of Tencor Common Stock, withdrawals of such
demands, and any other instruments served pursuant to California Law and
received by Tencor which relate to any such demand for appraisal and (ii) the
opportunity to participate in all negotiations and proceedings which take place
prior to the Effective Time with respect to demands for appraisal under
California Law. Tencor shall not, except with the prior written consent of KLA
or as may be required by applicable law, voluntarily make any payment with
respect to any demands for appraisal of Tencor Common Stock or offer to
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settle or settle any such demands. Any payments made in respect of Dissenting
Shares shall be made by Tencor or the Surviving Corporation as the case may be.
1.8 Surrender of Certificates.
(a) Exchange Agent. KLA shall select an institution
reasonably satisfactory to Tencor to act as the exchange agent (the "EXCHANGE
AGENT") in the Merger.
(b) KLA to Provide Common Stock. Promptly after the Effective
Time, KLA shall make available to the Exchange Agent for exchange in accordance
with this Article I, the shares of KLA Common Stock issuable pursuant to Section
1.6 in exchange for outstanding shares of Tencor Common Stock, and cash in an
amount sufficient for payment in lieu of fractional shares pursuant to Section
1.6(f) and any dividends or distributions which holders of shares of Tencor
Common Stock may be entitled pursuant to Section 1.8(d).
(c) Exchange Procedures. Promptly after the Effective Time,
KLA shall cause the Exchange Agent to mail to each holder of record (as of the
Effective Time) of a certificate or certificates (the "CERTIFICATES") which
immediately prior to the Effective Time represented outstanding shares of Tencor
Common Stock whose shares were converted into the right to receive shares of KLA
Common Stock pursuant to Section 1.6, cash in lieu of any fractional shares
pursuant to Section 1.6(f) and any dividends or other distributions pursuant to
Section 1.8(d), (i) a letter of transmittal (which shall specify that delivery
shall be effected, and risk of loss and title to the Certificates shall pass,
only upon delivery of the Certificates to the Exchange Agent and shall be in
such form and have such other provisions as KLA may reasonably specify) and (ii)
instructions for use in effecting the surrender of the Certificates in exchange
for certificates representing shares of KLA Common Stock, cash in lieu of any
fractional shares pursuant to Section 1.6(f) and any dividends or other
distributions pursuant to Section 1.8(d). Upon surrender of Certificates for
cancellation to the Exchange Agent or to such other agent or agents as may be
appointed by KLA, together with such letter of transmittal, duly completed and
validly executed in accordance with the instructions thereto, the holders of
such Certificates shall be entitled to receive in exchange therefor certificates
representing the number of whole shares of KLA Common Stock, payment in lieu of
fractional shares which such holders have the right to receive pursuant to
Section 1.6(f) and any dividends or distributions payable pursuant to Section
1.8(d), and the Certificates so surrendered shall forthwith be canceled. Until
so surrendered, outstanding Certificates will be deemed from and after the
Effective Time, for all corporate purposes, subject to Section 1.8(d) as to the
payment of dividends, to evidence the ownership of the number of full shares of
KLA Common Stock into which such shares of Tencor Common Stock shall have been
so converted and the right to receive an amount in cash in lieu of the issuance
of any fractional shares in accordance with Section 1.6(f) and any dividends or
distributions payable pursuant to Section 1.8(d).
(d) Distributions With Respect to Unexchanged Shares. No
dividends or other distributions declared or made after the date of this
Agreement with respect to KLA Common Stock with a record date after the
Effective Time will be paid to the holders of any unsurrendered Certificates
with respect to the shares of KLA Common Stock represented thereby until the
holders of record of such Certificates shall surrender such Certificates.
Subject to applicable law, following surrender of any such Certificates, the
Exchange Agent shall deliver to the record holders thereof,
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without interest, certificates representing whole shares of KLA Common Stock
issued in exchange therefor along with payment in lieu of fractional shares
pursuant to Section 1.6(f) hereof and the amount of any such dividends or other
distributions with a record date after the Effective Time payable with respect
to such whole shares of KLA Common Stock.
(e) Transfers of Ownership. If certificates for shares of KLA
Common Stock are to be issued in a name other than that in which the
Certificates surrendered in exchange therefor are registered, it will be a
condition of the issuance thereof that the Certificates so surrendered will be
properly endorsed and otherwise in proper form for transfer and that the persons
requesting such exchange will have paid to KLA or any agent designated by it any
transfer or other taxes required by reason of the issuance of certificates for
shares of KLA Common Stock in any name other than that of the registered holder
of the Certificates surrendered, or established to the satisfaction of KLA or
any agent designated by it that such tax has been paid or is not payable.
(f) No Liability. Notwithstanding anything to the contrary in
this Section 1.8, neither the Exchange Agent, KLA, the Surviving Corporation nor
any party hereto shall be liable to a holder of shares of KLA Common Stock or
Tencor Common Stock for any amount properly paid to a public official pursuant
to any applicable abandoned property, escheat or similar law.
1.9 No Further Ownership Rights in Tencor Common Stock. All shares of
KLA Common Stock issued upon the surrender for exchange of shares of Tencor
Common Stock in accordance with the terms hereof (including any cash paid in
respect thereof pursuant to Section 1.6(f) and 1.8(d)) shall be deemed to have
been issued in full satisfaction of all rights pertaining to such shares of
Tencor Common Stock, and there shall be no further registration of transfers on
the records of the Surviving Corporation of shares of Tencor Common Stock which
were outstanding immediately prior to the Effective Time. If after the Effective
Time Certificates are presented to the Surviving Corporation for any reason,
they shall be canceled and exchanged as provided in this Article I.
1.10 Lost, Stolen or Destroyed Certificates. In the event any
Certificates shall have been lost, stolen or destroyed, the Exchange Agent shall
issue in exchange for such lost, stolen or destroyed Certificates, upon the
making of an affidavit of that fact by the holder thereof, such shares of KLA
Common Stock, cash for fractional shares, if any, as may be required pursuant to
Section 1.6(f) and any dividends or distributions payable pursuant to Section
1.8(d); provided, however, that KLA may, in its discretion and as a condition
precedent to the issuance thereof, require the owner of such lost, stolen or
destroyed Certificates to deliver a bond in such sum as it may reasonably direct
as indemnity against any claim that may be made against KLA, Tencor or the
Exchange Agent with respect to the Certificates alleged to have been lost,
stolen or destroyed.
1.11 Tax and Accounting Consequences.
(a) It is intended by the parties hereto that the Merger shall
constitute a reorganization within the meaning of Section 368 of the Code. The
parties hereto adopt this Agreement as a "plan of reorganization" within the
meaning of Sections 1.368-2(g) and 1.368-3(a) of the United States Income Tax
Regulations.
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(b) It is intended by the parties hereto that the Merger shall
qualify for accounting treatment as a pooling of interests.
1.12 Taking of Necessary Action; Further Action. If, at any time after
the Effective Time, any further action is necessary or desirable to carry out
the purposes of this Agreement and to vest the Surviving Corporation with full
right, title and possession to all assets, property, rights, privileges, powers
and franchises of Tencor and Merger Sub, the officers and directors of Tencor
and Merger Sub will take all such lawful and necessary action, so long as such
action is consistent with this Agreement.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF TENCOR
Tencor represents and warrants to KLA and Merger Sub, subject to the
exceptions specifically disclosed in writing in the disclosure letter supplied
by Tencor to KLA dated as of the date hereof and certified by a duly authorized
officer of Tencor (the "TENCOR SCHEDULES"), as follows:
2.1 Organization of Tencor.
(a) Tencor and each of its subsidiaries is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation; has the corporate power and authority to own,
lease and operate its assets and property and to carry on its business as now
being conducted and as proposed to be conducted; and is duly qualified or
licensed to do business and is in good standing in each jurisdiction where the
character of the properties owned, leased or operated by it or the nature of its
activities makes such qualification or licensing necessary, except where the
failure to be so qualified would not have a Material Adverse Effect (as defined
below) on Tencor.
(b) Tencor has delivered to KLA a true and complete list of
all of Tencor's subsidiaries, indicating the jurisdiction of incorporation of
each subsidiary and Tencor's equity interest therein.
(c) Tencor has delivered or made available to KLA a true and
correct copy of the Articles of Incorporation and Bylaws of Tencor and similar
governing instruments of each of its subsidiaries, each as amended to date, and
each such instrument is in full force and effect. Neither Tencor nor any of its
subsidiaries is in violation of any of the provisions of its Articles of
Incorporation or Bylaws or equivalent governing instruments.
(d) When used in connection with Tencor, the term "MATERIAL
ADVERSE EFFECT" means, for purposes of this Agreement, any change, event or
effect that is materially adverse to the business, assets (including intangible
assets), financial condition or results of operations of Tencor and its
subsidiaries taken as a whole (except for those changes, events and effects that
are directly caused by (i) conditions affecting the United States economy as a
whole, or (ii) conditions affecting the semiconductor capital equipment
manufacturing industry as a whole, which conditions (in the case of clause (i)
or (ii)) do not affect Tencor in a disproportionate manner).
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2.2 Tencor Capital Structure. The authorized capital stock of Tencor
consists of 60,000,000 shares of Common Stock, no par value, of which there were
31,073,715 shares issued and outstanding as of January 10, 1997 and 1,000,000
shares of Preferred Stock, no par value, of which no shares are issued or
outstanding. All outstanding shares of Tencor Common Stock are duly authorized,
validly issued, fully paid and nonassessable and are not subject to preemptive
rights created by statute, the Articles of Incorporation or Bylaws of Tencor or
any agreement or document to which Tencor is a party or by which it is bound. As
of December 31, 1996, Tencor had reserved an aggregate of 3,930,073 shares and
137,365 shares, respectively, of Tencor Common Stock, net of exercises, for
issuance to employees, consultants and non-employee directors pursuant to the
Tencor 1993 Equity Incentive Plan and the Tencor 1993 Non-Employee Director
Stock Plan, under which options are outstanding for an aggregate of 2,677,860
shares and 87,365 shares, respectively, and under which 1,262,295 shares and
50,000 shares, respectively, are available for grant as of December 31, 1996. As
of December 31, 1996, Tencor had reserved an aggregate of, and there were
outstanding options for 309,130 shares, 98,576 shares and 49,153 shares,
respectively, of Tencor Common Stock for issuance pursuant to the Second Amended
and Restated 1984 Stock Option Plan, the Prometrix 1983 Employee Incentive Stock
Option Plan, as amended, and the Prometrix 1993 Employee Incentive Stock Option
Plan. All shares of Tencor Common Stock subject to issuance as aforesaid, upon
issuance on the terms and conditions specified in the instruments pursuant to
which they are issuable, would be duly authorized, validly issued, fully paid
and nonassessable. The Tencor Schedules list for each person who held in the
aggregate options to acquire 10,000 or more shares of Tencor Common Stock at on
or about January 10, 1997, the name of the holder of such option, the exercise
price of such option, the number of shares as to which such option will have
vested at such date, the vesting schedule for such option and whether the
exercisability of such option will be accelerated in any way by the transactions
contemplated by this Agreement, and indicate the extent of acceleration, if any.
As of December 31, 1996, an aggregate of 522,919 shares of Tencor Common Stock
were reserved for issuance pursuant to Tencor's 1993 Employee Stock Purchase
Plan and Tencor's 1993 Foreign Employee Stock Purchase Plan, on a combined
basis.
2.3 Obligations With Respect to Capital Stock. Except as set forth in
Section 2.2, there are no equity securities, partnership interests or similar
ownership interests of any class of Tencor, or any securities exchangeable or
convertible into or exercisable for such equity securities, partnership
interests or similar ownership interests, issued, reserved for issuance or
outstanding. Except for securities Tencor owns, directly or indirectly through
one or more subsidiaries, there are no equity securities, partnership interests
or similar ownership interests of any class of any subsidiary of Tencor, or any
security exchangeable or convertible into or exercisable for such equity
securities, partnership interests or similar ownership interests, issued,
reserved for issuance or outstanding. Except as set forth in Section 2.2, there
are no options, warrants, equity securities, partnership interests or similar
ownership interests, calls, rights (including preemptive rights), commitments or
agreements of any character to which Tencor or any of its subsidiaries is a
party or by which it is bound obligating Tencor or any of its subsidiaries to
issue, deliver or sell, or cause to be issued, delivered or sold, or repurchase,
redeem or otherwise acquire, or cause the repurchase, redemption or acquisition,
of any shares of capital stock, partnership interests or similar ownership
interests of Tencor or any of its subsidiaries or obligating Tencor or any of
its subsidiaries to grant, extend, accelerate the vesting of or enter into any
such option, warrant, equity security, call, right, commitment or agreement.
There are no registration rights and, to the knowledge of Tencor, as of the date
of this Agreement, there are no voting trusts, proxies or other agreements or
understandings with respect to any equity security of
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any class of Tencor or with respect to any equity security, partnership interest
or similar ownership interest of any class of any of its subsidiaries.
2.4 Authority.
(a) Tencor has all requisite corporate power and authority to
enter into this Agreement and the Tencor Stock Option Agreement and to
consummate the transactions contemplated hereby and thereby. The execution and
delivery of this Agreement and the consummation of the transactions contemplated
hereby, and the execution and delivery of the Tencor Stock Option Agreement and
the consummation of the transactions contemplated thereby, have been duly
authorized by all necessary corporate action on the part of Tencor, subject only
to the approval and adoption of this Agreement and the approval of the Merger by
Tencor's shareholders and the filing and recordation of the Agreement of Merger
pursuant to California Law. A vote of the holders of at least a majority of the
outstanding shares of the Tencor Common Stock is required for Tencor's
shareholders to approve and adopt this Agreement and approve the Merger. This
Agreement and the Tencor Stock Option Agreement have been duly executed and
delivered by Tencor and, assuming the due authorization, execution and delivery
by KLA and, if applicable, Merger Sub, constitute valid and binding obligations
of Tencor, enforceable in accordance with their respective terms, except as
enforceability may be limited by bankruptcy and other similar laws and general
principles of equity. The execution and delivery of this Agreement and the
Tencor Stock Option Agreement by Tencor do not, and the performance of this
Agreement and the Tencor Stock Option Agreement by Tencor will not, (i) conflict
with or violate the Articles of Incorporation or Bylaws of Tencor or the
equivalent organizational documents of any of its subsidiaries, (ii) subject to
obtaining the approval and adoption of this Agreement and the approval of the
Merger by Tencor's shareholders as contemplated in Section 5.2 and compliance
with the requirements set forth in Section 2.4(b) below, conflict with or
violate any law, rule, regulation, order, judgment or decree applicable to
Tencor or any of its subsidiaries or by which its or any of their respective
properties is bound or affected, or (iii) result in any breach of or constitute
a default (or an event that with notice or lapse of time or both would become a
default) under, or impair Tencor's rights or alter the rights or obligations of
any third party under, or give to others any rights of termination, amendment,
acceleration or cancellation of, or result in the creation of a lien or
encumbrance on any of the properties or assets of Tencor or any of its
subsidiaries pursuant to, any material note, bond, mortgage, indenture,
contract, agreement, lease, license, permit, franchise or other instrument or
obligation to which Tencor or any of its subsidiaries is a party or by which
Tencor or any of its subsidiaries or its or any of their respective properties
are bound or affected. The Tencor Schedules list all material consents, waivers
and approvals under any of Tencor's or any of its subsidiaries' agreements,
contracts, licenses or leases required to be obtained in connection with the
consummation of the transactions contemplated hereby.
(b) No consent, approval, order or authorization of, or
registration, declaration or filing with any court, administrative agency or
commission or other governmental authority or instrumentality, foreign or
domestic ("GOVERNMENTAL ENTITY"), is required by or with respect to Tencor in
connection with the execution and delivery of this Agreement and the Tencor
Stock Option Agreement or the consummation of the Merger, except for (i) the
filing of the Agreement of Merger with the Secretary of State of the State of
California, (ii) the filing of the Proxy Statement (as defined in Section 2.19)
with the Securities and Exchange Commission ("SEC") in accordance with the
Securities Exchange Act of 1934, as amended (the "EXCHANGE ACT"), (iii) such
consents, approvals,
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orders, authorizations, registrations, declarations and filings as may be
required under applicable federal and state securities laws and the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR ACT")
and the securities or antitrust laws of any foreign country, and (iv) such other
consents, authorizations, filings, approvals and registrations which if not
obtained or made would not be material to Tencor or KLA or have a material
adverse effect on the ability of the parties to consummate the Merger.
2.5 SEC Filings; Tencor Financial Statements.
(a) Tencor has filed all forms, reports and documents required
to be filed with the SEC since January 1, 1994, and has made available to KLA
such forms, reports and documents in the form filed with the SEC. All such
required forms, reports and documents (including those that Tencor may file
subsequent to the date hereof) are referred to herein as the "TENCOR SEC
REPORTS." As of their respective dates, the Tencor SEC Reports (i) were prepared
in accordance with the requirements of the Securities Act of 1933, as amended
(the "SECURITIES ACT"), or the Exchange Act, as the case may be, and the rules
and regulations of the SEC thereunder applicable to such Tencor SEC Reports, and
(ii) did not at the time they were filed (or if amended or superseded by a
filing prior to the date of this Agreement, then on the date of such filing)
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading. None of Tencor's subsidiaries is required to file any forms, reports
or other documents with the SEC.
(b) Each of the consolidated financial statements (including,
in each case, any related notes thereto) contained in Tencor SEC Reports (the
"TENCOR FINANCIALS"), including any Tencor SEC Reports filed after the date
hereof until the Closing, (x) complied as to form in all material respects with
the published rules and regulations of the SEC with respect thereto, (y) was
prepared in accordance with generally accepted accounting principles ("GAAP")
applied on a consistent basis throughout the periods involved (except as may be
indicated in the notes thereto or, in the case of unaudited interim financial
statements, as may be permitted by the SEC on Form 10-Q under the Exchange Act)
and (z) fairly presented the consolidated financial position of Tencor and its
subsidiaries as at the respective dates thereof and the consolidated results of
Tencor's operations and cash flows for the periods indicated, except that the
unaudited interim financial statements were or are subject to normal and
recurring year-end adjustments. The balance sheet of Tencor contained in Tencor
SEC Reports as of September 30, 1996 is hereinafter referred to as the "TENCOR
BALANCE SHEET." Except as disclosed in the Tencor Financials, since the date of
the Tencor Balance Sheet neither Tencor nor any of its subsidiaries has any
liabilities (absolute, accrued, contingent or otherwise) of a nature required to
be disclosed on a balance sheet or in the related notes to the consolidated
financial statements prepared in accordance with GAAP which are, individually or
in the aggregate, material to the business, results of operations or financial
condition of Tencor and its subsidiaries taken as a whole, except liabilities
(i) provided for in the Tencor Balance Sheet, or (ii) incurred since the date of
the Tencor Balance Sheet in the ordinary course of business consistent with past
practices and immaterial in the aggregate.
(c) Tencor has heretofore furnished to KLA a complete and
correct copy of any amendments or modifications, which have not yet been filed
with the SEC but which are required to
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be filed, to agreements, documents or other instruments which previously had
been filed by Tencor with the SEC pursuant to the Securities Act or the Exchange
Act.
2.6 Absence of Certain Changes or Events. Since the date of the Tencor
Balance Sheet through the date of this Agreement, there has not been: (i) any
Material Adverse Effect on Tencor, (ii) any material change by Tencor in its
accounting methods, principles or practices, except as required by concurrent
changes in GAAP, or (iii) any material revaluation by Tencor of any of its
assets, including, without limitation, writing down the value of capitalized
inventory or writing off notes or accounts receivable other than in the ordinary
course of business.
2.7 Taxes.
(a) Definition of Taxes. For the purposes of this Agreement,
"TAX" or "TAXES" refers to any and all federal, state, local and foreign taxes,
assessments and other governmental charges, duties, impositions and liabilities
relating to taxes, including taxes based upon or measured by gross receipts,
income, profits, sales, use and occupation, and value added, ad valorem,
transfer, franchise, withholding, payroll, recapture, employment, excise and
property taxes, together with all interest, penalties and additions imposed with
respect to such amounts and any obligations under any agreements or arrangements
with any other person with respect to such amounts and including any liability
for taxes of a predecessor entity.
(b) Tax Returns and Audits.
(i) Tencor and each of its subsidiaries have timely filed
all federal, state, local and foreign returns, estimates, information statements
and reports ("RETURNS") relating to Taxes required to be filed by Tencor and
each of its subsidiaries, except such Returns which are not material to Tencor,
and have paid all Taxes shown to be due on such Returns.
(ii) Except as is not material to Tencor, Tencor and each
of its subsidiaries as of the Effective Time will have withheld with respect to
its employees all federal and state income taxes, FICA, FUTA and other Taxes
required to be withheld.
(iii) Except as is not material to Tencor, neither Tencor
nor any of its subsidiaries has been delinquent in the payment of any Tax nor is
there any Tax deficiency outstanding, proposed or assessed against Tencor or any
of its subsidiaries, nor has Tencor or any of its subsidiaries executed any
waiver of any statute of limitations on or extending the period for the
assessment or collection of any Tax.
(iv) Except as is not material to Tencor, no audit or other
examination of any Return of Tencor or any of its subsidiaries is presently in
progress, nor has Tencor or any of its subsidiaries been notified of any request
for such an audit or other examination.
(v) Except as is not material to Tencor, no adjustment
relating to any Returns filed by Tencor or any of its subsidiaries has been
proposed formally or informally by any Tax authority to Tencor or any of its
subsidiaries or any representative thereof and, to the knowledge of Tencor, no
basis exists for any such adjustment which would be material to Tencor.
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(vi) Neither Tencor nor any of its subsidiaries
has any liability for unpaid Taxes which has not been accrued for or reserved on
the Tencor Balance Sheet, whether asserted or unasserted, contingent or
otherwise, which is material to Tencor.
(vii) None of Tencor's assets are treated as
"tax-exempt use property" within the meaning of Section 168(h) of the Code.
(viii) There is no contract, agreement, plan or
arrangement, including but not limited to the provisions of this Agreement,
covering any employee or former employee of Tencor or any of its subsidiaries
that, individually or collectively, could give rise to the payment of any amount
that would not be deductible pursuant to Sections 280G, 404 or 162 of the Code.
(ix) Neither Tencor nor any of its subsidiaries
has filed any consent agreement under Section 341(f) of the Code or agreed to
have Section 341(f)(2) of the Code apply to any disposition of a subsection (f)
asset (as defined in Section 341(f)(4) of the Code) owned by Tencor.
(x) Tencor is not, and has not been at any
time, a "United States real property holding corporation" within the meaning of
Section 897(c)(2) of the Code.
(xi) No power of attorney that is currently in
force has been granted with respect to any matter relating to Taxes payable by
Tencor or any of its subsidiaries.
(xii) Neither Tencor nor any of its subsidiaries
is party to or affected by any tax-sharing or allocation agreement or
arrangement.
(xiii) The Tencor Schedules list (y) any Tax
exemption, Tax holiday or other Tax-sparing arrangement that Tencor or any of
its subsidiaries has in any jurisdiction, including the nature, amount and
lengths of such Tax exemption, Tax holiday or other Tax-sparing arrangement and
(z) any expatriate tax programs or policies affecting Tencor or any of its
subsidiaries. Each of Tencor and its subsidiaries is in full compliance with all
terms and conditions of any Tax exemption, Tax holiday or other Tax-sparing
arrangement or order of any Governmental Entity and the consummation of the
transactions contemplated hereby will not have any adverse effect on the
continued validity and effectiveness of any such Tax exemption, Tax holiday or
other Tax-sparing arrangement or order.
2.8 Intellectual Property.
(a) Tencor and its subsidiaries own, or have the right to use,
sell or license all intellectual property necessary or required for the conduct
of their respective businesses as presently conducted (such intellectual
property and the rights thereto are collectively referred to herein as the
"TENCOR IP RIGHTS").
(b) The execution, delivery and performance of this Agreement
and the consummation of the transactions contemplated hereby will not constitute
a material breach of any instrument or agreement governing any Tencor IP Rights,
will not cause the forfeiture or termination
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or give rise to a right of forfeiture or termination of any Tencor IP Rights or
materially impair the right of Tencor, the Surviving Corporation or KLA to use,
sell or license any Tencor IP Rights or portion thereof.
(c) Neither the manufacture, marketing, license, sale or
intended use of any product or technology currently licensed or sold or under
development by Tencor or any of its subsidiaries violates in any material
respect any license or agreement between Tencor or any of its subsidiaries and
any third party or infringes in any material respect any intellectual property
right of any other party; and there is no pending or, to the knowledge of
Tencor, threatened claim or litigation contesting the validity, ownership or
right to use, sell, license or dispose of any Tencor IP Rights, nor has Tencor
received any written notice asserting that any Tencor IP Rights or the proposed
use, sale, license or disposition thereof conflicts or will conflict with the
rights of any other party.
(d) Tencor has taken reasonable and practicable steps designed
to safeguard and maintain the secrecy and confidentiality of, and its
proprietary rights in, all Tencor IP Rights.
2.9 Compliance; Permits; Restrictions.
(a) Neither Tencor nor any of its subsidiaries is, in any
material respect, in conflict with, or in default or violation of (i) any law,
rule, regulation, order, judgment or decree applicable to Tencor or any of its
subsidiaries or by which Tencor or any of its subsidiaries or any of their
respective properties is bound or affected, or (ii) any material note, bond,
mortgage, indenture, contract, agreement, lease, license, permit, franchise or
other instrument or obligation to which Tencor or any of its subsidiaries is a
party or by which Tencor or any of its subsidiaries or its or any of their
respective properties is bound or affected. To the knowledge of Tencor, no
investigation or review by any Governmental Entity is pending or threatened
against Tencor or any of its subsidiaries, nor has any Governmental Entity
indicated an intention to conduct the same. There is no material agreement,
judgment, injunction, order or decree binding upon Tencor or any of its
subsidiaries which has or could reasonably be expected to have the effect of
prohibiting or materially impairing any business practice of Tencor or any of
its subsidiaries, any acquisition of material property by Tencor or any of its
subsidiaries or the conduct of business by Tencor as currently conducted.
(b) Tencor and its subsidiaries hold all permits, licenses,
variances, exemptions, orders and approvals from governmental authorities which
are material to the operation of the business of Tencor (collectively, the
"TENCOR PERMITS"). Tencor and its subsidiaries are in compliance in all material
respects with the terms of the Tencor Permits.
2.10 Litigation. There is no action, suit, proceeding, claim,
arbitration or investigation pending, or as to which Tencor or any of its
subsidiaries has received any notice of assertion nor, to Tencor's knowledge, is
there a threatened action, suit, proceeding, claim, arbitration or investigation
against Tencor or any of its subsidiaries which reasonably would be likely to be
material to Tencor, or which in any manner challenges or seeks to prevent,
enjoin, alter or delay any of the transactions contemplated by this Agreement.
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2.11 Brokers' and Finders' Fees. Except for fees payable to Lehman
Brothers Inc. pursuant to an engagement letter dated January 9, 1996, a copy of
which has been provided to KLA, Tencor has not incurred, nor will it incur,
directly or indirectly, any liability for brokerage or finders' fees or agents'
commissions or any similar charges in connection with this Agreement or any
transaction contemplated hereby.
2.12 Employee Benefit Plans.
(a) With respect to each material employee benefit plan,
program, arrangement and contract (including, without limitation, any "employee
benefit plan" as defined in Section 3(3) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA")) maintained or contributed to by
Tencor or any trade or business (an "ERISA AFFILIATE") which is under common
control with Tencor within the meaning of Section 414 of the Code (the "TENCOR
EMPLOYEE PLANS"), Tencor has made available to KLA a true and complete copy of,
to the extent applicable, (i) such Tencor Employee Plan, (ii) the most recent
annual report (Form 5500), (iii) each trust agreement related to such Tencor
Employee Plan, (iv) the most recent summary plan description for each Tencor
Employee Plan for which such a description is required, (v) the most recent
actuarial report relating to any Tencor Employee Plan subject to Title IV of
ERISA and (vi) the most recent United States Internal Revenue Service ("IRS")
determination letter issued with respect to any Tencor Employee Plan.
(b) Each Tencor Employee Plan which is intended to be
qualified under Section 401(a) of the Code has received a favorable
determination from the IRS covering the provisions of the Tax Reform Act of 1986
stating that such Tencor Employee Plan is so qualified and nothing has occurred
since the date of such letter that could reasonably be expected to affect the
qualified status of such plan. Each Tencor Employee Plan has been operated in
all material respects in accordance with its terms and the requirements of
applicable law. Neither Tencor nor any ERISA Affiliate of Tencor has incurred or
is reasonably expected to incur any material liability under Title IV of ERISA
in connection with any Tencor Employee Plan.
2.13 Absence of Liens and Encumbrances. Tencor and each of its
subsidiaries has good and valid title to, or, in the case of leased properties
and assets, valid leasehold interests in, all of its material tangible
properties and assets, real, personal and mixed, used in its business, free and
clear of any liens or encumbrances except as reflected in the Tencor Financials
and except for liens for taxes not yet due and payable and such imperfections of
title and encumbrances, if any, which would not be material to Tencor.
2.14 Environmental Matters.
(a) Hazardous Material. Except as reasonably would not be
likely to result in a material liability to Tencor, no underground storage tanks
and no amount of any substance that has been designated by any Governmental
Entity or by applicable federal, state or local law to be radioactive, toxic,
hazardous or otherwise a danger to health or the environment, including, without
limitation, PCBs, asbestos, petroleum, urea-formaldehyde and all substances
listed as hazardous substances pursuant to the Comprehensive Environmental
Response, Compensation, and Liability Act of 1980, as amended, or defined as a
hazardous waste pursuant to the United States Resource
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Conservation and Recovery Act of 1976, as amended, and the regulations
promulgated pursuant to said laws, (a "HAZARDOUS MATERIAL"), but excluding
office and janitorial supplies, are present, as a result of the actions of
Tencor or any of its subsidiaries or any affiliate of Tencor, or, to Tencor's
knowledge, as a result of any actions of any third party or otherwise, in, on or
under any property, including the land and the improvements, ground water and
surface water thereof, that Tencor or any of its subsidiaries has at any time
owned, operated, occupied or leased.
(b) Hazardous Materials Activities. Except as reasonably would
not be likely to result in a material liability to Tencor, neither Tencor nor
any of its subsidiaries has transported, stored, used, manufactured, disposed
of, released or exposed its employees or others to Hazardous Materials in
violation of any law in effect on or before the Closing Date, nor has Tencor or
any of its subsidiaries disposed of, transported, sold, used, released, exposed
its employees or others to or manufactured any product containing a Hazardous
Material (collectively "HAZARDOUS MATERIALS ACTIVITIES") in violation of any
rule, regulation, treaty or statute promulgated by any Governmental Entity in
effect prior to or as of the date hereof to prohibit, regulate or control
Hazardous Materials or any Hazardous Material Activity.
(c) Permits. Tencor and its subsidiaries currently hold all
environmental approvals, permits, licenses, clearances and consents (the "TENCOR
ENVIRONMENTAL PERMITS") necessary for the conduct of Tencor's and its
subsidiaries' Hazardous Material Activities and other businesses of Tencor and
its subsidiaries as such activities and businesses are currently being
conducted.
(d) Environmental Liabilities. No material action, proceeding,
revocation proceeding, amendment procedure, writ, injunction or claim is
pending, or to Tencor's knowledge, threatened concerning any Tencor
Environmental Permit, Hazardous Material or any Hazardous Materials Activity of
Tencor or any of its subsidiaries. Tencor is not aware of any fact or
circumstance which could involve Tencor or any of its subsidiaries in any
material environmental litigation or impose upon Tencor any material
environmental liability.
2.15 Labor Matters. To Tencor's knowledge, there are no activities
or proceedings of any labor union to organize any employees of Tencor or any of
its subsidiaries and there are no strikes, or material slowdowns, work stoppages
or lockouts, or threats thereof by or with respect to any employees of Tencor or
any of its subsidiaries. Tencor and its subsidiaries are and have been in
compliance in all material respects with all applicable laws regarding
employment practices, terms and conditions of employment, and wages and hours
(including, without limitation, ERISA, WARN or any similar state or local law).
2.16 Agreements, Contracts and Commitments. Except as set forth in
the Tencor Schedules, neither Tencor nor any of its subsidiaries is a party to
or is bound by:
(a) any employment or consulting agreement, contract or
commitment with any officer or director level employee or member of Tencor's
Board of Directors, other than those that are terminable by Tencor or any of its
subsidiaries on no more than thirty days notice without liability or financial
obligation, except to the extent general principles of wrongful termination law
may limit Tencor's or any of its subsidiaries' ability to terminate employees at
will;
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(b) any agreement or plan, including, without limitation, any
stock option plan, stock appreciation right plan or stock purchase plan, any of
the benefits of which will be increased, or the vesting of benefits of which
will be accelerated, by the occurrence of any of the transactions contemplated
by this Agreement or the value of any of the benefits of which will be
calculated on the basis of any of the transactions contemplated by this
Agreement;
(c) any agreement of indemnification or guaranty not entered
into in the ordinary course of business other than indemnification agreements
between Tencor or any of its subsidiaries and any of its officers or directors;
(d) any agreement, contract or commitment containing any
covenant limiting the freedom of Tencor or any of its subsidiaries to engage in
any line of business or compete with any person or granting any exclusive
distribution rights;
(e) any agreement, contract or commitment currently in force
relating to the disposition or acquisition of assets not in the ordinary course
of business or any ownership interest in any corporation, partnership, joint
venture or other business enterprise; or
(f) any material joint marketing or development agreement.
Neither Tencor nor any of its subsidiaries, nor to Tencor's knowledge
any other party to a Tencor Contract (as defined below), has breached, violated
or defaulted under, or received notice that it has breached violated or
defaulted under, any of the material terms or conditions of any of the
agreements, contracts or commitments to which Tencor or any of its subsidiaries
is a party or by which it is bound of the type described in clauses (a) through
(l) above (any such agreement, contract or commitment, a "Tencor Contract") in
such a manner as would permit any other party to cancel or terminate any such
Tencor Contract, or would permit any other party to seek damages, which would be
reasonably likely to be material to Tencor.
2.17 Pooling of Interests. To the knowledge of Tencor, based on
consultation with its independent accountants, neither Tencor nor any of its
directors, officers, affiliates or shareholders has taken any action which would
preclude KLA's ability to account for the Merger as a pooling of interests.
2.18 Change of Control Payments. The Tencor Schedules set forth
each plan or agreement pursuant to which any material amounts may become payable
(whether currently or in the future) to current or former officers and directors
of Tencor as a result of or in connection with the Merger.
2.19 Statements; Proxy Statement/Prospectus. The information
supplied by Tencor for inclusion in the Registration Statement (as defined in
Section 3.4(b)) shall not at the time the Registration Statement is filed with
the SEC and at the time it becomes effective under the Securities Act, contain
any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the statements
therein not misleading. The information supplied by Tencor for inclusion in the
proxy statement/prospectus to be sent to the shareholders of Tencor and
stockholders of KLA in connection with the meeting of Tencor's shareholders to
consider the approval and adoption of this Agreement and the approval of the
Merger (the "TENCOR
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SHAREHOLDERS' MEETING") and in connection with the meeting of KLA's stockholders
to consider the approval of (i) the amendment of KLA's Certificate of
Incorporation to increase its authorized share capital to allow for the issuance
of shares of KLA Common Stock by virtue of the Merger, (ii) the issuance of
shares of KLA Common Stock by virtue of the Merger, and (iii) the amendment of
KLA's Certificate of Incorporation to change KLA's corporate name (subject to
and conditional upon the effectiveness of the Merger) (the "KLA STOCKHOLDERS'
MEETING") (such proxy statement/prospectus as amended or supplemented is
referred to herein as the "PROXY STATEMENT") shall not, on the date the Proxy
Statement is first mailed to Tencor's shareholders and KLA's stockholders, at
the time of the Tencor Shareholders' Meeting or the KLA Stockholders' Meeting
and at the Effective Time, contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they are made, not false or misleading; or omit to state any material fact
necessary to correct any statement in any earlier communication with respect to
the solicitation of proxies for the Tencor Shareholders' Meeting or the KLA
Stockholders' Meeting which has become false or misleading. The Proxy Statement
will comply as to form in all material respects with the provisions of the
Exchange Act and the rules and regulations thereunder. If at any time prior to
the Effective Time, any event relating to Tencor or any of its affiliates,
officers or directors should be discovered by Tencor which should be set forth
in an amendment to the Registration Statement or a supplement to the Proxy
Statement, Tencor shall promptly inform KLA. Notwithstanding the foregoing,
Tencor makes no representation or warranty with respect to any information
supplied by KLA or Merger Sub which is contained in any of the foregoing
documents.
2.20 Board Approval. The Board of Directors of Tencor has, as of the
date of this Agreement, determined (i) that the Merger is fair to, and in the
best interests of Tencor and its shareholders, and (ii) to recommend that the
shareholders of Tencor approve and adopt this Agreement and approve the Merger.
2.21 Fairness Opinion. Tencor has received a written opinion from
Lehman Brothers Inc., dated as of the date hereof, to the effect that as of the
date hereof, the Exchange Ratio is fair to Tencor's shareholders from a
financial point of view and has delivered to KLA a copy of such opinion.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF KLA AND MERGER SUB
KLA and Merger Sub represent and warrant to Tencor, subject to the
exceptions specifically disclosed in writing in the disclosure letter supplied
by KLA to Tencor dated as of the date hereof and certified by a duly authorized
officer of KLA (the "KLA SCHEDULES"), as follows:
3.1 Organization of KLA.
(a) KLA and each of its subsidiaries is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation; has the corporate power and authority to own,
lease and operate its assets and property and to carry on its business as now
being conducted and as proposed to be conducted; and is duly qualified or
licensed to do
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business and is in good standing in each jurisdiction where the character of the
properties owned, leased or operated by it or the nature of its activities makes
such qualification or licensing necessary, except where the failure to be so
qualified would not have a Material Adverse Effect (as defined below) on KLA.
(b) KLA has delivered to Tencor a true and complete list of
all of KLA's subsidiaries, indicating the jurisdiction of incorporation of each
subsidiary and KLA's equity interest therein.
(c) KLA has delivered or made available to Tencor a true and
correct copy of the Certificate of Incorporation and Bylaws of KLA and similar
governing instruments of each of its subsidiaries, each as amended to date, and
each such instrument is in full force and effect. Neither KLA nor any of its
subsidiaries is in violation of any of the provisions of its Certificate of
Incorporation or Bylaws or equivalent governing instruments.
(d) When used in connection with KLA, the term "MATERIAL
ADVERSE EFFECT" means, for purposes of this Agreement, any change, event or
effect that is materially adverse to the business, assets (including intangible
assets), financial condition or results of operations of KLA and its
subsidiaries taken as a whole (except for those changes, events and effects that
are directly caused by (i) conditions affecting the United States economy as a
whole, or (ii) conditions affecting the semiconductor capital equipment
manufacturing industry as a whole, which conditions (in the case of clause (i)
or (ii)) do not affect KLA in a disproportionate manner).
3.2 KLA and Merger Sub Capital Structure. The authorized capital
stock of KLA consists of 75,000,000 shares of Common Stock, par value $0.001 per
share, 74,000,000 of which have been designated "Common Stock" of which there
were 51,544,239 shares issued and outstanding as of January 10, 1997, including
110,000 shares held in the treasury of KLA, and 1,000,000 of which have been
designated "Junior Common Stock," of which no shares are issued and outstanding;
and 1,000,000 shares of Preferred Stock, par value $0.001 per share, of which no
shares are issued or outstanding. The authorized capital stock of Merger Sub
consists of 1,000 shares of Common Stock, no par value, all of which, as of the
date hereof, are issued and outstanding and are held by KLA. Merger Sub was
formed on January 9, 1997, for the purpose of consummating the Merger and has no
material assets or liabilities except as necessary for such purpose. All
outstanding shares of KLA Common Stock are duly authorized, validly issued,
fully paid and nonassessable and are not subject to preemptive rights created by
statute, the Certificate of Incorporation or Bylaws of KLA or any agreement or
document to which KLA is a party or by which it is bound. As of January 10,
1997, KLA had reserved an aggregate of 16,500,000 shares and 200,000 shares,
respectively, of KLA Common Stock, net of exercises, for issuance to employees,
consultants and non-employee directors pursuant to the KLA 1982 Stock Option
Plan and the KLA 1990 Outside Directors Stock Option Plan, under which options
are outstanding for an aggregate of 6,019,881 shares and 108,590 shares,
respectively, and under which 2,161,788 shares and 31,669 shares, respectively,
are available for grant as of January 10, 1997. In addition, as of January 10,
1997, options to purchase 4,772 shares of KLA Common Stock were outstanding and
904 shares of KLA Common Stock were available for grant pursuant to a stock plan
assumed by KLA in connection with its acquisition of Metrologix Inc. All shares
of KLA Common Stock subject to issuance as aforesaid, upon issuance on the terms
and conditions specified in the instruments pursuant to which they are issuable,
would be duly authorized,
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validly issued, fully paid and nonassessable. The KLA Schedules list for each
person who held in the aggregate options to acquire 10,000 or more shares of KLA
Common Stock at January 13, 1997, the name of the holder of such option, the
number of shares subject to such option, the exercise price of such option, the
number of shares as to which such option will have vested at such date, the
vesting schedule for such option and whether the exercisability of such option
will be accelerated in any way by the transactions contemplated by this
Agreement, and indicate the extent of acceleration, if any. As of January 13,
1997, there were an aggregate of 4,800,000 shares of KLA Common Stock have been
reserved for issuance pursuant to KLA's Employee Stock Purchase Plan (the "KLA
EMPLOYEE STOCK PURCHASE PLAN").
3.3 Obligations With Respect to Capital Stock. Except as set forth in
Section 3.2, and except pursuant to the KLA Rights Plan, there are no equity
securities, partnership interests or similar ownership interests of any class of
KLA, or any securities exchangeable or convertible into or exercisable for such
equity securities, partnership interests or similar ownership interests, issued,
reserved for issuance or outstanding. Except for securities KLA owns, directly
or indirectly through one or more subsidiaries, there are no equity securities,
partnership interests or similar ownership interests of any class of any
subsidiary of KLA, or any security exchangeable or convertible into or
exercisable for such equity securities, partnership interests or similar
ownership interests, issued, reserved for issuance or outstanding. Except as set
forth in Section 3.2 and except pursuant to the KLA Rights Plan, there are no
options, warrants, equity securities, partnership interests or similar ownership
interests, calls, rights (including preemptive rights), commitments or
agreements of any character to which KLA or any of its subsidiaries is a party
or by which it is bound obligating KLA or any of its subsidiaries to issue,
deliver or sell, or cause to be issued, delivered or sold, or repurchase, redeem
or otherwise acquire, or cause the repurchase, redemption or acquisition, of any
shares of capital stock, partnership interests or similar ownership interests of
KLA or any of its subsidiaries or obligating KLA or any of its subsidiaries to
grant, extend, accelerate the vesting of or enter into any such option, warrant,
equity security, call, right, commitment or agreement. There are no registration
rights and, to the knowledge of KLA, as of the date of this Agreement, there are
no voting trusts, proxies or other agreements or understandings with respect to
any equity security of any class of KLA or with respect to any equity security,
partnership interest or similar ownership interest of any class of any of its
subsidiaries.
3.4 Authority.
(a) Each of KLA and Merger Sub has all requisite corporate power
and authority to enter into this Agreement and to consummate the transactions
contemplated hereby and KLA has all requisite corporate power and authority to
enter into the KLA Stock Option Agreement and to consummate the transactions
contemplated thereby. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby, and the execution and
delivery of the KLA Stock Option Agreement and the consummation of the
transactions contemplated thereby, have been duly authorized by all necessary
corporate action on the part of KLA and, in the case of this Agreement, Merger
Sub, subject only to the filing and recordation of the Agreement of Merger
pursuant to California Law and the approval by KLA's stockholders of (i) the
amendment of KLA's Certificate of Incorporation to increase its authorized share
capital to allow for the issuance of shares of KLA Common Stock by virtue of the
Merger, (ii) the issuance of shares of KLA Common Stock by virtue of the Merger,
and (iii) the amendment of KLA's Certificate of Incorporation to change
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KLA's corporate name (subject to and conditional upon the effectiveness of the
Merger). A vote of the holders of at least a majority of the outstanding shares
of the KLA Common Stock is required for KLA's stockholders to approve each of
(i) the amendment of KLA's Certificate of Incorporation to increase its
authorized share capital to allow for the issuance of shares of KLA Common Stock
by virtue of the Merger, (ii) the issuance of shares of KLA Common Stock by
virtue of the Merger, and (iii) the amendment of KLA's Certificate of
Incorporation to change KLA's corporate name (subject to and conditional upon
the effectiveness of the Merger). This Agreement has been duly executed and
delivered by each of KLA and Merger Sub and, assuming the due authorization,
execution and delivery by Tencor, constitutes the valid and binding obligation
of KLA, enforceable in accordance with its terms, except as enforceability may
be limited by bankruptcy and other similar laws and general principles of
equity. The KLA Stock Option Agreement has been duly executed and delivered by
KLA and, assuming the due authorization, execution and delivery of the KLA Stock
Option Agreement by Tencor, the KLA Stock Option Agreement constitutes the valid
and binding obligation of KLA, enforceable in accordance with its terms, except
as enforceability may be limited by bankruptcy and other similar laws and
general principles of equity. The execution and delivery of this Agreement by
each of KLA and Merger Sub and the execution and delivery of the KLA Stock
Option Agreement by KLA do not, and the performance of this Agreement by each of
KLA and Merger Sub will not and the performance of the KLA Stock Option
Agreement by KLA will not, (i) conflict with or violate the Certificate of
Incorporation or Bylaws of KLA or the Articles of Incorporation or Bylaws of
Merger Sub or the equivalent organizational documents of any of KLA's other
subsidiaries, (ii) subject to obtaining the approval of KLA's stockholders of
(x) the amendment of KLA's Certificate of Incorporation to increase its
authorized share capital to allow for the issuance of shares of KLA Common Stock
by virtue of the Merger, (y) the issuance of shares of KLA Common Stock by
virtue of the Merger, and (z) the amendment of KLA's Certificate of
Incorporation to change KLA's corporate name (subject to and conditional upon
the effectiveness of the Merger) as contemplated in Section 5.2 and compliance
with the requirements set forth in Section 3.4(b) below, conflict with or
violate any law, rule, regulation, order, judgment or decree applicable to KLA
or any of its subsidiaries (including Merger Sub) or by which its or any of
their respective properties is bound or affected, or (iii) result in any breach
of or constitute a default (or an event that with notice or lapse of time or
both would become a default) under, or impair KLA's rights or alter the rights
or obligations of any third party under, or give to others any rights of
termination, amendment, acceleration or cancellation of, or result in the
creation of a lien or encumbrance on any of the properties or assets of KLA or
any of its subsidiaries (including Merger Sub) pursuant to, any material note,
bond, mortgage, indenture, contract, agreement, lease, license, permit,
franchise or other instrument or obligation to which KLA or any of its
subsidiaries (including Merger Sub) is a party or by which KLA or any of its
subsidiaries or its or any of their respective properties are bound or affected.
The KLA Schedules list all material consents, waivers and approvals under any of
KLA's or any of its subsidiaries' agreements, contracts, licenses or leases
required to be obtained in connection with the consummation of the transactions
contemplated hereby.
(b) No consent, approval, order or authorization of, or
registration, declaration or filing with any Governmental Entity is required by
or with respect to KLA or Merger Sub in connection with the execution and
delivery of this Agreement and the KLA Stock Option Agreement or the
consummation of the Merger, except for (i) the filing of a Form S-4 Registration
Statement (the "REGISTRATION STATEMENT") with the SEC in accordance with the
Securities Act, (ii) the filing of the Agreement of Merger with the Secretary of
State of the State of California, (iii) the filing of the
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Proxy Statement with the SEC in accordance with the Exchange Act, (iv) such
consents, approvals, orders, authorizations, registrations, declarations and
filings as may be required under applicable federal and state securities laws
and the HSR Act and the securities or antitrust laws of any foreign country, and
(v) such other consents, authorizations, filings, approvals and registrations
which if not obtained or made would not be material to KLA or Tencor or have a
material adverse effect on the ability of the parties to consummate the Merger.
3.5 Section 203 of the Delaware General Corporation Law Not Applicable.
The Board of Directors of KLA has taken all actions so that the restrictions
contained in Section 203 of the Delaware General Corporation Law applicable to a
"business combination" (as defined in such Section 203) will not apply to the
execution, delivery or performance of this Agreement or the Stock Option
Agreements or to the consummation of the Merger or the other transactions
contemplated by this Agreement or the Stock Option Agreements.
3.6 SEC Filings; KLA Financial Statements.
(a) KLA has filed all forms, reports and documents required to be
filed with the SEC since January 1, 1994, and has made available to Tencor such
forms, reports and documents in the form filed with the SEC. All such required
forms, reports and documents (including those that KLA may file subsequent to
the date hereof) are referred to herein as the "KLA SEC REPORTS." As of their
respective dates, the KLA SEC Reports (i) were prepared in accordance with the
requirements of the Securities Act or the Exchange Act, as the case may be, and
the rules and regulations of the SEC thereunder applicable to such KLA SEC
Reports, and (ii) did not at the time they were filed (or if amended or
superseded by a filing prior to the date of this Agreement, then on the date of
such filing) contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading. None of KLA's subsidiaries is required to file any forms,
reports or other documents with the SEC.
(b) Each of the consolidated financial statements (including, in
each case, any related notes thereto) contained in KLA SEC Reports (the "KLA
FINANCIALS"), including any KLA SEC Reports filed after the date hereof until
the Closing, (x) complied as to form in all material respects with the published
rules and regulations of the SEC with respect thereto, (y) was prepared in
accordance with GAAP applied on a consistent basis throughout the periods
involved (except as may be indicated in the notes thereto or, in the case of
unaudited interim financial statements, as may be permitted by the SEC on Form
10-Q under the Exchange Act) and (z) fairly presented the consolidated financial
position of KLA and its subsidiaries as at the respective dates thereof and the
consolidated results of KLA's operations and cash flows for the periods
indicated, except that the unaudited interim financial statements were or are
subject to normal and recurring year-end adjustments. The balance sheet of KLA
contained in KLA SEC Reports as of September 30, 1996 is hereinafter referred to
as the "KLA BALANCE SHEET." Except as disclosed in the KLA Financials, since the
date of the KLA Balance Sheet neither KLA nor any of its subsidiaries has any
liabilities (absolute, accrued, contingent or otherwise) of a nature required to
be disclosed on a balance sheet or in the related notes to the consolidated
financial statements prepared in accordance with GAAP which are, individually or
in the aggregate, material to the business, results of operations or financial
condition of KLA and its subsidiaries taken as a whole, except liabilities (i)
provided for in the KLA
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Balance Sheet, or (ii) incurred since the date of the KLA Balance Sheet in the
ordinary course of business consistent with past practices and immaterial in the
aggregate.
(c) KLA has heretofore furnished to Tencor a complete and
correct copy of any amendments or modifications, which have not yet been filed
with the SEC but which are required to be filed, to agreements, documents or
other instruments which previously had been filed by KLA with the SEC pursuant
to the Securities Act or the Exchange Act.
3.7 Absence of Certain Changes or Events. Since the date of the
KLA Balance Sheet through the date of this Agreement, there has not been: (i)
any Material Adverse Effect on KLA, (ii) any material change by KLA in its
accounting methods, principles or practices, except as required by concurrent
changes in GAAP, or (iii) any material revaluation by KLA of any of its assets,
including, without limitation, writing down the value of capitalized inventory
or writing off notes or accounts receivable other than in the ordinary course of
business.
3.8 Taxes.
(a) Tax Returns and Audits.
(i) KLA and each of its subsidiaries have timely
filed all Returns relating to Taxes required to be filed by KLA and each of its
subsidiaries, except such Returns which are not material to KLA, and have paid
all Taxes shown to be due on such Returns.
(ii) Except as is not material to KLA, KLA and each
of its subsidiaries as of the Effective Time will have withheld with respect to
its employees all federal and state income taxes, FICA, FUTA and other Taxes
required to be withheld.
(iii) Except as is not material to KLA, neither KLA
nor any of its subsidiaries has been delinquent in the payment of any Tax nor is
there any Tax deficiency outstanding, proposed or assessed against KLA or any of
its subsidiaries, nor has KLA or any of its subsidiaries executed any waiver of
any statute of limitations on or extending the period for the assessment or
collection of any Tax.
(iv) Except as is not material to KLA, no audit or
other examination of any Return of KLA or any of its subsidiaries is presently
in progress, nor has KLA or any of its subsidiaries been notified of any request
for such an audit or other examination.
(v) Except as is not material to KLA, no
adjustment relating to any Returns filed by KLA or any of its subsidiaries has
been proposed formally or informally by any Tax authority to KLA or any of its
subsidiaries or any representative thereof and, to the knowledge of KLA, no
basis exists for any such adjustment which would be material to KLA.
(vi) Neither KLA nor any of its subsidiaries has
any liability for unpaid Taxes which has not been accrued for or reserved on the
KLA Balance Sheet, whether asserted or unasserted, contingent or otherwise,
which is material to KLA.
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(vii) None of KLA's assets are treated as
"tax-exempt use property" within the meaning of Section 168(h) of the Code.
(viii) There is no contract, agreement, plan or
arrangement, including but not limited to the provisions of this Agreement,
covering any employee or former employee of KLA or any of its subsidiaries that,
individually or collectively, could give rise to the payment of any amount that
would not be deductible pursuant to Sections 280G, 404 or 162 of the Code.
(ix) Neither KLA nor any of its subsidiaries has
filed any consent agreement under Section 341(f) of the Code or agreed to have
Section 341(f)(2) of the Code apply to any disposition of a subsection (f) asset
(as defined in Section 341(f)(4) of the Code) owned by KLA.
(x) KLA is not, and has not been at any time, a
"United States real property holding corporation" within the meaning of Section
897(c)(2) of the Code.
(xi) No power of attorney that is currently in
force has been granted with respect to any matter relating to Taxes payable by
KLA or any of its subsidiaries.
(xii) Neither KLA nor any of its subsidiaries is
party to or affected by any tax-sharing or allocation agreement or arrangement.
(xiii) The KLA Schedules list (y) any Tax
exemption, Tax holiday or other Tax-sparing arrangement that KLA or any of its
subsidiaries has in any jurisdiction, including the nature, amount and lengths
of such Tax exemption, Tax holiday or other Tax-sparing arrangement and (z) any
expatriate tax programs or policies affecting KLA or any of its subsidiaries.
Each of KLA and its subsidiaries is in full compliance with all terms and
conditions of any Tax exemption, Tax holiday or other Tax-sparing arrangement or
order of any Governmental Entity and the consummation of the transactions
contemplated hereby will not have any adverse effect on the continued validity
and effectiveness of any such Tax exemption, Tax holiday or other Tax-sparing
arrangement or order.
3.9 Intellectual Property.
(a) KLA and its subsidiaries own, or have the right to use,
sell or license all intellectual property necessary or required for the conduct
of their respective businesses as presently conducted (such intellectual
property and the rights thereto are collectively referred to herein as the "KLA
IP RIGHTS").
(b) The execution, delivery and performance of this Agreement
and the consummation of the transactions contemplated hereby will not constitute
a material breach of any instrument or agreement governing any KLA IP Rights,
will not cause the forfeiture or termination or give rise to a right of
forfeiture or termination of any KLA IP Rights or materially impair the right of
KLA, the Surviving Corporation or Tencor to use, sell or license any KLA IP
Rights or portion thereof.
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(c) Neither the manufacture, marketing, license, sale or
intended use of any product or technology currently licensed or sold or under
development by KLA or any of its subsidiaries violates in any material respect
any license or agreement between KLA or any of its subsidiaries and any third
party or infringes in any material respect any intellectual property right of
any other party; and there is no pending or, to the knowledge of KLA, threatened
claim or litigation contesting the validity, ownership or right to use, sell,
license or dispose of any KLA IP Rights, nor has KLA received any written notice
asserting that any KLA IP Rights or the proposed use, sale, license or
disposition thereof conflicts or will conflict with the rights of any other
party.
(d) KLA has taken reasonable and practicable steps designed to
safeguard and maintain the secrecy and confidentiality of, and its proprietary
rights in, all KLA IP Rights.
3.10 Compliance; Permits; Restrictions.
(a) Neither KLA nor any of its subsidiaries is, in any
material respect, in conflict with, or in default or violation of (i) any law,
rule, regulation, order, judgment or decree applicable to KLA or any of its
subsidiaries or by which KLA or any of its subsidiaries or any of their
respective properties is bound or affected, or (ii) any material note, bond,
mortgage, indenture, contract, agreement, lease, license, permit, franchise or
other instrument or obligation to which KLA or any of its subsidiaries is a
party or by which KLA or any of its subsidiaries or its or any of their
respective properties is bound or affected. To the knowledge of KLA, no
investigation or review by any Governmental Entity is pending or threatened
against KLA or any of its subsidiaries, nor has any Governmental Entity
indicated an intention to conduct the same. There is no material agreement,
judgment, injunction, order or decree binding upon KLA or any of its
subsidiaries which has or could reasonably be expected to have the effect of
prohibiting or materially impairing any business practice of KLA or any of its
subsidiaries, any acquisition of material property by KLA or any of its
subsidiaries or the conduct of business by KLA as currently conducted.
(b) KLA and its subsidiaries hold all permits, licenses,
variances, exemptions, orders and approvals from governmental authorities which
are material to the operation of the business of KLA (collectively, the "KLA
PERMITS"). KLA and its subsidiaries are in compliance in all material respects
with the terms of the KLA Permits.
3.11 Litigation. There is no action, suit, proceeding, claim,
arbitration or investigation pending, or as to which KLA or any of its
subsidiaries has received any notice of assertion nor, to KLA's knowledge, is
there a threatened action, suit, proceeding, claim, arbitration or investigation
against KLA or any of its subsidiaries which reasonably would be likely to be
material to KLA, or which in any manner challenges or seeks to prevent, enjoin,
alter or delay any of the transactions contemplated by this Agreement.
3.12 Brokers' and Finders' Fees. Except for fees payable to Merrill
Lynch pursuant to an engagement letter dated December 20, 1996, and Deutsche
Morgan Grenfell Technology Group pursuant to an engagement letter dated December
16, 1996, a copy of each of which has been provided to Tencor, KLA has not
incurred, nor will it incur, directly or indirectly, any liability for brokerage
or finders' fees or agents' commissions or any similar charges in connection
with this Agreement or any transaction contemplated hereby.
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3.13 Employee Benefit Plans.
(a) With respect to each material employee benefit plan,
program, arrangement and contract (including, without limitation, any "employee
benefit plan" as defined in Section 3(3) of ERISA) maintained or contributed to
by KLA or any trade or business which is under common control with KLA within
the meaning of Section 414 of the Code (the "KLA EMPLOYEE PLANS"), KLA has made
available to Tencor a true and complete copy of, to the extent applicable, (i)
such KLA Employee Plan, (ii) the most recent annual report (Form 5500), (iii)
each trust agreement related to such KLA Employee Plan, (iv) the most recent
summary plan description for each KLA Employee Plan for which such a description
is required, (v) the most recent actuarial report relating to any KLA Employee
Plan subject to Title IV of ERISA and (vi) the most recent IRS determination
letter issued with respect to any KLA Employee Plan.
(b) Each KLA Employee Plan which is intended to be qualified
under Section 401(a) of the Code has received a favorable determination from the
IRS covering the provisions of the Tax Reform Act of 1986 stating that such KLA
Employee Plan is so qualified and nothing has occurred since the date of such
letter that could reasonably be expected to affect the qualified status of such
plan. Each KLA Employee Plan has been operated in all material respects in
accordance with its terms and the requirements of applicable law. Neither KLA
nor any ERISA Affiliate of KLA has incurred or is reasonably expected to incur
any material liability under Title IV of ERISA in connection with any KLA
Employee Plan.
3.14 Absence of Liens and Encumbrances. KLA and each of its
subsidiaries has good and valid title to, or, in the case of leased properties
and assets, valid leasehold interests in, all of its material tangible
properties and assets, real, personal and mixed, used in its business, free and
clear of any liens or encumbrances except as reflected in the KLA Financials and
except for liens for taxes not yet due and payable and such imperfections of
title and encumbrances, if any, which would not be material to KLA.
3.15 Environmental Matters.
(a) Hazardous Material. Except as reasonably would not be
likely to result in a material liability to KLA, no underground storage tanks
and no amount of any Hazardous Material, but excluding office and janitorial
supplies, are present, as a result of the actions of KLA or any of its
subsidiaries or any affiliate of KLA, or, to KLA's knowledge, as a result of any
actions of any third party or otherwise, in, on or under any property, including
the land and the improvements, ground water and surface water thereof, that KLA
or any of its subsidiaries has at any time owned, operated, occupied or leased.
(b) Hazardous Materials Activities. Except as reasonably would
not be likely to result in a material liability to KLA, neither KLA nor any of
its subsidiaries has transported, stored, used, manufactured, disposed of,
released or exposed its employees or others to Hazardous Materials in violation
of any law in effect on or before the Closing Date, nor has KLA or any of its
subsidiaries engaged in any Hazardous Materials Activities in violation of any
rule, regulation, treaty or statute promulgated by any Governmental Entity in
effect prior to or as of the date hereof to prohibit, regulate or control
Hazardous Materials or any Hazardous Material Activity.
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(c) Permits. KLA and its subsidiaries currently hold all
environmental approvals, permits, licenses, clearances and consents (the "KLA
ENVIRONMENTAL PERMITS") necessary for the conduct of KLA's and its subsidiaries'
Hazardous Material Activities and other businesses of KLA and its subsidiaries
as such activities and businesses are currently being conducted.
(d) Environmental Liabilities. No material action, proceeding,
revocation proceeding, amendment procedure, writ, injunction or claim is
pending, or to KLA's knowledge, threatened concerning any KLA Environmental
Permit, Hazardous Material or any Hazardous Materials Activity of KLA or any of
its subsidiaries. KLA is not aware of any fact or circumstance which could
involve KLA or any of its subsidiaries in any material environmental litigation
or impose upon KLA any material environmental liability.
3.16 Labor Matters. To KLA's knowledge, there are no activities or
proceedings of any labor union to organize any employees of KLA or any of its
subsidiaries and there are no strikes, or material slowdowns, work stoppages or
lockouts, or threats thereof by or with respect to any employees of KLA or any
of its subsidiaries. KLA and its subsidiaries are and have been in compliance in
all material respects with all applicable laws regarding employment practices,
terms and conditions of employment, and wages and hours (including, without
limitation, ERISA, WARN or any similar state or local law).
3.17 Agreements, Contracts and Commitments. Except as set forth in
the KLA Schedules, neither KLA nor any of its subsidiaries is a party to or is
bound by:
(a) any employment or consulting agreement, contract or
commitment with any officer or director level employee or member of KLA's Board
of Directors, other than those that are terminable by KLA or any of its
subsidiaries on no more than thirty days notice without liability or financial
obligation, except to the extent general principles of wrongful termination law
may limit KLA's or any of its subsidiaries' ability to terminate employees at
will;
(b) any agreement or plan, including, without limitation, any
stock option plan, stock appreciation right plan or stock purchase plan, any of
the benefits of which will be increased, or the vesting of benefits of which
will be accelerated, by the occurrence of any of the transactions contemplated
by this Agreement or the value of any of the benefits of which will be
calculated on the basis of any of the transactions contemplated by this
Agreement;
(c) any agreement of indemnification or guaranty not entered
into in the ordinary course of business other than indemnification agreements
between KLA or any of its subsidiaries and any of its officers or directors;
(d) any agreement, contract or commitment containing any
covenant limiting the freedom of KLA or any of its subsidiaries to engage in any
line of business or compete with any person or granting any exclusive
distribution rights;
(e) any agreement, contract or commitment currently in force
relating to the disposition or acquisition of assets not in the ordinary course
of business or any ownership interest in any corporation, partnership, joint
venture or other business enterprise; or
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(f) any material joint marketing or development agreement.
Neither KLA nor any of its subsidiaries, nor to KLA's knowledge any
other party to a KLA Contract (as defined below), has breached, violated or
defaulted under, or received notice that it has breached violated or defaulted
under, any of the material terms or conditions of any of the agreements,
contracts or commitments to which KLA or any of its subsidiaries is a party or
by which it is bound of the type described in clauses (a) through (l) above (any
such agreement, contract or commitment, a "KLA CONTRACT") in such a manner as
would permit any other party to cancel or terminate any such KLA Contract, or
would permit any other party to seek damages, which would be reasonably likely
to be material to KLA.
3.18 Pooling of Interests. To the knowledge of KLA, based on
consultation with its independent accountants, neither KLA nor any of its
directors, officers, affiliates or stockholders has taken any action which would
preclude KLA's ability to account for the Merger as a pooling of interests.
3.19 Change of Control Payments. The KLA Schedules set forth each
plan or agreement pursuant to which any material amounts may become payable
(whether currently or in the future) to current or former officers and directors
of KLA as a result of or in connection with the Merger.
3.20 Statements; Proxy Statement/Prospectus. The information
supplied by KLA for inclusion in the Registration Statement shall not at the
time the Registration Statement is filed with the SEC and at the time it becomes
effective under the Securities Act, contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein not misleading. The
information supplied by KLA for inclusion in the Proxy Statement shall not, on
the date the Proxy Statement is first mailed to KLA's stockholders and Tencor's
shareholders, at the time of the KLA Stockholders' Meeting or the Tencor
Shareholders' Meeting and at the Effective Time, contain any untrue statement of
a material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they are made, not false or misleading; or omit to
state any material fact necessary to correct any statement in any earlier
communication with respect to the solicitation of proxies for the KLA
Stockholders' Meeting or the Tencor Shareholders' Meeting which has become false
or misleading. The Proxy Statement will comply as to form in all material
respects with the provisions of the Exchange Act and the rules and regulations
thereunder. If at any time prior to the Effective Time, any event relating to
KLA or any of its affiliates, officers or directors should be discovered by KLA
which should be set forth in an amendment to the Registration Statement or a
supplement to the Proxy Statement, KLA shall promptly inform Tencor.
Notwithstanding the foregoing, KLA makes no representation or warranty with
respect to any information supplied by Tencor which is contained in any of the
foregoing documents.
3.21 Board Approval. The Board of Directors of KLA has, as of the date
of this Agreement, determined (i) that the Merger is fair to, and in the best
interests of KLA and its stockholders, and (ii) to recommend that the
stockholders of KLA approve (x) the amendment of KLA's Certificate of
Incorporation to increase its authorized share capital to allow for the issuance
of shares of KLA Common Stock by virtue of the Merger, (y) the issuance of
shares of KLA Common
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Stock by virtue of the Merger, and (z) the amendment of KLA's
Certificate of Incorporation to change KLA's corporate name (subject to and
conditional upon the effectiveness of the Merger).
3.22 Fairness Opinion. KLA has received written opinions from each of
Merrill Lynch and Deutsche Morgan Grenfell Technology Group, dated as of the
date hereof, to the effect that as of the date hereof, the Exchange Ratio is
fair to KLA from a financial point of view and has delivered to Tencor a copy of
such opinions.
ARTICLE IV
CONDUCT PRIOR TO THE EFFECTIVE TIME
4.1 Conduct of Business. During the period from the date of this
Agreement and continuing until the earlier of the termination of this Agreement
pursuant to its terms or the Effective Time, Tencor (which for the purposes of
this Article 4 shall include Tencor and each of its subsidiaries) and KLA (which
for the purposes of this Article 4 shall include KLA and each of its
subsidiaries) agree, except (i) in the case of Tencor as provided in Article 4
of the Tencor Schedules and in the case of KLA as provided in Article 4 of the
KLA Schedules, or (ii) to the extent that the other of them shall otherwise
consent in writing, to carry on its business diligently and in accordance with
good commercial practice and to carry on its business in the usual, regular and
ordinary course, in substantially the same manner as heretofore conducted and in
compliance with all applicable laws and regulations, to pay its debts and taxes
when due subject to good faith disputes over such debts or taxes, to pay or
perform other material obligations when due, and use its commercially reasonable
efforts consistent with past practices and policies to preserve intact its
present business organization, keep available the services of its present
officers and employees and preserve its relationships with customers, suppliers,
distributors, licensors, licensees, and others with which it has business
dealings. In addition, each of Tencor and KLA will promptly notify the other of
any material event involving its business or operations. Furthermore, Tencor and
KLA agree that during the period prior to the Effective Time they will exchange
monthly summary financial data and that their respective senior management
groups will participate in informational meetings on a monthly basis, at such
time and place as shall be mutually agreeable. No information or knowledge
obtained in any investigation will affect or be deemed to modify any
representation or warranty contained herein or the conditions to the obligations
of the parties to consummate the Merger.
In addition, except as permitted by the terms of this Agreement or the
Stock Option Agreements, and except in the case of Tencor as provided in
Article 4 of the Tencor Schedules, and except in the case of KLA in connection
with the KLA Rights Plan or as provided in Article 4 of the KLA Schedules,
without the prior written consent of the other, neither Tencor nor KLA shall do
any of the following, and neither Tencor nor KLA shall permit its subsidiaries
to do any of the following:
(a) Waive any stock repurchase rights, accelerate, amend or
change the period of exercisability of options or restricted stock, or reprice
options granted under any employee, consultant or director stock plans or
authorize cash payments in exchange for any options granted under any of such
plans;
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(b) Grant any severance or termination pay to any officer or
employee except payments in amounts consistent with policies and past practices
or pursuant to written agreements outstanding, or policies existing, on the date
hereof and as previously disclosed in writing to the other, or adopt any new
severance plan;
(c) Transfer or license to any person or entity or otherwise
extend, amend or modify in any material respect any rights to the Tencor IP
Rights or the KLA IP Rights, as the case may be, or enter into grants to future
patent rights, other than in the ordinary course of business;
(d) Declare or pay any dividends on or make any other
distributions (whether in cash, stock or property) in respect of any capital
stock or split, combine or reclassify any capital stock or issue or authorize
the issuance of any other securities in respect of, in lieu of or in
substitution for any capital stock, other than pursuant to the KLA Rights Plan;
(e) Repurchase or otherwise acquire, directly or indirectly,
any shares of capital stock except pursuant to rights of repurchase of any such
shares under any employee, consultant or director stock plan existing on the
date hereof, and other than pursuant to the KLA Rights Plan;
(f) Issue, deliver, sell, authorize or propose the issuance,
delivery or sale of, any shares of capital stock or any securities convertible
into shares of capital stock, or subscriptions, rights, warrants or options to
acquire any shares of capital stock or any securities convertible into shares of
capital stock, or enter into other agreements or commitments of any character
obligating it to issue any such shares or convertible securities, other than (i)
the issuance of shares of Tencor Common Stock or KLA Common Stock, as the case
may be, pursuant to the exercise of stock options therefor outstanding as of the
date of this Agreement, (ii) options to purchase shares of Tencor Common Stock
or KLA Common Stock, as the case may be, to be granted at fair market value in
the ordinary course of business, consistent with past practice and in accordance
with stock option plans existing on the date hereof, (iii) shares of Tencor
Common Stock or KLA Common Stock, as the case may be, issuable upon the exercise
of the options referred to in clause (ii), (iv) shares of Tencor Common Stock or
KLA Common Stock, as the case may be, issuable to participants in the KLA
Employee Stock Purchase Plan or the Tencor Employee Stock Purchase Plans
consistent with past practice and the terms thereof, (v) shares of Tencor Common
Stock or KLA Common Stock, as the case may be, issuable pursuant to the Stock
Option Agreements, and (vi) pursuant to the KLA Rights Plan;
(g) Cause, permit or propose any amendments to any charter
document or Bylaw (or similar governing instruments of any subsidiaries);
(h) Acquire or agree to acquire by merging or consolidating
with, or by purchasing any equity interest in or a material portion of the
assets of, or by any other manner, any business or any corporation, partnership
interest, association or other business organization or division thereof, or
otherwise acquire or agree to acquire any assets which are material,
individually or in the aggregate, to the business of Tencor or KLA, as the case
may be, or enter into any material joint ventures, strategic partnerships or
alliances;
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(i) Sell, lease, license, encumber or otherwise dispose of any
properties or assets which are material, individually or in the aggregate, to
the business of Tencor or KLA, as the case may be, except in the ordinary course
of business consistent with past practice;
(j) Incur any indebtedness for borrowed money (other than
ordinary course trade payables or pursuant to existing credit facilities in the
ordinary course of business) or guarantee any such indebtedness or issue or sell
any debt securities or warrants or rights to acquire debt securities of Tencor
or KLA, as the case may be, or guarantee any debt securities of others;
(k) Adopt or amend any employee benefit or employee stock
purchase or employee option plan, or enter into any employment contract, pay any
special bonus or special remuneration to any director or employee, or increase
the salaries or wage rates of its officers or employees other than in the
ordinary course of business, consistent with past practice, or change in any
material respect any management policies or procedures;
(l) Pay, discharge or satisfy any claim, liability or
obligation (absolute, accrued, asserted or unasserted, contingent or otherwise),
other than the payment, discharge or satisfaction in the ordinary course of
business;
(m) Make any grant of exclusive rights to any third party;
(n) Take any action that would be reasonably likely to
interfere with KLA's ability to account for the Merger as a pooling of
interests; or
(o) Agree in writing or otherwise to take any of the actions
described in Article 4 (a) through (n) above.
ARTICLE V
ADDITIONAL AGREEMENTS
5.1 Proxy Statement/Prospectus; Registration Statement; Other
Filings; Board Recommendations.
(a) As promptly as practicable after the execution of this
Agreement, Tencor and KLA will prepare, and file with the SEC, the Proxy
Statement and KLA will prepare and file with the SEC the Registration
Statement in which the Proxy Statement will be included as a prospectus. Each
of Tencor and KLA will respond to any comments of the SEC, will use its
respective best efforts to have the Registration Statement declared effective
under the Securities Act as promptly as practicable after such filing and will
cause the Proxy Statement to be mailed to its respective stockholders or
shareholders, as the case may be, at the earliest practicable time. As promptly
as practicable after the date of this Agreement, Tencor and KLA will prepare
and file any other filings required under the Exchange Act, the Securities Act
or any other Federal, foreign or Blue Sky laws relating to the Merger and the
transactions contemplated by this Agreement (the "OTHER FILINGS"). Each of
Tencor and KLA will notify the other promptly upon the receipt of any comments
from the SEC or its staff and of any request by the SEC or its staff or any
other government officials for amendments or
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supplements to the Registration Statement, the Proxy Statement or any
Other Filing or for additional information and will supply the other with
copies of all correspondence between such party or any of its representatives,
on the one hand, and the SEC, or its staff or any other government officials,
on the other hand, with respect to the Registration Statement, the Proxy
Statement, the Merger or any Other Filing. The Proxy Statement, the
Registration Statement and the Other Filings will comply in all material
respects with all applicable requirements of law and the rules and regulations
promulgated thereunder. Whenever any event occurs which is required to be set
forth in an amendment or supplement to the Proxy Statement, the Registration
Statement or any Other Filing, Tencor or KLA, as the case may be, will promptly
inform the other of such occurrence and cooperate in filing with the SEC or its
staff or any other government officials, and/or mailing to shareholders of
Tencor or stockholders of KLA, such amendment or supplement.
(b) The Proxy Statement will include the recommendation of the
Board of Directors of Tencor in favor of adoption and approval of this Agreement
and approval of the Merger (except that the Board of Directors of Tencor may
withdraw, modify or refrain from making such recommendation to the extent that
the Board determines, in good faith, after consultation with outside legal
counsel, that compliance with the Board's fiduciary duties under applicable law
would require it to do so). In addition, the Proxy Statement will include the
recommendations of the Board of Directors of KLA in favor of (x) the amendment
of KLA's Certificate of Incorporation to increase its authorized share capital
to allow for the issuance of shares of KLA Common Stock by virtue of the Merger,
(y) the issuance of shares of KLA Common Stock by virtue of the Merger, and (z)
the amendment of KLA's Certificate of Incorporation to change KLA's corporate
name, subject to and conditional upon the effectiveness of the Merger (except
that the Board of Directors of KLA may withdraw, modify or refrain from making
such recommendations to the extent that the Board determines, in good faith,
after consultation with outside legal counsel, that compliance with the Board's
fiduciary duties under applicable law would require it to do so).
5.2 Meetings of Shareholders and Stockholders. Promptly after the date
hereof, Tencor will take all action necessary in accordance with California Law
and its Articles of Incorporation and Bylaws to convene the Tencor Shareholders'
Meeting to be held as promptly as practicable, and in any event (to the extent
permissible under applicable law) within 45 days after the declaration of
effectiveness of the Registration Statement, for the purpose of voting upon this
Agreement. Tencor will consult with KLA and use its best efforts to hold the
Tencor Shareholders' Meeting on the same day as the KLA Stockholders' Meeting.
Promptly after the date hereof, KLA will take all action necessary in accordance
with the Delaware General Corporation Law and its Certificate of Incorporation
and Bylaws to convene the KLA Stockholders' Meeting to be held as promptly as
practicable, and in any event (to the extent permissible under applicable law)
within 45 days after the declaration of effectiveness of the Registration
Statement, for the purpose of (i) amending its Certificate of Incorporation to
increase its authorized share capital to allow for the issuance of shares
of KLA Common Stock by virtue of the Merger, (ii) voting upon the issuance of
shares of KLA Common Stock by virtue of the Merger, and (iii) amending its
Certificate of Incorporation to change its corporate name (subject to and
conditional upon the effectiveness of the Merger). KLA will consult with Tencor
and will use its best efforts to hold the KLA Stockholders' Meeting on the same
day as the Tencor Shareholders' Meeting. For so long as the Board of Directors
of Tencor continues to make the recommendation set forth in Section 5.1, Tencor
will use its best efforts to solicit from its shareholders proxies in favor of
the adoption and approval of this Agreement and the approval of the Merger and
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will take all other action necessary or advisable to secure the vote or consent
of its shareholders required by the rules of the National Association of
Securities Dealers, Inc. or California Law to obtain such approvals. For so long
as the Board of Directors of KLA continues to make the recommendations set forth
in Section 5.1, KLA will use its best efforts to solicit from its stockholders
proxies in favor of (i) the amendment of KLA's Certificate of Incorporation to
increase its authorized share capital to allow for the issuance of shares of KLA
Common Stock by virtue of the Merger, (ii) the issuance of shares of KLA Common
Stock by virtue of the Merger, and (iii) the amendment of KLA's Certificate of
Incorporation to change KLA's corporate name (subject to and conditional upon
the effectiveness of the Merger) and will take all other action necessary or
advisable to secure the vote or consent of its stockholders required by the
rules of the National Association of Securities Dealers, Inc. or the Delaware
General Corporation Law to obtain such approvals.
5.3 Confidentiality. The parties acknowledge that Tencor and KLA have
previously executed a Confidentiality Agreement, dated January 6, 1996 (the
"Confidentiality Agreement"), which Confidentiality Agreement will continue in
full force and effect in accordance with its terms.
5.4 No Solicitation.
(a) Restrictions on KLA.
(i) From and after the date of this Agreement until the
earlier of the Effective Time or termination of this Agreement pursuant to its
terms, KLA and its subsidiaries shall not, and will instruct their respective
directors, officers, employees, representatives, investment bankers, agents and
affiliates not to, directly or indirectly, (i) solicit or knowingly encourage
submission of, any proposals or offers by any person, entity or group (other
than Tencor and its affiliates, agents and representatives), or (ii)
participate in any discussions or negotiations with, or disclose any non-public
information concerning KLA or any of its subsidiaries to, or afford any access
to the properties, books or records of KLA or any of its subsidiaries to, or
otherwise assist or facilitate, or enter into any agreement or understanding
with, any person, entity or group (other than Tencor and its affiliates, agents
and representatives), in connection with any Acquisition Proposal with respect
to KLA. For the purposes of this Agreement, an "ACQUISITION PROPOSAL" with
respect to an entity means any proposal or offer relating to (i) any merger,
consolidation, sale of substantial assets or similar transactions involving the
entity or any subsidiaries of the entity (other than sales of assets or
inventory in the ordinary course of business or as permitted under the terms of
this Agreement), (ii) sale of 15% or more of the outstanding shares of capital
stock of the entity (including without limitation by way of a tender offer or
an exchange offer), (iii) the acquisition by any person of beneficial ownership
or a right to acquire beneficial ownership of, or the formation of any "group"
(as defined under Section 13(d) of the Exchange Act and the rules and
regulations thereunder) which beneficially owns, or has the right to acquire
beneficial ownership of, 15% or more of the then outstanding shares of capital
stock of the entity (except for acquisitions for passive investment purposes
only in circumstances where the person or group qualifies for and files a
Schedule 13G with respect thereto); or (iv) any public announcement of a
proposal, plan or intention to do any of the foregoing or any agreement to
engage in any of the foregoing. KLA will immediately cease any and all existing
activities, discussions or negotiations with any parties conducted heretofore
with respect to any of the foregoing. KLA will (i) notify Tencor as promptly as
practicable if any inquiry or proposal is made or any information or access is
requested in writing in connection with an
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Acquisition Proposal or potential Acquisition Proposal and (ii) as promptly as
practicable notify Tencor of the significant terms and conditions of any such
Acquisition Proposal. In addition, subject to the other provisions of this
Section 5.4(a), from and after the date of this Agreement until the earlier of
the Effective Time and termination of this Agreement pursuant to its terms, KLA
and its subsidiaries will not, and will instruct their respective directors,
officers, employees, representatives, investment bankers, agents and affiliates
not to, directly or indirectly, make or authorize any public statement,
recommendation or solicitation in support of any Acquisition Proposal made by
any person, entity or group (other than Tencor); provided, however, that nothing
herein shall prohibit KLA's Board of Directors from taking and disclosing to
KLA's stockholders a position with respect to a tender offer pursuant to Rules
14d-9 and 14e-2 promulgated under the Exchange Act.
(ii) Notwithstanding the provisions of paragraph (a)(i) above,
prior to the Effective Time, KLA may, to the extent the Board of Directors of
KLA determines, in good faith, after consultation with outside legal counsel,
that the Board's fiduciary duties under applicable law require it to do so,
participate in discussions or negotiations with, and, subject to the
requirements of paragraph (a)(iii), below, furnish information to any person,
entity or group after such person, entity or group has delivered to KLA in
writing, an unsolicited bona fide Acquisition Proposal which the Board of
Directors of KLA in its good faith reasonable judgment determines, after
consultation with its independent financial advisors, would result in a
transaction more favorable than the Merger to the stockholders of KLA (a "KLA
SUPERIOR PROPOSAL"). In addition, notwithstanding the provisions of paragraph
(a)(i) above, in connection with a possible Acquisition Proposal, KLA may refer
any third party to this Section 5.4(a) or make a copy of this Section 5.4(a)
available to a third party. In the event KLA receives a KLA Superior Proposal,
nothing contained in this Agreement (but subject to the terms hereof) will
prevent the Board of Directors of KLA from recommending such KLA Superior
Proposal to KLA's stockholders, if the Board determines, in good faith, after
consultation with outside legal counsel, that such action is required by its
fiduciary duties under applicable law; in such case, the Board of Directors of
KLA may withdraw, modify or refrain from making its recommendations set forth in
Section 5.1(b), and, to the extent it does so, KLA may refrain from soliciting
proxies and taking such other action necessary to secure the vote of its
stockholders as may be required by Section 5.2; provided, however, that KLA
shall not recommend to its stockholders a KLA Superior Proposal for a period of
not less than 48 hours after Tencor's receipt of a copy of such KLA Superior
Proposal (or a description of the significant terms and conditions thereof, if
not in writing); and provided further, that nothing contained in this Section
shall limit KLA's obligation to hold and convene the KLA Stockholders Meeting
(regardless of whether the recommendations of the Board of Directors of KLA
shall have been withdrawn, modified or not yet made).
(iii) Notwithstanding anything to the contrary herein, KLA will not
provide any non-public information to a third party unless: (x) KLA provides
such non-public information pursuant to a nondisclosure agreement with terms
regarding the protection of confidential information at least as restrictive as
such terms in the Confidentiality Agreement; and (y) such non-public
information is the same information previously delivered to Tencor.
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(b) Restrictions on Tencor.
(i) From and after the date of this Agreement the earlier
of the Effective Time or termination of this Agreement pursuant to its terms,
Tencor and its subsidiaries will not, and will instruct their respective
directors, officers, employees, representatives, investment bankers, agents and
affiliates not to, directly or indirectly, (i) solicit or knowingly encourage
submission of, any proposals or offers by any person, entity or group (other
than KLA and its affiliates, agents and representatives), or (ii) participate in
any discussions or negotiations with, or disclose any non-public information
concerning Tencor or any of its subsidiaries to, or afford any access to the
properties, books or records of Tencor or any of its subsidiaries to, or
otherwise assist or facilitate, or enter into any agreement or understanding
with, any person, entity or group (other than KLA and its affiliates, agents and
representatives), in connection with any Acquisition Proposal with respect to
Tencor. Tencor will immediately cease any and all existing activities,
discussions or negotiations with any parties conducted heretofore with respect
to any of the foregoing. Tencor will (i) notify KLA as promptly as practicable
if any inquiry or proposal is made or any information or access is requested in
writing in connection with an Acquisition Proposal or potential Acquisition
Proposal and (ii) as promptly as practicable notify KLA of the significant terms
and conditions of any such Acquisition Proposal. In addition, subject to the
other provisions of this Section 5.4(b), from and after the date of this
Agreement until the earlier of the Effective Time and termination of this
Agreement pursuant to its terms, Tencor and its subsidiaries will not, and will
instruct their respective directors, officers, employees, representatives,
investment bankers, agents and affiliates not to, directly or indirectly, make
or authorize any public statement, recommendation or solicitation in support of
any Acquisition Proposal made by any person, entity or group (other than KLA);
provided, however, that nothing herein shall prohibit Tencor's Board of
Directors from taking and disclosing to Tencor's shareholders a position with
respect to a tender offer pursuant to Rules 14d-9 and 14e-2 promulgated under
the Exchange Act.
(ii) Notwithstanding the provisions of paragraph (b)(i) above,
prior to the Effective Time, Tencor may, to the extent the Board of Directors
of Tencor determines, in good faith, after consultation with outside legal
counsel, that the Board's fiduciary duties under applicable law require it to
do so, participate in discussions or negotiations with, and, subject to the
requirements of paragraph (b)(iii), below, furnish information to any person,
entity or group after such person, entity or group has delivered to Tencor in
writing, an unsolicited bona fide Acquisition Proposal which the Board of
Directors of Tencor in its good faith reasonable judgment determines, after
consultation with its independent financial advisors, would result in a
transaction more favorable than the Merger to the shareholders of Tencor (a
"TENCOR SUPERIOR PROPOSAL"). In addition, notwithstanding the provisions of
paragraph (b)(i) above, in connection with a possible Acquisition Proposal,
Tencor may refer any third party to this Section 5.4(b) or make a copy of this
Section 5.4(b) available to a third party. In the event Tencor receives a
Tencor Superior Proposal, nothing contained in this Agreement (but subject to
the terms hereof) will prevent the Board of Directors of Tencor from
recommending such Tencor Superior Proposal to its stockholders, if the Board
determines, in good faith, after consultation with outside legal counsel, that
such action is required by its fiduciary duties under applicable law; in such
case, the Board of Directors of Tencor may withdraw, modify or refrain from
making its recommendation set forth in Section 5.1(b), and, to the extent it
does so, Tencor may refrain from soliciting proxies and taking such other
action necessary to secure the vote of its shareholders as may be required by
Section 5.2; provided, however, that Tencor shall not recommend
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to its shareholders a Tencor Superior Proposal for a period of not less than 48
hours after KLA's receipt of a copy of such Tencor Superior Proposal (or a
description of the significant terms and conditions thereof, if not in writing);
and provided further, that nothing contained in this Section shall limit
Tencor's obligation to hold and convene the Tencor Shareholders Meeting
(regardless of whether the recommendation of the Board of Directors of Tencor
shall have been withdrawn, modified or not yet made).
(iii) Notwithstanding anything to the contrary in paragraph
(b), Tencor will not provide any non-public information to a third party unless:
(x) Tencor provides such non-public information pursuant to a nondisclosure
agreement with terms regarding the protection of confidential information at
least as restrictive as such terms in the Confidentiality Agreement; and (y)
such non-public information is the same information previously delivered to KLA.
5.5 Public Disclosure. KLA and Tencor will consult with each other
before issuing any press release or otherwise making any public statement with
respect to the Merger, this Agreement or an Acquisition Proposal and will not
issue any such press release or make any such public statement prior to such
consultation, except as may be required by law or any listing agreement with a
national securities exchange or the Nasdaq Stock Market.
5.6 Legal Requirements. Each of KLA, Merger Sub and Tencor will take
all reasonable actions necessary or desirable to comply promptly with all legal
requirements which may be imposed on them with respect to the consummation of
the transactions contemplated by this Agreement (including furnishing all
information required in connection with approvals by or filings with any
Governmental Entity, and prompt resolution of any litigation prompted hereby)
and will promptly cooperate with and furnish information to any party hereto
necessary in connection with any such filings with or investigations by any
Governmental Entity, and any other such requirements imposed upon any of them or
their respective subsidiaries in connection with the consummation of the
transactions contemplated by this Agreement. KLA will use its commercially
reasonable efforts to take such steps as may be necessary to comply with the
securities and blue sky laws of all jurisdictions which are applicable to the
issuance of KLA Common Stock pursuant hereto. Tencor will use its commercially
reasonable efforts to assist KLA as may be necessary to comply with the
securities and blue sky laws of all jurisdictions which are applicable in
connection with the issuance of KLA Common Stock pursuant hereto.
5.7 Third Party Consents. As soon as practicable following the date
hereof, KLA and Tencor will each use its commercially reasonable efforts to
obtain all material consents, waivers and approvals under any of its or its
subsidiaries' agreements, contracts, licenses or leases required to be obtained
in connection with the consummation of the transactions contemplated hereby.
5.8 FIRPTA. At or prior to the Closing, Tencor, if requested by KLA,
shall deliver to the IRS a notice that the Tencor Common Stock is not a "U.S.
Real Property Interest" as defined and in accordance with the requirements of
Treasury Regulation Section 1.897-2(h)(2).
5.9 Notification of Certain Matters. KLA and Merger Sub will give
prompt notice to Tencor, and Tencor will give prompt notice to KLA, of the
occurrence, or failure to occur, of any event, which occurrence or failure to
occur would be reasonably likely to cause (a) any representation
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or warranty contained in this Agreement and made by it to be untrue or
inaccurate in any material respect at any time from the date of this Agreement
to the Effective Time such that the conditions set forth in Section 6.2(a) or
6.3(a), as the case may be, would not be satisfied as a result thereof or (b)
any material failure of KLA and Merger Sub or Tencor, as the case may be, or of
any officer, director, employee or agent thereof, to comply with or satisfy any
covenant, condition or agreement to be complied with or satisfied by it under
this Agreement. Notwithstanding the above, the delivery of any notice pursuant
to this section will not limit or otherwise affect the remedies available
hereunder to the party receiving such notice.
5.10 Best Efforts and Further Assurances. Subject to the respective
rights and obligations of KLA and Tencor under this Agreement, each of the
parties to this Agreement will use its best efforts to effectuate the Merger and
the other transactions contemplated hereby and to fulfill and cause to be
fulfilled the conditions to closing under this Agreement; provided that neither
KLA nor Tencor nor any subsidiary or affiliate thereof will be required to agree
to any divestiture by itself or any of its affiliates of shares of capital stock
or of any business, assets or property, or the imposition of any material
limitation on the ability of any of them to conduct their businesses or to own
or exercise control of such assets, properties and stock. Subject to the
foregoing, each party hereto, at the reasonable request of another party hereto,
will execute and deliver such other instruments and do and perform such other
acts and things as may be necessary or desirable for effecting completely the
consummation of the transactions contemplated hereby.
5.11 Stock Options and Employee Benefits.
(a) At the Effective Time, each outstanding option to purchase
shares of Tencor Common Stock (each a "Tencor Stock Option") under the Tencor
Stock Option Plans, whether or not exercisable, will be assumed by KLA. Each
Tencor Stock Option so assumed by KLA under this Agreement will continue to
have, and be subject to, the same terms and conditions set forth in the
applicable Tencor Stock Option Plan immediately prior to the Effective Time
(including, without limitation, any repurchase rights), except that (i) each
Tencor Stock Option will be exercisable (or will become exercisable in
accordance with its terms) for that number of whole shares of KLA Common Stock
equal to the product of the number of shares of Tencor Common Stock that were
issuable upon exercise of such Tencor Stock Option immediately prior to the
Effective Time multiplied by the Exchange Ratio, rounded down to the nearest
whole number of shares of KLA Common Stock, and (ii) the per share exercise
price for the shares of KLA Common Stock issuable upon exercise of such assumed
Tencor Stock Option will be equal to the quotient determined by dividing the
exercise price per share of Tencor Common Stock at which such Tencor Stock
Option was exercisable immediately prior to the Effective Time by the Exchange
Ratio, rounded up to the nearest whole cent. After the Effective Time, KLA will
issue to each holder of an outstanding Tencor Stock Option a notice describing
the foregoing assumption of such Tencor Stock Option by KLA.
(b) Tencor Stock Options assumed by KLA shall qualify
following the Effective Time as incentive stock options as defined in Section
422 of the Code to the extent Tencor Stock Options qualified as incentive stock
options immediately prior to the Effective Time.
(c) KLA will reserve sufficient shares of KLA Common Stock for
issuance under Section 5.11(a) and under Section 1.6(c) hereof.
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(d) For a period of one year following the Effective Time, the
combined company following the Merger will provide the persons employed by
Tencor immediately prior to the Effective Time, for so long as such persons
remain employed by KLA or the Surviving Corporation, with salary and benefits in
the aggregate which are substantially comparable to those provided to such
persons by Tencor immediately prior to the Effective Time.
5.12 Form S-8. KLA agrees to file a registration statement on Form
S-8 for the shares of KLA Common Stock issuable with respect to assumed Tencor
Stock Options no later than two (2) business days after the Closing Date.
5.13 Indemnification and Insurance.
(a) From and after the Effective Time, KLA will cause the
Surviving Corporation to fulfill and honor in all respects the obligations of
Tencor pursuant to any indemnification agreements between Tencor and its
directors and officers existing prior to the date hereof. The Articles of
Incorporation and By-laws of the Surviving Corporation will contain the
provisions with respect to indemnification set forth in the Articles of
Incorporation and By-laws of Tencor, which provisions will not be amended,
repealed or otherwise modified for a period of six years from the Effective Time
in any manner that would adversely affect the rights thereunder of individuals
who, immediately prior to the Effective Time, were directors, officers,
employees or agents of Tencor, unless such modification is required by law.
(b) After the Effective Time KLA will cause the Surviving Corporation,
to the fullest extent permitted under applicable law or under the Surviving
Corporation's Articles of Incorporation or By-laws, to indemnify and hold
harmless, each present director or officer of Tencor (collectively, the
"INDEMNIFIED PARTIES") against any costs or expenses (including attorneys'
fees), judgments, fines, losses, claims, damages, liabilities and amounts paid
in settlement in connection with any claim, action, suit, proceeding or
investigation, whether civil, criminal, administrative or investigative, to the
extent arising out of or pertaining to any action or omission in his or her
capacity as a director or officer of Tencor arising out of or pertaining to the
transactions contemplated by this Agreement for a period of six years after the
date hereof. In the event of any such claim, action, suit, proceeding or
investigation (whether arising before or after the Effective Time), (i) any
counsel retained by the Indemnified Parties for any period after the Effective
Time must be reasonably satisfactory to the Surviving Corporation and KLA, (ii)
after the Effective Time, KLA will cause the Surviving Corporation to pay the
reasonable fees and expenses of such counsel, promptly after statements
therefor are received and (iii) KLA will cause the Surviving Corporation to
cooperate in the defense of any such matter; provided, however, that neither
KLA nor the Surviving Corporation will be liable for any settlement effected
without its written consent (which consent will not be unreasonably withheld);
and provided, further, that, in the event that any claim or claims for
indemnification are asserted or made within such six-year period, all rights to
indemnification in respect of any such claim or claims will continue until the
disposition of any and all such claims; provided, further, that any
determination required to be made with respect to whether an Indemnified
Party's conduct complies with the standards set forth under California Law,
Tencor's articles of incorporation or bylaws or such agreements, as the case
may be, shall be made by independent legal counsel selected by the Indemnified
Party and reasonably acceptable to KLA; and provided, further,
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that nothing in this Section 5.13 shall impair any rights or
obligations of any present or former employees, agents, directors or officers
of Tencor. The Indemnified Parties as a group may retain only one law firm (in
addition to local counsel) to represent them with respect to any single action
unless there is, under applicable standards of professional conduct, a
conflict on any significant issue between the positions of any two or more
Indemnified Parties. In the event KLA or the Surviving Corporation or any of
their respective successors or assigns (i) consolidates with or merges into any
other person and shall not be the continuing or surviving corporation or entity
of such consolidation or merger, or (ii) transfers or conveys all or
substantially all of its properties and assets to any person, then, and in each
such case, to the extent necessary to effectuate the purposes of this Section
5.13, proper provision shall be made so that the successors and assigns of KLA
and Tencor assume the obligations set forth in this Section 5.13 and none of
the actions described in clause (i) or (ii) shall be taken until such provision
is made.
(c) For a period of six years after the Effective Time, KLA
will cause the Surviving Corporation to use its commercially reasonable efforts
to maintain in effect, if available, directors' and officers' liability
insurance covering those persons who are currently covered by Tencor's
directors' and officers' liability insurance policy on terms comparable to those
applicable to the then current directors and officers of KLA; provided, however,
that in no event will KLA or the Surviving Corporation be required to expend in
excess of 200% of the annual premium currently paid by Tencor for such coverage
(or such coverage as is available for such 200% of the annual premium).
(d) This Section 5.13 will survive any termination of this
Agreement and the consummation of the Merger at the Effective Time, is intended
to benefit Tencor, the Surviving Corporation and the Indemnified Parties, and
will be binding on all successors and assigns of the Surviving Corporation.
5.14 NMS Listing. KLA agrees to authorize for listing on the Nasdaq
National Market the shares of KLA Common Stock issuable, and those required to
be reserved for issuance, in connection with the Merger, upon official notice of
issuance.
5.15 KLA Affiliate Agreement. Set forth on the KLA Schedules is a
list of those persons who may be deemed to be, in KLA's reasonable judgment,
affiliates of KLA within the meaning of Rule 145 promulgated under the
Securities Act (each a "KLA AFFILIATE"). KLA will provide Tencor with such
information and documents as Tencor reasonably requests for purposes of
reviewing such list. KLA will use its best efforts to deliver or cause to be
delivered to Tencor, as promptly as practicable on or following the date hereof,
from each KLA Affiliate an executed affiliate agreement in substantially the
form attached hereto as Exhibit D, each of which will be in full force and
effect as of the Effective Time.
5.16 Tencor Affiliate Agreement. Set forth on the Tencor Schedules is a
list of those persons who may be deemed to be, in Tencor's reasonable judgment,
affiliates of Tencor within the meaning of Rule 145 promulgated under the
Securities Act (each a "TENCOR AFFILIATE"). Tencor will provide KLA with such
information and documents as KLA reasonably requests for purposes of reviewing
such list. Tencor will use its best efforts to deliver or cause to be delivered
to KLA, as promptly as practicable on or following the date hereof, from each
Tencor Affiliate an executed affiliate agreement in substantially the form
attached hereto as Exhibit E (the "TENCOR AFFILIATE
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AGREEMENT"), each of which will be in full force and effect as of the
Effective Time. KLA will be entitled to place appropriate legends on the
certificates evidencing any KLA Common Stock to be received by a Tencor
Affiliate pursuant to the terms of this Agreement, and to issue appropriate
stop transfer instructions to the transfer agent for the KLA Common Stock,
consistent with the terms of the Tencor Affiliate Agreement.
5.17 Regulatory Filings; Reasonable Efforts. As soon as may be
reasonably practicable, Tencor and KLA each shall file with the United States
Federal Trade Commission (the "FTC") and the Antitrust Division of the United
States Department of Justice ("DOJ") Notification and Report Forms relating to
the transactions contemplated herein as required by the HSR Act, as well as
comparable pre-merger notification forms required by the merger notification or
control laws and regulations of any applicable jurisdiction, as agreed to by the
parties. Tencor and KLA each shall promptly (a) supply the other with any
information which may be required in order to effectuate such filings and (b)
supply any additional information which reasonably may be required by the FTC,
the DOJ or the competition or merger control authorities of any other
jurisdiction and which the parties may reasonably deem appropriate.
5.18 Board of Directors of the Combined Company. The Board of Directors
of KLA will take all actions necessary to cause the Board of Directors of KLA,
immediately after the Effective Time, to consist of 12 persons, seven of whom
shall have served on the Board of Directors of KLA immediately prior to the
Effective Time, and five of whom shall have served on the Board of Directors of
Tencor immediately prior to the Effective Time (including Jon D. Tompkins and
Lida Urbanek). Of the five designees of Tencor, one person shall be considered a
Class II director, two persons shall be designated Class III directors and two
persons shall be designated Class I directors. If, prior to the Effective Time,
any of the Tencor or KLA designees shall decline or be unable to serve as a
Tencor or KLA director, Tencor (if such person was designated by Tencor) or KLA
(if such person was designated by KLA) shall designate another person to serve
in such person's stead, which person shall be reasonably acceptable to the other
party.
5.19 Committees of the Board of Directors of KLA. The Board of
Directors of KLA will take all actions necessary to cause the Compensation
Committee of the Board of Directors of KLA, immediately after the Effective
Time, to consist of three members, two of whom shall have served on the Board of
Directors of Tencor immediately prior to the Effective Time and one who shall
have served on the Board of Directors of KLA immediately prior to the Effective
Time. In addition, the Board of Directors of KLA will take all actions necessary
to cause the Audit Committee of the Board of Directors of KLA, immediately after
the Effective Time, to consist of three members, two of whom shall have served
on the Board of Directors of KLA immediately prior to the Effective Time and one
who shall have served on the Board of Directors of Tencor immediately prior to
the Effective Time. Furthermore, the Board of Directors of KLA will take all
actions necessary to cause one person who shall have served on the Board of
Directors of Tencor immediately prior to the Effective Time to serve on the
Nominating Committee of the Board of Directors of KLA, immediately after the
Effective Time.
5.20 Officers of Combined Company; Executive Committee. At the
Effective Time, Ken Levy will be offered a position as the Chairman of the Board
of KLA, Jon D. Tompkins will be offered a position as the Chief Executive
Officer of KLA and Ken Schroeder will be offered a position
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as the President and Chief Operating Officer of KLA. It is contemplated that
following the Effective Time an executive committee comprised of senior
management from both Tencor and KLA would be formed to jointly determine the
management of KLA following the Effective Time; the executive committee would
meet regularly to review the overall strategy, product direction and
operations of the new combined company.
5.21 Change of Name; Increase in Authorized Shares. Subject to the
terms hereof, at the KLA Stockholders' Meeting KLA shall propose and recommend
that its Certificate of Incorporation be amended at the Effective Time to change
its name to "KLA-Tencor Corporation." In addition, subject to the terms hereof,
at the KLA Stockholders' Meeting KLA shall propose and recommend that its
Certificate of Incorporation be amended to increase the authorized number of
shares of Common Stock thereunder to 250 million shares, provided that KLA may
propose and recommend an increase of such lesser number as in good faith it
determines (provided that, subject to the terms hereof, such lesser number is
not less than the number required to issue shares by virtue of the Merger and
the other transactions contemplated hereby).
ARTICLE VI
CONDITIONS TO THE MERGER
6.1 Conditions to Obligations of Each Party to Effect the Merger. The
respective obligations of each party to this Agreement to effect the Merger
shall be subject to the satisfaction at or prior to the Effective Time of the
following conditions:
(a) Stockholder and Shareholder Approval. This Agreement shall
have been approved and adopted, and the Merger shall have been duly approved, by
the requisite vote under applicable law, by the shareholders of Tencor; and an
increase in the authorized number of shares of KLA Common Stock so as to permit
the issuance of shares of KLA Common Stock by virtue of the Merger, as well as
such issuance, shall have been duly approved by the requisite vote under
applicable law and the rules of the National Association of Securities Dealers,
Inc. by the stockholders of KLA.
(b) Registration Statement Effective; Proxy Statement. The SEC
shall have declared the Registration Statement effective. No stop order
suspending the effectiveness of the Registration Statement or any part thereof
shall have been issued and no proceeding for that purpose, and no similar
proceeding in respect of the Proxy Statement, shall have been initiated or
threatened in writing by the SEC.
(c) No Order; HSR Act. No Governmental Entity shall have
enacted, issued, promulgated, enforced or entered any statute, rule, regulation,
executive order, decree, injunction or other order (whether temporary,
preliminary or permanent) which is in effect and which has the effect of making
the Merger illegal or otherwise prohibiting consummation of the Merger. All
waiting periods under the HSR Act relating to the transactions contemplated
hereby will have expired or terminated early.
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(d) Tax Opinions. KLA and Tencor shall each have received
written opinions from their respective counsel, Wilson, Sonsini, Goodrich &
Rosati, Professional Corporation, and Heller, Ehrman, White & McAuliffe, to the
effect that the Merger will constitute a reorganization within the meaning of
Section 368(a) of the Code; provided, however, that if the counsel to either KLA
or Tencor does not render such opinion, this condition shall nonetheless be
deemed to be satisfied with respect to such party if counsel to the other party
renders such opinion to such party. The parties to this Agreement agree to make
reasonable representations as requested by such counsel for the purpose of
rendering such opinions.
(e) Nasdaq Listing. The shares of KLA Common Stock issuable to
shareholders of Tencor pursuant to this Agreement and such other shares required
to be reserved for issuance in connection with the Merger shall have been
authorized for listing on the Nasdaq National Market upon official notice of
issuance.
(f) Opinion of Accountants. Each of KLA and Tencor shall have
received a letter from Price Waterhouse LLP, dated within two (2) business days
prior to the Effective Time, regarding that firm's concurrence with KLA's
managements' and Tencor's managements' conclusions as to the appropriateness of
pooling of interest accounting for the Merger under Accounting Principles Board
Opinion No. 16, if the Merger is consummated in accordance with this Agreement.
6.2 Additional Conditions to Obligations of Tencor. The obligation
of Tencor to consummate and effect the Merger shall be subject to the
satisfaction at or prior to the Effective Time of each of the following
conditions, any of which may be waived, in writing, exclusively by Tencor:
(a) Representations and Warranties. The representations and
warranties of KLA and Merger Sub contained in this Agreement shall have been
true and correct in all material respects as of the date of this Agreement. In
addition, the representations and warranties of KLA and Merger Sub contained in
this Agreement shall be true and correct in all material respects on and as of
the Effective Time except for changes contemplated by this Agreement and except
for those representations and warranties which address matters only as of a
particular date (which shall remain true and correct as of such particular
date), with the same force and effect as if made on and as of the Effective
Time, except in such cases (other than the representations in Sections 3.2, 3.3
and 3.22) where the failure to be so true and correct would not have a Material
Adverse Effect on KLA. Tencor shall have received a certificate with respect to
the foregoing signed on behalf of KLA by the Chief Executive Officer and the
Chief Financial Officer of KLA;
(b) Agreements and Covenants. KLA and Merger Sub shall have
performed or complied in all material respects with all agreements and covenants
required by this Agreement to be performed or complied with by them on or prior
to the Effective Time, and Tencor shall have received a certificate to such
effect signed on behalf of KLA by the Chief Executive Officer and the Chief
Financial Officer of KLA; and
(c) Material Adverse Effect. No Material Adverse Effect with
respect to KLA shall have occurred since the date of this Agreement.
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6.3 Additional Conditions to the Obligations of KLA and Merger
Sub. The obligations of KLA and Merger Sub to consummate and effect the Merger
shall be subject to the satisfaction at or prior to the Effective Time of each
of the following conditions, any of which may be waived, in writing, exclusively
by KLA:
(a) Representations and Warranties. The representations and
warranties of Tencor contained in this Agreement shall have been true and
correct in all material respects as of the date of this Agreement. In addition,
the representations and warranties of Tencor contained in this Agreement shall
be true and correct in all material respects on and as of the Effective Time
except for changes contemplated by this Agreement and except for those
representations and warranties which address matters only as of a particular
date (which shall remain true and correct as of such particular date), with the
same force and effect as if made on and as of the Effective Time, except in such
cases (other than the representations in Sections 2.2, 2.3 and 2.21) where the
failure to be so true and correct would not have a Material Adverse Effect on
Tencor. KLA shall have received a certificate with respect to the foregoing
signed on behalf of Tencor by the President and the Chief Financial Officer of
Tencor;
(b) Agreements and Covenants. Tencor shall have performed or
complied in all material respects with all agreements and covenants required by
this Agreement to be performed or complied with by it on or prior to the
Effective Time, and the KLA shall have received a certificate to such effect
signed on behalf of Tencor by the President and the Chief Financial Officer of
Tencor; and
(c) Material Adverse Effect. No Material Adverse Effect with
respect to Tencor shall have occurred since the date of this Agreement.
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
7.1 Termination. This Agreement may be terminated at any time
prior to the Effective Time of the Merger, whether before or after approval of
the Merger by the shareholders of Tencor or the approval of the issuance of KLA
Common Stock in connection with the Merger by the stockholders of KLA:
(a) by mutual written consent duly authorized by the Boards
of Directors of KLA and Tencor;
(b) by either Tencor or KLA if the Merger shall not have been
consummated by July 31, 1997; provided, however, that the right to terminate
this Agreement under this Section 7.1(b) shall not be available to any party
whose action or failure to act has been a principal cause of or
resulted in the failure of the Merger to occur on or before such date and such
action or failure to act constitutes a breach of this Agreement;
(c) by either Tencor or KLA if a Governmental Entity shall
have issued an order, decree or ruling or taken any other action (an "ORDER"),
in any case having the effect of permanently
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restraining, enjoining or otherwise prohibiting the Merger, which order,
decree or ruling is final and nonappealable;
(d) by either Tencor or KLA if the required approvals of the
shareholders of Tencor or the stockholders of KLA contemplated by this Agreement
shall not have been obtained by reason of the failure to obtain the required
vote upon a vote taken at a meeting of shareholders or stockholders, as the case
may be, duly convened therefor or at any adjournment thereof (provided that the
right to terminate this Agreement under this Section 7.1(d) shall not be
available to any party where the failure to obtain shareholder or stockholder
approval of such party shall have been caused by the action or failure to act of
such party in breach of this Agreement);
(e) by KLA, if the Board of Directors of Tencor recommends a
Tencor Superior Proposal to the shareholders of Tencor, or if the Board of
Directors of Tencor shall have withheld, withdrawn or modified in a manner
adverse to KLA its recommendation in favor of adoption and approval of this
Agreement and approval of the Merger;
(f) by Tencor, if the Board of Directors of KLA recommends a
KLA Superior Proposal to the stockholders of KLA, or if the Board of Directors
of KLA shall have withheld, withdrawn or modified in a manner adverse to Tencor
its recommendation in favor of approving the issuance of the shares of KLA
Common Stock by virtue of the Merger;
(g) by Tencor, upon a breach of any representation, warranty,
covenant or agreement on the part of KLA set forth in this Agreement, or if any
representation or warranty of KLA shall have become untrue, in either case such
that the conditions set forth in Section 6.2(a) or Section 6.2(b) would not be
satisfied as of the time of such breach or as of the time such representation or
warranty shall have become untrue, provided that if such inaccuracy in KLA's
representations and warranties or breach by KLA is curable by KLA through the
exercise of its commercially reasonable efforts, then Tencor may not terminate
this Agreement under this Section 7.1(i) provided KLA continues to exercise such
commercially reasonable efforts to cure such breach; or
(h) by KLA, upon a breach of any representation, warranty,
covenant or agreement on the part of Tencor set forth in this Agreement, or if
any representation or warranty of Tencor shall have become untrue, in either
case such that the conditions set forth in Section 6.3(a) or Section 6.3(b)
would not be satisfied as of the time of such breach or as of the time such
representation or warranty shall have become untrue, provided, that if such
inaccuracy in Tencor's representations and warranties or breach by Tencor is
curable by Tencor through the exercise of its commercially reasonable efforts,
then KLA may not terminate this Agreement under this Section 7.1(j) provided
Tencor continues to exercise such commercially reasonable efforts to cure such
breach.
7.2 Notice of Termination; Effect of Termination. Any termination of
this Agreement under Section 7.1 above will be effective immediately upon the
delivery of written notice of the terminating party to the other parties hereto.
In the event of the termination of this Agreement as provided in Section 7.1,
this Agreement shall be of no further force or effect, except (i) as set forth
in this Section 7.2, Section 7.3 and Article 8 (miscellaneous), each of which
shall survive the termination
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of this Agreement, and (ii) nothing herein shall relieve any party from
liability for any breach of this Agreement. No termination of this Agreement
shall affect the obligations of the parties contained in the Confidentiality
Agreement or the Stock Option Agreements, all of which obligations shall
survive termination of this Agreement in accordance with their terms.
7.3 Fees and Expenses.
(a) General. Except as set forth in this Section 7.3, all fees
and expenses incurred in connection with this Agreement and the transactions
contemplated hereby shall be paid by the party incurring such expenses whether
or not the Merger is consummated; provided, however, that KLA and Tencor shall
share equally all fees and expenses, other than attorneys' and accountants fees
and expenses, incurred in relation to the printing and filing of the Proxy
Statement (including any preliminary materials related thereto) and the
Registration Statement (including financial statements and exhibits) and any
amendments or supplements thereto.
(b) Tencor Payments.
(i) If (x) the Board of Directors of Tencor shall have
withheld, withdrawn or modified in a manner adverse to KLA its recommendation in
favor of adoption and approval of this Agreement and approval of the Merger and
at that time there shall not have occurred a Material Adverse Effect on KLA, or
(y) the Board of Directors of Tencor recommends a Tencor Superior Proposal to
the shareholders of Tencor, Tencor shall pay to KLA an amount equal to $40
million within one business day following the earlier to occur of (A)
termination of this Agreement pursuant to Section 7.1(e) hereof and (B) a Tencor
Negative Vote (as defined below);
(ii) If no payment shall be required pursuant to clause
7.3(b)(i) above, and if (x) the vote of the shareholders of Tencor approving and
adopting this Agreement and approving the Merger shall not have been obtained by
reason of the failure to obtain the required vote upon a vote taken at a meeting
of shareholders duly convened therefor or at any adjournment thereof (a "TENCOR
NEGATIVE VOTE") and (y) prior to such Tencor Negative Vote there shall have
occurred an Acquisition Proposal with respect to Tencor which shall have been
publicly disclosed and not withdrawn (a "TENCOR COMPETING PROPOSAL") and (z)
within 12 months following such Tencor Negative Vote Tencor shall enter into a
definitive agreement with respect to an Acquisition Proposal with the party (or
any affiliate of the party) that made the Tencor Competing Proposal or an
Acquisition Proposal with such party (or any such affiliate) shall have been
consummated, then, provided that there shall have not occurred a Material
Adverse Effect on KLA prior to the Tencor Negative Vote, Tencor shall pay to KLA
an amount equal to $40 million within one business day following demand
therefor; and
(iii) If no payment shall be required pursuant to
clauses 7.3(b)(i) or (ii) above and if there shall be a Tencor Negative Vote
then Tencor shall pay to KLA an amount equal to $5 million within one business
day following demand therefor.
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(c) KLA Payments.
(i) If (x) the Board of Directors of KLA shall have
withheld, withdrawn or modified in a manner adverse to Tencor its recommendation
in favor of approving the issuance of the shares of KLA Common Stock by virtue
of the Merger and at that time there shall not have occurred a Material Adverse
Effect on Tencor , or (y) the Board of Directors of KLA recommends a KLA
Superior Proposal to the shareholders of KLA, KLA shall pay to Tencor an amount
equal to $60 million within one business day following the earlier to occur of
(A) termination of this Agreement pursuant to Section 7.1(f) hereof and (B) a
KLA Negative Vote (as defined below);
(ii) If no payment shall be required pursuant to
clause 7.3(c)(i) above, and if (x) the vote of the stockholders of KLA in favor
of an increase in the authorized number of shares of KLA Common Stock so as to
permit the issuance of shares of KLA Common Stock by virtue of the Merger, as
well as such issuance, shall not have been obtained by reason of the failure to
obtain the required vote upon a vote taken at a meeting of stockholders duly
convened therefor or at any adjournment thereof (a "KLA NEGATIVE VOTE") and (y)
prior to such KLA Negative Vote there shall have occurred an Acquisition
Proposal with respect to KLA which shall have been publicly disclosed and not
withdrawn (a "KLA COMPETING PROPOSAL") and (z) within 12 months following such
KLA Negative Vote Tencor shall enter into a definitive agreement with respect to
an Acquisition Proposal with the party (or any affiliate of the party) that made
the KLA Competing Proposal or an Acquisition Proposal with such party (or any
such affiliate) shall have been consummated, then, provided that there shall not
have occurred a Material Adverse Effect on Tencor prior to the KLA Negative
Vote, KLA shall pay to Tencor an amount equal to $60 million within one business
day following demand therefor; and
(iii) If no payment shall be required pursuant to
clauses 7.3(c)(i) or (ii) above and if there shall be a KLA Negative Vote then
KLA shall pay to Tencor an amount equal to $5 million within one business day
following demand therefor.
(d) Payment of the fees described in Section 7.3(b) and
(c) above shall not be in lieu of damages incurred in the event of breach of
this Agreement.
7.4 Amendment. Subject to applicable law, this Agreement may be
amended by the parties hereto at any time by execution of an instrument in
writing signed on behalf of each of the parties hereto.
7.5 Extension; Waiver. At any time prior to the Effective Time any
party hereto may, to the extent legally allowed, (i) extend the time for the
performance of any of the obligations or other acts of the other parties hereto,
(ii) waive any inaccuracies in the representations and warranties made to such
party contained herein or in any document delivered pursuant hereto and (iii)
waive compliance with any of the agreements or conditions for the benefit of
such party contained herein. Any agreement on the part of a party hereto to any
such extension or waiver shall be valid only if set forth in an instrument in
writing signed on behalf of such party. Delay in exercising any right under this
Agreement shall not constitute a waiver of such right.
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ARTICLE VIII
GENERAL PROVISIONS
8.1 Non-Survival of Representations and Warranties. The representations
and warranties of Tencor, KLA and Merger Sub contained in this Agreement shall
terminate at the Effective Time, and only the covenants that by their terms
survive the Effective Time shall survive the Effective Time.
8.2 Notices. All notices and other communications hereunder shall be in
writing and shall be deemed given if delivered personally or by commercial
delivery service, or sent via telecopy (receipt confirmed) to the parties at the
following addresses or telecopy numbers (or at such other address or telecopy
numbers for a party as shall be specified by like notice):
(a) if to KLA or Merger Sub, to:
KLA Instruments Corporation
160 Rio Robles
P.O. Box 49055
San Jose, California 95161-9055
Attention: Chief Executive Officer
Telephone No.: (408) 434-4200
Telecopy No.: (408) 468-4266
with a copy to:
KLA Instruments Corporation
160 Rio Robles
P.O. Box 49055
San Jose, California 95161-9055
Attention: General Counsel
Telephone No.: (408) 434-4200
Telecopy No.: (408) 468-4266
with another copy to:
Wilson, Sonsini, Goodrich & Rosati, P.C.
650 Page Mill Road
Palo Alto, California 94304-1050
Attention: Larry W. Sonsini, Esq.
Telephone No.: (415) 493-9300
Telecopy No.: (415) 493-6811
-46-
(b) if to Tencor, to:
Tencor Instruments
One Technology Drive
Milpitas, California 95035
Attention: President
Telephone No.: (408) 970-9500
Telecopy No.: (408) 988-6420
with a copy to:
Heller, Ehrman, White & McAuliffe
525 University Avenue
Palo Alto, CA 94301
Attention: Sarah A. O'Dowd, Esq.
Telephone No.: (415) 324-7045
Telecopy No.: (415) 324-0638
8.3 Interpretation; Knowledge.
(a) When a reference is made in this Agreement to Exhibits,
such reference shall be to an Exhibit to this Agreement unless otherwise
indicated. The words "INCLUDE," "INCLUDES" and "INCLUDING" when used herein
shall be deemed in each case to be followed by the words "without limitation."
The table of contents and headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement. When reference is made herein to "THE BUSINESS OF" an entity,
such reference shall be deemed to include the business of all direct and
indirect subsidiaries of such entity. Reference to the subsidiaries of an entity
shall be deemed to include all direct and indirect subsidiaries of such entity.
(b) For purposes of this Agreement, the term "KNOWLEDGE"
means, with respect to any matter in question, that any of the Chief Executive
Officer, Chief Operating Officer, Chief Financial Officer or Controller of
Tencor or KLA, as the case may be, have actual knowledge of such matter.
8.4 Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other party, it being understood that all
parties need not sign the same counterpart.
8.5 Entire Agreement; Third Party Beneficiaries. This Agreement and the
documents and instruments and other agreements among the parties hereto as
contemplated by or referred to herein, including Tencor Schedules and the KLA
Schedules (a) constitute the entire agreement among the parties with respect to
the subject matter hereof and supersede all prior agreements and understandings,
both written and oral, among the parties with respect to the subject matter
hereof, it being understood that the Confidentiality Agreement shall continue in
full force and effect until the Closing and shall survive any termination of
this Agreement; and (b) are not intended to confer upon
-47-
any other person any rights or remedies hereunder, except with respect to the
matters set forth in Section 5.13.
8.6 Severability. In the event that any provision of this Agreement or
the application thereof, becomes or is declared by a court of competent
jurisdiction to be illegal, void or unenforceable, the remainder of this
Agreement will continue in full force and effect and the application of such
provision to other persons or circumstances will be interpreted so as reasonably
to effect the intent of the parties hereto. The parties further agree to replace
such void or unenforceable provision of this Agreement with a valid and
enforceable provision that will achieve, to the extent possible, the economic,
business and other purposes of such void or unenforceable provision.
8.7 Other Remedies; Specific Performance. Except as otherwise provided
herein, any and all remedies herein expressly conferred upon a party will be
deemed cumulative with and not exclusive of any other remedy conferred hereby,
or by law or equity upon such party, and the exercise by a party of any one
remedy will not preclude the exercise of any other remedy. The parties hereto
agree that irreparable damage would occur in the event that any of the
provisions of this Agreement were not performed in accordance with their
specific terms or were otherwise breached. It is accordingly agreed that the
parties shall be entitled to an injunction or injunctions to prevent breaches of
this Agreement and to enforce specifically the terms and provisions hereof in
any court of the United States or any state having jurisdiction, this being in
addition to any other remedy to which they are entitled at law or in equity.
8.8 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of California, regardless of the laws that
might otherwise govern under applicable principles of conflicts of law thereof;
provided that issues involving the corporate governance of any of the parties
hereto shall be governed by their respective jurisdictions of incorporation.
Each of the parties hereto irrevocably consents to the exclusive jurisdiction of
any state or federal court within the Northern District of California, in
connection with any matter based upon or arising out of this Agreement or the
matters contemplated herein, other than issues involving the corporate
governance of any of the parties hereto, agrees that process may be served upon
them in any manner authorized by the laws of the State of California for such
persons and waives and covenants not to assert or plead any objection which they
might otherwise have to such jurisdiction and such process.
8.9 Rules of Construction. The parties hereto agree that they have been
represented by counsel during the negotiation and execution of this Agreement
and, therefore, waive the application of any law, regulation, holding or rule of
construction providing that ambiguities in an agreement or other document will
be construed against the party drafting such agreement or document.
8.10 Assignment. No party may assign either this Agreement or any of
its rights, interests, or obligations hereunder without the prior written
approval of the of the parties. Subject to the preceding sentence, this
Agreement shall be binding upon and shall inure to the benefit of the parties
hereto and their respective successors and permitted assigns.
*****
-48-
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized respective officers as of the date first
written above.
TENCOR INSTRUMENTS
By:_____________________________________________
Name: Jon D. Tompkins
Title: President and Chief Executive Officer
KLA INSTRUMENTS CORPORATION
By:_____________________________________________
Name: Kenneth Levy
Title: Chief Executive Officer
TIGER ACQUISITION CORP.
By:_____________________________________________
Name: Kenneth Levy
Title: President
**** REORGANIZATION AGREEMENT ****
ANNEX 1 - CERTAIN DEFINITIONS
Term Section in which Term is defined
---- --------------------------------
"Acquisition Proposal" Section 5.4 (a)(i)
"Agreement" Section 1.2
"Agreement of Merger" Section 1.2
"California Law" Recitals
"Certificates" Section 1.8 (c)
"Closing" Section 1.2
"Closing Date" Section 1.2
"Code" Recitals
"Confidentiality Agreement" Section 5.3 (b)
"Dissenting Shares" Section 1.7 (a)
"DOJ" Section 5.17
"Effective Time" Section 1.2
"ERISA" Section 2.12 (a)
"ERISA Affiliate" Section 2.12 (a)
"Exchange Act" Section 2.4 (b)
"Exchange Agent" Section 1.8 (a)
"Exchange Ratio" Section 1.6 (a)
"FTC" Section 5.17
"GAAP" Section 2.5 (b)
"Governmental Entity" Section 2.4 (b)
"Hazardous Material" Section 2.14 (a)
"Hazardous Materials Activities" Section 2.14 (b)
"HSR Act" Section 2.4 (b)
"include" Section 8.3 (a)
"includes" Section 8.3 (a)
"including" Section 8.3 (a)
"Indemnified Parties" Section 5.13 (b)
"IRS" Section 2.12 (a)
-i-
"KLA" Preamble
"KLA Affiliate" Section 5.15
"KLA Balance Sheet" Section 3.6 (b)
"KLA Common Stock" Section 1.6 (a)
"KLA Competing Proposal" Section 7.3(c)(ii)
"KLA Contract" Section 3.17 (l)
"KLA Employee Plans" Section 3.13 (a)
"KLA Employee Stock Purchase Plan" Section 3.2
"KLA Environmental Permits" Section 3.15 (c)
"KLA Financials" Section 3.6 (b)
"KLA IP Rights" Section 3.9 (a)
"KLA Negative Vote" Section 7.3 (c)(ii)
"KLA Permits" Section 3.10 (b)
"KLA Rights Plan" Section 1.6 (a)
"KLA Schedules" Article III
"KLA SEC Reports" Section 3.6 (a)
"KLA Stock Option Agreement" Recitals
"KLA Stockholders' Meeting" Section 2.19
"KLA Superior Proposal" Section 5.4 (a)(ii)
"knowledge" Section 8.3 (b)
"Material Adverse Effect" Section 2.1 (d) and Section 3.1 (d)
"Merger" Section 1.1
"Merger Sub" Preamble
"Merger Sub Common Stock" Section 1.6 (d)
"New Purchase Date" Section 1.6 (c)
"Order" Section 7.1 (c)
"Other Filings" Section 5.1 (a)
"Proxy Statement" Section 2.19
"Registration Statement" Section 3.4 (b)
"Returns" Section 2.7 (b)(i)
-ii-
"SEC" Section 2.4 (b)
"Securities Act" Section 2.5 (a)
"Stock Option Agreements" Recitals
"Surviving Corporation" Section 1.1
"Tax" or "Taxes" Section 2.7 (a)
"the business of" Section 8.3 (a)
"Tencor" Preamble
"Tencor Affiliate" Section 5.16
"Tencor Balance Sheet" Section 2.5 (b)
"Tencor Common Stock" Section 1.6 (a)
"Tencor Contract" Section 2.16 (l)
"Tencor Competing Proposal" Section 7.3(b)(ii)
"Tencor Employee Plans" Section 2.12 (a)
"Tencor Employee Stock Purchase Plans" Section 1.6 (c)
"Tencor Environmental Permits" Section 2.14 (c)
"Tencor Financials" Section 2.5 (b)
"Tencor IP Rights" Section 2.8 (a)
"Tencor Negative Vote" Section 7.3 (b)(ii)
"Tencor Permits" Section 2.9 (b)
"Tencor Schedules" Article II
"Tencor SEC Reports" Section 2.5 (a)
"Tencor Shareholders' Meeting" Section 2.19
"Tencor Stock Option Agreement" Recitals
"Tencor Stock Option Plans" Section 1.6 (c)
"Tencor Superior Proposal" Section 5.4 (b)(ii)
-iii-
INDEX OF EXHIBITS
Exhibit A KLA Stock Option Agreement (included as Exhibit 99.2)
Exhibit B Tencor Stock Option Agreement (included as Exhibit 99.3)
Exhibit C Agreement of Merger
Exhibit D KLA Affiliate Agreement
Exhibit E Tencor Affiliate Agreement
INDEX OF ANNEXES
Annex 1 Certain Definitions
-iv-
Exhibit C
AGREEMENT OF MERGER
OF
TIGER ACQUISITION CORP.
AND
TENCOR INSTRUMENTS
This Agreement of Merger, dated as of the _____ day of ___________ 1997
("MERGER AGREEMENT"), by and among Tiger Acquisition Corp. ("SUB"), a California
corporation and a wholly owned subsidiary of KLA Instruments Corporation, a
Delaware corporation ("KLA"), and Tencor Instruments, a California corporation
("TENCOR" or the "SURVIVING CORPORATION").
RECITALS
A. Tencor was incorporated in the State of California on __________, and
on the date hereof has _______ shares of its Common Stock, no par value,
outstanding ("TENCOR COMMON").
B. Sub was incorporated in the State of California on January 9, 1997, and
on the date hereof has 1,000 shares of its Common Stock, no par value,
outstanding, all which are owned by KLA.
C. KLA, Sub and Tencor have entered into an Agreement and Plan of
Reorganization dated as of January 14, 1997 (the "REORGANIZATION AGREEMENT")
providing for certain representations, warranties, covenants and agreements in
connection with the transactions contemplated hereby. This Merger Agreement and
the Reorganization Agreement are intended to be construed together to effectuate
their purpose.
D. The shareholders of Tencor and Sub and the Board of Directors of KLA
deem it advisable and in their mutual best interests and in the best interests
of the shareholders of Tencor and Sub, respectively, that Sub be merged with and
into Tencor (the "MERGER").
E. The Boards of Directors of KLA, Tencor and Sub and the shareholders of
Sub and Tencor have approved the Merger. The shareholders of KLA have approved
the issuance of shares of Common Stock, par value $0.001 per share, of KLA ("KLA
COMMON") by virtue of the Merger.
AGREEMENTS
The parties hereto hereby agree as follows:
1. Sub shall be merged with and into Tencor, and Tencor shall be the
surviving corporation.
2. The Merger shall become effective on such date (the "EFFECTIVE TIME")
as this Merger Agreement is filed with the Secretary of State of the State of
California.
3. As of the Effective Time, each outstanding share of Common Stock, no
par value, of Sub shall be converted into and exchanged for one (1) share of
Common Stock, no par value, of the Surviving Corporation. Each stock certificate
of Sub evidencing ownership of any such Sub shares shall continue to evidence
ownership of such shares of capital stock of the Surviving Corporation
immediately following the Effective Time.
4. Upon the Effective Time of the Merger, each outstanding share of Tencor
Common shall be converted automatically into and exchanged for the right to
receive one (1) share of KLA Common ("MERGER CONSIDERATION"). All shares of
Tencor Common that are owned directly or indirectly by Tencor, KLA or any
subsidiary of Tencor or KLA shall be canceled, and no cash or securities of KLA
or other consideration shall be delivered in exchange therefor.
5. As of the Effective Time, all certificates representing shares of
Tencor Common, issued and outstanding immediately prior to the Effective Time,
shall no longer be outstanding and shall automatically be canceled and retired
and shall cease to exist, and each holder of a certificate representing any such
shares of Tencor Common shall cease to have any rights with respect thereto
except the right to receive the appropriate portion of the Merger Consideration
upon surrender of such certificate.
6. Any shares ("DISSENTING SHARES") of any holder of Tencor Common who has
demanded and perfected appraisal rights for such shares in accordance with the
California General Corporation Law and who, as of the Effective Time, has not
effectively withdrawn or lost such appraisal rights, shall not be converted into
Merger Consideration but shall be converted into the right to receive such
consideration as may be determined to be due with respect to such Dissenting
Shares pursuant to the California General Corporation Law. If after the
Effective Time any Dissenting Shares shall lose their status as Dissenting
Shares, then as of the occurrence of the event which causes the loss of such
status, such shares shall be converted into Merger Consideration in accordance
with Section 4 hereof.
7. Notwithstanding any other term or provision hereof, no fraction of a
share of KLA Common will be issued by virtue of the Merger, but in lieu thereof
each holder of shares of Tencor Common who would otherwise be entitled to a
fraction of a share of KLA Common (after aggregating all fractional shares of
KLA Common to be received by such holder) shall receive from KLA an amount of
cash (rounded to the nearest whole cent) equal to the product of (i) such
fraction, multiplied by (ii) the average closing price of a share of KLA Common
for the ten most recent days that KLA Common has traded ending on the trading
day immediately prior to the Effective Time, as reported on the Nasdaq National
Market.
8. The conversion of Tencor Common as provided by this Merger Agreement
shall occur automatically at the Effective Time of the Merger without action by
the holders thereof. Each holder of Tencor Common shall thereupon be entitled to
receive Merger Consideration in accordance with Section 4 hereof. Promptly after
the Effective Time, such shareholder shall be entitled to receive certificates
that represent the number of shares of KLA Common Stock issuable to such
shareholder under this Merger Agreement upon surrender as set forth in the
Reorganization Agreement of such shareholder's certificates which immediately
prior to the Effective Time represented outstanding shares of Tencor Common
Stock.
-2-
No dividends or other distributions on KLA Common declared or made
after the Effective Time shall be paid to the holder of any unsurrendered
certificate until the holder of record of such certificate shall surrender such
certificate. Subject to the effect, if any, of applicable laws, following
surrender of any certificate, there shall be delivered to the person entitled
thereto, without interest, the amount of dividends theretofore paid with respect
to the KLA Common so withheld as of any date subsequent to the Effective Time of
the Merger and prior to such date of delivery.
All Merger Consideration and cash paid in accordance with Section 7
hereof delivered upon the surrender for exchange of shares of Tencor Common in
accordance with the terms hereof shall be deemed to have been delivered in full
satisfaction of all rights pertaining to such Tencor Common. If, after the
Effective Time of the Merger, certificates are presented to the Surviving
Corporation for any reason, they shall be canceled and exchanged as provided in
this Section 8.
9. At the Effective Time of the Merger, the separate existence of Sub
shall cease, and Tencor shall succeed, without other transfer, to all of the
rights and properties of Sub and shall be subject to all the debts and
liabilities thereof in the same manner as if Tencor had itself incurred them.
10. Upon the Merger becoming effective, the Articles of Incorporation of
the Surviving Corporation shall be amended in full to read as set forth in
Exhibit A attached hereto.
11. (a) Notwithstanding the approval of this Merger Agreement by the
shareholders of Tencor and Sub, this Merger Agreement may be terminated at any
time prior to the Effective Time of the Merger by mutual agreement of the Boards
of Directors of KLA and Tencor, and the shareholders of Tencor.
(b) Notwithstanding the approval of this Merger Agreement by the
shareholders of Tencor and Sub, this Merger Agreement shall terminate forthwith
in the event that the Reorganization Agreement shall be terminated as therein
provided.
(c) In the event of the termination of this Merger Agreement as
provided above, this Merger Agreement shall forthwith become void and there
shall be no liability on the part of Tencor, KLA or Sub or their respective
officers or directors, except as otherwise provided in the Reorganization
Agreement.
(d) This Merger Agreement may be signed in one or more counterparts,
each of which shall be deemed an original and all of which shall constitute one
agreement.
(e) This Merger Agreement may be amended by the parties hereto any
time before or after approval hereof by the shareholders of Tencor and Sub, but,
after such approval, no amendments shall be made which by law require the
further approval of such shareholders without obtaining such approval. This
Merger Agreement may not be amended except by an instrument in writing signed on
behalf of each of the parties hereto.
-3-
IN WITNESS WHEREOF, the parties have executed this Merger Agreement as of
the date first written above.
TIGER ACQUISITION CORP.
____________________________________________
President
____________________________________________
Secretary
-4-
TENCOR INSTRUMENTS
____________________________________________
President
____________________________________________
Secretary
-5-
EXHIBIT A
ARTICLES OF INCORPORATION OF THE SURVIVING CORPORATION
OFFICERS' CERTIFICATE
OF
TENCOR INSTRUMENTS
Jon D. Tompkins, President, and Claudia Casey, Secretary, of Tencor
Instruments, a corporation duly organized and existing under the laws of the
State of California (the "CORPORATION"), do hereby certify:
1. They are the duly elected, acting and qualified President and the
Secretary, respectively, of the Corporation.
2. The authorized capital stock of the Corporation consists of 60,000,000
shares of Common Stock, no par value, of which there are________________ shares
outstanding and entitled to vote on the Agreement of Merger in the form
attached, and 1,000,000 shares of Preferred Stock, no par value, of which no
shares are issued or outstanding or entitled to vote on the Agreement of Merger
in the form attached.
3. The Agreement of Merger in the form attached was duly approved by the
shareholders of the Corporation in accordance with the General Corporation Law
of the State of California.
4. The shareholder approval was by the holders of ______% of the
outstanding shares of the Corporation. The required vote was a majority of the
outstanding shares of Common Stock, no par value, of the Corporation.
Each of the undersigned declares under penalty of perjury that the
statements contained in the foregoing certificate are true of their own
knowledge. Executed in ___________, on _____________ __, 1997.
____________________________________________
President
____________________________________________
Secretary
OFFICERS' CERTIFICATE
OF
TIGER ACQUISITION CORP.
Ken Levy, President and, Lisa Berry, Secretary, of Tiger Acquisition
Corp., a corporation duly organized and existing under the laws of the State of
California (the "CORPORATION"), do hereby certify that:
1. They are the duly elected, acting and qualified President and the
Secretary, respectively, of the Corporation.
2. There is only one authorized class of shares of the Corporation,
consisting of 1,000 shares of Common Stock, no par value, and the total number
of issued and outstanding shares is 1,000.
3. The Agreement of Merger in the form attached was approved by the board
of directors and the shareholder of the Corporation in accordance with the
General Corporation Law of the State of California.
4. The shareholder approval was by the holder of 100% of the outstanding
shares of the Corporation. The required vote was a majority of the outstanding
shares of Common Stock, no par value, of the Corporation.
5. No vote of the stockholders of KLA Instruments Corporation ("KLA") (the
sole shareholder of the Corporation and the parent of the Corporation) was
required by the General Corporation Law of the State of California or by the
Articles of Incorporation or Bylaws of KLA or the Corporation. The stockholders
of KLA have approved the issuance of shares of Common Stock, par value $0.001
per share, of KLA by virtue of the Merger.
The undersigned declare under penalty of perjury that the statements
contained in the foregoing certificate are true of their own knowledge. Executed
in _____________, on ____________________, 1997.
____________________________________________
President
____________________________________________
Secretary
Exhibit D
KLA INSTRUMENTS CORPORATION
AFFILIATE AGREEMENT
This KLA INSTRUMENTS CORPORATION AFFILIATE AGREEMENT ("AGREEMENT") is
dated as of January 14, 1997, between KLA Instruments Corporation, a Delaware
corporation ("KLA") and the undersigned affiliate ("AFFILIATE") of KLA.
WHEREAS, KLA and Tencor Instruments, a California corporation ("TENCOR")
propose to enter into an Agreement and Plan of Reorganization ("MERGER
AGREEMENT") pursuant to which Tencor and KLA intend to enter into a business
combination transaction to pursue their long term business strategies (the
"MERGER") (capitalized terms used and not otherwise defined herein shall have
the respective meanings ascribed to them in the Merger Agreement);
WHEREAS, Affiliate has been advised that Affiliate may be deemed to be an
"Affiliate" of KLA, as the term "Affiliate" is used in Accounting Series
Releases 130 and 135, as amended, although nothing contained herein shall be
construed as an admission by Affiliate that Affiliate is in fact an Affiliate of
KLA;
WHEREAS, it will be a condition to effectiveness of the Merger pursuant to
the Merger Agreement that the independent accounting firms that audit the annual
financial statements of Tencor and KLA will have delivered their written
concurrences with the conclusions of management of Tencor and KLA to the effect
that the Merger will be accounted for as a pooling of interests under Accounting
Principles Board Opinion No. 16;
WHEREAS, the execution and delivery of this Agreement by Affiliate is a
material inducement to KLA to enter into the Merger Agreement.
NOW, THEREFORE, intending to be legally bound, the parties hereby agree as
follows:
1. Acknowledgments by Affiliate. Affiliate acknowledges and understands
that the representations, warranties and covenants by Affiliate set forth herein
will be relied upon by KLA, Tencor, and their respective Affiliates, counsel and
accounting firms, and that substantial losses and damages may be incurred by
these persons if Affiliate's representations, warranties or covenants are
breached. Affiliate has carefully read this Agreement and the Merger Agreement
and has discussed the requirements of this Agreement with Affiliate's
professional advisors, who are qualified to advise him with regard to such
matters.
2. Covenants Related to Pooling of Interests. During the period beginning
from the date hereof and ending on the second day after the day that KLA
publicly announces financial results covering at least 30 days of combined
operations of KLA and Tencor, Affiliate will not sell, exchange, transfer,
pledge, distribute, make any gift or otherwise dispose of or grant any option,
establish any "short" or put-equivalent position with respect to or enter into
any similar transaction (through derivatives or otherwise) intended or having
the effect, directly or indirectly, to reduce
Affiliate's risk relative to any shares of KLA Common Stock. KLA may, at its
discretion, place a stock transfer notice consistent with the foregoing with its
transfer agent with respect to Affiliate's shares. Notwithstanding the
foregoing, Affiliate will not be prohibited by the foregoing from selling or
disposing of shares so long as such sale or disposition is in accordance with
the "de minimis" test set forth in SEC Staff Accounting Bulletin No. 76.
3. Beneficial Ownership of Stock. Except for the KLA Common Stock and
options to purchase KLA Common Stock set forth on the last page of this
Agreement, Affiliate does not beneficially own any shares of KLA Common Stock or
any other equity securities of KLA or any options, warrants or other rights to
acquire any equity securities of KLA.
4. Miscellaneous.
(a) For the convenience of the parties hereto, this Agreement may be
executed in one or more counterparts, each of which shall be deemed an original,
but all of which together shall constitute one and the same document.
(b) This Agreement shall be enforceable by, and shall inure to the
benefit of and be binding upon, the parties hereto and their respective
successors and assigns. As used herein, the term "successors and assigns" shall
mean, where the context so permits, heirs, executors, administrators, trustees
and successor trustees, and personal and other representatives.
(c) This Agreement shall be governed by and construed, interpreted
and enforced in accordance with the internal laws of the State of California.
(d) If a court of competent jurisdiction determines that any
provision of this Agreement is not enforceable or enforceable only if limited in
time and/or scope, this Agreement shall continue in full force and effect with
such provision stricken or so limited.
(e) Counsel to and accountants for the parties to the Agreement
shall be entitled to rely upon this Agreement as needed.
(f) This Agreement shall not be modified or amended, or any right
hereunder waived or any obligation excused, except by a written agreement signed
by both parties.
-2-
Executed as of the date shown on the first page of this Agreement.
KLA INSTRUMENTS CORPORATION
By:_________________________________________
Name:_______________________________________
Title:______________________________________
AFFILIATE
By:_________________________________________
Name of Affiliate:__________________________
Name of Signatory (if different from name of
Affiliate):_________________________________
Title of Signatory
(if applicable):____________________________
Number of shares of KLA Common Stock beneficially owned by Affiliate:
_______________________________________
Number of shares of KLA Common Stock subject to options beneficially owned by
Affiliate:
_______________________________________
-3-
***KLA AFFILIATE AGREEMENT***
-4-
Exhibit E
TENCOR INSTRUMENTS
AFFILIATE AGREEMENT
This TENCOR INSTRUMENTS AFFILIATE AGREEMENT ("AGREEMENT") is dated as of
January 14, 1997, between KLA Instruments Corporation, a Delaware corporation
("KLA") and the undersigned affiliate ("AFFILIATE") of Tencor Instruments, a
California corporation ("TENCOR").
WHEREAS, Tencor and KLA propose to enter into an Agreement and Plan of
Reorganization ("MERGER AGREEMENT") pursuant to which Tencor and KLA intend to
enter into a business combination transaction to pursue their long term business
strategies (the "MERGER") (capitalized terms used and not otherwise defined
herein shall have the respective meanings ascribed to them in the Merger
Agreement);
WHEREAS, pursuant to the Merger, at the Effective Time outstanding shares
of Tencor Capital Stock, including any shares owned by Affiliate, will be
converted into the right to receive shares of KLA Common Stock as set forth in
the Merger Agreement;
WHEREAS, Affiliate has been advised that Affiliate may be deemed to be an
"affiliate" of Tencor, as the term "affiliate" is used (i) for purposes of
paragraphs (c) and (d) of Rule 145 of the Rules and Regulations of the
Securities and Exchange Commission (the "SEC") and (ii) in the SEC's Accounting
Series Releases 130 and 135, as amended, although nothing contained herein shall
be construed as an admission by Affiliate that Affiliate is in fact an affiliate
of Tencor;
WHEREAS, it will be a condition to consummation of the Merger pursuant to
the Merger Agreement that (i) the attorneys for each of KLA and Tencor will have
delivered written opinions that the Merger will constitute a reorganization
within the meaning of Section 368(a) of the Internal Revenue Code of 1986 as
amended (the "CODE"), and (ii) the independent accounting firms that audit the
annual financial statements of Tencor and KLA will have delivered their written
concurrences with the conclusions of management of Tencor and KLA to the effect
that the Merger will be accounted for as a pooling of interests under Accounting
Principles Board Opinion No. 16;
WHEREAS, the execution and delivery of this Agreement by Affiliate is a
material inducement to KLA to enter into the Merger Agreement;.
NOW, THEREFORE, intending to be legally bound, the parties hereby agree as
follows:
1. Acknowledgments by Affiliate. Affiliate acknowledges and understands
that the representations, warranties and covenants by Affiliate set forth herein
will be relied upon by KLA, Tencor, and their respective affiliates, counsel and
accounting firms, and that substantial losses and damages may be incurred by
these persons if Affiliate's representations, warranties or covenants are
breached. Affiliate has carefully read this Agreement and the Merger Agreement
and has discussed
the requirements of this Agreement with Affiliate's professional advisors, who
are qualified to advise Affiliate with regard to such matters.
2. Compliance with Rule 145 and the Act.
(a) Affiliate has been advised that (i) the issuance of shares of
KLA Common Stock in connection with the Merger is expected to be effected
pursuant to a Registration Statement on Form S-4 under the Securities Act of
1933 as amended (the "ACT") and as such will not be deemed "restricted
securities" within the meaning of Rule 144 promulgated thereunder and resale of
such shares will not be subject to any restrictions other than as set forth in
Rule 145 of the Act unless otherwise transferred pursuant to an effective
registration statement under the Act or an appropriate exemption from
registration, (ii) Affiliate may be deemed to be an affiliate of Tencor, (iii)
no sale, transfer or other disposition by Affiliate of any KLA Common Stock
received by Affiliate will be registered under the Act. Affiliate accordingly
agrees not to sell, transfer or otherwise dispose of any KLA Common Stock issued
to Affiliate in the Merger unless (i) such sale, transfer or other disposition
is made in conformity with the requirements of Rule 145(d) promulgated under the
Act, or (ii) Affiliate delivers to KLA a written opinion of counsel, reasonably
acceptable to KLA in form and substance, that such sale, transfer or other
disposition is otherwise exempt from registration under the Act.
(b) KLA will give stop transfer instructions to its transfer agent
with respect to any KLA Common Stock received by Affiliate pursuant to the
Merger and there will be placed on the certificates representing such KLA Common
Stock, or any substitutions therefor, a legend stating in substance:
"THE SHARES REPRESENTED BY THIS CERTIFICATE WERE ISSUED IN A
TRANSACTION TO WHICH RULE 145 PROMULGATED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED, APPLIES AND MAY ONLY BE TRANSFERRED IN
CONFORMITY WITH RULE 145(d) UNDER SUCH ACT OR IN ACCORDANCE WITH A
WRITTEN OPINION OF COUNSEL, REASONABLY ACCEPTABLE TO THE ISSUER IN
FORM AND SUBSTANCE THAT SUCH TRANSFER IS EXEMPT FROM REGISTRATION
UNDER THE SECURITIES ACT OF 1933, AS AMENDED."
The legend set forth above shall be removed (by delivery of a substitute
certificate without such legend) and KLA shall so instruct its transfer agent,
if Affiliate delivers to KLA (i) satisfactory written evidence that the shares
have been sold in compliance with Rule 145 (in which case, the substitute
certificate will be issued in the name of the transferee), or (ii) an opinion of
counsel, in form and substance reasonably satisfactory to KLA, to the effect
that public sale of the shares by the holder thereof is no longer subject to
Rule 145.
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(c) To the extent required by applicable securities laws, KLA
agrees, for a period of two years from the date of this Agreement, to file with
the SEC in a timely manner all reports and other documents required of KLA under
the Act and the Securities Exchange Act of 1934, as amended.
3. Covenants Related to Pooling of Interests. During the period beginning
from the date hereof and ending on the second day after the day that KLA
publicly announces financial results covering at least 30 days of combined
operations of KLA and Tencor, Affiliate will not sell, exchange, transfer,
pledge, distribute, or otherwise dispose of or grant any option, establish any
"short" or put-equivalent position with respect to or enter into any similar
transaction (through derivatives or otherwise) intended or having the effect,
directly or indirectly, to reduce its risk relative to any securities, or shares
of KLA Common Stock received by Affiliate in connection with the Merger. KLA
may, at its discretion, cause a restrictive legend to the foregoing effect to be
placed on KLA Common Stock certificates issued to Affiliate in the Merger and
place a stock transfer notice consistent with the foregoing with its transfer
agent with respect to the certificates, provided that such restrictive legend
shall be removed and/or such notice shall be countermanded promptly upon
expiration of the necessity therefor at the request of Affiliate.
Notwithstanding the foregoing, Affiliate will not be prohibited by the foregoing
from selling or disposing of shares so long as such sale or disposition is in
accordance with the "de minimis" test set forth in SEC Staff Accounting Bulletin
No. 76 and so long as Affiliate has obtained KLA's prior written approval of
such sale or disposition.
4. Representations, Warranties and Covenants Related to Tax Effects of the
Merger.
(a) Affiliate is the beneficial owner of the number of shares of
Tencor Common Stock (including shares issuable upon exercise of stock options)
set forth on the last page of this Agreement and did not acquire any of the
Tencor Common Stock in contemplation of the Merger;
(b) Affiliate has not engaged in a Sale (as defined below) of any
shares of Tencor Common Stock in contemplation of the Merger;
(c) Affiliate has no plan or intention (a "PLAN") to engage in a
sale, exchange, transfer, redemption or reduction in any way of Affiliate's risk
of ownership by short sale or otherwise, or other disposition, directly or
indirectly (such actions being collectively referred to herein as a "SALE") of
more than 50% of the shares of KLA Common Stock to be received by Affiliate in
the Merger;
(d) If Affiliate is a partnership, then the term "sale" as used in
paragraph (c) above shall be deemed to include any distribution to the
undersigned's partners unless no recipient of any such distribution will receive
shares of Tencor Common Stock representing 1% or more of the shares of Tencor
Common Stock presently outstanding;
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(e) Affiliate is not aware of, or participating in, any Plan on the
part of the Affiliates of Tencor to engage in a Sale or Sales of the KLA Common
Stock to be received in the Merger such that the aggregate fair market value, as
of the Effective Date of the Merger, of the shares subject to such Sales would
exceed 50% of the aggregate fair market value of all shares of outstanding
Tencor Common Stock immediately prior to the Merger;
(f) Affiliate understands that Tencor, KLA and their respective
affiliates, as well as legal counsel to Tencor and KLA (in connection with
rendering their opinions that the Merger will be a "reorganization" within the
meaning of Section 368(a) of the Code) will be relying on (a) the truth and
accuracy of the representations contained herein and (b) Affiliate's performance
of the obligations set forth herein.
5. Miscellaneous.
(a) For the convenience of the parties hereto, this Agreement may be
executed in one or more counterparts, each of which shall be deemed an original,
but all of which together shall constitute one and the same document.
(b) This Agreement shall be enforceable by, and shall inure to the
benefit of and be binding upon, the parties hereto and their respective
successors and assigns. As used herein, the term "successors and assigns" shall
mean, where the context so permits, heirs, executors, administrators, trustees
and successor trustees, and personal and other representatives.
(c) This Agreement shall be governed by and construed, interpreted
and enforced in accordance with the internal laws of the State of California.
(d) If a court of competent jurisdiction determines that any
provision of this Agreement is not enforceable or enforceable only if limited in
time and/or scope, this Agreement shall continue in full force and effect with
such provision stricken or so limited.
(e) Counsel to and accountants for the parties to the Agreement
shall be entitled to rely upon this Agreement as needed.
(f) This Agreement shall not be modified or amended, or any right
hereunder waived or any obligation excused, except by a written agreement signed
by both parties.
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Executed as of the date shown on the first page of this Agreement.
KLA INSTRUMENTS CORPORATION
By:_________________________________________
Name:_______________________________________
Title:______________________________________
AFFILIATE
By:_________________________________________
Name of Affiliate:__________________________
Name of Signatory (if different from name of
Affiliate):_________________________________
Title of Signatory
(if applicable):____________________________
Number of shares of Tencor Common Stock beneficially owned by Affiliate:
_______________________________________
Number of shares of Tencor Common Stock subject to options beneficially owned by
Affiliate:
_______________________________________
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***TENCOR AFFILIATE AGREEMENT***
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